Wright v. Brooke Group Ltd.

• Decision Date: 09 October 2002
• Docket Number: No. 01-0712.,01-0712.
• Citation: 652 N.W.2d 159
• Parties: Robert A. WRIGHT and Deann K. Wright, Plaintiffs, v. BROOKE GROUP LIMITED, Liggett & Myers, Inc., Liggett Group, Inc., Philip Morris Incorporated (Philip Morris USA), Philip Morris Companies, Inc., R.J. Reynolds Tobacco Company, and R.J.R. Nabisco, Inc., Defendants.
• Court: Iowa Supreme Court

652 N.W.2d 159

Robert A. WRIGHT and Deann K. Wright, Plaintiffs, v. BROOKE GROUP LIMITED, Liggett & Myers, Inc., Liggett Group, Inc., Philip Morris Incorporated (Philip Morris USA), Philip Morris Companies, Inc., R.J. Reynolds Tobacco Company, and R.J.R. Nabisco, Inc., Defendants.

No. 01-0712.

Supreme Court of Iowa.

October 9, 2002.

E. Ralph Walker, David J. Darrell, and Harley C. Erbe of Walker Law Firm, Des Moines, Steven P. Wandro, CeCelia Ibson Wagner, Elizabeth S. Hodgson, and Michelle M. Casper of Wandro, Lyons, Wagner & Baer, P.C., Des Moines, Glenn L. Norris, George F. Davison, Jr., and Carla T. Schemmel of Hawkins & Norris, P.C., Des Moines, and Norwood S. Wilner of Spohrer, Wilner, Maxwell & Matthews, P.A., of Jacksonville, Florida, for plaintiffs.

Robert A. Van Vooren and Thomas D. Waterman of Lane & Waterman, Davenport, and Timothy E. Congrove and J. Patrick Sullivan of Shook, Hardy & Bacon L.L.P., Kansas City, Missouri, for defendant Philip Morris Incorporated.

Steven L. Nelson and Kris Holub Tilley of Davis, Brown, Koehn, Shors & Roberts, Des Moines, and Robert H. Klonoff, Jeffrey J. Jones and J. Todd Kennard of Jones, Day, Reavis & Pogue, Washington, D.C. and Columbus, Ohio, for defendant R.J. Reynolds Tobacco Company.

Richard J. Sapp and Michael W. Thrall of Nyemaster, Goode, Voigts, West, Hansell & O'Brien, P.C., Des Moines, and Kevin M. Reynolds and Richard J. Kirschman of Whitfield & Eddy, P.L.C., Des Moines, for amicus curiae Iowa Defense Counsel Association and The Defense Research Institute, Inc.

TERNUS, Justice.

The United States District Court for the Northern District of Iowa has certified eight questions to this court arising out of a personal injury action filed by a smoker against several cigarette manufacturers. The certified questions address the nature and extent of the manufacturers' liability under products liability, warranty and tort law. In general, our answers can be summarized as follows: (1) in a design defect products liability case, Iowa applies the test set forth in Restatement (Third) of Torts: Product Liability sections 1 and 2 (1998); (2) a civil conspiracy claim may be based on conduct that does not constitute an intentional tort; (3) a product manufacturer's failure to warn or disclose material information will support a fraud claim by a customer only when disclosure is necessary to prevent a prior representation from being misleading; (4) a product manufacturer's advertisements and statements do not constitute an undertaking so as to create a duty under Restatement (Second) of Torts section 323 (1965); and (5) a cigarette manufacturer has no warranty or tort liability to a smoker based on a manufacturing defect when the cigarettes smoked by the plaintiff were in the condition intended by the manufacturer.

I. Factual and Procedural Background.

The plaintiffs, Robert and DeAnn Wright, filed a petition against the defendants, all cigarette manufacturers, alleging they had been damaged as a result of Robert's cigarette smoking. (For the sake of simplicity, we will refer only to the plaintiff, Robert Wright, in the remainder of this opinion.) The specific claims made by the plaintiff include (1) negligence, (2) strict liability, (3) breach of implied warranty, (4) breach of express warranty, (5) breach of special assumed duty, (6) fraudulent misrepresentation, (7) fraudulent nondisclosure, and (8) civil conspiracy. The defendants filed a motion to dismiss that was largely overruled by the federal district court. See Wright v. Brooke Group Ltd., 114 F.Supp.2d 797, 838 (N.D.Iowa 2000)

.

Thereafter, the defendants asked the federal court to certify questions of law to the Iowa Supreme Court pursuant to Iowa Code section 684A.1 (2001). Concluding the case presented several questions of state law that are potentially determinative and as to which there is either no controlling precedent or the precedent is ambiguous, the district court certified eight questions to this court.

The questions certified are:

1. In a design defect products liability case, what test applies under Iowa law to determine whether cigarettes are unreasonably dangerous? What requirements must be met under the applicable test?

2. Under Iowa law, can Defendants rely on Comment i of § 402A of the Restatement (Second) of Torts to show that cigarettes are not unreasonably dangerous?

3. Under Iowa law, does the common knowledge of the health risks associated with smoking, including addiction, preclude tort and warranty liability of cigarette manufacturers to smokers because cigarettes are not unreasonably dangerous insofar as the risks are commonly known? If yes, then:

a. [During] what period of time would such knowledge be common?

b. Is there a duty to warn of the risks associated with smoking cigarettes in light of such common knowledge?

c. Is reliance on advertisements, statements or representations suggesting that there are no risks associated with smoking, including addiction, justifiable in light of such common knowledge?

4. Under Iowa law, can Plaintiffs bring a civil conspiracy claim arising out of alleged wrongful conduct that may or may not have been an intentional tort — i.e., strict liability for manufacturing a defective product or intentionally agreeing to produce an unreasonably dangerous product?

5. Under Iowa law, can a manufacturer's alleged failure to warn or to disclose material information give rise to a fraud claim when the relationship between a Plaintiff and a Defendant is solely that of a customer/buyer and manufacturer?

6. Does an "undertaking" arise under § 323 of the Restatement (Second) of Torts, as adopted in Iowa, by reason of a product manufacturer's advertisements or statements directed to its customers?

7. Does Iowa law allow a Plaintiff to recover from a cigarette manufacturer under a manufacturing defect theory when the cigarettes smoked by Plaintiff were in the condition intended by the manufacturer?

8. Does Iowa law allow Plaintiff to recover from a cigarette manufacturer for breach of implied warranty of merchantability when the cigarettes smoked by Plaintiff were in the condition intended by the manufacturer and Plaintiff alleges Defendants' cigarettes are "substantially interchangeable"?

We will answer the questions in the order propounded.

II. In a Design Defect Products Liability Case, What Test Applies Under Iowa Law to Determine Whether Cigarettes Are Unreasonably Dangerous? What Requirements Must Be Met Under the Applicable Test?

A. Iowa law governing strict liability for defective products. The Iowa Supreme Court first applied strict liability in tort for a product defect in 1970, adopting Restatement (Second) of Torts section 402A (1965). Hawkeye-Sec. Ins. Co. v. Ford Motor Co., 174 N.W.2d 672, 684 (Iowa 1970). Section 402A provides:

Special Liability of Seller of Product for Physical Harm to User or Consumer:

(1) one who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if

(a) the seller is engaged in the business of selling such a product, and

(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.

(2) The rule stated in Subsection (1) applies although

(a) the seller has exercised all possible care in the preparation and sale of his product, and

(b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.

Restatement (Second) of Torts § 402A. Our purpose in adopting this provision was to relieve injured plaintiffs of the burden of proving the elements of warranty or negligence theories, thereby insuring "`that the costs of injuries resulting from defective products are borne by the manufacturers that put such products on the market.'" Hawkeye-Sec. Ins. Co., 174 N.W.2d at 683 (citation omitted).

Consistent with this purpose we held that a plaintiff seeking to recover under a strict liability theory need not prove the manufacturer's negligence. Id. at 684. Moreover, we concluded that application of strict liability in tort was not exclusive and did not "`preclude liability based on the alternative ground of negligence, when negligence could be proved.'" Id. at 685 (citation omitted). Although Hawkeye-Security was a manufacturing defect case, id. at 676-77, our opinion implied that strict liability in tort was applicable to design defects as well, id. at 684 (quoting authority that strict liability is applicable when "the defect arose out of the design or manufacture" of the product).

In Aller v. Rodgers Machinery Manufacturing Co., a design defect case, our court discussed in more detail the test to be applied in strict liability cases. 268 N.W.2d 830, 832 (Iowa 1978). In that case, the plaintiff asked the court to eliminate the "unreasonably dangerous" element of strict products liability, arguing that to require proof that the product was unreasonably dangerous injected considerations of negligence into strict liability, thwarting the purpose of adopting a strict liability theory. Id. at 833-34. We rejected the plaintiff's request to eliminate the "unreasonably dangerous" element, concluding the theories of strict liability and negligence were distinguishable:

In strict liability the plaintiff's proof concerns the condition (dangerous) of a product which is designed or manufactured in a particular way. In negligence the proof concerns the reasonableness of the manufacturer's conduct in designing and selling the product as he did.

In strict liability the plaintiff takes the design as it was finalized in the finished product and shows it was both dangerous and that it was unreasonable to subject the user to this danger because the user would not contemplate the danger in the normal and innocent use of the product or consumption of the product. In

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