Summary of a Recent
Judicial Development in
Commercial Transactions

Depositors Entitled to Bring Products
Liability Suit Against Grain Bank

Steve White
National AgLaw Center Graduate Assistant

Summary of Decision

In Duxbury v. Spex Feeds, Inc., 681 N.W.2d 380 (Minn. Ct. App. 2004), the Minnesota Court of Appeals held that producers who had made deposits to a grain bank were able to file a products liability claim against the grain bank.

Background

The Duxburys were farmers who raised corn and hogs. Duxbury v. Spex Feeds, 681 N.W.2d at 384. Defendant Spex Foods, Inc. was a company that produced and sold feed and feed additives and operated a grain bank at which farmers could deliver corn and "receive a proportional share of the corn commingled in the bank." Id.

The Duxburys delivered grain to Spex to the grain bank in 1998 and 1999 and made arrangements with Spex to mix and deliver hog feed made from their share of corn in the grain bank. See id. Spex manufactured the hog feed by combining ground corn with soybean meal and other medicines and supplements. See id. The price paid by the Duxburys covered all components of the hog feed, minus the price for the corn. See id. They also paid an additional fee for the grinding, mixing, and delivery of the feed. See id.

The Duxburys' hogs experienced gestational problems caused by toxins in the hog feed they purchased from Spex. See id. Consequently, they brought an action for products liability and breach of implied warranty against Spex, contending that Spex did not take proper care in controlling the moisture level of grain in the bins and that it did not take the necessary steps to check for mold or toxins in the grain. See id. The jury ruled in favor of the Duxburys' and Spex appealed that judgement to the Minnesota Court of Appeals. See id.

Arguments

Spex argued that the breach of implied warranty claim was precluded because the Code was inapplicable. See id. at 388n.2. They asserted that the claim was precluded because a "sale," as defined under the Code had not occurred. See id. Based on that argument, Spex further argued that the claims for products liability and breach of implied warranty should be merged, thereby precluding the Duxburys' products liability claim. See id.

Analysis and Holding

After determining that there was a valid sale and that the Code applied so that the implied warranty claim was not precluded, the court examined Spex's argument that the products liability claim should be precluded. See id. at 387. It explained that for there to be a products liability claim, the product in question must have left the producer's possession in a defective condition and caused harm to the consumer. See id.

The court noted that Spex was in the business of producing and providing animal feed to farmers and that testing of the hog feed showed that the feed contained toxins harmful to hogs. See id. at 384, 388. The court stated that "because products liability is based on manufacturing flaws and negligence is not incorporated into this theory, it cannot be merged with an implied warranty claim." Id. at 388 n.2. The court therefore held that the Duxburys' claim for products liability was not precluded. See id. at 388.

The case was decided on June 15, 2004; this summary was posted Feb. 16, 2005.