## Facts

- A Kentucky veterinarian and horse owner used “Rhinomune,” a Norden-manufactured vaccine marketed as protecting pregnant mares from rhinopneumonitis-related abortions.
- After inoculation, several of the plaintiff’s broodmares aborted their foals.
- The plaintiff brought a federal diversity action alleging breach of express warranty and implied warranty under Kentucky’s UCC.
- The case centered on whether Norden’s advertising and representations about the vaccine’s efficacy created an express warranty.
- A jury awarded the plaintiff $40,500, representing the value of the lost foals.
- The trial court’s instructions did not require the jury to find (i) reliance as an element of express warranty or (ii) causation as a prerequisite for consequential damages.

## Issues

1. Under Kentucky’s UCC § 2-313, must a plaintiff prove reliance on the seller’s affirmation of fact or promise to recover for breach of express warranty?
2. Did the trial court err in instructing on consequential damages by failing to require causation and by misstating the statutory measure of breach-of-warranty damages under Kentucky’s UCC?
3. Was the evidence sufficient to sustain liability on an implied-warranty theory as tried and submitted?

## Decision

- The Sixth Circuit vacated the $40,500 judgment and remanded.
- It held that, under Kentucky law as predicted by the federal court, reliance is a necessary element of an express-warranty claim, and the jury should have been instructed accordingly.
- It held the damages instructions were erroneous because they did not adequately require proof that the breach proximately caused the claimed consequential losses and did not properly explain the UCC framework for damages.
- It concluded the implied-warranty theory lacked an adequate evidentiary basis on the record and did not sustain the verdict as an alternative ground.

## Legal Principles

- In a diversity case, federal courts apply state substantive law and must predict how the state’s courts would resolve unsettled state-law questions.
- Under Kentucky’s UCC § 2-313, an express warranty requires that the seller’s affirmation of fact or promise become part of the “basis of the bargain,” which entails buyer reliance (often presumed but subject to rebuttal).
- Advertisements and catalog statements can create express warranties when they assert facts (not mere opinion or puffery) and are relied upon in the purchase decision.
- Under Kentucky’s UCC damages provisions, direct damages generally reflect the difference between the value as warranted and as accepted, while consequential damages require proof of proximate causation and must be separately and correctly explained to the jury.

## Conclusion

The Sixth Circuit set aside the warranty verdict because the jury was not properly instructed on reliance for express warranty or on causation and the statutory measure of consequential damages, and because the implied-warranty claim was not adequately supported as tried; the case was remanded for further proceedings with correct instructions.


Overstreet v. Norden Laboratories, Inc., 669 F.2d 1286 (6th Cir. 1982)