Douglas-Hanson Co., Inc. v. BF Goodrich Co.
| Decision Date | 29 June 1999 |
| Docket Number | No. 98-1737.,98-1737. |
| Citation | 598 N.W.2d 262,229 Wis.2d 132 |
| Parties | DOUGLAS-HANSON COMPANY, INC., Plaintiff-Respondent, v. BF GOODRICH COMPANY, Defendant-Plaintiff. |
| Court | Wisconsin Court of Appeals |
On behalf of the defendant-appellant, the cause was submitted on the briefs of Eric J. Magnuson, John B. Lunseth and Ernest W. Grumbles of Rider, Bennett, Egan & Arundel, LLP, of Minneapolis, Minnesota, and Daniel W. Hildebrand of DeWitt Ross & Stevens S.C. of Madison.
On behalf of the plaintiff-respondent, the cause was submitted on the brief of Scott S. Payzant and Lisa M. Agrimonti of Doherty, Rumble & Butler Professional Association, St. Paul, Minnesota.
Before Cane, C.J., Myse, P.J., and Hoover, J.
BF Goodrich Company appeals a judgment awarding Douglas-Hanson Company, Inc. $1,832,134 in compensatory damages and $1,000,000 in punitive damages. Douglas-Hanson claims it is entitled to tort damages as a result of Goodrich's intentional misrepresentation that it had a commercially viable adhesive product that it was able to deliver to Douglas-Hanson for processing. Goodrich contends that the trial court erroneously denied Goodrich's motion for judgment notwithstanding the verdict (JNOV) because the economic loss doctrine precludes Douglas-Hanson's pursuit of a tort remedy. Goodrich argues that its commercial relationship was governed by a contract that did not guarantee any specific amount of product that Douglas-Hanson was to process. Goodrich also contends that the inadvertent submission of an exhibit to the jury summarizing Douglas-Hanson's expert's testimony as to damages and the court's undisclosed ex parte response to a jury request, declining to submit other experts' reports, were prejudicial errors. In addition, Goodrich maintains that the trial court erroneously instructed the jury on the elements of intentional misrepresentation.
We conclude that the economic loss doctrine does not preclude a plaintiff's claim for intentional misrepresentation when the misrepresentation fraudulently induces a plaintiff to enter into the contract. The misrepresentation renders the contract void or voidable and accordingly contract remedies are inapplicable. We do not, however, address whether the economic loss doctrine bars an intentional misrepresentation claim if the representation does not fraudulently induce the party to enter into a contract. In addition, we conclude that the inadvertent submission of a summary of one expert witness's opinion and the court's undisclosed ex parte response to the jurors' request for additional expert summaries were not prejudicial errors. Finally, we conclude that the court properly instructed the jury on the elements of intentional misrepresentation. Accordingly, we affirm the judgment.
Goodrich operated an adhesive systems division that was attempting to develop a specialty adhesive film to be used in the installation of carpets in automobiles. The adhesive film required "curing" by electron beam processing. Goodrich contacted Douglas-Hanson about processing the adhesive film because Douglas-Hanson had experience with electron beam processing, although it did not have the equipment to handle Goodrich's specific needs. Goodrich and Douglas-Hanson met and corresponded several times to discuss Douglas-Hanson's providing the curing service for Goodrich. At these meetings, Goodrich made representations that it had developed a satisfactory commercially viable product.
Goodrich and Douglas-Hanson entered into a "confidentiality agreement," which allowed Douglas-Hanson access to certain information about the adhesive product so that it could determine if it could cure the product. Goodrich also sent Douglas-Hanson a letter memorializing their negotiations thus far. The letter included a forecast estimating Goodrich's anticipated sales volumes over a five-year period, a service term, a termination provision, and pricing and payment provisions. Eventually, on January 28, 1994, Goodrich prepared and signed an off-plant contract, which was delivered to Douglas-Hanson.
During this time, Douglas-Hanson and Goodrich also explored the possibility of Douglas-Hanson purchasing the equipment required to provide the type of curing required to process the adhesive. Ultimately, on January 31, Douglas-Hanson ordered an electron beam processor and arranged to have it retro-fitted to meet Goodrich's requirements. The cost of the processor, including the charges for the retro-fitting, delivery, installation and depreciation exceeded $1,000,000. Shortly thereafter, in February, Douglas-Hanson executed the off-plant service contract with Goodrich providing for the processing of the specialty adhesive. The contract did not guarantee any minimum amount of product Douglas-Hanson was to process and was to begin on June 1.
Following the execution of the contract, Goodrich continued to develop the adhesive. During early 1994, at periodic meetings between Goodrich and Douglas Hanson, Goodrich continued to discuss where the product's development stood and the logistics of handling the material and packaging.
Douglas-Hanson was unable to install its equipment until late 1994 as a result of problems with the manufacturer. Once the equipment was installed, Goodrich, in spring of 1995, sent either four or eight rolls of adhesive for curing. No additional product was submitted. Douglas-Hanson's sales manager visited Goodrich in May 1995 to discuss the project's status. He was told Goodrich was uncertain when it was going to send additional product to Douglas-Hanson and that it had decided to conduct a market study to determine whether it had a viable product or if it had any customers for the product. Eventually, the project was discontinued, and Goodrich sold the adhesive systems division.
After demanding performance of the contract, Douglas-Hanson initiated suit alleging, among other claims, breach of contract and intentional misrepresentation. At trial, Douglas-Hanson elected to pursue the intentional misrepresentation claim. The jury returned a verdict for Douglas-Hanson on the intentional misrepresentation claim awarding $1,832,134 as compensatory damages and $1,000,000 as punitive damages. The jury concluded that Goodrich falsely informed Douglas-Hanson that the product had completed the development stage and was ready for marketing when, in truth, the specialty adhesive was still in the development stage and, despite Goodrich's efforts, was never satisfactorily developed to the point where the product could be marketed. As a result of Goodrich's representations that the product was ready for market, Douglas-Hanson acquired, at significant cost, the necessary machinery to process Goodrich's specialty adhesive.
During the trial, exhibit 46, a summary of one of plaintiff's damage experts' opinions, was inadvertently submitted to the jury to use during deliberations. The exhibit contained calculations of Douglas-Hanson's out-of-pocket and lost profit damages. This exhibit was excluded from evidence because some of the calculations contained inaccuracies. During trial, at the court's request, Douglas-Hanson submitted a revised report, exhibit 59. During jury deliberations, the jury requested other experts' reports. The bailiff conveyed this request to the court. Without notifying the parties of the request, the court instructed the bailiff to advise the jury that no expert reports would be submitted for their use during deliberations, in accordance with the parties' prior agreement. It was only after the jury had returned a verdict that the court learned that exhibit 46 had inadvertently been submitted to the jury among the other exhibits.
Goodrich filed a post-verdict motion seeking judgment notwithstanding the verdict on the intentional misrepresentation and punitive damages claim. Goodrich also sought a new trial pursuant to § 805.15(1), STATS., based on alleged prejudicial errors at trial. The trial court denied Goodrich's motion, and this appeal ensued.
Before we begin our analysis, we must note a preliminary matter. At the close of trial, Douglas-Hanson elected to pursue its intentional misrepresentation claim over its breach of contract claim. It is unclear whether Douglas-Hanson's election of a tort claim for deceitful intentional misrepresentation implicates the contract. If Douglas-Hanson is asserting purely a tort claim without the contract being implicated, the economic loss doctrine has no application. The record suggests, however, that the contract is implicated. We therefore assume, for the purpose of this discussion, that the contract is implicated in Douglas-Hanson's claim asserted against Goodrich.2
[1]
We now consider whether the economic loss doctrine precludes Douglas-Hanson's tort claim. "We review a trial court's denial of a motion for judgment notwithstanding the verdict (JNOV) de novo." Logterman v. Dawson, 190 Wis. 2d 90, 101, 526 N.W.2d 768, 771 (Ct. App. 1994). A motion for JNOV may be granted when "the verdict is proper but, for reasons evident in the record which bear upon matters not included in the verdict, the movant should have judgment." Section 805.14(5)(b), STATS. Goodrich contends that no liability exists as a matter of law because the economic loss doctrine bars Douglas-Hanson's tort claim. Goodrich argues that its commercial relationship with Douglas-Hanson was governed by a contract which did not guarantee any specific amount of product that Douglas-Hanson was to process.
[2, 3]
The economic loss doctrine provides that a commercial purchaser of a product cannot recover from a manufacturer, under tort theories, damages that are solely economic losses. Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 400, 573 N.W.2d 842, 844-45 (1998). When contractual expectations are frustrated because of a defect in the subject matter of a...
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