## Facts

- Patty Precision Products Co., a military contractor, obtained a federal contract in 1974 to manufacture bomb racks and needed vertical machining centers to produce component side plates.
- Brown & Sharpe Manufacturing Co. supplied three “hydrotape” vertical machining centers equipped with General Electric Co. numerical controls, delivered in 1975 (one later replaced due to a cracked base).
- The machines allegedly performed poorly from installation and required frequent repairs; defendants extended warranties through June 1977.
- Patty Precision sued in diversity in 1978 asserting fraud and warranty theories; after prior appellate proceedings, the remaining theory for trial against GE was breach of implied warranty (including merchantability) under Oklahoma law, based on problems attributed to GE’s controls.
- GE and Brown & Sharpe had a separate supply agreement containing a warranty disclaimer limiting GE’s warranties, but Patty Precision was not a party to that agreement, was not given the disclaimer, and had no notice of it when acquiring the machines.
- At trial, the district court admitted GE’s upstream disclaimer and instructed the jury in a manner permitting consideration of that disclaimer when assessing GE’s implied-warranty liability to Patty Precision.
- The jury found for GE on the implied-warranty claim; the court denied Patty Precision’s motion for a new trial and awarded GE $170,421.54 in attorney’s fees.

## Issues

1. Whether, under Oklahoma UCC law, a manufacturer’s warranty disclaimer in an upstream contract with an intermediary can negate implied warranties as to a downstream purchaser who lacked notice of the disclaimer.
2. Whether admitting the upstream disclaimer into evidence and instructing the jury to consider it constituted prejudicial error requiring a new trial on the implied-warranty claim against GE.
3. Whether an attorney’s fee award to GE could stand when the defense judgment supporting “prevailing party” status was reversed.

## Decision

- The Tenth Circuit reversed the judgment for GE on the implied-warranty claim and remanded for a new trial.
- The court held GE’s upstream disclaimer to Brown & Sharpe was not effective against Patty Precision because it was not communicated to Patty Precision in a legally effective manner.
- The district court erred by admitting the upstream disclaimer and by giving jury instructions that allowed the jury to treat the disclaimer as relevant to GE’s liability to Patty Precision.
- The errors were prejudicial because they risked misleading the jury on a central liability question.
- The attorney’s fee award to GE was reversed because it depended on GE’s defense verdict.

## Legal Principles

- Under Oklahoma UCC law, a disclaimer of implied warranties is ineffective against a buyer unless it is provided in a conspicuous writing and communicated to that buyer.
- A manufacturer cannot rely on an undisclosed upstream disclaimer (between manufacturer and intermediary) to defeat implied-warranty claims of a downstream purchaser who lacked notice of the disclaimer.
- Evidence that is legally inoperative against a party may be irrelevant and misleading; admitting such evidence, combined with instructions permitting its consideration on liability, can require a new trial.
- When a judgment establishing prevailing-party status is reversed, a fee award dependent on that status cannot stand.

## Conclusion

The Tenth Circuit ordered a new trial on Patty Precision’s implied-warranty claims against GE because GE’s upstream disclaimer, unknown to Patty Precision, could not bar those claims and should not have been presented to the jury; the related attorney’s fee award to GE was reversed as a consequence.


Patty Precision Prods. Co. v. Brown & Sharpe Mfg. Co., 846 F.2d 1247 (10th Cir. 1988)