COURT OF APPEALS DECISION DATED AND FILED August 13, 2008 David R. Schanker Clerk of Court of Appeals |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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APPEAL
from an order of the circuit court for
Before Brown, C.J.,
¶1 PER CURIAM. Renaissance Learning, Inc., appeals from an order granting summary judgment to Omron Corporation. Renaissance sought to recover the over $2.5 million damages it incurred when a component part Omron supplied to an intermediary manufacturer with which Renaissance had contracted failed in use. We agree with the circuit court that Renaissance’s breach of contract and breach of implied warranty claims fail for lack of privity of contract, its tort claims are barred by the economic loss doctrine and its Wis. Stat. § 100.18 (2005-06)[1] claim fails for lack of intent to mislead. We affirm.
¶2 Renaissance sells
optical mark readers (OMRs) to school systems.
OMRs electronically read the “bubbles” students mark on scantron sheets.
Omron makes photosensors that are
components of OMRs. Renaissance decided
to redesign its OMRs and in February 2001 bought a design from a
¶3 Renaissance’s claims against Omron stem from the period during which Renaissance evaluated which photosensor to incorporate into its redesigned OMR. The design Renaissance purchased used an Omron ’169A. The ’169A could read only pencil marks, however, and Renaissance deemed it essential that the photosensor in its application be capable of reading dye ink. The ’169 could do both. On April 11, 2001 a representative of NEP Electronics, an Omron distributor, visited Renaissance accompanied by Omron’s Tim Hession. NEP gave Renaissance Omron’s 1998 Photomicrosensor Product Data Book, which provided general information about Omron’s entire line of photosensors.[2]
¶4 Because the redesigned OMR incorporated a continuously lit photosensor, Renaissance was interested in the photosensor’s endurance. A chart in the Data Book showed the results of laboratory reliability testing Omron had conducted. The average life expectancy of the tested photosensors was stated to be 344,000 hours, about thirty-nine years. Accompanying text explained that the data were obtained under constant conditions and cautioned that, in actual usage, ambient condition changes must be considered. Since the data were not stated to be limited to any particular models, Renaissance understood the data to be broadly applicable to all photosensors for sale in the Data Book, including the ’169.
¶5 On June 7, 2001, Omron’s Hession and Arlynne Fernandez Smith,
also of Omron, traveled to Renaissance’s office because Renaissance wanted a
teleconference with Omron’s
¶6 In July Renaissance contracted with Plexus, which purchased the ’169 photosensor directly from Omron. Within a year, customers—especially in humid areas of the country—began reporting OMR failure. An investigation showed that the continuously lit ’169 photosensors rapidly degraded when their aluminum components oxidized in the presence of water vapor and heat. Renaissance incurred more than $2.5 million in damages stemming from investigating and replacing the failed OMRs.
¶7 On April 13, 2004, Renaissance filed an action against Omron asserting contract claims, tort claims and a statutory claim under Wis. Stat. § 100.18.[4] Omron moved to dismiss all the claims, asserting that there was no privity of contract, the tort claims were barred by the economic loss doctrine, and the § 100.18 claim was barred by the statute of limitations. The court granted Omron’s motion to dismiss Renaissance’s tort claims but denied the motion to dismiss the others. Omron then moved for summary judgment on the remaining claims, addressing the § 100.18 claim on its merits, rather than making a statute of limitations argument. In September 2006, the court granted Omron’s motion on the express and implied contract claims, concluding there was no privity of contract, but denied it on the § 100.18 claim.
¶8 On May 30, 2007, the time for filing dispositive motions long past, Omron sought leave to file another summary judgment motion on the only remaining claim, the alleged violation of Wis. Stat. § 100.18. This motion addressed the merits and the statute of limitations, which was supported by a newly filed affidavit of Omron’s Hession. Renaissance opposed the motion on grounds the affidavit was inconsistent with Hession’s prior deposition testimony, thereby calling his credibility into question. The court granted leave, limited argument to the statute of limitations and ultimately granted Omron’s motion. Renaissance appeals. Additional facts will be supplied where warranted.
DISCUSSION
1. Contract Claims
¶9 Renaissance contracted with Plexus to manufacture its OMR. Plexus contracted with Omron to supply the ’169. The question is whether Renaissance has an action in contract against Omron by virtue of sample test data in Omron’s Data Book, Smith orally representing that the ’169 was Omron’s “best” part for the OMR, and Omron’s failure to dissuade Renaissance from using the ’169 once Omron became aware of the OMR’s design and intended purpose. At summary judgment, the circuit court said no. We agree.
¶10 When reviewing a grant of summary judgment, we apply de novo
the standards set forth in Wis. Stat. § 802.08(2),
just as the circuit court did. See Linden v. Cascade Stone Co., 2005 WI
113, ¶5, 283
¶11 The circuit court concluded that Omron and Renaissance were not
in privity of contract. No written
contract existed between Renaissance and Omron.
Renaissance contends, however, that the representations in the Data Book
combined with interactions between its and Omron’s employees created
privity. Renaissance looks to Paulson
v. Olson Implement Co., 107
¶12 In Paulson, the two stockholders of a large-scale farm corporation
(collectively, Paulson) entered into a written agreement with Olson Implement Company
to buy a grain-drying facility that included a component manufactured by Super
Steel Products Corporation.
¶13 The supreme court had “no difficulty, in law or equity, in
finding privity” between Super Steel and Paulson because Super Steel’s actions
and express representations, made for the obvious purpose of inducing a sale,
formed a “unilateral contract” with Paulson.
¶14 Superficially similar, Paulson nonetheless is easily
distinguishable. That case was based on
express oral guarantees. Here, the
affidavits of Omron employees who dealt with Renaissance all aver that they did
not provide any oral or written
representations or guarantees of the ’169’s performance.[5] The affidavits similarly disavowed that they
ever represented or guaranteed either orally or in writing that the information
in the Data Book would be how the ’169 would perform either generally or in
Renaissance’s application. As Renaissance
did not refute those averments in its counteraffidavits, those matters are
deemed uncontroverted. See Wisconsin Elec. Power Co. v. California
Union Ins. Co., 142
¶15 We do not decide whether Paulson extends to written representations. Assuming solely for argument’s sake that it does, Renaissance’s position still comes up short. Indeed, Renaissance shies from characterizing the Data Book as expressly warranting the ’169’s performance. Rather, Renaissance asserts that it “understood” the reliability data to apply to the ’169; that the data “indicated” to it that humidity was not a factor; and that, because the Data Book did not distinguish between the ’169 and the ’169A, it “concluded” the ’169 was suitable for its application. Conclusions about the ’169’s aptness thus came from Renaissance’s own deductions drawn from the reliability data. This is a far cry from the direct, specific promises of suitability found in Paulson.
¶16 No written
contract existed between Renaissance and Omron.
Renaissance’s attempt to use Paulson as a springboard for finding
an express contract fails because, first, no oral guarantees were made and,
second, the reliability data in no way constitute direct, specific
representations or guarantees of the ’169’s performance. Renaissance’s summary judgment papers confirm
that Renaissance drew not on Omron’s direct representations but on its own
inferences and interpretations of the reliability data. Viewing the summary judgment materials in the
light most favorable to Renaissance, no reasonable fact finder could conclude
that information from Hession and Smith, by itself or combined with the Data
Book, created a contract between Renaissance and Omron. Without privity of contract between
Renaissance and Omron, there is no
liability for a breach of warranty, express or implied. See
Prinsen
v. Russos, 194
2. Economic Loss Doctrine
¶17 The circuit court dismissed Renaissance’s three tort claims—fraudulent misrepresentation, negligent misrepresentation and strict responsibility—on grounds that they were barred by the economic loss doctrine (ELD). Renaissance contends that the court’s ruling is an unwarranted extension of the ELD unrelated to its underlying principles.
¶18 A motion to dismiss a complaint for failure to state a claim
tests the legal sufficiency of the complaint, a matter we review de novo. Wausau Tile, Inc. v. County Concrete Corp.,
226
¶19 The ELD is a judicially created doctrine under which a commercial
purchaser of a product cannot recover from a manufacturer, under tort theories,
damages that are solely economic. Daanen
& Janssen, Inc. v. Cedarapids, Inc., 216
¶20 We conclude that this case fits precisely within the parameters
of the ELD. Renaissance pled only
economic damages. It alleged that it
incurred more than $2.5 million in losses relating to the investigation and
replacement of over 20,000 failed OMRs. Repair
and replacement costs are typical measures of economic loss.
¶21 We disagree that the circuit court overextended the doctrine’s
boundaries. “A manufacturer in a
commercial relationship has no duty under either negligence or strict liability
theories to prevent a product from injuring itself. The duty to provide a product which functions
to certain specifications is contractual.”
Rich Prods. Corp. v. Kemutec, Inc., 241 F.3d 915, 918 (7th Cir.
2001). In protecting the freedom to
contract, commercial parties may set the terms of their own agreement,
including warranties, disclaimers and limitation of remedies and a manufacturer
may negotiate with its distributors and purchasers to disclaim or limit its
liability for economic losses. Daanen
& Janssen, 216
3.
¶22 Renaissance’s complaint also raised a false advertising claim under Wis. Stat. § 100.18. Omron argues on appeal that it is barred by the three-year statute of limitations. See Wis. Stat. § 100.18(11)(b)3.
¶23 We need not address the argument as presented. Wisconsin Stat. § 100.18 claims require proof of intent to sell or induce. Stuart v. Weisflog’s Showroom Gallery, Inc., 2008 WI 86, ¶35, ___ Wis. 2d ___, ___ N.W.2d ___, No. 2005AP1287. We have concluded that Renaissance’s understanding of the ’169’s capabilities came from its own misperceptions, not from any misrepresentations by Omron. If there was no negligent misrepresentation, there surely cannot have been intentional misrepresentation. This claim fails.
CONCLUSION
¶24 The parties had no formal contract and none was created by
virtue of any oral or written representations or face-to-face dealings;
Renaissance’s contract claims therefore fail. The ELD precludes Renaissance from pursuing
tort remedies for its solely economic loss. Tort law aims to protect people from
unanticipated calamity. See
By the Court.—Order affirmed.
This opinion will not be published. See Wis. Stat. Rule 809.23(1)(b)5.
[1] All references to the Wisconsin Statutes are to the 2005-06 version.
[2] The terms “photosensor” and “photomicrosensor” appear to be used interchangeably in the parties’ materials. We intend no difference in meaning, and use “photosensor” for brevity.
[3] A day earlier, Smith had e-mailed Hirofumi Murai in Ayabe, asking: “For preparation for the meeting tomorrow, what would be the reliability difference between [the ’169 and ’169A]?” Murai responded by e-mail at 2:41 p.m. on June 7:
In regard to the reliability comparison between Infrared LED [the ’169A] and red LED [the ’169], in general, red LED has lower reliability than infrared because another element of Al (aluminum) is doped into the GaAs. This ingredient has an adverse affect on the reliability when ambient humidity is high.
Murai’s response was not communicated to Renaissance.
[4] Renaissance also sued Plexus, who later was dismissed.
[5] The
closest to an affirmative representation of suitability came from Smith, the
Omron employee who told Renaissance that the ’169 was Omron’s “best” part for
it. Renaissance offers nothing to show
that, at the time, the ’169 was not Omron’s best part for it. Renaissance deemed it essential that the
redesigned OMR be capable of reading dye ink.
The ’169 could and the ’169A could not.
A Renaissance affidavit exhibit indicates that, under Renaissance’s own
testing, the ’169 “was accurate 100% of the time and the [’169A] had a
considerable amount of inconsistencies.”
The ’169B with which Renaissance later replaced the ’169 did not become
commercially available until the latter half of 2002. If Smith made such a broad comment, it does
not approach the direct, specific guarantee of suitability present in Paulson
v.
Olson Implement Co., 107