Section 2-607(3)(a) of the Uniform Commercial Code, as incorporated into Illinois law as 810 ILCS 5/2-607(3)(a), provides that once a tender of goods has been accepted by the buyer, and a problem with the goods is discovered, “the buyer must within a reasonable time after he discovers or should have discovered any breach [of any express or implied warranty] notify the seller of the breach or be barred from any remedy. . .”

     This timely pre-suit notice made directly by the buyer to the seller is not only standard commercial practice but is an essential element of the buyer’s cause of action for breach of warranty. Branden v. Gerbie, 62 Ill. App. 3d 138, 140 (1st Dist. 1978).

     The notice requirement of section 2-607(3)(a) “generally requires that the plaintiff contact the seller directly and inform the seller of the problems incurred with a particular product that he purchased.” Maldonado v. Creative Woodworking Concepts, 296 Ill. App. 3d (3d Dist. 1998), citing Connick v. Suzuki Motor Co. 174 Ill. 2d 482 (1996).

     “If the problem relates to an injury, the plaintiff must notify the seller that an injury has occurred.” Id., citing 810 ILCS 5?2-607, Note 5.

The Connick Exceptions.

     In the Connick case, cited above, the Illinois Supreme Court discussed two narrow exceptions to the notice requirement. The court explained that “[d]irect notice is not required when (1) the seller has actual knowledge of the defect of the particular product, (citing Malawy v. Richards Manufacturing Co., 150 Ill. App. 3d 549 (5th Dist. 1986)) or (2) the seller is deemed to have been reasonably notified by the filing of the buyer’s complaint alleging breach of UCC warranty, (citing Perona v. Volkswagen of America, Inc., 276 Ill. App. 3d 609 (1st Dist. 1995))” 174 Ill. 2d at 492.

     Narrowing these two exceptions even further, the court held that the first exception, i.e. actual knowledge of the defect on the part of the seller that would excuse the buyer from providing notice of the defect, is only applicable when the seller “is somehow apprised of the trouble with the particular product purchased by a particular buyer.’ 174 Ill. 2d at 494, (emphasis added).

     Regarding the second exception, i.e. notice by lawsuit, the court narrowed the exception to suits filed by “a consumer plaintiff who suffers personal injury.” 174 Ill. 2d at 495. Accord, Goldstein v. G.D. Searle & Co., 62 Ill. App. 3d 344 (1st Dist. 1978).

The Actual Knowledge Exception in the Illinois Federal Courts

     The second exception noted above, i.e, notice by lawsuit, is fairly straightforward in its application. Either the buyer’s complaint involves a personal injury, or it does not. The first exception however – actual knowledge of the defect on the part of the seller – is more nuanced, and the federal courts in Illinois have not been in agreement regarding the parameters of this exception.

     For example, Stella v. LVMH Perfumes & Cosmetics USA, Inc., 564 F. Supp. 2d 833 (N.D. Ill. 2008), involved a claim against a lipstick manufacturer whose product allegedly exposed the buyer to dangerous levels of lead. A public report by an industry group reveled that the seller’s lipstick contained many times the amount of lead that the U.S. Food and Drug Administration had established as the maximum safe lead level for food. The buyer claimed that she would not have purchased the lipstick had the seller warned of the lead content in the product. The buyer sustained no present personal injury but sought the cost of medical monitoring for the future. She sued the seller under several theories including breach of the implied warranty of merchantability. The seller moved to dismiss on the grounds that the buyer had failed to provide pre-suit notice of their claim.

     The plaintiff-purchaser invoked the actual knowledge exception to the notice requirement, claiming that the aforementioned industry report was sufficient to put the seller on notice of the defect. At the pleading stage of the case the court said “[w]hen taken as a whole and in the best light to plaintiff, the complaint sufficiently alleged [that the manufacturer] had actual knowledge of the presence of lead in the lipstick . . . This is enough to fit the claim under the first identified exception to the direct notice requirement.” Stella at 837.

     Regarding the second exception – the personal injury exception – the court added that “plaintiff’s claim for medical monitoring is a form of personal injury claim,” Id., citing cases.

     A similar result occurred a year earlier in the case of Hedges v. Earth, Inc., 2015 U.S. Dist. LEXIS 52318 (N.D. Ill. April 21, 2015), a case involving a shoe that incorporated a “negative heel” which, according to the seller, provided numerous health benefits including improved posture, reduced joint stress and stronger core muscles. The plaintiff bought a pair of the Earth Shoes but subsequently found out from numerous studies and scientific research that the seller’s claims of health benefits were unfounded. The buyer’s claims against the seller included an action for breach of express warranty. No pre-suit notice had been given by the buyer to the seller before suit was filed.

     The district court began its analysis by noting the general rule that “pre-suit notice is an essential element of a breach of warranty claim, and the absence of such notice results in dismissal.” Hedges, 2015 U.S. Dist. LEXIS 52318 at *3, (citing cases).

     To excuse his lack of pre-suit notice plaintiff-buyer invoked the “actual knowledge” exception to the notice requirement, citing the various news stories and scientific studies that contradicted the seller’s health claims. The seller countered by arguing that “news stories and studies concerning general complaints related to a product line do not provide the specific knowledge of a particular breach as required under Connick” Id., at *4.

    While the district court stated that “the actual knowledge exception is not satisfied just because a company is aware of third-party reports criticizing a product line [and that] ‘even if a manufacturer is aware of problems with a particular product line, the notice requirement of Section 2-607 is satisfied only where the manufacturer is somehow apprised of the trouble with a particular product purchased by a particular buyer’” Id., at*5, quoting Connick, 174 Ill. 2d at 494.

     The court continued by saying that “this conclusion comports with common sense; even though there are public records about a general problem with a product line, a seller has no way of knowing whether a particular product actually suffers from the defect until the buyer provides notice of the alleged defect.” Id.

     Despite these correct pronouncements of the law the court held that the buyer “has alleged a set of facts that, if true, demonstrate that [the seller] had actual knowledge of the particular defect with the particular shoe that [plaintiff] purchased, Id., at *6,7.

     According to the facts in the complaint, the court concluded, the seller “must have known that the particular pair of shoes it sold to [the plaintiff] was defective.” Id., at *7.

     The court’s rationale for this conclusion was that that since the claimed “defect” was allegedly false advertising, rather than something to do with the particular pair of shoes purchased by the plaintiff, the “defect” claimed applied equally to each and every pair of the same model of shoe sold by the defendant. Id., at *8.

     In Flynn v. FCA US LLC, 2016 U.S. Dist. LEXIS 130614 (S.D. Ill. Sept. 23, 2016), the Southern District of Illinois, citing the Stella case, supra, refused to dismiss a breach of warrant claim at the pleading stage for lack of pre-suit notice because the claimed defect impacted the entire product line rather than the individual product purchased by the plaintiff.

     The broader view of the actual knowledge exception to the notice rule, as illustrated in the above-cited cases, has been criticized and rejected in a number of subsequent district court opinions. For example, in Muir. NBTY, Inc., 2016 U.S. Dist. LEXIS 129494 (N.D. Ill. Sept. 22, 2016), a case involving a dietary supplement that allegedly bore an inaccurate statement of its contents on its label, the buyer claimed that he was excused from his pre-suit notice obligation because the seller was aware of the misleading label based upon knowledge of test results that had shown that the product was far less potent than advertised. Since the entire product line allegedly suffered from the same mislabeling, the buyer, citing the Stella and Hedges cases, supra, argued that the seller must have actual knowledge of the claimed defect. Muir, 2016 U.S. Dist. LEXIS 129494 at *32.

     Rejecting this argument, the district court said that “this kind of generalized knowledge is not sufficient to excuse the pre-suit notice requirement.” Id. In order for the buyer to be excused from providing notice, the seller must be “’somehow apprised of the trouble with the particular product by a particular buyer.’” Id., quoting Connick, supra, 174 Ill. 2d at 494.

     In Block v. Lifeway Foods, Inc., 2017 U.S. Dist. LEXIS 143828 (N.D. Ill. Sept. 6, 2017), the district court again rejected the “entire product line” rationale that had been used in Stella and similar cases to excuse pre-suit notice, saying that it “is not bound by those rulings and, respectfully, believes that they run contrary to the principles outlined in Connick. . . “ Block, 2017 U.S. Dist. LEXIS 143828 at *18. See also, Anthony v. Country Life Mfg., LLC, 70 F. App’x 379, 384 (7th Cir. 2003).

      Lastly, another court in the Northern District of Illinois rejected the rationale of the Stella and Hedges decisions, supra, saying that “numerous cases have declined to follow these decisions, finding them either inconsistent with or completely contrary to Illinois law,” Rodriguez v. Ford Motor Co., 596 F. Supp. 3d 1050 at 1055 (N.D. Ill. 2022), citing Block and Muir, supra.

     The Rodriguez opinion concludes its strict interpretation of the actual knowledge exception by stating that ‘[t]his Court agrees with the Block and Muir courts – Illinois law requires more than [the buyer’s] general allegation that [the seller] had knowledge of the defect in the. . . product line.” Id. Accord, Bojko v. Pierre Fabre USA, Inc., 2023 U.S. Dist. LEXIS 110443 (N.D. Ill June 27, 2023) (likewise finding the Stella and Hedges decisions to be “inconsistent with Illinois law”.

The Andrews case.

     The first exception to the notice rule, i.e. actual knowledge of the defect on the part of the seller, was the subject of a recent decision by the First District of the Appellate Court of Illinois in the case of Andrews v. Carbon on 26th, LLC, 2024 IL App (1st) 231369, leave to appeal granted, Case Nos. 130862, 130863 (consolidated) sub nom. Martin Produce, Inc. v Jack Tuchen Wholesale Produce, Inc. (In re Andrews), 2024 Ill LEXIS 587 and 667 (2024).

     As is more fully explained below, the Andrews case was a commercial dispute between a distributor (the buyer in this case), and a group of wholesalers (the sellers), who had sold allegedly contaminated produce (cilantro) to the distributor, who in turn had sold the produce to a group of restaurants which were named defendants in a series of personal injury suits filed by sickened patrons. 

     The somewhat complicated history of the Andrews case arose from an outbreak of E. coli bacterial that, as mentioned, was traced to contaminated cilantro served to customers of the defendant, the operator of two fast-casual Mexican restaurants. The contaminated cilantro had sickened a number of the restaurants’ customers who brought personal injury claims against the defendant-restaurants along with the distributor and wholesalers of the cilantro. The claims against the restaurants were settled on the eve of trial, and eventually all of the plaintiffs’ claims against the distributor and wholesalers were likewise settled. 

      What remained were the contribution claims between the distributor and the wholesalers, seeking recovery of monies paid to the customers in settlement of their personal injury claims. The distributor’s contribution action alleged a breach of the implied warranty of merchantability on the part of the wholesalers for selling the contaminated cilantro. In their defense against the distributor’s warranty claim the wholesalers alleged that the distributor had failed to provide them with pre-suit notice of its claim as required by section 2-607(3)(a) of the Uniform Commercial Code, incorporated into Illinois law as 810 ILCS 5/2-607(3)(a).

     In response, the distributor contended that it was excused from providing notice to the wholesalers because the wholesalers had actual knowledge of the problems with the cilantro since the wholesalers had been parties to the personal injury suits brought by the customers of the restaurants, and the wholesalers had participated in discovery in those cases which had made them fully aware of the problems with the contaminated produce. Thus, the distributor contended that it was excused from providing a separate, pre-suit notice of the problem to the wholesalers, invoking the “actual knowledge” exception to the notice requirement as recognized in Connick.

     The wholesalers moved for summary judgment against the distributor on the warranty count based on lack of pre-suit notice. The circuit court initially denied the motion, finding the existence of a factual question as to whether notice was excused by reason of the wholesalers’ involvement in five years of litigation by over seventy restaurant patrons, which “common sense”, the court said, would dictate to have afforded the wholesalers with actual knowledge of the defect in the cilantro, thereby excusing pre-suit notice by the distributors. Andrews at ¶ 41.

     On reconsideration, however, the circuit court reversed its prior ruling and granted summary judgment in the wholesalers’ favor. “The court believed that it had erroneously suggested in its earlier decision that the law would ‘allow a defendant-seller to receive reasonable notice from third-parties via the filing of a lawsuit. But Illinois law is clear, [the court concluded], ‘that only consumer plaintiffs that suffer person injury can satisfy their Section 2-607 notice requirement by filing a lawsuit against the seller.’” Id. at ¶ 15, quoting Connick, 174 Ill. 2d at 495.

     Thus, the circuit court shifted its focus from the “actual knowledge” exception to the notice rule, with which the court felt sufficiently satisfied in order to deny summary judgment to the wholesalers initially, to the “notice-by-lawsuit” exception, which the court recognized is applicable only to personal injury cases, not contribution actions, thereby granting the summary judgment motion. Id. at ¶ 41.

     The distributor’s motion for reconsideration of the granting of the wholesalers’ summary judgment was denied, and the distributor’s appeal followed. 

     The appellate court began by recognizing the precedential impact of the Connick case in holding that pre-suit notice by a buyer is excused when the seller has actual knowledge of the defect in a particular product, and that notice by lawsuit is only effective when a consumer plaintiff is claiming personal injury. Because, however, the record demonstrated that the wholesalers “had actual knowledge that the specific shipments of cilantro they supplied to [the buyer-distributor] were alleged to have been contaminated” long before the distributor’s lawsuit, “when the personal injury plaintiffs [the restaurant patrons] first brought claims against them,” the court held that it could not say “on these facts, as a matter of law, that the first Connick exception – actual knowledge of the defective product – was not satisfied.” Id. at ¶ 40.

     While acknowledging that the “personal injury lawsuit exception did not apply here” to excuse notice by the buyer, the appellate court said that “the consumer lawsuits could still be the vehicle by which the wholesalers, in this case, received actual pre-suit knowledge of the defective product.” Id. at ¶ 42.

     “By naming everyone in the supply chain, the personal injury suits filed here necessarily gave each of those entities' actual knowledge that the cilantro they sold was alleged to be defective. In our view, this is the sort of actual knowledge that will make it unnecessary for a buyer to separately notify its direct seller that a transaction is considered [problematic].” Id. at ¶ 43, (emphasis in the original).

     “In sum”, the court concluded, “we reject the wholesalers’ argument that a lawsuit filed by a third-party, though it cannot constitute pre-suit notice under section 2-607 of the UCC [in the absence of personal injury], can never be what causes a remote seller to have actual knowledge of a defect in the goods at issue.” Andrews, at ¶ 45.

     The appellate court thereupon reversed the summary judgment that had been rendered in favor of the wholesalers and remanded the case for further consideration of the distributor’s breach of warranty claim. Id. at ¶ 41.

Petitions for Leave to Appeal Granted.

     Separate petitions for leave to appeal by two of the wholesalers were granted by the Illinois Supreme Court on September 25, 2024. See, Martin Produce, Inc. v Jack Tuchten Wholesale Produce, Inc. (In re Andrews), 2024 Ill. LEXIS 587 and 667 (Ill. Sept. 25, 202

The Andrews Case in the Federal District Courts.

     The Andrews case was referenced in two recent opinions from the United States District Court for the Northern District of Illinois, both of which distinguished Andrews from the facts of the cases at bar. In Raya v. Mead Johnson Nutrition Co., No. 24 C 4696, 2024 U.S. Dist. LEXIS 217317 (N.D. Ill. Dec. 2, 2014), a putative class action alleging that certain infant formula sold by the defendant contained undisclosed heavy metals, a claim for breach of implied warranty was asserted along with other claims. The defendant-seller moved to dismiss, arguing that the plaintiff-buyer failed to provide them with pre-suit notice of the claim. The plaintiff had been involved in a previous lawsuit which had asserted identical claims against the defendant but was voluntarily dismissed. The plaintiff claimed that the existence of the prior lawsuit provided the defendant-seller with actual notice of the claimed defect in the formula, thereby excusing the plaintiff from providing separate pre-suit notice prior to the filing of the subsequent suit.

     The court said, however, that since the buyer, a named plaintiff in the prior suit, was aware of the conduct serving as the basis for a breach of warranty claim, based upon her involvement in the earlier class action, she was obligated to provide pre-suit notice of the breach prior to filing her own suit. It is not clear from the court’s opinion whether the plaintiff herself raised the Andrews case, or if the court, on its own initiative, distinguished Andrews on its own from the plaintiff-buyer’s individual lawsuit, stating that “[w]hile the Andrews case currently on appeal held that a third-party lawsuit could establish notice by ‘caus[ing] a seller to have knowledge of a defect in the goods at issue,’ Andrews does not support [plaintiff’s] argument that her own prior lawsuit can establish notice.” 2024 U.S. Dist. LEXIS 217317 at *21, quoting Andrews, 2024 IL App (1st) 231369 at ¶ 46.

     A more direct reference to the Andrews case is found in the case of Calixte v. Walgreen Co., No. 1:22-cv-01855, 2024 U.S. Dist. LEXIS 229675 (N.D. Ill. Dec. 19, 2024), involving a putative class action based on a claim for breach of warranty of merchantability associated with allegedly defective pre-paid gift cards. No pre-suit notice of the claim was provided by the plaintiff-buyers, and the defendant-seller moved for summary judgment on the warranty claim on that basis. The question before the court was whether the case could be decided as a matter of law on the issue of whether the defendant-seller had actual knowledge of the defect. 

     After encountering trouble with the stated value of the gift cards he had purchased, the plaintiff contacted the company that distributed and serviced the cards and informed it of his “’submission of [his] situation to their dispute resolution process’”, but did not contact the defendant. Calixte at *2, (quoting the record in the case).

     The plaintiff argued that the card servicer and the defendant “were within the same chain of distribution”, likening his case to the knowledge that the wholesalers had in Andrews who were in the same chain of distribution as the buyer-distributors.

     The district court readily distinguished Andrews, in which the defendant-wholesalers gained actual knowledge of the defective product prior to the distributors’ lawsuit because the wholesalers had been specifically named as defendants in suits filed by the injured plaintiffs. Id. at *7,8 (citing Andrews, at ¶¶ 42, 43).

     Also, in Calixte, the record was devoid of any evidence of communication between the card servicer and the defendant which would have imputed actual knowledge of the claim to the defendant. Id. at *8.

Conclusion.

     Practitioners of commercial law, especially warranty litigators, should be mindful of the notice requirement of the UCC, and its exceptions, as well as potential changes to the actual knowledge exception as forecast by the Andrews case, now on appeal to the Illinois Supreme Court.

     It is expected that the court will closely scrutinize the rationale for the ruling in the Andrews decision, and may make a definitive decision on whether or not a third-party’s lawsuit, while not satisfying the suit-as-notice exception, may indeed serve as actual knowledge of a defect, thereby satisfying the first exception to the notice requirement, as stated in the Connick case, which is the last time the Illinois Supreme Court addressed the subject of the notice requirement under the Uniform Commercial Code.