Statutory
fraud claim valid
Whether
buyer is part of ‘public’ is jury
By
David Ziemer
david.ziemer@wislawjournal.com
June
18, 2007
| What
the court held Case:
K&S Tool & Die Corp. v. Perfection Machinery Sales, Inc., No. 2005AP2148. Issue:
Does a prior relationship between two businesses remove the buyer from the definition
of “the public” in sec. 100.18, as a matter of law? Holding:
No. Whether
a buyer is a member of “the public” is a question for the jury to decide. Attorneys:
For Appellant: Fox, Paul T., Chicago, IL; Seibold, Gregory P., Madison; Attorneys:
For Appellant:
Fox, Paul T., Chicago, IL; Seibold, Gregory P., Madison; For Respondent: Hanrahan,
Michael J., Milwaukee |
A
pre-existing relationship between a buyer and seller does not preclude application
of the false advertising statute, sec. 100.18, the Wisconsin Supreme Court held
on June 12.
K&S
Tool & Die Corp. 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 owner of K&S, sought a press with a 1000-ton pressing
force for a particular job.
Kluksen
contacted Perfection Machinery Sales, Inc., a company in the business of selling
used industrial machinery to commercial clients, which had previously sent K&S
brochures and catalogs.
Perfection
did not have a 1,000-ton press in its inventory, but agreed to search for one,
later informing Klusken that they had found two in Michigan.
K&S
hired a third company to inspect the presses, both of which were dismantled. The
inspector recommended one as the better press, and K&S told Perfection it
wanted to purchase that press. Perfection bought and then sold that press to K&S.
However,
the press was actually only 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, including a claim
for false advertising under sec. 100.18. At 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 published decision, K&S Tool & Die Corp. v. Perfection
Machinery Sales, Inc., 2006 WI App 148, 295 Wis.2d 298, 720 N.W.2d 507.
The
Supreme Court granted review, but also affirmed, in a unanimous decision by Justice
Jon P. Wilcox.
The
court first held that the trial court did not err in refusing to rule, as a matter
of law, that K&S is not a member of the public, but instead, submitting that
issue to the jury.
The
court drew an analogy to Cawker v. Meyer, 147 Wis. 320, 133 N.W. 157 (1911), in
which the court declined to define the meaning of the phrase “public utility.”
As in Cawker, the court held the issue was for the jury.
The court
wrote, “Based on the existing interpretations of ‘the public,’
a plaintiff remains a member of ‘the public’ unless a particular relationship
exists between him or her and the defendant. The existence of a particular relationship
‘will depend upon its own peculiar facts and circumstances and must be tested
by the statute in the light of such facts and circumstances.’”
Perfection
maintained that a “particular relationship” existed, based on the fact
that K&S had previously purchased machinery from it, and that K&S and
Perfection entered into an agreement for Perfection to find K&S a suitable
press.
However,
the one prior sale between the two had occurred in 1996. The court concluded that
a jury could reasonably conclude that this was insufficient to constitute a “particular
relationship.”
The
court also held that the jury could reasonably find that the false advertising
caused K&S pecuniary loss, noting that, in a case of statutory fraud, reasonable
reliance is not an element.
Click
here for Case Analysis.
David
Ziemer can be reached by email.
