Tankstar USA, Inc. v. Navistar, Inc.

• Citation: 923 N.W.2d 170 (Table),385 Wis.2d 211,2019 WI App 1
• Decision Date: 27 November 2018
• Docket Number: Appeal No. 2017AP1907
• Parties: TANKSTAR USA, INC., Bulk Logistics, Inc., Schwerman Trucking Company, North American Bulk Transport, Inc. and Rogers Cartage Company, Plaintiffs-Appellants, v. NAVISTAR, INC. and Lakeside International Trucks, Inc., Defendants-Respondents.
• Court: Court of Appeals of Wisconsin

385 Wis.2d 211
923 N.W.2d 170 (Table)
2019 WI App 1

TANKSTAR USA, INC., Bulk Logistics, Inc., Schwerman Trucking Company, North American Bulk Transport, Inc. and Rogers Cartage Company, Plaintiffs-Appellants,
v.
NAVISTAR, INC. and Lakeside International Trucks, Inc., Defendants-Respondents.

Appeal No. 2017AP1907

Court of Appeals of Wisconsin.

DATED AND FILED November 27, 2018

PER CURIAM.

¶1 Tankstar USA, Inc. ("Tankstar USA"), Bulk Logistics, Inc. ("Bulk"), Schwerman Trucking Company ("Schwerman"), North American Bulk Transport, Inc. ("North American"), and Rogers Cartage Company ("Rogers") (collectively, "Tankstar") appeal a summary judgment granted in favor of Navistar, Inc. ("Navistar") and Lakeside International Trucks, Inc. ("Lakeside"). The judgment was granted on Tankstar’s breach of contract and fraudulent inducement claims relating to its purchase of seventy-nine ProStar semi-trailer trucks manufactured by Navistar and purchased from Lakeside.

¶2 Tankstar argues the circuit court erred in granting summary judgment on its fraudulent inducement claim against Lakeside on the basis that Tankstar lacks an available remedy for any alleged fraud. We agree with the circuit court that Tankstar’s subsequent conduct in selling the trucks and instituting the present action for contract-based damages had the effect of affirming the contract, thereby precluding Tankstar from seeking restitutionary damages associated with a rescission of its contracts with Lakeside. Because Tankstar has no breach of contract claim against Lakeside, the circuit court properly dismissed Tankstar’s fraudulent inducement claim.

¶3 Tankstar also argues the contractual "repair and replace" remedy Navistar offered in its various warranties failed of its essential purpose because several trucks required repeated engine repairs. As a result, Tankstar asserts it is entitled to the full panoply of remedies available under the Uniform Commercial Code ("U.C.C."), including consequential damages. We agree with the circuit court that Tankstar has failed to present evidence that would permit a reasonable factfinder to conclude that, as to the entire batch of trucks, the "repair and replace" remedy has categorically failed due to the alleged design defects. We also observe that aside from its categorical claim, Tankstar makes no effort to argue or demonstrate that any individual truck or trucks suffered from such frequent and repeated repairs that Tankstar was deprived of an effective contract remedy. We therefore conclude that Tankstar was limited to its contractual remedies against Navistar. We affirm the circuit court in all respects.

BACKGROUND

¶4 This lawsuit concerns a series of semi-trailer truck purchases made by Tankstar USA through its wholly owned subsidiary Bulk. As part of the settlement of a prior dispute, Bulk was obligated to purchase half of the new trucks for its fleet from Navistar and Lakeside. Navistar was the manufacturer and Lakeside was the retailer from which Bulk purchased the trucks. After the purchases, Bulk leased the trucks to its sister companies—Schwerman, North American, and Rogers—which were also wholly owned subsidiaries of Tankstar USA.

¶5 Bulk’s first purchases under the settlement agreement occurred in 2009. Bulk bought twenty "ProStar" trucks, which were the first design iteration Navistar manufactured to comply with new air quality standards that would go into effect in 2010. The trucks were manufactured with Navistar’s proprietary "MaxxForce" engine. According to the testimony of Tankstar USA’s president, Jack Schwerman, the first twenty ProStar trucks were a "disaster" and experienced "breakdowns and excessive down time."

¶6 Nonetheless, Bulk purchased additional ProStar trucks between 2010 and 2012. In January 2010, Bulk accepted delivery of twenty model year 2010-2011 ProStar trucks. In the spring of 2011, Bulk purchased forty model year 2012 ProStar trucks. The high failure rates of the original twenty 2009 trucks led Navistar and Lakeside to make Tankstar a "very attractive offer" to replace them. In mid-2011, Bulk placed an order for an additional twenty model-year 2012 trucks to replace the 2009 trucks.

¶7 After experiencing similar breakdown issues with the 2010-2012 ProStar trucks, Tankstar filed the present action in November of 2015, advancing causes of action for breach of express and implied warranties, breach of contract, and multiple theories of fraud, including fraudulent inducement as a result of Lakeside’s alleged misrepresentations regarding the improved quality of the model year 2012 trucks.¹ Tankstar, recognizing that the various purchase contracts contained exclusive or limited express warranty provisions, also asserted that such provisions were unconscionable and had failed of their essential purpose, thereby permitting Tankstar to "recover all actual and economic damages."

¶8 Navistar and Lakeside filed motions to dismiss Tankstar’s tort claims against them as being barred by the economic loss doctrine.² Specifically, Navistar and Lakeside argued the alleged fraudulent statements pertained only to the parties’ expectations regarding performance or the quality or character of the goods sold. Navistar and Lakeside also sought to dismiss or strike Tankstar’s allegations regarding the "unconscionability" of the warranties or remedy limitations contained in the relevant contracts, asserting that such allegations were not a part of a valid claim or an actionable legal theory.

¶9 The circuit court granted the motions and dismissed Tankstar’s tort claims as barred by the economic loss doctrine.³ Tankstar was permitted to pursue a contract-based fraud in the inducement claim, under which it was limited to the remedies available under contract law. The parties stipulated that references to the unconscionability or other failings in the contracts’ warranty and remedy provisions were not substantive claims, but rather potential defenses to any assertion by Navistar and Lakeside that Tankstar’s remedies were limited under the relevant contracts.

¶10 Following the circuit court’s ruling on the motion to dismiss, Navistar and Lakeside each moved for summary judgment on Tankstar’s contract claims, including its claims for breach of contract and breach of warranty. The relevant contracts in this case fall into two categories: (1) the vehicle purchase contracts between Bulk and Lakeside; and (2) Navistar’s manufacturer’s warranties and its service agreements with Tankstar. Navistar and Lakeside argued that they were entitled to judgment as a matter of law under each category of the relevant contracts.

¶11 The three purchase contracts used different versions of the standard "Motor Vehicle Purchase Contract" forms issued by the Wisconsin Automobile & Truck Dealers Association. Each purchase contract stated that Bulk was purchasing the trucks from the dealership "AS IS" with no warranties (including implied warranties).⁴ Moreover, each contract disclaimed any liability on Lakeside’s part for "any consequential damages, damages to property, damages for loss of use, loss of time, loss of profits, or income, or any other incidental damages arising out of the sale or use of the purchased vehicle." (Capitalization omitted.) Similarly, each contract stated that Lakeside was not a party to any warranties offered by the manufacturer.

¶12 Based on the foregoing language, Lakeside argued that because it had not warranted that the trucks would be free from defects—and indeed had disclaimed any warranties (whether express or implied)—Tankstar’s breach of contract and warranty claims failed as a matter of law.⁵ Lakeside also argued that Tankstar’s contract-based fraudulent inducement claim failed as a matter of law because Tankstar had no available remedy for the alleged fraud. Tankstar could not seek rescission because it no longer owned any of the trucks involved in the lawsuit, nor could it prove that Lakeside breached any contract so as to entitle it to contract damages.

¶13 Navistar also argued it was entitled to summary judgment based on the language contained in its manufacturer’s warranties and other service contracts.⁶ Each of the trucks came with what Navistar refers to as its "base warranty." The base warranty promised that Navistar would, at its option, "repair or replace any part of this vehicle which proves defective in material and/or workmanship in normal use and service" for a period of twelve months from delivery or for the first 100,000 miles, whichever expired first. The base warranties disclaimed all other warranties, including the implied warranties of merchantability and fitness for a particular purpose, and they also expressly excluded liability for incidental and consequential damages.⁷

¶14 Tankstar also purchased several "optional service contracts" from Navistar. Like the base warranties, the optional service contracts included a "repair and replace" promise, but they extended the warranty by up to 500,000 miles on each covered vehicle. Each of the optional service contracts contained the same disclaimer regarding all other warranties as was found in the base warranty. The optional service contracts also precluded Navistar’s liability for incidental and consequential damages.

¶15 After Tankstar expressed dissatisfaction with the frequency of breakdowns and its limited coverage under the base warranties and optional service contracts, the parties negotiated a "custom service contract" that extended the manufacturer’s warranty to 72 months or 700,000 miles...