Free Trial Brief - District Court of Arizona - Arizona

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GREENBERG TRAURIG, LLP
ATTORNEYS AT LAW SUITE 700 2375 EAST CAMELBACK ROAD PHOENIX, ARIZONA 85016 (602) 445-8000

Steven M. Weinberg, SBN 016817, [email protected] Brian J. Schulman, SBN 015286, [email protected] Kimberly A. Warshawsky, SBN 022083, [email protected] Attorneys for Plaintiff Awareness Corporation and Third Party Defendants Allcock and Schmidt IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Awareness Corporation, Plaintiff, Group Vision International, L.L.C., et al., Defendants. And related cross claims and third party actions. Plaintiff Awareness Corporation ("Awareness") hereby submits its bench memorandum regarding the distributor defendants' ("Defendants") negligent misrepresentation claim against it. As it now exists, the negligent misrepresentation claim survives only on the basis that Awareness did not include the ingredient senna on its Experience label until learning that the ingredient actually was in the formula. Awareness had no prior reason to believe that its label was inaccurate. Thus, the salient contested issue is whether, under these circumstances, Awareness breached a duty to the Distributor Defendants. It did not. No. CV03-2024-PHX-DGC PLAINTIFF AWARENESS CORPORATION'S BENCH MEMORANDUM NO. 8 RE: ALLEGED NEGLIGENT MISREPRESENTATION

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2375 EAST CAMELBACK ROAD, SUITE 700 PHOENIX, ARIZONA 85016 (602) 445-8000

Arizona recognizes the tort of negligent misrepresentation, as defined by RESTATEMENT (SECOND) OF TORTS § 552 (1977). Haisch v. Allstate Ins. Co., 5 P.3d 940, 944 (Ariz. App. 1977). Section 552 provides, in relevant part: (1) One, who, in the course of his business . . . or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. RESTATEMENT (SECOND) OF TORTS § 552 cmt. e (emphasis added). The maker of

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representations supplied for the guidance of others has two separate duties to the recipient of information. First, the maker of a representation is obliged to speak honestly and in good faith. Id. at cmt. a. Second, a defendant is liable for negligent misrepresentation if, and only if, he has failed to exercise the care or competence of a reasonable man. Id. at cmt. e. Awareness did not breach their duty of honesty. Awareness honestly communicated the manufacturer's exact label information. Additionally, Awareness had no reason to believe that the label was inaccurate. misrepresentation. The product was commercially successful and there were no complaints about the product that would have indicated any Therefore, Awareness honestly represented the supplement's ingredients in good faith and without any doubt as to their accuracy. Arizona law allows Awareness to rely on the manufacturer's information. "In the absence of circumstances putting a reasonable person on inquiry, a person is justified in relying on a misrepresentation of a material fact without making further inquiry." St. Joseph's Hosp. & Med. Ctr. v. Reserve Life Ins. Co., 742 P.2d 808, 817 (Ariz. 1987) (holding that a hospital, based on its own information and intelligence, reasonably relied on an insurance company's negligent misrepresentation that an insurance policy was

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effective; reasoning that the hospital had no reason to believe that the information was inaccurate). When Awareness was put on notice that its product contained the unlisted ingredient senna, it immediately changed the product label to include the omitted ingredient. Awareness fulfilled its obligation to honestly communicate information. Awareness also acted with reasonable care and competence. reasonableness is case specific and dependent upon circumstances. Generally, RESTATEMENT

(SECOND) OF TORTS § 552 cmt. e. The Restatement offers as guidance that "[w]hen the information concerns a fact not known to the recipient, he is entitled to expect that the supplier will exercise that care and competence in its ascertainment which the supplier's business or profession requires." Id. Here, Awareness is a distributor and not a manufacturer. The manufacturer supplied Awareness with a certificate of the product's quality. Awareness had every right to rely upon the manufacturer's information. Upon learning of the omission, with reasonable care and competence, Awareness fixed the label. There is no legal duty imposed on Awareness by law, rule or regulation that required it as a distributor to independently ascertain the ingredients of the products manufactured by a third party manufacturer. None of the Distributor Defendants has shown any damage caused by the alleged misrepresentation.

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2375 EAST CAMELBACK ROAD, SUITE 700 PHOENIX, ARIZONA 85016 (602) 445-8000

RESPECTFULLY SUBMITTED this 8th day of August, 2005. GREENBERG TRAURIG, LLP By: /s/ Kimberly A. Warshawsky Steven M. Weinberg Brian J. Schulman Kimberly A. Warshawsky Attorneys for Awareness Corporation and Third Party Defendants Allcock and Schmidt

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2375 EAST CAMELBACK ROAD, SUITE 700 PHOENIX, ARIZONA 85016 (602) 445-8000

CERTIFICATE OF SERVICE I hereby certify that on August 8, 2005, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for filing and transmittal s of a Notice of Electronic Filing to the following CM/ECF registrants: Curtis D. Drew, Esq. 2342 North Pima Road Scottsdale, Arizona 85257-2405 [email protected] Attorney for Defendant Group Vision International, L.L.C. G. Gregory Eagleburger, Esq. The Eagleburger Law Group 2999 North 44th Street, Suite 303 Phoenix, Arizona 85018 [email protected] Attorneys for Distributor Defendants I hereby certify that on August 8, 2005, I served the attached document by facsimile and United States mail on the following, who are not registered participants of the CM/ECF System:

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/s/ J. David Smith

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