Hinrichs v. DOW Chemical Company, 2017AP2361

• Court: United States State Supreme Court of Wisconsin
• Writing for the Court: ANN WALSH BRADLEY, J.
• Citation: 2020 WI 2,389 Wis.2d 669,937 N.W.2d 37
• Parties: Chris HINRICHS and Autovation Limited, Plaintiffs-Appellants-Petitioners, v. The DOW CHEMICAL COMPANY d/b/a Dow Automotive, Defendant-Respondent-Petitioner.
• Docket Number: No. 2017AP2361,2017AP2361
• Decision Date: 09 January 2020

389 Wis.2d 669
937 N.W.2d 37
2020 WI 2

Chris HINRICHS and Autovation Limited, Plaintiffs-Appellants-Petitioners,
v.
The DOW CHEMICAL COMPANY d/b/a Dow Automotive, Defendant-Respondent-Petitioner.

No. 2017AP2361

Supreme Court of Wisconsin.

Oral Argument: October 3, 2019
Opinion Filed: January 9, 2020

For the defendant-respondent-petitioner, there were briefs filed by Patrick M. Harvey, Gabrielle Baumann Adams, and Husch Blackwell LLP, Milwaukee. There was an oral argument by Patrick M. Harvey.

For the plaintiff-appellant-petitioner, there were briefs filed by Terry J. Booth and Rogahn Jones LLC, Waukesha. There was an oral argument by Terry J. Booth.

ANN WALSH BRADLEY, J.

389 Wis.2d 679

¶1 In this case we are asked to address a multitude of issues that arise out of common law and statutory misrepresentation claims. Along the way, we discuss the economic loss doctrine together with its exceptions and examine statutes and their applications.

¶2 Both parties to this case seek review of aspects of an unpublished, per curiam decision of the court of appeals.¹ The court

937 N.W.2d 43

of appeals affirmed the circuit court’s dismissal of Chris Hinrichs and Autovation Limited’s (collectively, Hinrichs) common law misrepresentation claims against the DOW Chemical

389 Wis.2d 680

Company (Dow) and reversed the circuit court’s dismissal of Hinrichs’ statutory claim made pursuant to Wis. Stat. § 100.18 (2015-16).²

¶3 Hinrichs appeals the dismissal of his common law misrepresentation claims. Specifically, he contends that the court of appeals erred by applying the economic loss doctrine to bar such claims. He argues that the "fraud in the inducement" and "other property" exceptions to the economic loss doctrine apply and that as a result his common law claims should go forward.

¶4 Dow cross-petitioned for review of the court of appeals’ determination that Hinrichs’ Wis. Stat. § 100.18 claim survives its motion to dismiss. It asserts first that Hinrichs’ statutory claim is barred by the economic loss doctrine. Next, it contends that Hinrichs is not "the public" within the meaning of § 100.18 and that this court should overrule its previous decision in State v. Automatic Merchs. of Am., Inc., 64 Wis. 2d 659, 221 N.W.2d 683 (1974). Finally, Dow contends that the heightened pleading standard set forth by Wis. Stat. § 802.03(2) for claims of fraud applies to claims made under § 100.18, and that Hinrichs’ complaint fails to meet those heightened standards.

¶5 In examining Hinrichs’ common law claims, we conclude that the "fraud in the inducement" exception to the economic loss doctrine does not apply to allow Hinrichs’ common law claims to go forward because the alleged misrepresentation is related to the quality and characteristics of the product in question and is thus not extraneous to the contract. We further conclude that the "other property" exception to the

389 Wis.2d 681

economic loss doctrine does not apply to allow Hinrichs’ common law claims to go forward because the JeeTops and adhesive are components of an integrated system.

¶6 With regard to Hinrichs’ statutory claim, we conclude first that the economic loss doctrine does not serve as a bar to claims made under Wis. Stat. § 100.18. We conclude second that one person can be "the public" for purposes of Wis. Stat. § 100.18(1) and decline Dow’s invitation to overrule Automatic Merchandisers. The court of appeals correctly determined that dismissal for failure to meet "the public" component of a § 100.18 claim in this case was in error. Finally, we conclude that the heightened pleading standard set forth by Wis. Stat. § 802.03(2) for claims of fraud does not apply to claims made under Wis. Stat. § 100.18 and that Hinrichs’ complaint states a claim under the general pleading standard.

¶7 Accordingly, we affirm the decision of the court of appeals.

I

¶8 The facts set forth below are taken from Hinrichs’ complaint. Because we are reviewing the circuit court’s determination of a motion to dismiss for failure to state a claim, we must assume that these facts are true.³

¶9 Hinrichs developed a product called JeeTops, which he manufactures and installs

937 N.W.2d 44

through his company, Autovation Limited. He obtained a patent for the JeeTops in 2010.

389 Wis.2d 682

¶10 JeeTops are acrylic skylights installed aftermarket in the roofs of Jeep Wrangler vehicles equipped with a certain type of hardtop. The complaint describes the JeeTops as giving "front-seat passengers unparalleled views of the outdoors" and rear-seat passengers "unprecedented panoramic views." After installation, "[t]he cumulative effect is to give the Wrangler’s occupants the sensation of directly experiencing the environment through which they are driving."

¶11 Installation of JeeTops is accomplished using an adhesive manufactured by Dow. The adhesive performs a dual role, attaching the JeeTops to the existing Jeep and maintaining a watertight seal.

¶12 In 2013, Mark Formentini, an agent for Dow, informed Hinrichs that Dow had a new primer available for use with the adhesive employed in installing JeeTops panels. Formentini further informed Hinrichs that the primer would be tested with the acrylic used in JeeTops.

¶13 Shortly thereafter, Hinrichs relayed to Dow that customers were experiencing cracks in their JeeTops panels. Dow responded that the acrylic used in the JeeTops had been sent to its labs for testing.

¶14 After completing testing, Dow sent a report to Hinrichs claiming that the adhesive was properly functioning. The report further indicated that Dow found "[n]o evidence of any crazing or surface cracking ...."

¶15 Hinrichs continued purchasing and using Dow adhesives to install JeeTops, but customers continued to observe crazing and fracturing of the acrylic. By October of 2014, one-third of all JeeTops panel installations using the Dow adhesive system had failed.

¶16 Investigation eventually revealed that the Dow adhesive was attacking the integrity of the

389 Wis.2d 683

acrylic, which caused the panels to leak, and subsequently to craze and fracture. By this time JeeTops had received extensive negative publicity, high profile customers had stopped purchasing the product, and dealers had dropped JeeTops from their product lines.

¶17 In time Hinrichs was able to identify a suitable replacement adhesive, but by then the product had suffered a rash of negative publicity. As a result, Hinrichs alleges that despite the warm reception JeeTops initially received, he is unable to sell them because of the perception that they are unreliable.

¶18 Following these events, Hinrichs brought four causes of action against Dow: negligent misrepresentation, intentional misrepresentation, strict responsibility misrepresentation and violation of Wis. Stat. § 100.18(1).⁴ Dow moved to dismiss

937 N.W.2d 45

the complaint for failure to state a claim upon which relief can be granted.⁵

389 Wis.2d 684

¶19 The circuit court granted Dow’s motion to dismiss. As relevant here, the circuit court determined first that the economic loss doctrine barred Hinrichs’ common law misrepresentation claims. It characterized Hinrichs’ losses as purely economic in nature and rejected Hinrichs’ argument that either the "fraud in the inducement" exception or "other property" exception applied.

¶20 Second, the circuit court determined that Hinrichs’ Wis. Stat. § 100.18 claim must fail because Hinrichs is not "the public" within the meaning of the statute. Specifically, the circuit court based its conclusion on the "plain inference from the complaint ... that Dow’s agent had already been dealing with Plaintiff, and was merely offering another product to them."

¶21 Hinrichs appealed and the court of appeals affirmed in part and reversed in part. The court of appeals affirmed the circuit court’s determination that the economic loss doctrine bars Hinrichs’ common law misrepresentation claims. Like the circuit court, the court of appeals concluded that neither of the claimed exceptions to the economic loss doctrine applied. Hinrichs v. The DOW Chemical Co., No. 2017AP2361, 2019 WL 462485, unpublished slip op., ¶¶14-16 (Wis. Ct. App. Feb. 6, 2019) (per curiam).

¶22 However, the court of appeals reversed the circuit court’s determination with regard to the Wis. Stat. § 100.18 claim. It concluded that "dismissal of the Wis. Stat. § 100.18 claim based upon the failure to meet ‘the public’ component of the first element was improper. The issue requires further exploration through

389 Wis.2d 685

the discovery process." Id., ¶22. Hinrichs petitioned for review of the court of appeals’ conclusion regarding the common law misrepresentation claims, and...