3:22-cv-00538
W.D. Wis.Aug 21, 2023Background
- Montauk (Galveston LFG, Montauk Energy Holdings, Montauk Renewables) contracted with BIOFerm on April 17, 2018 to design and commission a PSA-based RNG facility in Galveston, Texas for $13,150,000.
- BIOFerm marketed PSA systems with performance guarantees and a comprehensive warranty; Montauk relied on those representations and visited an operational site before contracting.
- After commissioning, the plant underperformed; Montauk alleges improper welding and defective media installation by BIOFerm, with BIOFerm recommending and performing a media removal/reinstallation in April 2020.
- Montauk engaged Carbotech in late 2021 to correct media installation (costing > $850,000); Carbotech concluded BIOFerm had improperly reinstalled media in April 2020.
- Montauk filed suit Sept. 20, 2022 (diversity jurisdiction) asserting multiple state-law claims including Count Six under Wis. Stat. § 100.18 (DTPA). BIOFerm moved to dismiss Count Six under Fed. R. Civ. P. 12(b)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether pre-contract representations are time-barred by § 100.18(11)(b)3 (3-year statute of repose) | Montauk: fraud was undiscoverable within 3 years; continuing problems made earlier statements actionable | BIOFerm: claim accrues when representation made; statements inducing the contract (pre-April 17, 2018) are outside 3-year repose | Held: Pre-contract representations are time-barred; Kain controls accrual at time of representation |
| Whether post-contract communications are "to the public" under § 100.18(1) | Montauk: contract envisioned ongoing negotiations; some post-contract statements were distinct negotiations or part of continuing fraud | BIOFerm: once parties contract they form a particular relationship and cease to be "the public;" post-contract statements thus outside § 100.18 | Held: Post-contract statements about the project were private between parties, not to the public, so § 100.18 does not apply |
| Whether a "continuing fraud" or similar exception rescues time-barred/publicly-made statements | Montauk: cites Werner and Northcentral for continuing-fraud theory that could toll or restart accrual | BIOFerm: Werner/others require an actionable representation to the public within repose period; Montauk pleads no such public communications | Held: Continuing-fraud theory inapplicable because no pleaded misleading public communications within the 3-year period |
| Whether leave to amend/discovery should be allowed to try to plead a § 100.18 claim | Montauk: requests leave to discover and amend if court finds pleading deficiency | BIOFerm: discovery already open and plaintiff has had time; no plausible facts would convert private statements into public ones | Held: Denied as unnecessary; plaintiff free to seek leave later but court sees no basis to recharacterize private communications as public |
Key Cases Cited
- Kain v. Bluemound E. Indus. Park, Inc., 635 N.W.2d 640 (Wis. Ct. App. 2001) (DTPA claim accrues at time of defendant's representation under § 100.18)
- Kailin v. Armstrong, 643 N.W.2d 132 (Wis. Ct. App. 2002) (parties who contract form a "particular relationship" and are not "the public" for § 100.18 purposes)
- Fricano v. Bank of Am. NA, 875 N.W.2d 143 (Wis. Ct. App. 2015) (post-purchase statements cannot have caused the original purchase or contract)
- Tomczak v. Bailey, 578 N.W.2d 166 (Wis. 1998) (statutory accrual and limitations principles)
- United Concrete & Constr., Inc. v. Red-D-Mix Concrete, Inc., 836 N.W.2d 807 (Wis. 2013) (puffery and factual question for jury on deceptive representations)
- Werner v. Pittway Corp., 90 F. Supp. 2d 1018 (W.D. Wis. 2000) (discusses continuing-tort/continuing-fraud concept in context of DTPA claims)