Tietsworth v. Harley-Davidson, Inc.

Steven C. David Bratz, John W. Tietsworth, Myers, Gary Streitenberger, Gary Wegner,

Plaintiffs-Appellants, Harley-Davidson Inc., Harley-Davidson, Company, Defendants-Respondents- Motor

Petitioners. Supreme Court argument No. 02-1034. Oral November Decided March 2004 WI 32 (Also 233.) reported in 677 N.W.2d there defendants-respondents-petitioners For the Schmidt, Parsons, Patrick W. W. Stuart by were briefs Davis, H. Twig- O. Kelly Armstrong, Jeffrey O. Thomas L. Milwaukee, and Robert & Quarles Brady, and ger Lardner, Milwaukee, and oral & Foley Binder and Parsons. W. Stuart by argument by a brief there was the plaintiffs-appellants For Crivello, II, and Prank T. Warshafsky, Ted W. Warshaf- Bloch, S.C., Milwau- Rotter, & Reinhardt Tarnoff, sky, Selbin, Lieff, Leebove and Lisa J. kee; Jonathan D. Bernstein, LLP, Francisco, San Cabraser, & Heimann Bershad, Michael M. Buchman CA; J. and David LLP, Lerach, Bershad, & New Weiss, Hynes Milberg, Ademi, K. Ademi, Robert Guri York, Shpetim NY O'Reilly O'Reilly, Cudahy, LLP, and Ademi & and oral argument by Jonathan D. Selbin. by

An amicus curiae brief was filed James A. Buchen, Madison, on behalf of Wisconsin Manufactur- ers & Commerce. by Jeffrey

An curiae Fertl, amicus brief was filed S. Washington, Hugh Beisner, Milwaukee, John H. DC, F. counsel) Young, (of Jr. Reston, VA,on behalf of Product Liability Advisory Council, Inc.

¶ 1. SYKES, DIANE S. J. This is a class action Harley-Davidson lawsuit on behalf of certain motor- cycle seeking compensatory punitive owners and dam- ages injunctive legal relief, and under theories, several alleged motorcycles' engines. for an defect in the The plaintiffs alleged any personal injury prop- have not or erty damage by engines, caused the defective nor have they alleged motorcycle engines actually that their have any way. They allege, failed or malfunctioned rather, motorcycles that their are diminished in value because "propensity" premature engine the defect creates a for failure. plaintiffs originally pleaded 2. The for claims

negligence, produсts liability, deceptive strict fraud, and 100.18(1) (ll)(b) § practices trade under Wis. Stat. and (1999-2000).1 The circuit court dismissed the entire plaintiffs ap- action for failure to state a claim. The pealed only the dismissal of their claims for common- statutory deceptive practices, law fraud and trade appeals the court of reinstated both. We reverse. allegation product ¶ 3. An that a is diminished in product value because the line has demonstrated a propensity premature product for failure such that the

1All references to the Wisconsin Statutes are to the 1999-2000 version unless otherwise indicated. prema- point

might fail in the future will at some or speculative turely to constitute is too uncertain injury cognizable legally and is therefore insuffi- tort damages In claim for fraud. in a tort cient to state this claim. economic loss doctrine bars addition, the a claim have also failed to state 4. The practices deceptive Stat. trade violation Wis. for provides private § action cause of The statute 100.18. resulting pecuniary an advertisement from loss representation public "assertion, that contains deceptive untrue, or mislead- of fact which is statement (ll)(b). 100.18(1), plaintiffs' § ing." claim Wis. Stat. Harley- allegation primarily on the is based engine ("Harley") defect failed to disclose Davidson motorcycle purchases. plaintiffs' prior A non- to the represen- "assertion, does not constitute disclosure 100.18(1). § Stat. of fact" under Wis. tation or statement advertising allege Harley's ma- The also engine "premium" motorcycle as the terial described "[е]ighty-eight masterpiece," quality, inches cubic "a and you ready torque to take and filled to the brim with advertising thundering This is classic down the road." puffery, and under the at common law non-actionable statute. HISTORY

I. FACTS AND PROCEDURAL appeal for of a motion to dismiss 5. This is an accept true, as claim, and therefore we a failure to state following purposes the facts from review, the of this complaint. C. Plaintiff Steven action amended class proposed class own and the members Tietsworth year Harley early-2000 motor- model or lease 1999 or cycles equipped 88B or Twin Cam with Twin Cam 88 engines. Harley's marketing advertising and literature following the contained engines: statement about TC-88 six-year [the a Developing process.... TC-88s] was a masterpiece. everything result is studied from We inside, way through way oil moves to the rocker job its staying oil-tight. Only cover does 21 functional parts carry over design. carry into the new does What power Harley-Davidson® engine, only over is of a more so.

Harley motorcycles "premium" also stated that the were quality, engine "[ejighty- and described the TC-88 eight torque cubic inches filled the brim with ready you thundering to take down the road." January Harley 6. On sent letter to Harley motorcycles Tietsworth and other owners of informing bearing them that rear "the cam in a small Harley-Davidson's engines number of Twin Cam has unlikely you it failed. While is will ever have to worry you situation, about this have our assurance that Harley-Davidson your committed satisfaction." (Emphasis complaint.) added in amended The letter explain company extending went on to warranty that the was beаring

on the cam from the standard one- year/unlimited mileage warranty, five-year/50,000 to a warranty. Separately, Harley developed mile a $495 hearing repair "cam kit" and made the kit available to departments, expedite its dealers service "to rear bearing repair." cam

¶ 7. June Tietsworth, On a California proposed against resident, filed this class action lawsuit Harley County alleging in Milwaukee Court, Circuit (1) (2) negligence; products liability; four claims: strict (3) (4) decep- common-law fraudulent and concealment; 100.18(1) § practices contrary tive trade to Wis. Stat. (the Deceptive Act or Trade Practices Wisconsin "DTPA"). complaint to later amended the Tietsworth representative plaintiffs four own- Wisconsin name as engines. motorcycles equipped TC-88 with ers of alleges complaint cam that the The amended early-2000 bearing model mechanism in the 1999 inherently causing engines year defective, TC-88 premature unreasonably dangerous propensity for en- gine pertinent to the common-law fraud failure. As is complaint statutory claims, DTPA the amended bearing Harley's alleged the cam failure to disclose that purchase plaintiffs to their motor- defect induced the cycles by reasonably rely upon Harley's causing them to regarding "premium" quality representations motorcycles. alleges complaint further 9. The amended they engine plaintiffs defect,

if the had known of the purchased product or would not have either would complaint paid not it. The amended does have less for actually motorcycles allege plaintiffs' have any way, engine failure, malfunctioned suffered have reasonably Nor certain to fail or malfunction. or are allege any property complaint dam- amended does the age engine injury arising personal defect. out of the alleges plain- complaint that the Rather, the amended including motorcycles di- value, have diminished tiffs' motorcycles Harley value, resale because minished engines equipped have demonstrated with TC-88 engine premature "propensity" fail failure and/or prematurely. complaint. Harley The to dismiss the moved County Court, the Honorable Will- Circuit

Milwaukee dismissing Harley's granted motion, Haese, iam J. entirety complaint a claim. for failure state its appealed of their common-law the dismissal only, appeals fraud and DTPA claims and the court of Harley-Davidson, Inc., reinstated both. Tietsworth App ¶75, 2003 WI 2dWis. 661 N.W.2d450.

II. OF STANDARDS REVIEW ¶ 11. A motion to dismiss for failure to state a complaint legally claim tests whether the sufficient to may granted. state a cause of action for which relief be Watts, 506, 512, Watts v. 137 Wis. 2d 405 N.W.2d 305 (1987). Wereview a dismissal for failure to state a claim (or accepting alleged complaint novo, de the facts in the complaint) purposes here, the amended as true for Northridge Id.; our review. see also Co. v. W.R.Grace & (1991). Co., 918, 923-24, 162 Wis. 2d 471 N.W.2d 179

III. DISCUSSION A. Common-Law Fraud Claim plaintiffs'

¶ 12. The common-law fraud claim is premised allegation Harley on the failed to disclose bearing or concealed the existence of the cam defect prior plaintiffs' purchases motorcycles. to the of their It is well-established that a nondisclosure is not action misreрresentation duty able as a tort unless there is a Co., Inc., disclose. Ollerman v. O'Rourke 94 Wis. 2d (1980). 17, 26, 288 N.W.2d95 Our decision Ollerman categories misrepresentation outlined the three misrepresentation, negli Wisconsin law—intentional gent misrepresentation, responsibility and strict misrepresentation described the common and dis —and tinct elements of the three torts. Id. at 24-25. claims share the fol- All 1)

lowing required have elements: the defendant must 2) plaintiff; representation fact to the the plaintiff a of made representation 3) false; and of fact must be misrepresentation and relied on the must have believed damage. Id. The here detriment or to his misrepresentation, allege carries the which intentional 4) following elements: the defendant must additional knowledge misrepresentation with have made the recklessly caring without whether it was it was false or 5) have made the the defendant must false; true or misrepresentation intent deceive and to induce with to damage. plaintiff Id. to act on it to his detriment or general rule that in 14. Ollerman reiterated to transaction, "silence, a failure a sales or business misrepresentation fact, a not an intentional disclose duty has a to disclose." Id. at 26. unless the seller duty questions scope a to disclose are existence and "a held that for the court. Id. at 27. Ollerman law duty a lot has a of a residential subdivider-vendor purchaser facts which are to disclose 'non-commercial' material to the trans- vendor, to the which are known readily to the are not discernible action, which specified purchaser." this was a Id. at 42. We policy holding," premised on certain consider- "narrow present real transac- in non-commercial estate ations Id. at 41-42. tions. here, however, are The transactions at issue pur-

motorcycle purchases, real not residential estate duty open question and it is an whether chases, broadly recognized more in Ollerman extends disclose significant goods. of consumer This is to sales ("[W]hen policy a court issue. Id. at 27. common-law question legal duty making resolves a the court is determination.") policy parties it, But the did not brief and therefore dowe not decide it. Legally Cognizable Injury

i. No damages ¶ 16. Ollerman also held that in inten- according tional cases are measured bargain" "typically rule, to the "benefit of the stated as property the difference between the value of the as represented purchased." and its actual value Id. at bargain" damages 52-53. "Benefit of the "depend in fraud cases bargain on the nature of the and the circum- stances of each case." Id. at 53. deciding

¶ 17. In the context of when a claim purposes accrues for limitations, statute of we generally capable have held that tort claim is not of (and accrue) present enforcement therefore not does plaintiff damage. unless the has suffered actual Pritzlaff Milwaukee, 302, 315, Archdiocese 194 Wis. 2d of (1995); Hoerl, 533 N.W.2d780 Hennekens v. 160 Wis. 2d (1991). damage 144, 152, 465N.W.2d812 Actual is harm already "reasonably that has occurred or is certain" to occur in the 315; future. 194 Wis. 2d at Pritzlaff, damage Hennekens, 160 2d at Wis. 152-53. Actual is not possibility (citing the mere of future harm. Id. at 153 Soc., Meracle v. Children's Serv. 149 Wis. 2d 26-27, (1989)). By statute, N.W.2d a fraud claim aggrieved party accrues when the constituting discovers the facts 893.93(l)(b).2 § the fraud. Wis. Stat. Al though question we are not here confronted with a

2 The by statute modifies the older cited plaintiffs. cases Co., Milling 618, 625, Gollon v. Jackson 224 Wis. 273 N.W. 59 purposes claim accrued for when this a statute of complaint defense, limitations the amended must ad- equately injury damage plead an actual loss that —a already reasonably has occurred or is certain to occur—in order to state actionable fraud claim. Ollerman, addition, 94 Wis. 2d at 54. In fraud claims pleaded particularity. must be with Wis. Stat. 802.03(2). § injury complained of here is diminution only plaintiffs allege

in value their motor- —the cycles they paid However, are worth less than for them. complaint allege plain- the amended does not that the motorcycles tiffs' have diminished value because their engines reasonably failed, fail, have will or are certain bearing fail as a result of the TC-88 cam defect. The complaint allege amended does not that the motorcycles have sold their at loss because of the alleged engine complaint alleges defect. The amended only motorcycles have diminished value— primarily potential diminished resale value—because Harley motorcycles equipped engines with TC-88 have "propensity" premature engine demonstrated a for fail- bearing ure will fail as a result of the cam defect. and/or injury legally cognizable This is insufficient to state a purposes of a fraud claim. premised upon ¶ 19. Diminished value a mere speculative possibility product failure too futurе support claim. The and uncertain to a fraud (1937) (a complete fraud is and cause of action accrues at the the fraud discovered perpetrated, time the fraud is not when Broeckert, v. occur); Stahl consequential damages 170 Wis. (1920) Frederick, v. Jacobs 627, 629, 176 (same); N.W. 66 Wis. (1892) (same). 254, 256, 51 N.W. 320 allege particular specifically that their motor- do not only Harley cycles prematurely, prod- fail that the will motorcycles engines uct line that consists of with TC-88 premature engine propensity for has demonstrated a allegation particular product line failure. An that a fails allegation prematurely does not constitute that motorcycles only plaintiffs' particular so, that will do possibility they there is a that will do so. certainly agree appeals 20. We with the court damages allegations complaint in a fraud are against certainty" a

not evaluated standard "absolute purposes a for failure to a of motion to dismiss state Tietsworth, 755, 16. But an claim. 261 Wis. 2d allegation product a in value is diminished because might might ‍​‌‌‌​‌​​‌​‌‌‌​​​‌​​‌‌​‌‌‌‌‌‌‌​​‌​‌​‌‌​‌‌‌​​‌‌​​‌‍of an event or circumstance that —-or inherently conjectural not—occur the future is allege benefit-of-the-bargain damages does not actual certainty" required with the "reasonable to state a fraud claim. many

¶ 21. This conclusion is consistent with affirmed the federal and state court decisions that have brought products fraud, dismissal of claims under strict liability, allegedly tort and other theories where actually product defective has not malfunctioned. injury" list, These "no cases are too numerous to but for representative sample, e.g., Angus Shiley Inc., see, (3d 1993) (affirming F.2d 147-48 Cir. dismissal of a claim for intentional infliction of emotional distress allegedly on defective heart valve that was func- based tioning properly); Corp., Carlson v. General Motors (4th 1989) (affirming F.2d Cir. dismissal of claim for resale value of diesel cars due to diminished damage "poor reputation" rather than actual or loss defect); resulting from Briehl v. Motors vehicle General (8th 1999) Corp., (affirming 623, 172 F.3d 627-29 Cir. dismissal class action lawsuit for fraud and breach of warranty only alleged damage where the from vehicles' system overpayment defective brake was and dimin value); Corp., ished resale Jarman v. United Industries (S.D. 2000) F.Supp.2d (dismissing 757, Miss. warranty, statutory pur fraud, and various claims for allegedly pesticide chase of ineffective where there is no allegation product failure); Chrysler of actual Weaver v. (S.D.N.Y.1997) Corp., (dismissing 96, 172 F.R.D. 99-100 warranty allegedly class action fraud and lawsuit for integrated defective child seats where there is no alle gation product that the has malfunctioned or the defect itself); Corp., manifested v. Yost General Motors (D.N.J. 1986) F.Supp. (dismissing 656, 657-58 fraud and warranty alleged engine engine claim for defect where plaintiff alleges has not malfunctioned and diminished only); Ziegelmann DaimlerChrysler Corp., value v. (N.D. 2002) (collecting 556,

N.W.2d 559-65 cases and dismissing negligence action and class fraud lawsuit for alleged system damages pre brake defect where were only value); on mised diminution Frank v. Daimler- (N.Y. 2002) Chrysler Corp., App. 9, 741 N.Y.S.2d 17 Div. (dismissing negligence, products fraud, class action liability alleged lawsuit seat backrest defect allegation failure); product absence of of аctual Yu v. (Ill. Corp., Int'l Bus. Mach. 732 N.E.2d 1177-78 2000) App. (affirming fraud, dismissal of class action negligence, deceptive practices trade lawsuit for allegedly computer defective software where there was failure); allegation product no of actual Ford Motor Co. (Ala. 1998) (affirming Rice, 726 So.2d dismissal class action fraud lawsuit for SUV tendency alleged design where to cause rollover defect vehicles did not roll manifest itself and defect did not over). amended com- ¶ note, however, that the 22. We allegation arguably plaint that does contain one injury particularized to these a more sufficient to state complaint paragraph plaintiffs: of the amended at 35 Harley allege that "all of the knew motorcycles are defective and will with the TC-88s motorcycles prematurely reference to "all" fail." This motorcycles, engines plaintiffs' includes the with TC-88 equivalent of a more can read as the and therefore be motorcycles allegation plaintiffs' particularized that the Accordingly, appli- prematurely. fail we address will claim. loss doctrine to this cation of the economic Doctrine ii. Economic Loss generally Apart insufficient dam from the 23.

ages allegations eco action, in the cause of fraud this claim. The economic loss nomic loss doctrine bars judicially-created principle remedies doctrine is contracting operates generally preclude parties from recovery pursuing purely economic or commer tort relationship. the contract cial losses assоciated with Corp., Digicorp, 54, Inc. v. Ameritech 2003 WI ¶¶ 32, 652. 33-35, 262 Wis. 2d 662 N.W.2d by Sunnyslope Adopted Grad- this court Risberg, ing, Inc., Miller, 148 2d Inc. & Wis. Bradford (1989), loss 921, 213 the economic 910, 437 N.W.2d recovery precludes economic losses tort for doctrine up resulting product to a from failure of a to live contracting party's expectations. Tile, Inc. v. Wausau County Corp., Concrete Wis. 2d 245-46, (1999). generally "requires N.W.2d doctrine transacting parties pursue only in Wisconsin to their asserting remedies when contractual an economic loss Digicorp, claim." Wis. 2d purposes

¶ 25. "Economic loss" for of the doctrine product includes the diminution in the value general it is because inferior and does not work for the purposes for which it was manufactured and sold. Northridge, 162 Wis. 2d at 925-26. It includes both consequential direct economic loss economic loss. Cedarapids, Janssen, Inc., & Daanen Inc. v. 2dWis. (1998). 395, 401, 573 N.W.2d 842 The economic loss doctrine has been extended to consumer transactions as contracting well as transactions between commercial parties. State Farm Mut. Auto. Ins. Co. Ford Motor (1999). Co., 305, 225 Wis. 2d 592 311-12, N.W.2d201 ¶ 26. The economic doctrine is loss "based on understanding that contract law and the law war of ranty, particular, in is better suited tort than law dealing purely with economic in loss the commercial [contract Daanen, arena." 216 Wis. 2d at "If a 403-04. ing party] permitted to in a sue tort when transaction expected, party does work not out is in effect rewriting agreement to obtain a that was benefit part bargain." Armstrong, not Kailin v. 2002 WI App ¶ 70, n.19, 676, 2d Wis. 643 N.W.2d 132.

¶ Thus, we have often stated that the eco- following impor- nomic loss doctrine serves the three policiеs: tant common-law (1) to maintain the fundamental distinction between (2) law; parties' tort and protect contract to commercial (3) contract; by

freedom to allocate economic risk and risk party situated to assess the of encourage

to best loss, assume, to purchaser, the commercial economic allocate, against risk. or insure Daanen, 2d at 403. Wis. and 28. The distinction between tort contract differing concepts duty: of "contract on their

law rests bargained-for obligations, while tort law is rests on law obligations" imposed society large. legal at on on based Farm, Tile, 247; at 226 Wis. 2d see also State Wausau 2d at 316-18. economic loss doctrine 225 Wis. "recognizes product a a certain level that whether meets expectations performance purchaser's or a is not [but] [is] [r]ather, ... of societal interest matter differences in the matter of contract." Id. at 321. "These duty and in contract and tort law source nature regarding remedy damages produce and different rules (punitive damages are not in contract ac- recoverable example), loss tions, for and economic doctrine sphere." keep proper large part in each in its exists (Sykes, concurring Digicorp, 32, J., 262 Wis. 2d part, part). dissenting applied loss been 29. The economic doctrine has

by negligent and courts bar claims of strict Wisconsin by misrepresentation, responsibility federal courts negligent, applying law to bar claims strict Wisconsin responsibility, misrepreséntation. intentional App Ltd., Bros., v. Brunsell WI Selzer (negligent ¶¶ 31-33, 2d 652 N.W.2d806 257 Wis. responsibility misrepresentation); Home and strict 2000) (7th Boys, Pep Valu, 960, Inc. 213 964 Cir. F.3d (intentional, negligent, responsibility misrep- and strict resentation); Systems, Cooper Power Inc. v. Union Car- (7th Co., Inc., 675, 682 & 123 F.3d bide Chems. Plastics 1997) (intentional misrepresentation); Badger Cir. Colgate-Palmolive Pharmacal, Co., 621, Inc. v. 1 F.3d (7th 1993) (negligent responsibility Cir. and strict misrepresentation). Applying economic loss doctrine to mis-

representation claims furthers the doctrine's central purpose:

Where there are well-developed remedies, contractual such as the remedies the Uniform Commercial (in states) provides Code force in all U.S. for breach of warranty fitness, quality, specifications of goods, there no provide need to tort remedies misrepresentation. duplicate tort remedies would remedies, the contract adding unnecessary complexity Worse, the provision to the law. duplicative these tort remedies would undermine contract law. (7th 1999). Telecom, 862,

All-Tech 174 F.3d Cir. "misrepresentations Thus, these, such as that ulti- mately quality product concern sold, are properly through remedied claims for breach of war- ranty." Cooper Systems, Power 123 F.3d at 682. generally foregoing

¶ 31. We cited to the line appellate opinions federal in last term's decision Digicorp, Digicorp presup ¶¶ 2dWis. 43-45. posed general applicability of the economic loss doctrine to claims; the case tested viability appeals' the continued of the court of decision Douglas-Hanson Co., v. BF Co., Inc. Goodrich (Ct. 1999), App. Wis. 2d 598 N.W.2d262 which had recognized exception to the economic loss doctrine for claims of intentional fraud-in-the-inducement of Digicorp in was an alternative Also at issue

contract.3 exception Douglas-Hanson'& to eco- fraud the broad to claim, Tool the so-called Huron nomic loss doctrine: Engi- Michigan of Huron Tool and on the case based neering Consulting Services, Inc., 532 v.Co. Precision (Mich. 1995), recognized App. which Ct. N.W.2d 541 of action for fraud-in-the-inducement cause narrow misrepresentations not "extraneous to" and "interwo- subject of the contract. ven the matter with" Digicorp, justices participate in ¶ Two did not 32. decided five of the court who however, and the members 2-1-2 on issue of a fraud-in-the- divided the case exception to economic loss doctrine. inducement (Crooks, Digicorp, ¶ 32, J., 2d 5 n.2 lead 262 Wis. J.); (Sykes, joined by opinion, ¶ J., Prosser, n.3 82 (Bradley, dissenting part); concurring part, 85 J.). joined majority dissenting, by A J., Bablitch, justices participating authored Crooks, who —Justices opinion, joined by Justice Prosser and this the lead Douglas-Hanson to the extent Co. writer —overruled exception recognized the economic it a broad fraud-in-the-inducement loss doctrine for all claims of Digicorp, 2d 32, Wis. 51. of contract. majority, Digicorp Jus- Two members of the recognition Prosser, announced their tices Crooks Tool-type action as an of a narrow cause of Huron exception ¶¶ 3, doctrine. Id. at to the economic loss part lead n.2, This writer dissented from that opinion, concluding ex- that a fraud-in-the-inducement unnecessary ception was economic loss doctrine v. BF accepted Douglas-Hanson Co. Goo We review (Ct. 1999), Co., 132, App. but 229 Wis. 2d 598 N.W.2d drich in a evenly, justice participating, resulting not divided with one Co., BF Goodrich summary Douglas-Hanson affirmance. Co. v. 2d 607 N.W.2d 621. 2000 WI Wis. inappropriate, because contract at remedies law equity fraudulently and in for contracts induced were adequate. (Sykes, concurring part, ¶¶at J., Id. in 73-83 dissenting part). three-justice majority in reversed judgment, agreeing the that the facts of the case were satisfy Tool-type insufficient narrow, even a Huron Id., ¶¶ 62, claim. Bradley Digicorp, joined

¶ 34. Justice in dissented by rejected Bablitch; Tool, Justice the dissenters Huron Douglas-Hanson and would have maintained in its entirety. majority ¶¶ Id., Thus, 84-91. while a justices participating Digicorp Douglas- overruled separate majority willing- Hanson, a a announced type ness to some allow of fraud-in-the-inducement tort exception as an doctrine, to the economic loss three of (albeit justices participating the five different sets of three) rejected Douglas-Hanson both and Huron Tool. Accordingly, Digicorp produce majority did not agreement necessary recognition for the authoritative element-specific of an fraud-in-the-inducement tort exception cause of action as an to the economic loss doctrine. present opportunity

¶ 35. This case does an not Tool-type determine a whether Huron action cause of exception to the economic loss would doctrine be recognized by majority alleged of this court. The fraud plainly pertains quality here to the character goods subject that are the matter of the contract. warranty plaintiffs such, 36. As have rem- alleged motorcycles. edies for the their defects In addition, thеre are contract remedies at law and in equity to the extent that were fraudu- lently purchase motorcycles. induced to their A contract fraudulently party induced is voidable; void or fraudu- may

lently affirm the enter a contract induced to pursue damages and seek breach contract equitable restitutionary remedy and seek rescission necessary party including damages, to restore the sums making fraudulently position prior to the induced to his Racine Nat'l Bank & Trust Co. of the contract. First (1980); Notte, 207, 225, 293 N.W.2d 530 97 Wis. 2d v. Koenig Assocs., 374, 381, 2d v. & 153 Wis. Eklund (Ct. 1989); App. Seemann, v. Head & Inc. N.W.2d (Ct. Gregg, 156, 166-67, 2d 311 N.W.2d 104 Wis. 1981). App does not bar The economic loss doctrine fraudulently induced con remedies for these contract Powersports, Harley-Davidson Motor Co tracts. See 2003) (7th (collecting Inc., 973, 978 n.7 Cir. 319 F.3d cases). Wisconsin recognize In no reason to short, we see

exception this doctrine to allow to the economic loss dispute an inten- to be remedied as consumer contract misrepresentation The loss doc- tort. economic tional plaintiffs' claim. The common-law fraud trine bars the may have contract remedies—breach contract/warranty rescission, and restitution —but or may pursue a claim for not tort allegedly having purchased premised defective mo- on torcycles. DTPA

B. Claim statutory plaintiffs' claim is based on The Deceptive Act, Wis. Stat. Trade Practices Wisconsin's 100.18(1), deceptive, generally prohibits § false, which misleading representations in of fact or statements or public announcements. or sales advertisements provides, pertinent part: DTPA person, firm, No corporation association, or agent or or employee thereof... with intent public induce the any any manner to enter into contract obligation or relating to purchase, sale, hire, use or any lease of ... . . . merchandise shall make advertisement, ... an announcement, representation statement or any advertisement, ... which kind to the public announce- ment, statement or representation contains any asser- tion, representation or untrue, statement which is of fact deceptive or misleading. 100.18(1) added). § (emphasis Wis. Stat. The DTPA provides private persons suffering cause of action for pecuniary loss as a result of a violation of the statute:

Any person suffering pecuniary loss because of a viola- by tion of this any section person may other any sue in court competent jurisdiction and shall recover such pecuniary loss, together costs, with including reason- able attorney fees. 100.18(ll)(b)2. §

Wis. Stat. plaintiff 39. Under the terms of the statute, a asserting allege a DTPA claim must that the defendant specified has, with the intent, made an "advertisement, representation announcement, statement or ... to the public," representation which contains an "assertion, or deceptive statement of fact" that is "untrue, or mislead- ing," plaintiff pecuniary and that the has sustained a representation loss as a. result of the "assertion, § 100.18(1); statement of fact." Wis. Stat. see also Wis JI —Civil 2418. plaintiffs' 40. As we noted, have case is

premised primarily allegation Harley on the failed alleged motorcycle engine to disclose the A defect. representation nondisclosure is not an "assertion, or 100.18(1). § statement of fact" under Wis. Stat. sup- speak to insufficient to omission Silence—an —is 100.18(1). § The DTPA port Stat. claim under Wis. a duty impose disclose, but, purport to to does not represen- only prohibits assertions, affirmative rather, deceptive, false, are of fact that tations, or statements qualify misleading.4 permit as a nondisclosure To or decision in which appellate ‍​‌‌‌​‌​​‌​‌‌‌​​​‌​​‌‌​‌‌‌‌‌‌‌​​‌​‌​‌‌​‌‌‌​​‌‌​​‌‍no has identified Our research the basis go on the DTPA was allowed forward a claim under representa or an affirmative statement anything other than of Linscott, 142 v. Enterprises Tim Torres example, in tion. For (Ct. 1987), appeals the court of App. 2d 416 N.W.2d670 Wis. 100.18(1) where a retailer § under Wis. Stat. upheld a verdict that his estab in and a flier signs deceptively represented had custard was only a certain frozen place lishment was the Daun, 2d 173 Wis. Similarly, Grube Id. at 68-69. available. (Ct. 1992), appeals the court App. 496 N.W.2d 106 on a real estate premised claim under the statute reinstated a had no the seller representations" "affirmative broker's at 59. These cases are property. in the Id. knowledge of defects upholding case discovered no only; we have representative The dissent reads aon nondisclosure. premised DTPA claim omis that nondisclosures or a conclusion supporting Grube reasoning The dissent's the DTPA. are actionable under sions misrepresen law several common the case involved as follows: claim, upon a course premised DTPA and a tation claims misrepresentations included both affirmative conduct that Therefore, according to the Dissent, 37 n.52. nondisclosures. the term "mis "apparently" used dissent, appeаls the court both opinion in its to refer to interchangeably representation" nondisclosures, in connec misrepresentations affirmative DTPA claim. Id. This and the the common law claims tion with In its discussion argument precedent. from a sound is not in Grube never claim, appeals court of DTPA plaintiffs' rather, omissions, but, used or nondisclosures referenced Id. at 57-59. "misrepresentations." "representations" term elsewhere referred to nondisclosures specifically The court claims. law analyzed plaintiffs' common opinion when it its affirmatively was appeals in Grube Certainly if the court of representation "assertion, actionable or statement of 100.18(1) § expand fact" under Wis. Stat. would beyond statute far its terms. complaint 41. To the extent that the amended

alleges any they assertions, affirmative are mere com "puffery" legally sup mercial and hence insufficient to port Puffery a claim under the statute. has been defined exaggerations reasonably expected as "the to be of a degree quality product, seller as to the of his falsity precisely truth or of which cannot be deter TV, mined." State v.American 146 Wis. 2d 301-02, (1988) (quoting Living, 430 N.W.2d709 et al., Better Inc. (3d (1957), 54 F.T.C. aff'd., 259 F.2d 271 Cir. 1958)). Snap-On Corp., See also Loula v. Tools 175 Wis. (Ct. 1993) (statement App. 50, 54, 2d 498 N.W.2d 866 money that a tool dealer would make as much as a lawyer exaggeration, doctor or was an "the truth or falsity precisely of which cannot determined," be and "so vague nothing and indefinite that it amounts to more puffery," than mere nonactionable at common law aas misrepresentation.) "[a] general In TV, American we held thаt products

statement that one's are best not actionable support as a of fact" and could not a § claim under TV, Wis. Stat. 100.18. American 146 Wis. 2d at 302. We also concluded that the characterization product of a as "the finest" and sale as a "clearance" or "merely examples hyperbole "closeout" were puffery," insufficient to state a claim under the DTPA. Id. at 299.

holding that DTPA claim upon was actionable based nondis- omissions, closures or it would explicitly. have said so Similarly here, affirmative statements fairly complaint constitute in the amended identified Harley alleged puffery. examples have is to of obvious masterpiece," "premium of "a advertised the TC-88 as ready torque quality," and to "filledto the brim with and thundering you the road." down take equates quality" best," "the to "Premium puffery squarely of Ameri- the definition and is within arguably pre- "masterpiece" is more The can TV. term specific a as it connotes best," than "the insofar cise engineering not move the achievement, this does but puffery. reason for of One of the domain term out scope excluding puffs from the of actionable commercial they capable misrepresentations are "not is that (quoting being refuted," id. at 302 or substantiated (1983)), Sterling Drug, and a Inc., 395, 752 102 F.T.C. determining hope of have as little factfinder would masterpiece" it "a was indeed the TC-88 whether simply determining it was "the best." whether would Harley's the is "filled to brim that the TC-88 statement thundering ready you torque take down with linguistic specificity re- the minimal road" lacks even proof quired refutation, it amenable to make entertaining attempt might prove to be. however Accordingly, a is not because nondisclosure representation of fact" for or statement "assertion, only purposes affirmative DTPA, and because the complaint alleged are mere in the amended assertions puffery, plaintiffs under failed to state a claim have § Stat. 100.18. Wis. Appeals

By The decision of the Court the Court.— reversed. BRADLEY,J., from withdrew 46. ANN WALSH participation. {dissent-

¶ 47. ABRAHAMSON, SHIRLEY S. C.J. ing) majority opinion I . Because conclude that the has gone expanding scope too far of the economic loss puffery rule doctrine, and the I dissent.

¶ 48. This case comes to us on a motion to dismiss complaint. plaintiffs a in this case seek relief on grounds. plaintiffs First, two assert common-law fraudulent and concealment claim Harley-Davidson, against contending Harley- Davidson knew about failed to disclose defect bearing motorcycles the cam mechanism of certain it majority opinion sold. The dismisses this claim under arguing doctrine, the economic loss that the pursue recovery purely are not entitled to tort arising economic losses out of their contractual rela- tionship Harley-Davidson.1 with plaintiffs Harley-

¶ Second, 49. the assert that Deceptive Davidson violated Wisconsin's Trade Prac- (DTPA), 100.18(1), § tices Act tionally Wis. Stat. it when inten- falsely represented motorcycles

and equipped faulty particu- with the mechanism were of a quality long- lar standard of safe, and suitable for majority opinion distance use. dismisses the second (1) claim on two theories: a nondisclosure, opposed assertion, to affirmative is insufficient to (2) support 100.18(1);2 § а claim under Wis. Stat. puffery, that the affirmative assertions are commercial legally support insufficient to a claim under the stat- ute.3

1 Majority op., 20. The economic loss doctrine does not 100.18 claims. Kailin v. Armstrong, apply § to Wis. Stat. 2, 42, 43, AppWI 252 Wis. 2d 643 N.W.2d 132. ¶¶ 2 Majority op., 3 Id., majority opinion denying ¶ 50. The falters both misrepresen- claims. As to the common law intentional claim, majority opinion pushes tation the the economic beyond statutory loss rule reasonable limits. As to the claim, majority opinion meaningless the crafts dis- tinction between affirmative assertions and nondisclo- purpose sures and undermines the of Wis. Stat. 100.18(1) by treating Harley-Davidson's representa- § puffery~ problems tions as I discuss each of these with majority opinion in turn.

I misrepre- ¶ 51. As to the common law intentional claim, fraud, sentation sometimes referred to herein as majority opinion good plain- delivers news to the tiffs, ultimately good. but delivers more bad news than paragraphs

¶ 52. After ten of bad news dicta describing why no-injury explain this case is a case and ing premised upon possi that diminished value a mere bility product speculative of future failure is too support misrepresentation uncertain an intentional claim,4 majority opinion gives some good complaint news: the amended is sufficient particularized allegation damage.5 state a more ¶ 53. Then comes the ultimate bad news. The plaintiffs' economic loss rule bars common law intentional claim.6 4 1d., ¶91 12-21. plaintiffs' explains great length 5 122. The brief at no-injury involving malfunctioning difference between cases

product seeking bargain arid fraud clаims benefit of the dam ages. Harley-Davidson 6 raised the economic loss issue for the petition general first time in its for review to this court. The major- reaching however, the ¶ result, this In 54. determining ity opinion of a the nature seeks to avoid exception to the economic loss fraud in the inducement "[t]his applicable case in It states that Wisconsin. rule opportunity present to determine whether an does not exception Tool-type an to cause of action as a Huron major- by recognized be loss doctrine would economic ity this court."7 majority opinion irrel ¶ asserts that it is 55. scope of a fraud to determine the existence evant exception adopting the because even the inducement fraud in the inducement with" Huron Tool8 "interwoven alleged plainly pertains "[t]he to the here fraud test, subject goods quality that are the of the character words," "In other asserts of the contract."9 matter recognize majority opinion, no to "we see reason exception to this loss doctrine allow to the economic dispute inten be remedied as an contract consumer misrepresentation tort."10 tional majority opinion disagree I with the 56. plaintiffs in this case can avoided. The this issue be alleged argue intentional entering purchase prior into their occurred circuit court not raised in the state is that matters rule this Co., Ill v. Holland Plastics State appeal. waived on are deemed (1983). This rule is one of 497, 504, 2d 331 N.W.2d Wis. con administration, however, may court nevertheless this right. a matter of appeal belоw on not raised sider issues Servs., 37, 2d Health & Social 103 Wis. County Dep't Brown (1981). 307 N.W.2d 7 Majority op., 35¶ Servs., Consulting Eng'g Precision Huron Tool & Co. v. 1995). (Mich. App. Ct. 532 N.W.2d 9Id., 10 Id., motorcycles. type explic- This of fact situation one was itly contemplated by opinion Digicorp the lead in to provide exception economic to the loss rule.11 I resolving conclude that the breadth of the fraud in the exception inducement to the economic loss rule is an aspect proceed essential I of this case. therefore to scope exception. consider the A the brief historical development exception review of the of the fraud will in assist this endeavor. ap-

¶ 57. Courts have three different taken proaches determining scope in the of a fraud in the exception the inducement to economic loss rule. In jurisdictions, exception recognized, some no at least claims, the context of U.C.C. the economic loss rule justice at all.12 one At least this court has favored this approach.13

11 Corp., 54, 52, Inc. v. Digicorp, Ameritech 2003 262 ¶WI 32, Wis. 2d 662 N.W.2d 652. 12 Flagg Energy Corp. See Corp., Dev. General Motors (Conn. (a 1998) 1075, A.2d claim of fraudulent purchase product inducement procured a defective under the ground U.C.C. invalid on was the that such claim was inconsistent provided by with exclusive remedies U.C.C.). Others conclude that U.C.C. not does restrict a party from pursuing fraud and arising claims goods. out of a dispute over the sale of See Steven C. Tourek et al., Code, Bucking the "Trend": The Commercial Uniform Doctrine, Economic Loss Law Common Causes Action Misrepresentation, 875, 878-84, Fraud and 84 Iоwa L. Rev. (1999). 54, Digicorp, Corp., Inc. v. Ameritech 2003 WI (Sykes, J., Wis. 2d concurring 662 N.W.2d 652 in part, dissenting part). contrast, courts many "recognize In contract] inducement of a can be an

fraud [in rule."14 The theory to the economic loss exception a in the inducement to the exception behind fraud that contracts entered into under loss rule is economic of proper ordering cannot the promote false pretenses between One court parties. risks and responsibilities articulated this as follows: reasoning negotiations begin assumption the

[C]ontract with hardly encourage party lying is will free other duty by open bargaining. specific encompassed The duty parties in the inducement fraud honestly regarding entering speak into the contract to parties freely can allocate risk if negotiated terms. How truth- they rely opposite party speak cannot on the fully during negotiations regarding subject matter they cannot tell what is a he and of the contract —if not?15 what is juris a of analysis, on this number Relying Illinois, Texas, have

dictions, California, such as to the a fraud in the inducement exception recognized Court of Appeals economic loss rule.16 Wisconsin Co., Inc. exception Douglas-Hanson such an adopted Co., 132, 138-39, 2d 598 BF 229 Wis. Goodrich 14 Barton, Drowning Appli in a Sea Contract: Joseph R. of Negligent Loss Rule to Fraud and cation Economic Claims, 1789, Mary L. Rev. 1831 41 Wm. & Misrepresentation (2000). 15 Inns, Inc., Supp. 2d Sys., Inc. v. Micros 8 F. Budgetel (E.D. 1998) 1137, 1148 Wis. 16See, Eng'rs USA v. Presidio e.g., Corp. Formosa Plastics (Tex. Contractors, Inc., 41, 1998); Khan v. & 960 S.W.2d (Cal. 1990); Inc., Rptr. App. Ct. Shiley 266 Cal. (Ill. Co., Mfg. Co. v. Nat'l Tank N.E.2d

Moorman 1982). (Ct. 1999), App. holding N.W.2d that "the econоmic preclude loss doctrine not a does claim for misrepresentation misrepresenta intentional when the fraudulently plaintiff tion induces to enter into the According appeals, contract." to the court of fraud exception the inducement to the economic loss rule is appropriate for a number of reasons. Intentional mis representations ability parties undermine the negotiate freely.17 public policy supports placing Sound resulting the burden of loss from a seller, on the who caused the loss and is best situated to upon risk, assess and allocate the rather than buyer.18 justices Two of this court have favored this approach.19 agree approach. I with this jurisdictions, category

¶ 60. A third such as Michigan adopted and Florida, have a narrower fraud exception, adopting reasoning in the inducement of Michigan Appeals Engi Court of in Huron Tool & neering Consulting Services, Co. v. Precision 532 (Mich. 1995). App. Although N.W.2d541 Ct. the Michi gan recognized excep court a fraud in the inducement tion to the rule, economic loss it added the additional complainant may bring that a caveat an intentional misrepresentation only claim if it is extraneous to the alleged words, breach contract.20 In other the inten misrepresentation factually tional claim must be distin- Co., Co., Douglas-Hanson Inc. v. BF Goodrich 229 Wis.2d (Ct. 1999). 132, 144-45, 598 App. N.W.2d 18Id. at 145-46. Bradley Justices and Bablitch advocated the "broad" exception. Digicorp, 262 Wis. 2d Tool, Huron 532 N.W.2d at 546. misrepresentation

guishable contract; from the subject intertwined with the interwoven or ‍​‌‌‌​‌​​‌​‌‌‌​​​‌​​‌‌​‌‌‌‌‌‌‌​​‌​‌​‌‌​‌‌‌​​‌‌​​‌‍cannot he contract.21 matter of the has resulted cоn- The Huron Tool rule

flicting an intentional constitutes views about what misrepresentation or "interwoven with" "extraneous to" that the have "taken the view Some courts a contract. strictly temporal."22 is, if the intentional That is issue prior to the execution occurs excepted to the contract and contract, it is extraneous taken courts have economic loss rule. Other from the misrepre- timing of the intentional the view that the compari- important as "a substantive is not as sentation against allegedly fraudulent statements son of the justices provisions."23 of this court have Two contract's of the Huron Tool rule.24 version advocated some to, interwoven "extraneous nightmarish 62. The Huron Tool applica- proved in its to be with" test has "application remarked tion. One commentator Ouija impossible. A board test has been the 'interwoven' analysis accurately just predict the results. could 'conflicting produced 'murky' approach and the has ap- opinions, courts the same district even within theory, analysis peal.' is, in 'so Further, the 'interwoven' "25 exception Another whole.' that it swallows broad 21 Id. at 545. Inducement Claims Should Schwiep, Fraudulent Paul J. Attack, B.J., Rule From Economic Loss Fla.

Always be Immune 2001, 22, 24. Apr. at

23 Id.

24 Prosser, (Crooks, J., 32, Digicorp, 262 Wis. 2d ¶ J.). Digicorp, 262 Wis. at 27. See also 22, Schwiep, supra note J., dissenting). 32, (Bradley,

2d 86-89 ¶¶ opined practical commentator that "the effect of the requirement [that additional the fraud be extraneous to contract] exception nullity."26 the has rendered the

¶ approaches 63. As I have stated, each of these exception the fraud in the inducement has had an Digiсorp, advocate in this Corp., In court. Inc. v. Ameritech 54, 2003 WI 32, Wis. 2d 652,27 N.W.2d (JJ. justices participating three Crooks, Prosser, and Sykes) rejected Douglas-Hanson fraud in the in- exception ducement to the economic loss rule.28 Four (JJ. participating justices Crooks, Prosser, Bablitch, and Bradley) agreed Digicorp in that some fraud exception inducement to the economic loss rule exists, equally but the four divided about what fraud in the exception inducement entailed.29 26Barton, supra note at 1808. 27Majority op., ¶ 28Digicorp, Inc. v. Corp., Ameritech 262 Wis. 2d 5 n.2. 29Id., 5 n.2. Harley-Davidson Digicorp contends that the court held that alleged where an misrepresentation inducing a contract con- cerns quality or product characteristics of a that is the subject contract, matter of the the economic loss rule any bars tort premised upon claim the misrepresentation. Harley- argues Davidson adopted this court the rule set forth Huron Tool that the economic loss doctrine bars tort claims for misrepresentation that are "interwoven" with the terms of the contract, permits but tort claims for a induces a contract if the misrepresentation is unrelated to the express implied terms of a Harley-Davidson contract. errs. As majority opinion explains, justices "three of participat- five (albeit three) ing Digicorp] [in different rejected sets of both Douglas-Hanson Majority Huron Tool." op., three-justice

A Digicorp majority decided that the facts of the case were insufficient to satisfy the Huron exception. Tool justices Digicorp agree

¶ the four of the I with 64. holding be a fraud the that there should court exception I the economic loss rule. would to inducement Bradley Digi- Bablitch conclude, as did Justices exception corp, a fraud in the inducement that Douglas-Hanson by appeals in the court of articulated Douglas-Hanson good under the rule. But either is a rule, I the Tool least version of Huron rule or at some present plaintiffs case should in the conclude that the complaint. a motion to dismiss their survive Harley-Davidson allege 65. engines prior quality misrepresented of the TC-88 the motorcycles purchase plaintiffs' con- decision to to the taining They allege malfunctioning engines. motorcycles Harley-Davidson with "all of the knew that prematurely fail." are defective and will the TC-88s satisfy allegations of the at one formulation These least Digi- opinion in forth in the lead test set Huron Tool excep- "[I]n corp: in the inducement order for the fraud [to apply, would have tion to In have] contract. of the before the formation occurred misrepresenta- constitute . . . intentional addition, to prove plaintiff five elements have to would tion, Jury Civil law and in Wisconsin in the case set forth Instruction 2401."30 principles understanding and ra- An underlying rule serves economic loss

tionales applied.31 clarify The economic be the rule should when purposes distinc- maintain the are to rule's stated loss 2d Digicorp, Wis. Co., 918, 933, 2d & 162 Wis. Northridge v. W.R. Grace Co. (1991) (the distinguishing policy principles 471 N.W.2d cat into which actions determine and contract between tort fits). injury alleged egory complainant's protect tion between tort law and law,32 contract encourage party freedom contract, and to best situated to assess the risk of economic loss to insure against, my opinion, assume, or allocate the loss.33In majority opinion's recognize the failure to the inten- misrepresentation present tional claim in the case purposes.34 undermines these boundary between contract and tort is often indis parties "[Wlhen tinct. disputing, to a contract are tort and overlap, making contract it difficult to draw a clear distinction Hayes, 228, between the two." 246, Brooks 133 Wis. 2d (1986) treatises, (citing N.W.2d167 discussing articles and cases law). overlap between contract and tort See also State Farm Co., Mut. 305, Auto. Ins. Co. v. Ford Motor 225 Wis. 2d 318-19 (1999) (the boundary between tort and contract law has moved consumers). in the direction protecting of Gilmore, See Grant (1974). The Death Contract of 33For a purposes discussion of the of rule, the economic loss Janssen, see Inc., Daanen & Cedarapids, 395, Inc. v. 216 Wis. 2d (1998). 400-09, 573 N.W.2d 842 For a fuller discussion of the Telecom, reasons for the doctrine, economic loss see All-Tech (7th Amway Corp., 862, Inc. v. 174 F.3d 1999); 865-67 Cir. Barton, 14, supra note at 1796-1800. 34For a barring discussion that misrepresenta intentional tion claims under the economic loss rule undermines the purposes rule, of Digicorp, see 262 Wis. 2d 89-92 ¶¶ (Bradley, J., dissenting). special

Fraud is a circumstance not purpose within the the economic economic loss doctrine. The loss doctrine devel oped because "concern about extending liability ad infinitum consequences for the negligent Rabin, of a act." Robert L. Tort Recovery Negligently Economic A Loss: Reassess fоr Inflicted ment, (1985) added). 37 Stan. L. See, Rev. (emphasis e.g., Co., Inc., Ollerman v. O'Rourke 17, 48-51, 2dWis. (1980) (courts N.W.2d 95 are impose liability reluctant to in negligence actions for causing pecuniary loss resulting not bodily from harm physical damage property, to undergirding purposes economic These commercial transac- in the context of rule evolved loss goods parties at arm's contracted tions which length. from situations are distinct circumstances Such engaged not in business who are in which consumers goods.35 into contracts for enter Adapting con- loss rule to the economic requires of the eco- an evaluation transactions sumer light underpinnings rule and its nomic loss particular this court has situation. While of a facts recognized apply rule can economic loss not clear that it should transactions,36 it is consumer involving apply claims fraud in the inducement allegation of I that the conclude consumer transactions. misrepresentations is, at at in the case bar intentional very a motion to to withstand least, sufficient failing claim. for to state a dismiss excep- Allowing a fraud in the inducement intentional false rule for to the economic loss tion prior in a consumer to a contract made statements purchase preserves tort law a distinction between & Daanen liability); exposed are to wide because defendants (the Janssen, a loss doctrine is 2d at 400 "economic 216 Wis. pur- that a commercial providing doctrine judicially created manufacturer, under recover from a product of a cannot chaser liability, products negligence of or strict the tort theories nature."). solely 'economic' in damages that are 35 Telecom, Amway 862, 866 Corp., Inc. v. 174 F.3d All-Tech 1999). (7th Cir. Co., Ford Motor Auto. Ins. Co. v. Farm Mut. State (1999) (holding "that the 311-12, 305, 592 N.W.2d

2dWis. consumer transactions applies to economic loss doctrine loss."). purely economic Farm's tort claims bars State contract law and fosters the values of each.37 It main- tains the value of by contract ensuring consumers are in a position to make intelligent decisions in allo- loss, the risk cating of thereby increasing the likelihood losses can be resolved contract. It furthers purposes by tort law sustaining financial deterrent for those who intentionally their misrepresent goods. 70. A fraud in the inducement to the exception economic loss rule for intentional false statements made to consumers is founded on the tort of intentional misrepresentation, a tort action protecting intangible economic interests. This tort action is separate and distinct from the created duty solely by contract.38 "[T]he interest protected fraud by is plaintiffs right to on justifiably rely the truth of a defendant's factual representation in a situation where an intentional lie would result loss to the An plaintiff."39 overextension adopting For a court an intentional misrepresentation exception rule, to the economic loss see Mfg. Moorman Co. v. Co., (Ill. 1982). Nat'l Tank 435 N.E.2d

For a discussion desirability of allowing recovery in intentional misrepresentation contract, Barton, versus see su- (contract pra note at 1825-29 and tort claims are funda- mentally different and serve сomplementary but pur- distinct poses; these differences should inform the application correct the economic misrepresentation). loss rule to 38The five elements of intentional misrepresentation (fraud) (1) are: the defendant made a fact; (2) (3) representation untrue; was the defendant knew the (4) representation was untrue recklessly; or made it repre the sentation was made with intent to deceive and induce the plaintiff upon to act plaintiffs it to the pecuniary damage; and (5) plaintiff representation believed the to he true and relied (2002). on it. Wis JI —Civil 2401

39 Martin, (Fla. 1995) 1327, Woodson 663 2d So. 1330 (Altenbernd, J., dissenting).

184 misrepre- fraudulent the economic loss rule drowns in a sea of contract.40 sentation claims contract" and kind of "freedom of 71. What against being "ability the risk" is to assess and insure protected party a contract com- when a fostered inducing tort in a contract that mits an intentional monetary party? loss to another On what basis causes say does not need can we that an individual consumer remedy misrepresentation of intentional the tort ques- against a manufacturer?41 answer both tions is none.42 by questions are never addressed 72. These

majority opinion, simply asserts however, because it bars this intentional that the economic loss doctrine remedy there is a tort because in contract. (2000). 14, supra See Barton, at 1843 note Delaval, Steamship Corp. v. Transamerica In East River Inc., 858, (1986), Court Supreme the United States 476 U.S. clear, "It how- sea/drowning metaphor as follows: used al- ever, products liability] were development [of if this far, in a contract law would drown sea progress lowed to too tort."

41 See, Corp., Homes e.g., Thompson v. Neb. Mobile 647 P.2d (Mont. 1982) ability warranty (voicing skepticism of consumer). protect law to (economic See, e.g., supra al., loss rule Tourek et note claims); law fraud Frank applied not be to bar common should Torts: A Rule and Intentional The Economic Loss Nussbaum, (1996) Sword, 8 St. Thomas L. Rev. Shield or A 504-05 (same). majority opinion

¶ 73. The announces outcome today announcing scope without a rule of law. The exception the fraud in the inducement to the economic day.43 loss rule remains for another Treating complaint's ¶ allegations 74. true, as we must do a motion to dismiss, I conclude that plaintiffs have stated a claim for fraud in the inducement of the contract, whether under Huron Tool Douglas-Hanson. plaintiffs ultimately or Whether the prevail question in their claim is a to be determined at trial, not on a motion to dismiss.

HH1—1 unpersuaded by ¶ majority I 75. am also opinion's conclusion that the in this case are proceed not entitled to with their claim under Wis. Stat. § 100.18(1), Deceptive (DTPA), Trade Practices Act (A) following plaintiffs' on the theories: The case is premised primarily allegation Harley- on the alleged motorcycle Davidson failed to disclose the de- prohibits only fect44 deceptive, and the DTPA untrue, misleading affirmative assertions rather than omis- (B) any sions; puffery affirmative assertions are and not actionable.45

¶ 76. I discuss each of these issues in turn. Judge written, As Posner has the economic loss doctrine imply does not abolition of the fraud tort in all cases in which plaintiff and thе defendant have business relations. Indeed Judge Posner the application of economic loss to such cases Telecom, All-Tech poses Amway question. Inc. v. a close Corp., (7th 1999). 174 F.3d Cir. The Seventh Circuit Court of Appeals declined predict how this court would answer this question given that it is such a close call. 44Majority op., 40. Id.,

A allegation Harley-Davidson failed only aspect one of the to disclose certain defects is plaintiffs' allegations, cannot and "the nondisclosure" be advertising The material has to be viewed isolation. any assertion, a to determine read as whole representation, whether decep- untrue, or statement of fact is misleading tive, under the statute.46 or plaintiffs' ¶ The of action under 78. cause Wis. 100.18(1) § alleges Harley-Davidson also Stat. deceptive that motor- made affirmative statements engines particular cycles equipped with were of a TC-88 allege quality. standard or Harley-Davidson also reasonably should have knew or engines motorcycles TC-88 "were known that the with dangerously defective" and failed to advise or warn rendering disabling purchasers inherent, an defect of motorcycles in- and unsuitable for their unsafe including long-distance and use, tended and foreseeable highway riding. stage, Whether, at the motion to dismiss question DTPA is a of

failure to disclose falls within the question statutory interpretation, a of law that this independently or court court decides of the circuit court analyses. benefiting appeals, In con- but from their give struing goal effect to statute, our is to discern and 381, Sys., Corp., A Inc. v. Hertz 782 F.2d Avis Rent Car (2d 1986) ("Thus, reviewing that in emphasized Cir. we havе advertising practices unfair under prohibiting FTC actions must 'consider the Federal Trade Commission Act court entirety engage disputatious in its and not. .. advertisement than each The entire mosaic should be viewed rather dissection. Inc., Drug, 317 F.2d separately.'") (quoting Sterling tile FTC v. (2d 1963). 669, 674 Cir.

the intent of the In legislature.47 so a court must doing, ascertain the intent from legislative language statute in context, relation to its history, scope, objective, including the consequences alternative interpretations.48 100.18(1) § Wisconsin Stat. protects con-

sumers from untrue, or deceptive, advertise- misleading ments, announcements, statements or representations. The statute proscribes "advertisement, announce- ment, statement or representation contain[ing] any assertion, representation or statement fact which is untrue, deceptive misleading."49 Cole, 59, 13, State v. 167, 2003 WI 262 Wis. 2d Szulczewski, (citing N.W.2d 700 State v. 216 Wis. 2d (1998)). 574 N.W.2d 660 48 Cole, 167, See (citing Davis, 262 Wis. 2d 13 State v. 62). 136, 13, 2001 986, WI 248 Wis. 2d N.W.2d 100.18(1) full, § In provides Wis. Stat. that: person, firm, corporation association, agent employee No or or or thereof, sell, distribute, consumption with intent to increase the of any dispose any estate, merchandise, securities, or in wise real service, employment, anything by person, firm, or offered such corporation association, agent thereof, employee directly or or or indirectly, sale, hire, public distribution, or to the use or other public any any or with intent to induce the in manner to enter into obligation relating purchase, sale, hire, contract or the to use or any estate, merchandise, securities, employment lease of real or service, make, publish, disseminate, circulate, place shall or before cause, public, directly indirectly, made, published, or or to be disseminated, circulated, placed state, public, or before the in this newspaper, magazine publication, in a or other inor the form of a book, notice, handbill, poster, bill, circular, pamphlet, letter, sign, placard, card, label, any station, or over radio or television or in any way foregoing, other similar or dissimilar to the an advertise- ment, announcement, representation any statement or kind to public relating purchase, sale, hire, to such use or lease of such estate, merchandise, securities, employment real service or or to thereof, advertisement, the terms or conditions which announce- language ¶ 81. The of the statute is broad in scope, affecting products, entities, services, numerous of communication. and means consistently Wisconsin courts have language

held that of Wis. Stat. § purpose, going serves a remedial than 100.18 further providing a the common law cause of action to been deceived or consumers who have mislead.50 history supports ¶ 82. The of the statute the view language purpose that its broad serves of consumer protection. reviewing statute, In the evolution of the previously this court has concluded that since enact- its legislature expanded ment, the the reach has of Wis. § protections Stat. 100.18 to afford consumers new ment, any assertion, representation repre- statement or contains untrue, deceptivе or of fact sentation statement which is misleading. Enters., Linscott, 56, See Tim Torres Inc. v. 142 Wis. 2d (Ct. 1987) ("The App. scope 416 N.W.2d670 broad remedial protective purpose of sec. 100.18 its make it similar to the provisions remedial federal antitrust laws rectify wrong proof eliminate or a the traditional standards of may necessary."); be relaxed if Dorr v. Heart Hosp., Sacred (Ct. 1999) ("Section 425, 445, App. Wis. 2d 597 N.W.2d 462 prohibits deceptive, misleading, 100.18 or untrue statements of any made public setting, kind to the in a commercial no matter ("[W]e Kailin, made."); reject how 252 Wis. 2d § . premise .. that Wis. Stat. 100.18 does not create new cause action, simply provides remedy but for common law .."). claims . . §

The differ elements of the cause of action under 100.18 misrepre- from those of the common law claims of intentional sentation, liability misrepresentation negligent strict mis- Kailin, 676, representation. 252 Wis. 2d

189 increasingly sophisticated keep pace methods of with disseminating information.51 majority opinion simply concludes, 83. The reasoning authority, that a nondisclosure is without representation assertion, "an or statement of fact" not 100.18(1).52 § language Neither the under Wis. Stat. misrepresenta- the statute nor the case law excludes Am., Inc., 64 State v.Automatic Merchandisers Wis. 2d (1974). Haubrich, 659, 662-63, 221 See also Bonn v. N.W.2d (Ct. 1985). 168, 173-74, App. 2d 366 N.W.2d503 Wis. statutory

One commentator has written that "Wisconsin's law . . . enacted to address the shortcom- was The ings protections of common law for consumers.... evils the remedy § legislature attempting just [in 100.18] were not was deception advertising deception implicit overt but also such as consumers, tendency intentionally or that has thе to mislead Goretzke, Resurgence Emptor: not." Cullen Caveat Puff- ery the Pro-Consumer Trend in Wisconsin's Mis- Undermines Doctrine, 171, L. representation 2003 Wis. Rev. 52Majority op., interpreting 40. The case law Wis. Stat. not, majority opinion point § at 100.18 does as the claims note are not toward the inexorable conclusion nondisclosures Although reported the actionable under statute. cases assertions, litigation involved affirmative lack of on this Daun, fact, subject dispositive. is not In Grube v. 173 Wis. 2d (Ct. 1987), App. by majority a case cited N.W.2d § opinion allowing only a claim under 100.18 based on misrepresentations, for propo affirmative does not stand this sition. Grube, brought "negligence,

In actions for misrepresentation, responsibility misrep- intentional strict resentation, negligent misrepresentation and violation of sec. making against 100.18" the defendants for certain affirmative suitability regarding property for business assertions family failing the existence of purposes and for disclose gasoline later to be underground tank was discovered causing groundwater contamination. through made in the

tions nondisclosures course of representations in consumer transaction which have ‍​‌‌‌​‌​​‌​‌‌‌​​​‌​​‌‌​‌‌‌‌‌‌‌​​‌​‌​‌‌​‌‌‌​​‌‌​​‌‍been made. present Harley-Davidson case, 84. In the made quality product, clearly

various claims about of its implying engine subject that its would not be to sudden complete plaintiffs' and mechanical The failure. com- plaint alleges Harley-Davidson that and "advertised motorcycles equipped engines marketed the with TC-88 premium quality motorcycles as appropriate safe and were use,

for their intended and fоreseeable including long-distance highway riding." plain- and The allege motorcycles not, fact, tiffs further that the are in appropriate safe and such uses because the defect bearing may the cam leave riders stranded or cause injured. them to be Jury The Wisconsin Civil Instructions ex-

plain an if false, assertion is "untrue it is errone- appeals

The court of Grube addressed the difference between affirmative assertion and a nondisclosure in the context of the law common claims not § respect respect with to Wis. Stat. 100.18. With to the common claims, appeals law fraud the court of concluded that "the complaint alleges support misrepre- Grubes' facts to claims of affirmatively through sentation ... both nondisclosure." Grube, 2d 173 Wis. at 56. premised §

The in Grube their Wis. Stat. 100.18 significant part claim in defendant in response on Thiel's silence 19; plaintiffs questions. to the Plaintiff Brief at Re- Grube's spondent Appendix Thiel's Brief and at 4-5. The court of § appeals proceed, stating allowed 100.18 claim to that "the misrepresentations.. alleged complaint, . in the if Grubes' proven, 'deceptive advertising'" scope are within the sec. Grube, 2d at appeals appar- 100.18." 173 Wis. court of ently "misrepresentation" in opinion used its to refer to both misrepresentation. affirmative and nondisclosure things they represent ous, or does not state or are."53 "deceptive misleading if An assertion is it causes something reader or listener to believe other than what wrong is in fact true or leads to a belief."54The law is deceptive misleading clear that an advertisement is or only by by not false affirmative assertions but asser- representations, tions, and of fact fail statements important to disclose the whole truth or that omit facts give misleading impressions.55 thus, speaks, If a seller its words must be suffi- misleading. may "[H]alf cient so as not to be of the truth obviously lie, amount to a if it is understood to be allegation Harley- In words, whole."56 other is that affirmatively engine Davidson asserted that the was a "masterpiece," implying had no inherent that it defect subjecting it to failure. upon Commission, 87. The Federal Trade which past,57 recognized court has relied in

this has may while an advertisement literally make assertions that are "may deceptive true, it be where the overall impression misleading."58 communicated

53 (2002). Wis. JI —Civil 2418 54Id. 55 Am,., Inc., 859, Volkswagen Perona v. 684 866 N.E.2d of

(Ill. 1997) (failure App. Ct. to disclose sudden acceleration problem support in vehicle fraud under consumer sufficient act). protection 56 Dobbs, Dan B. and Keeton on the Law Prosser Torts of (5th 1984). § at ed. Madison, Inc., & Appliance See State Am. T.V. of (1988). 292, 301-02, Wis. 2d 430 N.W.2d 709 Preston, L. Federal See Ivan Trade Commission's Implications Constituting Deceptive Adver Identification of (1989). tising, 57 U. Cinn. L. Rev. misrep- 88. Even the context of common-law recognized twenty claims, resentation this court over years ago that the distinction between an affirmative consistently assertion and a nondisclosure has been by public policy exceptions. undermined sensible As the Co., Inc., court stated in Ollerman v. O'Rourke 94 Wis. (1980), 2d 288 N.W.2d95 courts have in their moved interpretation duty duty common-law of from "no holding actively disclose" to sellers who conceal defect misrepresentation.59 or tell half-truths liable for § ¶ 89. The actionable 100.18, words Wis. Stat. representation "assertion, fact," or statement of should be read the context of the statute as a whole consistently legislature's goal inhibiting with the range deceptive misleading broad com- business munications. Material ex- omissions should not be cluded from the reach statute's when omissions make representations the assertions or about the of a merits product deceptive, misleading, majority or untrue. The opinion beyond limits the statute far its words or the legislature's intent. § legislature adopted The Wis. Stat. 100.18 public policy legislature

as the of this The state. did not deceptive create an artificial distinction between or misleading representation, assertion, or statement of representation, assertion, fact and an or statement of deceptive misleading fact that because it is a partial truth. This court should not do in the so legislature's stead. Co., Inc., Ollerman v. O'Rourke 17, 30-31, 2d 94 Wis. (1980).

N.W.2d 95

B majority opinion allega- ¶ 91. The dismisses the advertising, labeling puffery. deceptive them as tions allegations at the of the com- 92. We look first liberally plaint, all which are to be construed with plaintiffs.60 reasonable inferences drawn favor of the Harley-Davidson decep- complaint that asserts tively engines motorcycles and as advertised TC-88 being equipped premium quality engines safe, with appropriate long-distance were reliable and highway and specifically, complaint use. More includes by Harley-Davidson made with affirmative assertions respect performance motorсycles to the of the affected development, testing research, and the of those motorcycle engines plaintiffs pur- that induced the motorcycles. chase their present allege

¶ 93. The in the case Harley-Davidson representations made three that mis- purchase led them and induced them to defective mo- torcycles. alleged representations are follows: Those

(1) marketing de- Harley-Davidson's literature engine in development scribed the of the TC-88 following manner: 663, 669, Scarpaci County, v. Milwaukee 96 Wis.2d (1980) ("The purpose complaint give is to

N.W.2d claim; therefore, notice of the nature of the it is not necessary plaintiff complaint for the to set out all the eventually proved to The purpose facts which must be recover. of a motion to dismiss for failure to state a claim is the same as legal sufficiency of purpose the of the old demurrer to test the construed, pleadings liberally claim. Because the are to be a the legally only if claim should be dismissed as insufficient 'it is recover.1") quite plaintiff clear that under no conditions can the (citations omitted).

Developing six-year [the process.... TC-88s] was a masterpiece. result studied everything We from way inside, the through way oil moves to the job rocker cover does its staying oil-tight. Only of carry parts functional in the design. over new What carry does over power Harley-Davidson® is the of a engine, only more so.

(2) Harley-Davidson engine described the TC-88 as "[e]ighty-eight cubic filled inches to the brim with torque ready and you take thundering down the road"; and

(3) Harley-Davidson "аdvertised and marketed motorcycles equipped engines with TC-88 premium quality motorcycles that were safe and appropriate use, their and long- intended foreseeable including highway distance and riding." majority opinion plain-

¶ 94. The dismisses complaint tiffs' phrases because it contends that words and "masterpiece," "premium quality,"

like and you torque ready "filled to the brim with and take thundering vague down the road" too are and indefinite to be verified.61 majority opinion

¶ 95. The takes the words "mas- terpiece" "premium quality" of out the context of marketing advertising literature, which made a representations, number of the truth of are which capable being Specifically, length of verified. the testing of ("stud- testing ("six-year process"), the extent of everything"), carryover ("21"), parts ied of number power equivalence prior and the with models are all Harley-Davidson facts that can be verified. That re- culminating ferred to all these achievements as in a "masterpiece" "premium quality" suggests all op., Majority extremely high testing produced an and

the research clearly product implies quality that is not an and this complete engine subject be to sudden and that would mechanical failure. majority analysis opinion,

¶ with little or 96. The authority, puffery. I all of dismisses these statements Harley-Davidson's statements, read as a conclude that puffery support a whole, are sufficient to were not and § claim under Wis. Stat. 100.18. "Puffery" broadly repre- refers nonfactual opinion or as statements of value.62

sentations such "puffing. frequently [as] has a term court defined .. reasonably exaggerations to be used denote degree expected quality of his a seller as to the pre- product, falsity or cannot be the truth of which cisely determined."63 Puffery [been] "long has an ac- considered

ceptable advertising technique,"64 and that a cases hold rest a claim for on consumer cannot rely person puffery no on because reasonable would representations.65 such fact, a statement of 99. The distinction between opinion, puffery faint,

a statement of is often 62Goretzke, note supra at 171. 2d at Appliance, Am. T.V.& 146 Wis. 301-02.

64Id. at 301. legal that Contemporary suggests research conclu rely person that a does not on seller's state sion reasonable quality reality. reflect Studies opinion ments of does not necessarily suggest distinguish do between that consumers not Goretzke, describing quality. statements of fact and statements subjects (discussing note at 173-74 the fact that supra per gallon "27 on gets treated a car miles statement gas gas" opinion gets "truly a car excellent regular and the mileage" as equivalents). easily Puffery

uncertain, and not drawn.66 is a form of opinion opinions a statement of and facts drift into among each the other. Thus distinction the three has apply produced been hard to and has inconsistent case ques- law.67The distinction has also been a viewed as fact, tion for the trier of one of court, not law for the providing dismissing thus another reason for not the complaint on a motion to dismiss.68 66 Gee, (1916) 246, 255, Miranovitz v. 163 Wis. 157 N.W.790 ("The attempt upon a base distinction the difference between 'opinion' and in confusion; a 'fact' has resulted much repre in being sentations one to be of opinion case held matters and representations in exactly another case of same character being held to be statements of fact. This distinction is often unreal."). uncertain, indefinite, times and Judge Learned Hand that a supposed concluded distinction opinion "escaped between and fact has not it criticism opinion Whether it is in depends part deserves." or fact on the buyer circumstances of the seller. Vulcan Metals v. Co. (2d 1918). Co., Mfg. Simmons 248 F. 856 Cir. 67 instance, Dorr-Oliver, Papers, For v. Consolidated Inc. Inc., (Ct. 589, 594, App. 1989), 153 Wis. 2d 451 456 N.W.2d appeals court of that a claim a liquid held seller's that clarifier equipment a "long puffery, would have life" was but in Radford Enterprises, 544-45, v. J.J.B. 163 Wis. 2d N.W.2d 790 (Ct. 1991), court App. appeals representing of held that a having a hull" boat as "sound was not. Corp., 50, 54, In Loula v. 2d Snap-On Tools 175 Wis. (Ct. 1993), dealership

N.W.2d 866 that "a App. Snap-On claims proposition" was a no-risk and that such "make dealers as much lawyers" money puffery. as doctors and held to be were provide boundary These sense of clear decisions no a what not puffery. between statements do or do constitute 68See, Miranovitz, Hein, 253; e.g., at Lambert Wis. (Ct. 1998). 712, 724, n.4, 2d App. 218 Wis. N.W.2d only A can be held liable not seller opinion.69 I also statements of fact but statements Harley-Davidson's state- conclude would therefore product quality opinion regarding its ments jury question, present puffery, or a are not at least long approách a This is consistent with are actionable. law.70 line of case Wisconsin Harley-Davidson's advertising literature, Harley-Davidson's сoupled status one with motorcycle premier world, in the con- manufacturers puffery. not mere firms that its statements were producing Harley-Davidson reputation its on has built many quality years. reputation high products for This person that when a to believe would lead reasonable Harley-Davidson "masterpiece," it has a it claims built motorcycle does have not has fact built material defect. majority opinion's of dismissal the posturing does disservice to

statements as boastful consuming Harley-Davidson public the that both high Harley-Davidson's products in such esteem. holds 69 opinion assigned liability for statements of Wisconsin has by person does not believe the statements that are made who Shimanski, See, 175, 192, v. 2d e.g., to be true. Lundin Wis. (1985) ("[SJtatements opinion are actionable N.W.2d ‍​‌‌‌​‌​​‌​‌‌‌​​​‌​​‌‌​‌‌‌‌‌‌‌​​‌​‌​‌‌​‌‌‌​​‌‌​​‌‍opinion."); his speaker incompatible if the knows of facts with ("It (1966) Bitter, 653, 658, Hartwig 2d 139 N.W.2d644 v. Wis. assertion, clear, therefore, if, the at the time of the that opin incompatible are his utterer is aware of facts that with Co., Novelty inpraesenti."); Zingale ... fraud is Mills ion (1943) ("A 144, 150, 244 Wis. 11 N.W.2d 644 statement facts not disclosed or opinion upon in a business transaction reasonably interpreted recipient may be otherwise known the maker of no fact implied as an statement knows incompatible his opinion."). with 69, supra. cited at note See cases allegations complaint may- 103. While may I trial, not be out at conclude if the borne opinion treating pleaded majority all all were facts reasonable inferences drawn from those facts true purpose testing legal sufficiency for the complaint, it would conclude that the have support made sufficient to a cause of assertions action § under Stat. Wis. 100.18. For I forth, the reasons set dissent.

Case Details

Case Name: Tietsworth v. Harley-Davidson, Inc.

Court Name: Wisconsin Supreme Court

Date Published: Mar 26, 2004

Citation: 677 N.W.2d 233

Docket Number: 02-1034

Court Abbreviation: Wis.