## Facts

- Iomega Corporation, a Delaware corporation, manufactured “Zip” computer storage drives.
- Six purchasers—Jason Rinaldi, Barbara Fout, Dale Fout, Richard Nicholson, Paul Nelson, and Adam Schwam—filed a putative class action on behalf of themselves and others similarly situated.
- Plaintiffs alleged the Zip drives suffered from a defect commonly called the “Click of Death,” which could damage disks and make stored data unreadable; plaintiffs also alleged the problem could transfer when an affected disk was used in another drive.
- Plaintiffs sought to represent purchasers of Zip drives from January 1, 1995 forward.
- The complaint asserted four counts: (1) breach of the implied warranty of merchantability, (2) negligent design and manufacture, (3) violation of the Delaware Consumer Fraud Act based on alleged misrepresentations in advertising, and (4) negligent failure to warn.
- Iomega included a written disclaimer of the implied warranty of merchantability inside the Zip drive packaging.
- Plaintiffs alleged the disclaimer was not “conspicuous” under U.C.C. § 2-316(2) because a buyer could not see it until after purchase, when the box was opened.
- Iomega moved to dismiss the complaint, arguing (among other grounds) that the in-box disclaimer barred the implied-warranty claim.

## Issues

1. Whether a disclaimer of the implied warranty of merchantability placed inside product packaging can be treated as conspicuous and effective under U.C.C. § 2-316(2) on a motion to dismiss when buyers allegedly could not discover it until after purchase.
2. Whether the complaint stated a claim for breach of the implied warranty of merchantability notwithstanding Iomega’s asserted disclaimer.
3. Whether the remaining tort and Delaware Consumer Fraud Act claims were pleaded sufficiently to survive dismissal under Delaware pleading standards.

## Decision

- The court denied Iomega’s motion to dismiss the implied-warranty-of-merchantability claim to the extent it relied on the in-box disclaimer as a complete bar at the pleading stage.
- The court held that, taking the allegations as true, it could not determine as a matter of law on a motion to dismiss that the inside-the-box disclaimer was conspicuous and part of the parties’ bargain.
- The court granted the motion in part and denied it in part as to the non-U.C.C. counts, permitting some aspects to proceed while dismissing or narrowing others based on pleading and legal-sufficiency limits.

## Legal Principles

- Under U.C.C. § 2-316(2) (as adopted in Delaware), a written disclaimer of the implied warranty of merchantability must mention “merchantability” and must be “conspicuous.”
- “Conspicuous” is evaluated in context; whether a reasonable buyer ought to have noticed the disclaimer may depend on when and how the term is presented, including whether it is discoverable only after purchase.
- At the motion-to-dismiss stage, the court accepts well-pleaded allegations as true and does not resolve fact-dependent questions about notice, assent, and presentation of contract terms.
- A seller’s reliance on post-purchase, in-the-box terms may raise questions about whether the term became part of the parties’ agreement; those questions commonly cannot be settled on the pleadings alone.

## Conclusion

In this putative class action over allegedly defective Zip drives, the Delaware Superior Court refused to dismiss the implied-warranty-of-merchantability claim based solely on Iomega’s inside-the-box disclaimer, reasoning that the disclaimer’s conspicuousness and its status as part of the bargain could not be decided as a matter of law on a motion to dismiss; the court otherwise granted the dismissal motion in part and denied it in part on the remaining claims.


Rinaldi v. Iomega Corporation, 41 U.C.C. Rep. Serv. 2d 1143 (1999)