When the court is reviewing a district judge's interpretation of state law, the court gives "considerable weight" to the interpretation of the judge. Accordingly, if a federal district judge has reached a permissible conclusion upon a question of local law, the court should not reverse even though it may think the law should be otherwise.
Plaintiffs Duane Martin and Robert Rick were commercial farmers in Michigan. In August of 1972, Martin and Rick placed independent orders for cabbage seed with the defendant, Joseph Harris Co., Inc., a national producer and distributor of seed. The order form supplied by the defendant included a clause disclaiming the implied warranty of merchantability and limiting buyers' remedies to the purchase price of the seed. Neither of the plaintiffs read the clause nor did the salesman make any attempt either to point it out or to explain its purpose. After placing their order, the plaintiffs have received a catalog from the defendant notifying them that the cabbage seeds to be supplied will no longer be subjected to a “hot water” treatment – a treatment that was used to eradicate a fungus that causes the affected plants to rot before maturing. In April and May of 1973, the plaintiffs have planted their cabbage crop and thereafter, the defendant had notified them that the seed lot used to fill the plaintiff’s order was infected with fungus. The fungus has destroyed a large portion of the plaintiffs’ cabbage crop and in August 1075, they have brought an action against the defendant. The district court has ruled that the disclaimer of warranty and limitation of liability clause found in the order form signed by the plaintiffs was unconscionable and, therefore, unenforceable. A jury was impaneled to try plaintiffs' legal liability theories of negligence and breach of implied warranty. Following a six-day trial the jury returned a verdict against plaintiffs on both theories; however, the district court granted the plaintiffs' motion for a judgment notwithstanding the verdict on the breach of implied warranty question. A second jury impaneled to hear the issue of damages returned verdicts in favor of Martin in the amount of Thirty-six Thousand ($36,000.00) Dollars and in favor of Rick in the amount of Sixteen Thousand ($16,000.00) Dollars.
Did the trial court err in holding the disclaimer and limitation clause unconscionable under U.C.C. § 2-302? Furthermore, did it err in granting the plaintiffs' motion for a judgment notwithstanding the verdict on the breach of implied warranty question?
The Court held that the producer's warranty disclaimer and limitation of remedy was properly held to be unconscionable under U.C.C. § 2-302 of Michigan's version of the Uniform Commercial Code, Mich. Comp. Laws Ann. § 440.1101 et seq. The court concluded that the district court properly considered the defendant's economic strength, the fact that the defendant did not make the farmers aware of changes in the order form altering significant statutory rights, the defendant's discontinuance of hot water treatment for the cabbage seed, and the latent disease in the cabbage seed. The court also held that the proper measure of damages as applied by the district court was the difference in value between the cabbage crops actually raised by the farmers and the cabbage crops that they would have raised if the seeds had not been diseased. Regarding the grant of the district court with a judgment notwithstanding the verdict to the plaintiffs, the Court held that the district court applied the correct standard of law in setting aside the jury verdict. In evaluating a motion for a judgment notwithstanding the verdict, the fundamental principle is to keep at a minimum the interference with the jury. This principle takes root in the applicable standard which is exactly the same as the standard for granting a directed verdict: whether, without weighing the credibility of the witnesses or the weight of the evidence, reasonable persons could have reached only one verdict. The court ruled that district court properly granted the judgment notwithstanding the verdict in favor of the farmers on the implied warranty issue since the standard is to view the evidence in the light most favorable to the party who received the jury verdict.