927 N.W.2d 156
Wis. Ct. App.2019Background
- Hinrichs developed "JeeTops" acrylic skylight panels; his company Autovation manufactured and installed them and used a Dow adhesive to attach and seal the panels.
- In 2013 customers reported cracking; a Dow agent sent an October 22, 2013 lab-report stating the Dow adhesive was functioning properly and that no crazing or surface cracking was observed.
- After the report, Hinrichs and Autovation continued using Dow adhesive; by October 2014 about one-third of installed JeeTops had failed (leaking, crazing, fracturing).
- Plaintiffs switched to a replacement adhesive after discovering the cause, but negative publicity had already hurt sales.
- Plaintiffs sued Dow alleging negligent, intentional, and strict responsibility misrepresentation, and violation of WIS. STAT. § 100.18; the circuit court dismissed all claims and plaintiffs appealed.
- The appellate court affirmed dismissal of the misrepresentation claims under the economic loss doctrine but reversed as to the § 100.18 claim and remanded for further proceedings on that statutory claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the economic loss doctrine bars plaintiffs' misrepresentation claims | Economic loss doctrine exceptions apply: fraud-in-the-inducement or "other property" exception | Economic loss doctrine applies; misrepresentation occurred in connection with product performance and damaged an integrated system | Affirmed: economic loss doctrine bars the misrepresentation claims (no fraud-in-the-inducement; "other property" exception fails) |
| Fraud-in-the-inducement exception applicability | Dow's October 22 report induced continued purchases and was a pre-contractual, extraneous misrepresentation | Plaintiffs were already using adhesive before the report; the statements concerned adhesive quality (not extraneous) | Rejected: alleged misrepresentation was not shown to be pre-contract formation or extraneous to the contract |
| "Other property" exception applicability | JeeTops (damaged acrylic) is "other property" distinct from the adhesive | The adhesive and JeeTops formed an integrated system; damage resulted from disappointed expectations in adhesive performance | Rejected: JeeTops and adhesive were integrated; plaintiffs foresaw adhesive performance risk; exception not met |
| Whether plaintiffs stated a claim under WIS. STAT. § 100.18 (representation to "the public" and falsity) | Plaintiffs were members of the public for § 100.18 purposes and adequately alleged Dow knowingly made untrue/misleading statements to induce purchases | Dow argued plaintiffs were not "the public" due to an existing buyer relationship and that statements were not proven untrue/deceptive at pleading stage | Reversed in part: complaint plausibly alleges falsity/deceptiveness and intent; whether plaintiffs are "the public" is a factual question and dismissal on that ground was improper — claim proceeds to discovery |
Key Cases Cited
- Ferris v. Location 3 Corp., 337 Wis. 2d 155 (2011) (describing economic loss doctrine purpose)
- Tietsworth v. Harley-Davidson, Inc., 270 Wis. 2d 146 (2004) (economic loss doctrine bars certain misrepresentation claims)
- Kaloti Enters., Inc. v. Kellogg Sales Co., 283 Wis. 2d 555 (2005) (elements of fraud-in-the-inducement exception)
- State Farm Fire & Cas. Co. v. Hague Quality Water, Int'l, 345 Wis. 2d 741 (2013) (tests for "other property" exception: integrated system and disappointed expectations)
- Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235 (1999) (damage by defective component within integrated system is not damage to "other property")
- Grams v. Milk Prods., Inc., 283 Wis. 2d 511 (2005) (disappointed expectations analysis)
- K&S Tool & Die Corp. v. Perfection Mach. Sales, Inc., 301 Wis. 2d 109 (2007) (elements of a § 100.18 claim: representation to the public, falsity/deceptiveness, and pecuniary loss)
- Kailin v. Armstrong, 252 Wis. 2d 676 (2002) (economic loss doctrine does not apply to § 100.18 claims)
- Selzer v. Brunsell Bros., 257 Wis. 2d 809 (2002) (examples of components becoming part of an integrated system)