Horn v. A.O. Smith Corp.
| Citation | 50 F.3d 1365 |
| Decision Date | 20 March 1995 |
| Docket Number | 94-1591,94-1590,94-1592 and 94-1599,Nos. 94-1589,s. 94-1589 |
| Parties | Raymond L. HORN, Joyce A. Horn, Joseph Dues, Sharon Dues, Alvin Timmerman, Rose E. Timmerman, Eric E. Link, Karen K. Link, Walter A. Schwieterman, and Frieda L. Schwieterman, Plaintiffs-Appellants, v. A.O. SMITH CORPORATION and A.O. Smith Harvestore Products, Incorporated, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
Sherrill W. Colvin, Haller & Colvin, Fort Wayne, IN, Paul F. Shappell, Whiteman, Shappell & Burkett, Portland, IN, David W. Peck (argued), Barron, Peck & Bennie, Cincinnati, OH, B.J. Hammarback, River Falls, WI, for Raymond L. Horn et al., plaintiffs-appellants in Nos. 94-1589, 94-1590.
Lee A. Watson, Donald E. Egan, Clay A. Tillack, Linda L. Cashmore, Stewart T. Kusper, Katten, Muchin & Zavis, Chicago, IL, D. Randall Brown, Barnes & Thornburg, Fort Wayne, IN, John C. Dods (argued), Shook, Hardy & Bacon, Kansas City, MO, for A.O. Smith Corp., et al., defendants-appellees in Nos. 94-1589, 94-1599.
Lee A. Watson, Donald E. Egan, Clay A. Tillack, Linda L. Cashmore, Stewart T. Kusper, Katten, Muchin & Zavis, Chicago, IL, D. Randall Brown, Barnes & Thornburg, Fort Wayne, IN, John C. Dods, Margaret D. Lineberry, Kelly W. Schemenauer, Shook, Hardy & Bacon, Kansas City, MO, for A.O. Smith Harvestore Products, Inc., defendant-appellee in No. 94-1589.
Lee A. Watson, Donald E. Egan, Clay A. Tillack, Linda L. Cashmore, Stewart T. Kusper, Katten, Muchin & Zavis, Chicago, IL, Richard E. Steinbronn, D. Randall Brown, Barnes & Thornburg, Fort Wayne, IN, John C. Dods (argued), Margaret D. Lineberry, Kelly W. Schemenauer, Shook, Hardy & Bacon, Kansas City, MO, for A.O. Smith Corp., et al., defendants-appellees in Nos. 94-1590, 94-1591, 94-1592.
Sherrill W. Colvin, Haller & Colvin, Fort Wayne, IN, David W. Peck (argued), Barron, Peck & Bennie, Cincinnati, OH, B.J. Hammarback, River Falls, WI, Alvin Timmerman et al., plaintiffs-appellants in Nos. 94-1591, 94-1592, 94-1599.
Lee A. Watson, Donald E. Egan, Clay A. Tillack, Linda L. Cashmore, Stewart T. Kusper, Katten, Muchin & Zavis, Chicago, IL, Richard E. Steinbronn, D. Randall Brown, Barnes & Thornburg, Fort Wayne, IN, John C. Dods (argued), Shook, Hardy & Bacon, Kansas City, MO, for A.O. Smith Corp., defendant-appellee in Nos. 94-1591, 94-1592.
Before BAUER, KANNE, and ROVNER, Circuit Judges.
These five consolidated appeals raise a single question under Indiana law--whether the claims of fraud and breach of contract of the various plaintiffs are barred by the statutes of limitation. Plaintiffs all are dairy farmers who purchased or leased silos manufactured by defendant A.O. Smith Harvestore Products, Inc. ("AOSHPI"), a subsidiary of defendant A.O. Smith Corporation. 1 Plaintiffs maintain that when they purchased or leased their Harvestore silos at various times between 1976 and 1981, AOSHPI and its authorized local dealer represented, inter alia, that the silos were "oxygen-limiting"--that is, that they would limit the oxygen that could come into contact with stored feed. According to the dealer, this feature would enhance the feed's nutritional value and all but eliminate feed spoilage. Each of the five sets of plaintiffs charged in separate lawsuits that the dealer's representations were false and that their reliance on those representations caused harm to their dairy operations. 2 The district court consolidated the five cases and then granted AOSHPI's motion for summary judgment in each case, finding that the statute of limitations had run as to each claim of each plaintiff. Plaintiffs separately appealed, and we consolidated their appeals for oral argument and disposition. We now affirm the district court's judgment in three of the five cases, reverse the judgment in the remaining two cases, and remand for further proceedings.
Because we are reviewing the grant of AOSHPI's motion for summary judgment, we relate the facts in the light most favorable to plaintiffs. The five sets of plaintiffs separately purchased or leased Harvestore silos from Tri-State Harvestore Systems, Inc. ("Tri-State"), an independent Harvestore dealer, between 1976 and 1981. AOSHPI and its independent dealers marketed the silos as an improvement over conventional cement silos in that they minimized the amount of oxygen that could enter the silo, thus yielding a more palatable and nutritious feed. Unlike conventional silos that are unloaded from the top, thereby exposing the uppermost layer of feed to air, the Harvestore silos are unloaded through a door located near the bottom of the structure. During the unloading process, breather bags at the top of the silo expand to prevent oxygen from entering.
For purposes of its motion for summary judgment, AOSHPI admitted that the Tri-State dealer, through its salesmen, had made certain false representations to the various plaintiffs about the attributes of the silos and the effect they would have on plaintiffs' dairy operations. In this appeal, therefore, we assume that the dealer made the following false representations to each of the five sets of plaintiffs.
First, the dealer represented that because the Harvestore silos were sealed units, virtually no oxygen would come into contact with the ensiled feed when the silo doors were closed. Plaintiffs were told that this "oxygen-limiting" capacity would all but eliminate feed spoilage. 3 The dealer also explained that breather bags at the top of the silo would compensate for any air or pressure changes within the silo, that only an insignificant amount of air would enter the silo during unloading due to the unique design of the unloader door, and that this air would be converted into a gas that would not harm the ensiled feed. According to the Harvestore dealer, only a repairable problem or improper use of the silo would cause additional oxygen to come into contact with the feed. Although Harvestore silos were significantly more expensive than conventional cement silos, the higher cost was justified, plaintiffs were told, because by preventing oxidation, excessive fermentation, and nutritional losses, the silos would greatly reduce or entirely eliminate the need to supplement feed with protein. In this regard, each of the plaintiffs were told that the resultant feed savings would cause the silos to pay for themselves over time. Plaintiffs also were told that the silos would create a warm "caramelized" feed that would be more palatable and nutritious for their cows and that would cause milk production and farm profits to increase. 4 The silos were marketed as nearly maintenance-free and capable of lasting a lifetime. Finally, plaintiffs were told that owners of Harvestore silos became part of the "Harvestore family," which meant that they could look to AOSHPI's trained representatives for prompt service and advice.
By their own account, plaintiffs did not realize that these representations were false until they attended a meeting in December 1991, where certain lawyers documented the difficulties other farmers had experienced with Harvestore silos. Asserting a variety of tort and contract claims, plaintiffs commenced the instant actions less than a year later. In moving for summary judgment, however, AOSHPI argued that each of the plaintiffs knew or should have known long before the December 1991 meeting that they had suffered cognizable injuries that were caused by the dealer's fraud. The district court agreed with AOSHPI, finding in each case that the plaintiffs' fraud claims had accrued more than six years prior to the filing of suit. See Horn v. A.O. Smith Corp., 1994 U.S.Dist. (N.D.Ind. Feb. 18, 1994). The court also rejected plaintiffs' contention that the limitations period was tolled because AOSHPI and its agents had fraudulently concealed their causes of action. Moreover, because the statutes applicable to plaintiffs' various other claims were all less than six years, the district court found each of those claims barred as well. 5 In these appeals, plaintiffs challenge the dismissal only of their fraud and breach of contract claims. We review the district court's application of a statute of limitations on summary judgment de novo. Cathedral of Joy Baptist Church v. Village of Hazel Crest, 22 F.3d 713, 716 (7th Cir.), cert. denied, --- U.S. ----, 115 S.Ct. 197, 130 L.Ed.2d 129 (1994); Fries v. Chicago & Northwestern Transp. Co., 909 F.2d 1092, 1094 (7th Cir.1990).
The statute of limitations applicable to plaintiffs' fraud claims is set out in Ind.Code Sec. 34-1-2-1. See Lawyers Title Ins. Corp. v. Pokraka, 595 N.E.2d 244, 247 (Ind.1992). 6 That statute permits a plaintiff to allege fraud at any time within six years of the accrual of a cause of action. The point of accrual is not defined by statute, but is left to the courts. See Burks v. Rushmore, 534 N.E.2d 1101, 1103 (Ind.1989); Barnes v. A.H. Robins Co., 476 N.E.2d 84, 85 (Ind.1985). The Indiana Supreme Court traditionally has said that a cause of action accrues "and thus the statute of limitations begins to run, when the resultant damage of a [tortious] act is 'susceptible of ascertainment.' " Wehling v. Citizens Nat'l Bank, 586 N.E.2d 840, 842 (Ind.1992) (quoting Montgomery v. Crum, 199 Ind. 660, 161 N.E. 251, 259 (1928)); see also Madlem v. Arko, 592 N.E.2d 686, 687 (Ind.1992). Yet in Barnes v. A.H. Robins Co., 476 N.E.2d 84, 87-88 (Ind.1985), in response to a certified question from this court, the state supreme court modified its traditional rule where the plaintiff alleged an injury from the protracted exposure to a foreign substance. In that circumstance, the court applied a "discovery rule," which looked to when the plaintiff knew or should have discovered that she had been injured by the act of another. Id.; see also Burks, 534 N.E.2d at 1104. The court gradually extended application of...
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