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    The case Lopez v. Huron,San Antonio Court of Appeals, No. 04-15-00327-CV (Tex.App. Dist.4 02/03/2016)illustrates a fine line distinction between damages, a damaged product, and “damages arising out of personal injury, death, or property damage” within the realm of a products liability claim.


    Adam Huron (d/b/a Adam’s Mexican Food Products) makes and distributes masa to a variety of commercial Hispanic food sources. In 2010, Mr. Huron agreed to purchase plastic bags from Erick Lopez (aka: A.J. Plastics, Inc.) who agreed to ship the bags directly to Mr. Huron.


    In November, 2011, a customer of Mr. Huron informed him that a shipment of nearly 1,700 cases of masa was defective because the seams on the plastic bags were breaking, exposing the masa to the elements. The customer paid more than $19,300.00 for the spoiled masa; all product was returned to Mr. Huron, who had to ship the customer replacement cases in different plastic bags. Huron and his business then sued Lopez and A.J. Plastics seeking restitution under theories ofbreach of implied warranties of merchantability and fitness for a particular purpose. The trial court found that defendant Lopez breached both contractual obligations, and that his company also breached the implied warranty of merchantability. The jury awarded Mr. Huron $16,199.07 in damages, with 20% apportioned to Mr. Lopez, and 80% apportioned to A.J. Plastics, Inc.


    On appeal, Mr. Lopez argued that the result should be reversed, because Mr. Huron should not have sued Lopez and his company, A.J. Plastics, Inc., on a contractual claim but rather on a products liability claim. An action in Products Liability is statutorily defined as:


    “any action against a manufacturer or seller for recovery of damages arising out of

    personal injury, death, or property damage allegedly caused by a defective product

    whether the action is based in strict tort liability, strict products liability, negligence, misrepresentation, breachof express or implied warranty, or any other theory or

    combination of theories.” Tex. Civ. Prac. & Rem. Code Ann.§82.001(2)

    (West 2011). (Emphasis added).


    The San Antonio Court of Appeals noted that the implied warranty claim is a contractual claim where the only injury is to the defective product itself.  Mid Continent Aircraft Corp. v. Curry Cty. Spraying Serv., Inc., 572 S.W.2d 308, 313 (Tex. 1978).


    Texas courts have historically rejected arguments where “damage to a finished product caused by a defective component part constitutes damage to 'other property,' so as to permit tort recovery for damage to the finished product.” Pugh v. Gen. Terrazzo Supplies, Inc., 243 S.W.3d 84, 92 (Tex. App.—Houston [1st Dist.] 2007, pet. denied). The question to the court then became whether the plastic bags should be considered a component part of the packaged masa so that the damage to the masa is not damage to "other property." Lopez, at 9.


    “Other Property” defined:

    Texas courts would ... characterize damage to a product caused by a defective

    component as “economic loss” rather than damage to “other property,” and

    therefore, not subject to recovery under a negligence theory. Alcan Aluminum

    Corp. v. BASF Corp.,133 F. Supp. 2d 482, 505 (N.D. Tex. 2001). The court

    reasoned that because damage to the finished product was foreseeable, the parties

    were “sophisticated entities capable of protecting themselves in the contracting

    process.” Id. at 505. (Emphasis Added).


    Held: Since Mr. Huron’s claim did not seek damages “arising out of personal injury, death, or property damage” under the particular meaning and Texas courts historical interpretation of the phrase, his claim was not a Products Liability cause of action underTex. Civ. Prac. & Rem. Code Ann.§82.001(2).


    The court stated emphatically that, in the context of a commercial transaction, damage to the packaged masa could be “reasonably contemplated” by both parties in the event the bags were defective. Because Huron’s claim (economic loss) is for damages to a finished product caused by a defective component, there is no damage to “other property.”Pugh v. Gen. Terrazzo Supplies, Inc., 243 S.W.3d 84, 92 (Tex. App. - Houston [1st Dist.] 2007, pet. denied).


    Synopsis: Because Mrs. Huron’s claim was for damages to the packed masa due to a defective component (ie; the plastic bags) there was no damage to “other property.” The damaged product was a result of the defective packaging; the product wasn’t damaged in and of itself. Damages to a product because of an alternative defective component are brought under a breach of contract claim, not a Products Liability claim – even if the end result produces a damaged product due to said defective component.


    Therefore, the appellee (Mr. Huron) was entitled to recover his resulting economic loss which included both direct and consequential loss. The court characterized the damage to the masa as an indirect, consequential loss.

    Make sure your attorney knows all the nuances of Product’s Liability, and how to properly approach your claim for product damages.


    Setterberg Law Office

    www.SetterbergLawOffice.com

    randy@setterberglawoffice.com



    Randy
    Jun 04, 2016
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