Public
Case Analysis
June
28, 2006
The
case is noteworthy for its similarity to another case involving nearly identical
facts, but which resulted in the opposite result, Mayville Die & Tool, Inc.,
v. Weller Machinery Co., 249 Wis.2d 490, 639 N.W.2d 224 (Table), 2001 WL 1512917
(Nov.29, 2001, Wis.App.)(unpublished).
In
that case, Mayville asked Weller, a distributor, for assistance in locating a
vertical boring mill. Weller contracted Fabricating & Production machinery,
Inc. (FPM), which located a used vertical boring mill in Romania. Weller forwarded
the specifications for the mill from FPM to Mayville, representing that the machine
had been manufactured in the 1980s, and was in excellent condition.
Mayville
agreed to buy the mill for $86,000, plus delivery charges. However, the mill had
several missing or damaged parts, and components that predated the 1980s.
As
in the case at bar, the parties had a pre-existing relationship, the plaintiff
was the one initiating the contact, and the defendant was not the party in possession
of the machinery.
Mayville
sued FPM and Weller under several theories, including sec. 100.18. However, the
circuit court dismissed Weller from the suit, and the court of appeals affirmed.
The
court of appeals held that Mayville was not included in the statute’s definition
of “the public,” reasoning, “Mayville and Weller had an ongoing
business relationship which led Mayville to contact Weller for assistance in locating
a vertical boring mill. We therefore conclude Mayville was not a member of the
public within the meaning of the statute.”
This
conclusion is directly contrary to the holding in the case at bar.
The
court also addressed Mayville’s negligence claim, finding no causation, writing
“the concession of Mayville’s representation that Mayville knew Weller
had no more information about the boring mill than Mayville had precludes recovery.
That is, because Mayville understood that the allegedly false statements or assertions
were not being made by Weller based upon any independent observation it made of
the machine, but were merely being forwarded by it, Mayville cannot be said to
have relied upon representations made by Weller.”
As
noted, this statement was made while addressing Mayville’s negligence claim,
rather than its sec. 100.18 claim. However, it could be equally applicable to
the element of actual reliance in the case at bar.
Also
of interest in the Mayville decision is the court’s statement that, because
of its holding that the plaintiff was not a member of “the public,”
it need not address whether the cause of action would be precluded by the economic
loss doctrine. The decision in the case at bar does not even address this issue.
Other
courts have addressed the relationship between the economic loss doctrine and
sec. 100.18 claims.
In
Weather Shield Mfg. Inc., v. PPG Industries, Inc., 1998 WL 469913 (W.D.Wis., June
11, 1998)(unpublished), the court held, “As a matter of policy there is little
reason to distinguish a sec. 100.18(1) claim from a common law misrepresentation
claim. Section 100.18(1) is primarily a damage enhancement statute for existing
common law misrepresentation claims. … Accordingly, the principles which
support the economic loss doctrine apply with the same force to a sec. 100.18
claim between commercial purchasers.”
The
court added, “exempting sec. 100.18 claims from the effects of the economic
loss doctrine would virtually nullify the doctrine.”
That
appears to be exactly what has happened in the case at bar; what is essentially
a tort claim can proceed, despite the doctrine.
Current
Wisconsin law appears to allow that, however. In Kailin v. Armstrong, 2002 WI
App 70, 252 Wis.2d 676, 643 N.W.2d 132, 147-149, the court of appeals held that
the economic loss doctrine does not bar sec. 100.18, a holding it reaffirmed in
Tietsworth v. Harley-Davidson, Inc., 2003 WI App 75, 261 Wis.2d 755, 661 N.W.2d
450.
Tietsworth
was reversed by the Supreme Court, 2004 WI 32, 270 Wis.2d 146, 677 N.W.2d 233,
but the court held only that the plaintiff failed to state a claim under sec.
100.18; the court did not reverse the holding that the economic loss doctrine
is inapplicable.
The
only comment the Supreme Court has made on the issue is as follows: “the
economic loss doctrine did not necessarily preclude other claims, e.g., (1) breach
of contract; violation of Wis. Stat. sec. 100.18...” Van Lare v. Vogt, Inc.,
2004 WI 110, 274 Wis.2d 631, 683 N.W.2d 46, 52.
Thus, the
economic loss doctrine does not apply to sec. 100.18 under current law.
However,
a case can be made that it should apply to cases such as the one at bar. In Kailin,
Tietsworth, and Van Lare, the Uniform Commercial Code was indisputably not applicable.
It
is not clear from the opinion in the case at bar whether the UCC applies or not,
but where it does, these cases could be distinguished.
In
Insurance Co. of N. Am. v. Cease Elec., Inc., 2004 WI 139, 276 Wis.2d 361, 688
N.W.2d 462, 468-469, the court held the doctrine inapplicable to a contract for
services, and provided as its primary justification, the applicability of the
UCC to products, but not services.
Thus,
even if the doctrine does not “necessarily” bar sec. 100.18 claims,
perhaps it could if the UCC applies to the transaction at issue.
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David Ziemer
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David
Ziemer can be reached by email.
