Two Recent Product Liability Decisions from Farm Country

For those of you, like me, living in rural farming communities this time of year, you are accustomed to watching the wheat turn golden, the canola’s bright yellow flowers bloom, the corn go from knee high at the Fourth of July to over your head, and the combines and tractors exit the barn.

These modern machines are truly impressive. And expensive. A new harvester can cost upwards of a million dollars. And a large tractor costs half a million or more. Compare that to a new Ford F-150, prices starting around $35k, and you can begin to see why product liability and warranty law for these machines is incredibly important for farmers, distributors, and manufacturers. Two recent cases highlight this fact.

The Eighth Circuit recently decided Secura Insurance Co. v. Deere & Co., ruling in favor of Deere & Company on an insurance subrogation claim. The basic facts are simple enough. A farm implement dealer purchased two 2018 model year John Deere tractors. Approximately one year later, both tractors caught fire. The implement dealer’s insurer paid the claim. The insurer then filed a subrogation action against John Deere, claiming breach of warranty under both design defect and manufacturing defect theories, arguing that engine compartment fire shields should have been installed on the tractors. The district court rejected the claims, and the Eighth Circuit affirmed.

As to design defect, the court concluded Deere’s warranty against defects in “material or workmanship” did not cover design defects—such as the alleged defect in failing to include fire shields as standard equipment in 2018 models. Looking to dictionaries and case law from Minnesota and elsewhere, the court concluded that, “relating to defective products, flaws in materials and workmanship refer to mistakes made during the construction or assembly of a product, while defects in design refer to inadequacies in the plans used to construct or assemble a product.” In other words, design defects are not defects in “material or workmanship.”

The court then rejected the manufacturing-defect claim, reasoning that “a manufacturing defect arises when the actual product does not match the product's intended design,” but finding that the insurer had “failed to point to any evidence showing Deere intended the 2018.5 RX tractors to have engine side shields.” Even if “[f]rom the standpoint of most farmers—Deere’s customers—the tractors may have been poorly designed,” “the decision to allow Deere to disclaim implied warranties is a policy matter for the legislative branch outside the role of [courts].”

The second case is the Fifth Circuit’s First v. Rolling Plains Implement Co., Inc. Defendant Rolling Plains sold a used combine manufactured by AGCO Corporation to John Craig First, who later sued the manufacturer and seller, among others, asserting that he was misled as to the combine’s quality and condition. Specifically, a Rolling Plains employee had told First that the combine was part of AGCO Corporation’s Certified Pre-Owned Program, that it was “vigorously inspected” and “Darned Near Good As New,” that the Combine had roughly 400 hours on it, and that it had “never been to the field”—all false claims.

The Fifth Circuit affirmed the dismissal of the fraud claims against AGCO Corporation, reasoning “we cannot impute Handley’s statements to AGCO Corporation,” because Handley worked for Rolling Plains, a different company and legal entity, and “Corporations are distinct legal entities, and generally one corporation will not be held responsible for the acts of another.”

The court also rejected First’s warranty claims against AGCO Finance, concluding that Rolling Plains—not AGCO—made the statements about the combine’s history and quality. And First provided no evidence that Rolling Plains had actual or apparent authority to act as AGCO’s agent.

These cases are good reminders of at least two lessons. First, language matters, whether in an insurance contract or an express warranty. The specific terms of a contract or warranty control. Second, the law of agency is important. Just because an individual or entity is selling a company’s product does not make them an agent of the company, and not every statement—or misstatement—from that seller can be imputed to the manufacturer.