Tietsworth v. Harley-Davidson, Inc., No. 02-1034.

• Court: United States State Supreme Court of Wisconsin
• Citation: 677 N.W.2d 233,2004 WI 32,270 Wis.2d 146
• Docket Number: No. 02-1034.
• Parties: Steven C. TIETSWORTH, David Bratz, John W. Myers, Gary Streitenberger, and Gary Wegner, Plaintiffs-Appellants, v. HARLEY-DAVIDSON, INC., and Harley-Davidson Motor Company, Defendants-Respondents-Petitioners.
• Decision Date: 26 March 2004

270 Wis.2d 146
2004 WI 32
677 N.W.2d 233

Steven C. TIETSWORTH, David Bratz, John W. Myers, Gary Streitenberger, and Gary Wegner, Plaintiffs-Appellants,
v.
HARLEY-DAVIDSON, INC., and Harley-Davidson Motor Company, Defendants-Respondents-Petitioners

No. 02-1034.

Supreme Court of Wisconsin.

Oral argument November 5, 2003.

Decided March 26, 2004.

270 Wis.2d 151

For the defendants-respondents-petitioners there were briefs by W. Stuart Parsons, Patrick W. Schmidt, O. Thomas Armstrong, Jeffrey O. Davis, Kelly H. Twigger and Quarles & Brady, Milwaukee, and Robert L. Binder and Foley & Lardner, Milwaukee, and oral argument by W. Stuart Parsons.

For the plaintiffs-appellants there was a brief by Ted W. Warshafsky, Frank T. Crivello, II, and Warshafsky, Rotter, Tarnoff, Reinhardt & Bloch, S.C., Milwaukee; Jonathan D. Selbin, Lisa J. Leebove and Lieff, Cabraser, Heimann & Bernstein, LLP, San Francisco, CA; and David J. Bershad, Michael M. Buchman and Milberg, Weiss, Bershad, Hynes & Lerach, LLP, New York, NY and Shpetim Ademi, Guri Ademi, Robert K.

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O'Reilly and Ademi & O'Reilly, LLP, Cudahy, and oral argument by Jonathan D. Selbin.

An amicus curiae brief was filed by James A. Buchen, Madison, on behalf of Wisconsin Manufacturers & Commerce.

An amicus curiae brief was filed by Jeffrey S. Fertl, Milwaukee, John H. Beisner, Washington, DC, Hugh F. Young, Jr. (of counsel) Reston, VA, on behalf of Product Liability Advisory Council, Inc.

¶ 1. DIANE S. SYKES, J.

This is a class action lawsuit on behalf of certain Harley-Davidson motorcycle owners seeking compensatory and punitive damages and injunctive relief, under several legal theories, for an alleged defect in the motorcycles' engines. The plaintiffs have not alleged any personal injury or property damage caused by the defective engines, nor have they alleged that their motorcycle engines have actually failed or malfunctioned in any way. They allege, rather, that their motorcycles are diminished in value because the defect creates a "propensity" for premature engine failure.

¶ 2. The plaintiffs originally pleaded claims for negligence, strict products liability, fraud, and deceptive trade practices under Wis. Stat. § 100.18(1) and (11)(b) (1999-2000).¹ The circuit court dismissed the entire action for failure to state a claim. The plaintiffs appealed only the dismissal of their claims for common-law fraud and statutory deceptive trade practices, and the court of appeals reinstated both. We reverse.

¶ 3. An allegation that a product is diminished in value because the product line has demonstrated a propensity for premature failure such that the product

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might or will at some point in the future fail prematurely is too uncertain and speculative to constitute a legally cognizable tort injury and is therefore insufficient to state damages in a tort claim for fraud. In addition, the economic loss doctrine bars this claim

¶ 4. The plaintiffs have also failed to state a claim for deceptive trade practices in violation of Wis. Stat. § 100.18. The statute provides a private cause of action for pecuniary loss resulting from an advertisement to the public that contains an "assertion, representation or statement of fact which is untrue, deceptive or misleading." Wis. Stat. § 100.18(1), (11)(b). The plaintiffs' claim is based primarily on the allegation that Harley-Davidson ("Harley") failed to disclose the engine defect prior to the plaintiffs' motorcycle purchases. A non-disclosure does not constitute an "assertion, representation or statement of fact" under Wis. Stat. § 100.18(1). The plaintiffs also allege that Harley's advertising material described the motorcycle engine as "premium" quality, "a masterpiece," and "[e]ighty-eight cubic inches filled to the brim with torque and ready to take you thundering down the road." This is classic advertising puffery, non-actionable at common law and under the statute.

I. FACTS AND PROCEDURAL HISTORY

¶ 5. This is an appeal of a motion to dismiss for failure to state a claim, and therefore we accept as true, for purposes of this review, the following facts from the amended class action complaint. Plaintiff Steven C. Tietsworth and the members of the proposed class own or lease 1999 or early-2000 model year Harley motor-cycles equipped with Twin Cam 88 or Twin Cam 88B

270 Wis.2d 154

engines. Harley's marketing and advertising literature contained the following statement about the TC-88 engines

Developing [the TC-88s] was a six-year process. . . . The result is a masterpiece. We studied everything from the way oil moves through the inside, to the way a rocker cover does its job of staying oil-tight. Only 21 functional parts carry over into the new design. What does carry over is the power of a Harley-Davidson® engine, only more so.

Harley also stated that the motorcycles were "premium" quality, and described the TC-88 engine as "[e]ighty-eight cubic inches filled to the brim with torque and ready to take you thundering down the road."

¶ 6. On January 22, 2001, Harley sent a letter to Tietsworth and other owners of Harley motorcycles informing them that "the rear cam bearing in a small number of Harley-Davidson's Twin Cam 88 engines has failed. While it is unlikely that you will ever have to worry about this situation, you have our assurance that Harley-Davidson is committed to your satisfaction." (Emphasis added in amended complaint.) The letter went on to explain that the company was extending the warranty on the cam bearing from the standard one-year/unlimited mileage warranty, to a five-year/50,000 mile warranty. Separately, Harley developed a $495 "cam bearing repair kit" and made the kit available to its dealers and service departments, "to expedite rear cam bearing repair."

¶ 7. On June 28, 2001, Tietsworth, a California resident, filed this proposed class action lawsuit against Harley in Milwaukee County Circuit Court, alleging four claims: (1) negligence; (2) strict products liability; (3) common-law fraudulent concealment; and (4) deceptive trade practices contrary to Wis. Stat. § 100.18(1)

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(the Wisconsin Deceptive Trade Practices Act or "DTPA"). Tietsworth later amended the complaint to name as representative plaintiffs four Wisconsin owners of motorcycles equipped with TC-88 engines

¶ 8. The amended complaint alleges that the cam bearing mechanism in the 1999 and early-2000 model year TC-88 engines is inherently defective, causing an unreasonably dangerous propensity for premature engine failure. As is pertinent to the common-law fraud and statutory DTPA claims, the amended complaint alleged that Harley's failure to disclose the cam bearing defect induced the plaintiffs to purchase their motorcycles by causing them to reasonably rely upon Harley's representations regarding the "premium" quality of the motorcycles.

¶ 9. The amended complaint further alleges that if the plaintiffs had known of the engine defect, they either would not have purchased the product or would have paid less for it. The amended complaint does not allege that the plaintiffs' motorcycles have actually suffered engine failure, have malfunctioned in any way, or are reasonably certain to fail or malfunction. Nor does the amended complaint allege any property damage or personal injury arising out of the engine defect. Rather, the amended complaint alleges that the plaintiffs' motorcycles have diminished value, including diminished resale value, because Harley motorcycles equipped with TC-88 engines have demonstrated a "propensity" for premature engine failure and/or fail prematurely.

¶ 10. Harley moved to dismiss the complaint. The Milwaukee County Circuit Court, the Honorable William J. Haese, granted Harley's motion, dismissing the complaint in its entirety for failure to state a claim. The plaintiffs appealed the dismissal of their common-law

270 Wis.2d 156

fraud and DTPA claims only, and the court of appeals reinstated both. Tietsworth v. Harley-Davidson, Inc., 2003 WI App 75, ¶ 1, 261 Wis. 2d 755, 661 N.W.2d 450.

II. STANDARDS OF REVIEW

[1, 2]

¶ 11. A motion to dismiss for failure to state a claim tests whether the complaint is legally sufficient to state a cause of action for which relief may be granted. Watts v. Watts, 137 Wis. 2d 506, 512, 405 N.W.2d 305 (1987). We review a dismissal for failure to state a claim de novo, accepting the facts alleged in the complaint (or here, the amended complaint) as true for purposes of our review. Id.; see also Northridge Co. v. W.R. Grace & Co., 162 Wis. 2d 918, 923-24, 471 N.W.2d 179 (1991).

III. DISCUSSION

A. Common-Law Fraud Claim

[3]

¶ 12. The plaintiffs' common-law fraud claim is premised on the allegation that Harley failed to disclose or concealed the existence of the cam bearing defect prior to the plaintiffs' purchases of their motorcycles. It is well-established that a nondisclosure is not actionable as a misrepresentation tort unless there is a duty to disclose. Ollerman v. O'Rourke Co., Inc., 94 Wis. 2d 17, 26, 288 N.W.2d 95 (1980). Our decision in Ollerman outlined the three categories of misrepresentation in Wisconsin law—intentional misrepresentation, negligent misrepresentation, and strict responsibility misrepresentation—and described the common and distinct elements of the three torts. Id. at 24-25.

270 Wis.2d 157

[4, 5]

¶ 13. All misrepresentation claims share the following required elements: 1) the defendant must have made a representation of fact to the plaintiff; 2) the representation of fact must be false; and 3) the plaintiff must have believed and relied on the misrepresentation to his detriment or damage. Id. The plaintiffs here allege intentional misrepresentation, which carries the following additional elements: 4) the defendant must have made the misrepresentation with knowledge that it was false or recklessly without caring whether it was true or false; and 5) the defendant must have made the misrepresentation...