Converting/Biophile v. Ludlow Composites

• Decision Date: 23 August 2006
• Docket Number: No. 2005AP1628.,2005AP1628.
• Citation: 722 N.W.2d 633,2006 WI App 187
• Parties: CONVERTING/BIOPHILE LABORATORIES, INC., Plaintiff-Appellant, v. LUDLOW COMPOSITES CORPORATION and D.C. Henning, Inc., Defendants-Respondents.
• Court: Wisconsin Court of Appeals

722 N.W.2d 633

2006 WI App 187

CONVERTING/BIOPHILE LABORATORIES, INC., Plaintiff-Appellant, v. LUDLOW COMPOSITES CORPORATION and D.C. Henning, Inc., Defendants-Respondents.

No. 2005AP1628.

Court of Appeals of Wisconsin.

Submitted on Briefs July 10, 2006.

Opinion Filed August 23, 2006.

On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Alexander Ullenberg, Esq. of Ullenberg Law Offices of Fond Du Lac.

On behalf of the defendants-respondents, the cause was submitted on the brief of Paul D. Cranley of Cook & Franke, S.C. of Madison, and Matthew D. Harper, of Eastman & Smith, LTD. of Toledo, OH.

Before SNYDER, P.J., NETTESHEIM and ANDERSON, JJ.

¶ 1 NETTESHEIM, J

Converting/Biophile Laboratories, Inc. (CBL) appeals from an order dismissing its complaint against Ludlow Composites Corporation and D.C. Henning, Inc. The circuit court dismissed CBL's action as improvidently commenced in Wisconsin because it read a forum-selection provision in Ludlow's invoices to CBL as mandating that all claims resulting from the parties' commercial transaction be brought in Ohio. We disagree. We read the clauses as permissive, not mandatory. We reverse and remand for further proceedings on CBL's complaint.

BACKGROUND

¶ 2 Typically on review of a motion to dismiss, we look only to the complaint, summarizing its allegations and taking them as true for purposes of the appeal. Beilfuss v. Huffy Corp., 2004 WI App 118, ¶ 2 n. 1, 274 Wis.2d 500, 685 N.W.2d 373. Here, however, the motion to dismiss was granted based on the forum-selection clause in the invoices, a matter not alleged in CBL's complaint. When, on a motion to dismiss, parties present matters outside the pleadings, the motion should be processed as one for summary judgment. Gielow v. Napiorkowski, 2003 WI App 249, ¶ 12, 268 Wis.2d 673, 673 N.W.2d 351; see WIS. STAT. § 802.06(3) (2003-04).¹ Accordingly, our recitation of facts also includes averments from affidavits the parties submitted in support of or in opposition to Ludlow's motion to dismiss.

¶ 3 CBL is a Wisconsin corporation that manufactures the Ear Muffin®, a foam adapter used with a device that tests a newborn's hearing. Ludlow, a Delaware corporation located in Ohio, manufactures foam for industrial applications. D.C. Henning is a Wisconsin distributor of Ludlow's foam products. In 2003, Ludlow provided CBL with a free sample of its foam product, which Ludlow represented would be suitable for CBL to use in the production of the Ear Muffin®.

¶ 4 After testing the foam product, CBL placed an order with Ludlow on December 5, 2003. Ludlow responded on December 8 with an order confirmation and shipped the order to CBL on December 30.

¶ 5 On January 5, 2004, Ludlow sent an invoice to CBL for the shipment of foam product. The bottom of the invoice accompanying the shipment stated in capitalized bold type: "IMPORTANT: THIS SALE IS MADE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH ON THE REVERSE SIDE HEREOF." The reverse side of the invoice was titled in bold, capitalized, underlined letters: "ADDITIONAL TERMS AND CONDITIONS OF SALE," and consisted of ten paragraphs. Paragraph 8 was titled in capitalized, underlined letters: "JURISDICTION, VENUE AND TIME FOR BRINGING CLAIMS." The text of the paragraph provided:

All claims arising from the sale of the Products hereunder, including any claim for breach of these Terms and Conditions shall be brought within one (1) year from the date that the cause of action arises, or within two (2) years from the date of the sale of the Products, whichever is shorter. Buyer hereby consents to and submits to the jurisdiction of the courts of the State of Ohio and further consents to venue of any such proceeding in the Common Pleas Court of Sandusky, Ohio, or the United States District Court for the Northern District of Ohio, Western Division, based upon the location of Seller's principal place of business. (Emphasis added.)

CBL did not object to the Terms and Conditions on the invoice, and paid it on February 5, 2004.

¶ 6 Before paying that invoice, however, CBL placed a second, larger order with Ludlow on January 6, 2004, for additional rolls of foam product. Ludlow acknowledged this second purchase order with three separate confirmation orders. Ludlow shipped the product to CBL in two shipments and invoiced CBL via three separate invoices dated February 18, 19 and 28, 2004. As with the invoice covering the parties' first transaction, each of these invoices recited the bolded and capitalized language we have noted above and included the same forum-selection provision stating that CBL consented to Ohio jurisdiction and venue. CBL again did not object to the Terms and Conditions.

¶ 7 By early March 2004, CBL learned that the foam was failing in its commercial application with the Ear Muffin®, and, as a result, CBL refused to pay the February invoices, amounting to nearly $39,000. CBL conducted an international recall of the defective foam, incurring over $114,000 in expenses for manufacturing and shipping replacement product and in lost profits.

¶ 8 In June 2004, CBL first became aware of the Terms and Conditions recited in the invoices when Ludlow and D.C. Henning representatives mentioned them to CBL. In response, CBL's president told Ludlow's and D.C. Henning's representatives that he was unaware of such Terms and Conditions and that CBL never had agreed to them. He explained that, in keeping with "industry standard practice of which Ludlow ... should have been aware," purchase orders and order confirmations are directly reviewed by the senior employee who negotiated the purchase, while invoices are handled by the accounts payable department and passed on for review by the senior employee only when quantity or price differs from the purchase order.

¶ 9 In October 2004, after Ludlow refused to reimburse CBL for the expenses incurred in the recall, CBL commenced this action in the circuit court for Fond du Lac County. CBL's complaint alleged claims sounding in rescission, restitution, breach of contract, breach of warranty, misrepresentation and product liability. Without filing an answer, Ludlow moved to dismiss pursuant to the forum-selection provision on the reverse side of the invoices. Ludlow argued that, pursuant to WIS. STAT. § 402.207, the Terms and Conditions on the invoices were enforceable additional terms of the sales contract. CBL disagreed, and argued in the alternative for rescission on grounds of mistake or for nonenforcement of the forum-selection clause on grounds of unconscionableness or that it was permissive, not mandatory. The circuit court agreed with Ludlow, granting the motion to dismiss the complaint without prejudice so that CBL might proceed in an Ohio court.

¶ 10 CBL appeals. We certified this case to the supreme court. However, our certification was rejected by a divided court.

DISCUSSION

¶ 11 CBL contends that its action was wrongly dismissed pursuant to the forum-selection clause found in the Terms and Conditions recited on the reverse of the invoices. First, CBL contends on a threshold basis that Ludlow's order confirmations and shipment of the goods, followed by CBL's acceptance of the goods, precludes the application of WIS. STAT. § 402.207, titled "Additional terms in acceptance or confirmation." CBL alternatively contends that even if the forum-selection provision is held to be part of the parties' agreement, it still is unenforceable because: (1) the clause materially alters the agreement under WIS. STAT. § 402.207(2)(b); (2) CBL's purchase order expressly limited acceptance to its own terms; (3) the clause is permissive, not mandatory; and (4) the clause does not govern CBL's fraud and WIS. STAT. § 100.18 claims.

¶ 12 The circuit court ruled that the invoices represented additional terms to the parties' contract and that the additional terms did not materially alter the contract. The court also concluded that CBL's failure to discover and read the forum-selection provision on the backside of the invoices was no defense. The bottom line for the court was the clause's "unequivocally clear" language and CBL's failure to object within a reasonable time.

¶ 13 As we have stated, we are treating the issue under the law of summary judgment. That altered stance does not change our standard of review, however. Motions to dismiss and for summary judgment both are subject to our de novo review. State ex rel. Lawton v. Town of Barton, 2005 WI App 16, ¶ 9, 278 Wis.2d 388, 692 N.W.2d 304 (motion to dismiss); Gielow, 268 Wis.2d 673, ¶ 12, 673 N.W.2d 351 (motion to dismiss processed as summary judgment).

WISCONSIN STAT. § 402.207 and UCC § 2-207

¶ 14 WISCONSIN STAT. § 402.207 provides in relevant part:

Additional terms in acceptance or confirmation. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) The offer expressly limits acceptance to the terms of the offer;

(b) They materially alter it; or

(c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

The wording of § 402.207 is identical to UNIFORM COMMERCIAL CODE § 2-207 (2003).

¶ 15 CBL submits that the parties' agreement already had been finalized through the purchase orders and order confirmations prior to Ludlow's submission of the invoices. Accordingly, CBL contends that the invoices cannot be part of any contract between the parties. CBL asserts that WIS. STAT. § 402.207 therefore does not apply because the statute addresses only issues of contract...