Polaris Industries, Inc. v. McDonald

• Decision Date: 13 August 2003
• Docket Number: No. 12-01-00372-CV.,12-01-00372-CV.
• Citation: Polaris Industries, Inc. v. McDonald, 119 S.W.3d 331 (Tex. App. 2003)
• Parties: POLARIS INDUSTRIES, INC., and Randy Ballard d/b/a American Outdoor Power, Appellants, v. Larry McDONALD, Appellee.
• Court: Texas Court of Appeals

119 S.W.3d 331

POLARIS INDUSTRIES, INC., and Randy Ballard d/b/a American Outdoor Power, Appellants, v.Larry McDONALD, Appellee.

No. 12-01-00372-CV.

Court of Appeals of Texas, Tyler.

August 13, 2003.

Ken E. Carroll, Carrington, Coleman, Sloman & Blumenthal, L.L.P., Dallas, Timothy D. Kelly, Kelly & Berens, P.A., Minneapolis, MN, Thomas R. McLeroy Jr., for appellant.

Don Wheeler, Andy Tindel, Provost & Umphrey Law Firm, L.L.P., Tyler, J. Mark Mann, Wellborn, Houston, Adkison, Mann, Sadler & Hill, L.L.P., Henderson, for appellee.

Panel consisted of WORTHEN, C.J., GRIFFITH, J., and DeVASTO, J.

OPINION

SAM GRIFFITH, Justice.

Polaris Industries, Inc. and Randy Ballard d/b/a American Outdoor Power (sometimes collectively referred to as "Polaris") bring this interlocutory appeal from a class certification order in which the trial court certified a class premised upon breaches of the implied warranty of merchantability in the design of personal watercraft ("PWC" or "jet skis").We reverse the trial court's judgment and dismiss for want of jurisdiction.

BACKGROUND

Polaris designs, manufactures and markets motorized products for recreation and utility use, including snowmobiles, motorcycles, all-terrain vehicles and PWC.American Outdoor Power is a Polaris dealership.The engine of a PWC is directly coupled to a drive shaft which, when running, rotates an impeller.The impeller is situated where surface water is drawn up and underneath the watercraft.The water travels through the impeller and is accelerated, producing a thrust to move the watercraft forward.Squeezing the throttle level increases engine speed.Turning the handlebar pivots the jet pump nozzle and controls the direction of the PWC.The throttle must be applied in order to turn the PWC.This feature is unlike a conventional boat which uses a rudder to control direction.PWC do not have rudders, propellers or any comparable device protruding into the water from the bottom of the machine.PWC do not have brakes.In this respect, they are like other boats.The customary way to stop the machine is to cut the power and let it glide to a stop.

Named plaintiffLarry McDonald("McDonald") sued Polaris claiming that Polaris PWC's lack of adequate collision avoidance capabilities-they have no design features that would provide the operator with steering or maneuvering capability in off-throttle or off-power operating condition-causes the PWC to be defective, unmerchantable and unfit for their ordinary purposes because of inherent design inadequacies in the operating characteristics of the craft.He asserts causes of action for breach of the implied warranty of merchantability and violation of the Magnuson Moss Act, and asks for the cost of repair, replacement or the amount representing the loss in value of the PWC attributable to the presence of the alleged inadequacies.McDonald filed his suit as a class action on behalf of all persons similarly situated who purchased a new Polaris personal watercraft in the United States on or after May 5, 1995, manufactured or distributed by the Polaris Defendant and sold by and through its authorized dealers such as American Outdoor Power.

After a certification hearing, the trial court defined the class as follows:

All persons and entities who purchased new Polaris personal watercraft from dealers in the State of Texas after May 4, 1995 and who still own their Polaris personal watercraft as of the date of this Order Certifying Class.

The Class shall not include:

....

2.New Polaris personal watercraft purchasers who have suffered personal injury as a result of the operation of their Polaris personal watercraft;

3.New Polaris personal watercraft purchasers who have sustained damage to property other than their Polaris personal watercraft as a result of their of[sic] operation of their Polaris personal watercraft ....

Polaris has sold over 12,000 PWC in Texas during the period of time included in the class definition.

IMPLIED WARRANTY OF MERCHANTABILITY

McDonald has pleaded a cause of action against Polaris for breach of the implied warranty of merchantability with respect to the design of the Polaris personal PWC which he purchased from American Outdoor Power.The implied warranty of merchantability is codified in the Texas Business and Commerce Code.The elements of a cause of action for breach of the implied warranty of merchantability are as follows: 1) the defendant sold or leased a product to the plaintiff; 2) the product was unmerchantable; 3) the plaintiff notified the defendant of the breach; and 4) the plaintiff suffered injury.Tex. Bus. & Com.Code Ann. §§ 2.314,2.314 cmt. 13, 2.607(c)(1), 2.714, 2.715(Vernon 1994).

The Texas Business & Commerce Code provides a nonexclusive list of the minimum criteria required for a product to be unmerchantable.First, a product is considered unmerchantable if it cannot pass without objection in the trade.TEX. BUS. & COM.CODE ANN. § 2.314(b)(1)(Vernon 1994).To pass without objection, a product must be of a quality comparable to other products that are sold in that line of trade under the contract description.Harris Packaging Corp. v. Baker Concrete Constr. Co.,982 S.W.2d 62, 65-66(Tex. App.-Houston [1st Dist.]1998, pet. denied)(plaintiff did not show that other manufacturers of similar goods placed warning label on their product);Fitzgerald v. Caterpillar Tractor Co.,683 S.W.2d 162, 163-64(Tex.App.-Fort Worth1985, writ ref'd n.r.e.)(defendant established the design of forklift sold to plaintiff was same design used by all manufacturers throughout the world).Second, a product is considered unmerchantable if it is unfit for ordinary purposes.Tex. Bus. & Com.Code Ann. § 2.314(b)(3)(Vernon 1994).For a product to be unfit for ordinary purposes, it must have a defect, i.e., the product lacks something necessary for adequacy.Plas-Tex, Inc. v. U.S. Steel Corp.,772 S.W.2d 442, 444(Tex.1989).A product can lack something necessary for adequacy when it does not accomplish the purposes for which it was manufactured, or when it is constructed in a manner which makes it "unreasonably dangerous."See, e.g., Hyundai Motor Co. v. Rodriguez,995 S.W.2d 661, 665(Tex.1999)(design of car's restraint system that caused passenger to be thrown into the roof was unfit for its ordinary purpose);Church & Dwight Co., Inc. v. Huey,961 S.W.2d 560, 569(Tex. App.-San Antonio1997, pet. denied)(substance to remove paint was not fit for its ordinary purpose because it could not be rinsed away).And third, a product is considered unmerchantable if it does not conform to the promises or affirmations of fact which are on the product's container or label.Tex. Bus. & Com.Code Ann. § 2.314(b)(6)(Vernon 1994).After a product is shown to be unmerchantable, a plaintiff must then establish that the defect caused him to suffer injury.Rodriguez,995 S.W.2d at 667-68.

In an action for breach of the implied warranty of merchantability, the plaintiff can recover actual damages.Actual damages include direct damages, which are measured by the difference between the value of the goods accepted and the value of the goods if they had been as warranted.Tex. Bus. & Com.Code Ann. § 2.714(b)(Vernon 1994);Signal Oil & Gas Co. v. Universal Oil Prods.,572 S.W.2d 320, 327(Tex.1978).Actual damages also include incidental and consequential damages, such as foreseeable lost profits, personal injury, and property damage caused by the breach.Tex. Bus. & Com. Code Ann. § 2.715(b)(Vernon 1994);Garcia v. Texas Instruments,610 S.W.2d 456, 462(Tex.1980);Signal Oil & Gas Co.,572 S.W.2d at 326.

The defendant can assert the defense that the dangers of the goods are common knowledge in the community, and thus the implied warranty of merchantability does not apply.See, e.g., American Tobacco Co., Inc. v. Grinnell,951 S.W.2d 420, 435(Tex.1997)(no implied warranty of merchantability applied because health dangers of cigarettes commonly known).Also, when the plaintiff has examined the goods before entering into the contract or has refused to examine the goods, there is no implied warranty of merchantability for defects that an examination should have revealed.Tex. Bus. & Com.Code Ann. § 2.316(c)(2)(Vernon 1994).

MAGNUSON-MOSS WARRANTY ACT

McDonald has also pleaded a cause of action against Polaris arising under the Magnuson Moss Warranty Act, 15 U.S.C.A. §§ 2301-2312(West 1982)("the Act").The Act regulates written warranties and provides a private right of action by consumers against manufacturers or retailers who fail to comply with written warranties or implied warranties.The Act does not preempt Texas law on warranty liability unless a Texas statute conflicts with the provisions of the Act.SeeMurphy v. Mallard Coach Co.,179 A.D.2d 187, 192, 582 N.Y.S.2d 528, 531(1992).Importantly, the Act specifically provides that state law determines whether or not an implied warranty exists.See15 U.S.C.A. § 2301(7)(West 1982).

The Act states that "a consumer who is damaged by the failure of a supplier, warrantor or service contractor to comply with any obligation under [the Act] or under a written warranty, implied warranty or service contract, may bring suit for damages and other legal and equitable relief."See15 U.S.C.A. § 2310(a)(3), (d)(1)(West 1982).The Act provides consumers a federal cause of action for breach of an implied warranty of merchantability or fitness for a particular purpose whether or not a written warranty is involved in the transaction.Royal Lincoln-Mercury Sales, Inc. v. Wallace,415 So.2d 1024, 1026-27(Miss.1982).However, the federal cause of action for breach of an implied warranty allowed by the Act will only be sustainable if a breach can be proved under the applicable state law.Feinstein v. Firestone Tire & Rubber Co.,535 F.Supp. 595, 605(S.D.N.Y.1982).Consequently, the alleged breach of the implied warranty of merchantability under Texas law...