Knapp Shoes, Inc. v. Sylvania Shoe Manufacturing Corp.

O’Connor, J.

(concurring). The language of subsections (1) and (3) of 940 Code Mass. Regs. § 3.08 makes clear that those subsections apply only to transactions between business persons or entities and consumers. Subsection (2), standing alone, is less clear, but it is fair to conclude, as the court does, that that subsection also should be construed as focusing only on transactions between business persons or entities and consumers. Therefore, I agree with the court that the correct answer to the first certified question is that 940 Code Mass. Regs. § 3.08(2) does not apply to a breach of warranty in conjunction with a sale of goods by one business person or entity to another business person or entity.

I write separately only to express the view that the Attorney General would not exceed his authority under G. L. c. 93A, § 2 (c), were he to promulgate a regulation declaring that a breach of warranty of merchantability in connection with a sale of goods by one business person or entity to another business person or entity, whether or not intentional or negligent, constitutes an unfair and deceptive act or practice entitling the buyer to the remedies provided by G. L. c. 93A, § 11.

Merchantability, for warranty purposes, is defined by G. L. c. 106, § 2-314. Goods, to be merchantable, must “(a) pass without objection in the trade under the contract *748 description; and ...(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved.” G. L. c. 106, § 1-205. Reading §§ 2-314 and 1-205 together, trade usage is a part of every agreement unless expressly excluded. Thus, “merchantability” takes into account allowances made by trade usage and custom for minimal variations in goods contracted for. In this case, the judge found that there had been a breach of warranty, that is, that there had been a failure to perform of sufficient magnitude to be unacceptable in the trade. A regulation that would declare to be unfair an unintentional and non-negligent failure of performance of sufficient magnitude to constitute a breach of warranty, thereby shifting the risk of such a failure, including liability for attorney’s fees, to the party whose performance has failed to meet trade standards, would not be unreasonable nor beyond the pale of G. L. c. 93A.

Such a regulation would not be inconsistent with, that is, repugnant to or in contradiction of, the rules, regulations and decisions of the Federal Trade Commission and the Federal courts interpreting the provisions of 15 U.S.C. § 45 (a)(1) (1988). As we noted in Purity Supreme, Inc. v. Attorney Gen., 380 Mass. 762, 780 (1980), “States are not forbidden . . . from adopting rules more restrictive than those of the FTC.” The fact that a regulation that would declare a breach of warranty an unfair act or practice, and therefore unlawful, in the circumstances set forth in the first certified question, finds no counterpart in the rules, regulations and decisions of the Federal Trade Commission and the Federal courts interpreting the Federal Trade Commission Act, does not lead to a conclusion that such a regulation would be inconsistent with that body of Federal law. The fact that there are no parallel provisions in Federal law would not establish repugnancy or contradiction. Such a regulation would be entirely consistent with the Federal Trade Commission Act and decisions interpreting it.