Acme Corporation, a citizen of State X, manufactures widgets. Acme widgets are distributed to retailers throughout the United States by Widgets, Inc., a citizen of State Y. Plaintiff, a citizen of State Y, purchased an Acme widget from a retailer in her hometown. Shortly after purchasing the widget, Plaintiff was seriously injured when the widget overheated and exploded.
Plaintiff sued Acme in the federal district court located in State Y, properly invoking the court’s diversity jurisdiction. Plaintiff sought $100,000 in damages on two state-law tort theories: (1) failure to warn, and (2) sale of a dangerously defective product.
Under the applicable state law, a manufacturer’s duty to warn is fully discharged if a proper warning is affixed to the product at the point of delivery to its distributor. A distributor’s duty is fully discharged if the warning is affixed at the point of delivery to the retailer. State law further pro-vides that both manufacturers and distributors may be held separately and strictly liable for selling a “dangerously defective” product, even if they have given adequate warning of the risks. Plaintiff’s complaint alleged both that Acme had failed to affix a warning label to the product and that Acme’s widgets had a dangerous propensity to overheat.
After extensive discovery, Acme filed a motion for summary judgment on the failure to warn claim. It attached to its motion the supporting affidavits of employees of both Acme and Widgets attesting that a proper warning label had been affixed to the widget both at the time of delivery to Widgets and at the time of distribution to the retailer who sold the widget to Plaintiff. While conceding that the warning label usually provided with the product did give adequate notice of the danger of overheating and explosion under certain circumstances, Plaintiff nevertheless contested the motion for summary judgment with her own affidavit, in which she stated that there had been no warning label affixed to her widget when she purchased it from her local retailer.
The federal court granted Acme’s motion for summary judgment on the failure to warn claim and entered judgment on that claim against Plaintiff. No appeal was taken. Soon afterward, Acme and Plaintiff settled the dangerous defect claim for an undisclosed amount.
Shortly after the conclusion of the federal litigation, Plaintiff filed suit in the state court of State Y, asserting against Widgets, Inc., the same two claims she had asserted against Acme in federal court: failure to warn and sale of a dangerously defective product. Widgets answered and then moved to dismiss on grounds of claim and issue preclusion.