Reference no: EM131657967

Question: James Bainbridge and Daniel Fingarette formulated a plan for a three-dimensional photography business through four independent companies. In January 1988, Bainbridge met with officials of the Minnesota Mining & Manufacturing Company (3M) to seek assistance with the three-dimensional film development process. In mid-1989, 3M formulated a new emulsion that it claimed would work well with the film development process. 3M apparently understood that this emulsion would be used in combination with a backcoat sauce that 3M had also developed. In December 1989, 3M began selling the new emulsion and backcoat sauce to two of the claimants' four companies, but not to the two others. After Bainbridge and Fingarette began using 3M's new emulsion, they encountered a problem with the film development process: the photographs faded, losing their three-dimensional effect. By early 1990, the claimants experienced a significant decline in camera sales. 3M eventually solved the problem, but the claimants' business ultimately failed.

The four companies established by Bainbridge and Fingarette sued 3M in a Texas trial court for breach of express and implied warranties. They argued that the photographic fading was caused by the incompatibility of 3M's new emulsion and its old backcoat sauce. The jury concluded that 3M breached an express warranty for the emulsion and implied warranties for the emulsion and the backcoat sauce. Applying Minnesota law, the trial courtawarded the four firms $29,873,599 in lost profits. An intermediate appellate court upheld this award. The Supreme Court of Texas withheld final judgment and certified the following question to the Supreme Court of Minnesota: "For breach of warranty under [Minnesota's version of UCC section 2-318], is a seller liable to a person who never acquired any goods from the seller, directly or indirectly, for pure economic damages (e.g., lost profits), unaccompanied by any injury to the person or the person's property?" This question arose because two of the plaintiff companies, while suffering losses due to 3M's breaches of warranty, had not dealt directly with 3M. How did the Supreme Court of Minnesota answer the certified question?