Square Peg Meet Round Hole – Do Design Defects Breach a Warranty Against Defects in Material or Workmanship?

January 27, 2014

By Jeffrey W. Post

In Bruce Martin Constr., Inc. v. CTB, Inc., 735 F.3d 750 (8th Cir. 2013), the Eighth Circuit considered whether a design defect breaches an express warranty against “defects in material or workmanship.” Id. at 753. The product at issue was a system that automated the process of unloading grain from bins. Id. at 751-52. The buyer sued claiming that the sweeps on the system were too flimsy to push the grain out of the bins. Id. The buyer’s expert opined that the flimsy sweeps amounted to a design defect. Id. at 753-54.

The seller then moved for summary judgment arguing that a design defect did not constitute a defect in material or workmanship. Id. at 752. The buyer countered that the flimsy sweeps constituted defective materials. Id. at 754.

Applying Indiana law, the Eighth Circuit concluded that summary judgment was proper because the flimsy sweeps constituted a design defect and design defects were not covered by warranty against defects in material and workmanship. Id. at 754. In reaching its conclusion, the Court drew a bright line between design defects and defects in materials or workmanship. Id. at 753. The Court held that a design defect reflects an inadequacy of the design itself, while defects in material and workmanship reflect departures from the intended design. Id. The Court concluded that the buyer’s expert’s characterization of the flimsy sweeps as a design defect and the buyer’s concession that the sweeps conformed to the design were fatal to the buyer’s claim. In support of its position, the Eighth Circuit cited to several decisions in other jurisdictions that reached the same conclusion. Buyer had also brought a claim for negligent misrepresentation, which the Eighth Circuit concluded was barred by the economic-loss doctrine. Id. at 753-54.

From a practitioner’s perspective, the CTB, Inc. holding raises several issues. As a threshold matter, it is worth noting that not every jurisdiction has reached the same result. A few jurisdictions have held that a design defect does constitute a breach of warranty against defects in material or workmanship. Thus, in drafting the warranty provision you can eliminate uncertainty by expressly including or excluding a warranty against design defects. You also may be able to accomplish this result more subtly by choosing a jurisdiction through a choice-of-law provision that has clear law on this issue. From a litigation perspective, the CTB, Inc. holding can substantially impact case evaluation and your forum choice. Moreover, in developing your theory of the case, the success of your action or defense may well hinge on how persuasively you characterize the defect as one of design versus materials/workmanship.