‘Public’
in sec. 100.18 includes prior customers
By
David Ziemer
Wisconsin Law Journal
June
28, 2006
| What
the court held Case:
K&S Tool & Die Corp. v. Perfection Machinery Sales, Inc., No. 2005AP2148. Issue:
Is application of sec. 100.18 precluded, where the parties have a pre-existing
relationship, and the buyer initially approached the seller? Holding:
No. A prior business relationship does not preclude the buyer from being a member
of "the public" under the statute. Counsel:
Seibold, Gregory P., Madison, for appellant; Hanrahan, Michael J., Milwaukee,
for respondent. |
Even
though a buyer is a sophisticated commercial party with a prior history of doing
business with the seller, and initiated contact with the seller, the buyer is
nevertheless a member of “the public” within the meaning of sec. 100.18,
the Wisconsin Court of Appeals held on June 22.
K&S
Tool & Die Corp. is a Wisconsin corporation that creates metal parts and dies.
Production stamping is one process K&S uses to create metal parts. The process
uses a punch press and a die to stamp pieces of steel into metal parts.
In
2000, Thomas Klusken, the sole owner of K&S, determined that K&S needed
a press with a 1000-ton pressing force for a particular job. K&S began searching
through brochures it had been sent from companies that sold used presses, but
was unable to find what it needed.
Perfection
Machinery Sales, Inc., an Illinois corporation in the business of selling used
industrial machinery to commercial clients, was one of the companies that had
sent K&S brochures and catalogs.
Klusken
contacted Perfection and spoke to Jason Broderick, a sales representative, telling
him that K&S needed a 1,000-ton press with certain features. Perfection
did not have in its inventory a 1,000-ton press with all the features K&S
was looking for, but Broderick agreed to look around to see if he could find one.
Broderick
subsequently called Klusken to say that he had found two 1,000-ton presses in
Michigan. K&S hired another company, Industrial Rebuilding Machining, Inc.,
to inspect the presses, both of which were dismantled. Industrial Rebuilding recommended
one as the better press, and K&S told Perfection it wanted to purchase that
press. Perfection sold that press to K&S.
However,
the press was actually an 800-ton press, and required three hits, rather than
one, to make the part for which it had been purchased.
K&S
brought suit against Perfection, asserting a number of claims. However, the sec. 100.18
claim was the only claim that went to trial. The jury found in favor of K&S,
and found damages of $306,000. Perfection appealed, but the court of appeals affirmed,
in a decision by Judge Margaret J. Vergeront.
The
court concluded that K&S is a member of “the public,” under sec.
100.18
The statute
provides that a corporation intending to sell merchandise to the public, or attempting
to encourage the public to enter a contract to purchase merchandise, shall not
make untrue, deceptive or misleading assertions in any advertisements, or announcements
to the public related to that merchandise.
After
reviewing the case law addressing the definition of “the public,” the
court concluded, “We can see no basis in the statute itself or the case law
for concluding that the legislature intended that a purchaser of a particular
product lose the protection of Wis. Stat. sec. 100.18 solely because the
purchaser had previously made inquiries about products and purchased products
from the seller.”
The
court also found it irrelevant that K&S had initiated the contact with Perfection.
Finally,
the court then held that reasonable reliance is not required for showing the causation
of pecuniary loss to the plaintiff, because the statute creates a cause of action
separate from common law misrepresentation. Because K&S did, in fact, rely
on the representation, and suffered loss as a result, the court affirmed.
Click
here for Case Analysis.
David
Ziemer can be reached by email.
