Brand Marketing Group LLC v. Intertek Testing Services, N.A., Inc.
2015 U.S. App. LEXIS 16077
| 3rd Cir. | 2015Background
- Brand Marketing Group (Pennsylvania LLC) contracted with Chinese manufacturer Reecon to produce Thermablasters and relied on Intertek (product-testing firm) to certify compliance with ANSI Z.21.11.2b.
- Intertek tested the heaters in China, issued a Test Data Sheet indicating compliance, and Brand purchased and sold heaters to Ace Hardware; Ace later stopped sales after learning the heaters were noncompliant.
- Ace obtained a default judgment against Brand for about $611,060; Brand sued Intertek for negligent misrepresentation (fraud claim withdrawn); Intertek counterclaimed for trademark infringement (use of Intertek’s mark).
- A jury found Intertek liable for negligent misrepresentation and awarded Brand $1,045,000 in compensatory damages and $5 million in punitive damages; jury found for Intertek on trademark claim (no damages).
- District Court denied most post-trial relief; on appeal the Third Circuit affirmed, addressing (1) economic-loss doctrine and § 552 exception, (2) compensatory damages scope, (3) availability and propriety of punitive damages, and (4) alleged inconsistent verdicts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether economic-loss doctrine barred negligent misrepresentation claim | Brand: § 552 (Restatement) applies — Intertek supplied information foreseeably relied on by Brand via Reecon/Test Data Sheet | Intertek: internet/public info and indirect disclosure to Reecon mean Brand not in the “limited group” under § 552 | Court: Bilt‑Rite exception applies; § 552(2)(a) allows third‑party recovery when supplier knows recipient will pass info to intended beneficiaries; claim not barred |
| Proper measure and scope of compensatory damages under negligent misrepresentation | Brand: may recover actual pecuniary loss including lost profits/benefit of bargain with third parties (Ace) | Intertek: Restatement § 552B limits damages to actual losses and excludes benefit‑of‑the‑bargain/lost profits | Court: Predicts Pa. would adopt § 552B but read it to exclude only benefit of contract with defendant; lost profits from third‑party contract (Ace) recoverable; jury award supported by evidence |
| Availability and factual basis for punitive damages in negligent misrepresentation | Brand: punitive damages are available under Pennsylvania law for reckless conduct in negligence; facts (Curkeet testimony, translation issues, incomplete processes) show Recklessness | Intertek: punitive damages never available for § 552 claims or, alternatively, insufficient evidence of subjective appreciation of risk; award violates due process | Court: Punitive damages can be awarded in negligent misrepresentation (Hutchison principle); record (esp. Curkeet) permitted punitive instruction; 5:1 ratio not grossly excessive under Due Process |
| Whether jury verdicts were inconsistent (Brand liable; Intertek counterclaim wins) | Brand: liability for negligent misrepresentation caused Brand’s loss; trademark counterclaim could coexist | Intertek: Brand’s pre‑permission use of Intertek mark superseded Intertek’s liability (caused the same injury) | Court: Reconciliable; no abuse of discretion in denying new trial — jury could rationally find Intertek’s misrepresentation caused Brand’s loss |
Key Cases Cited
- Bilt‑Rite Contractors, Inc. v. Architectural Studio, 866 A.2d 270 (Pa. 2005) (Pennsylvania adopts Restatement § 552 negligent‑misrepresentation rule permitting third‑party recovery in certain business contexts)
- Hutchison ex rel. Hutchison v. Luddy, 870 A.2d 766 (Pa. 2005) (punitive damages available in negligence where plaintiff proves greater culpability than ordinary negligence)
- BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (U.S. 1996) (guideposts for assessing whether punitive damages are grossly excessive)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S. 2003) (limitations on using a defendant’s disparate conduct in reprehensibility analysis; relation to plaintiff’s harm required)
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (U.S. 1938) (choice‑of‑law principle establishing application of state substantive law in diversity cases)
- Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (U.S. 2001) (compensatory damages and role in punitive‑damages proportionality analysis)