2020 WI 2
SUPREME COURT OF WISCONSIN
CASE NO.: 2017AP2361
COMPLETE TITLE: Chris Hinrichs and Autovation Limited,
Plaintiffs-Appellants-Petitioners,
v.
The DOW Chemical Company d/b/a Dow Automotive,
Defendant-Respondent-Petitioner.
REVIEW OF DECISION OF THE COURT OF APPEALS
Reported at 386 Wis. 2d 351,927 N.W.2d 156
(2019 – unpublished)
OPINION FILED: January 9, 2020
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: October 3, 2019
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Waukesha
JUDGE: Kathryn W. Foster
JUSTICES:
ANN WALSH BRADLEY, J., delivered the majority opinion of the
Court, in which ROGGENSACK, C.J., ZIEGLER and DALLET, JJ.,
joined and REBECCA GRASSL BRADLEY, J., joined with respect to
Parts I, II, and III. REBECCA GRASSL BRADLEY, J., filed an
opinion concurring in part and dissenting in part.
NOT PARTICIPATING:
KELLY and HAGEDORN, JJ.
ATTORNEYS:
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.
2020 WI 2
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2017AP2361
(L.C. No. 2016CV1544)
STATE OF WISCONSIN : IN SUPREME COURT
Chris Hinrichs and Autovation Limited,
Plaintiffs-Appellants-Petitioners,
FILED
v.
JAN 9, 2020
The DOW Chemical Company d/b/a Dow Automotive,
Sheila T. Reiff
Defendant-Respondent-Petitioner. Clerk of Supreme Court
ANN WALSH BRADLEY, J., delivered the majority opinion of the Court,
in which ROGGENSACK, C.J., ZIEGLER and DALLET, JJ., joined and
REBECCA GRASSL BRADLEY, J., joined with respect to Parts I, II,
and III. REBECCA GRASSL BRADLEY, J., filed an opinion concurring
in part and dissenting in part.
KELLY and HAGEDORN, JJ., did not participate.
REVIEW of a decision of the Court of Appeals. Affirmed.
¶1 ANN WALSH BRADLEY, J. 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.
No. 2017AP2361
¶2 Both parties to this case seek review of aspects of an
unpublished, per curiam decision of the court of appeals.1 The
court 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 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
1 Hinrichs v. The DOW Chemical Co., No. 2017AP2361,
unpublished slip op. (Wis. Ct. App. Feb. 6, 2019) (per curiam)
(affirming in part and reversing in part an order of the circuit
court for Waukesha County, Kathryn W. Foster, Judge).
2 All subsequent references to the Wisconsin statutes are to
the 2015-16 version unless otherwise indicated.
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No. 2017AP2361
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 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.
3
No. 2017AP2361
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 through his company, Autovation Limited.
He obtained a patent for the JeeTops in 2010.
¶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
3 See Yacht Club at Sister Bay Condominium Ass'n, Inc. v.
Village of Sister Bay, 2019 WI 4, ¶4, 385 Wis. 2d 158, 922
N.W.2d 95.
4
No. 2017AP2361
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 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.
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No. 2017AP2361
¶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 the
complaint for failure to state a claim upon which relief can be
granted.5
4 Wisconsin Stat. § 100.18(1) provides:
No person, firm, corporation or association, or agent or
employee thereof, with intent to sell, distribute,
increase the consumption of or in any wise dispose of
any real estate, merchandise, securities, employment,
service, or anything offered by such person, firm,
corporation or association, or agent or employee
thereof, directly or indirectly, to the public for sale,
hire, use or other distribution, or with intent to induce
the public in any manner to enter into any contract or
obligation relating to the purchase, sale, hire, use or
lease of any real estate, merchandise, securities,
employment or service, shall make, publish, disseminate,
circulate, or place before the public, or cause,
directly or indirectly, to be made, published,
disseminated, circulated, or placed before the public,
in this state, in a newspaper, magazine or other
publication, or in the form of a book, notice, handbill,
poster, bill, circular, pamphlet, letter, sign, placard,
card, label, or over any radio or television station, or
in any other way similar or dissimilar to the foregoing,
an advertisement, announcement, statement or
representation of any kind to the public relating to
such purchase, sale, hire, use or lease of such real
estate, merchandise, securities, service or employment
or to the terms or conditions thereof, which
advertisement, announcement, statement or
representation contains any assertion, representation or
statement of fact which is untrue, deceptive or
misleading.
5 See Wis. Stat. § 802.06(2)(a)6.
6
No. 2017AP2361
¶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, 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 the discovery process." Id., ¶22. Hinrichs petitioned
for review of the court of appeals' conclusion regarding the common
7
No. 2017AP2361
law misrepresentation claims, and Dow cross-petitioned for review
of the § 100.18(1) issue.
II
¶23 We are asked to review the court of appeals'
determination affirming in part and reversing in part the circuit
court's grant of Dow's motion to dismiss for failure to state a
claim. Whether a motion to dismiss was properly granted is a
question of law this court reviews independently of the
determinations rendered by the circuit court and court of appeals.
Town of Lincoln v. City of Whitehall, 2019 WI 37, ¶21, 386
Wis. 2d 354, 925 N.W.2d 520.
¶24 A motion to dismiss tests the legal sufficiency of the
complaint. Meyers v. Bayer AG, Bayer Corp., 2007 WI 99, ¶21, 303
Wis. 2d 295, 735 N.W.2d 448. Under our established methodology
for review of a motion to dismiss, we accept all facts pleaded in
the complaint as true. Id.
¶25 In our review, we are called upon to review the court of
appeals' determination that the economic loss doctrine bars
Hinrichs' common law misrepresentation claims. The application of
the economic loss doctrine to a set of facts presents a question
of law we review independently from the determinations of the
circuit court and court of appeals. Insurance Co. of N. Am. v.
Cease Elec. Inc., 2004 WI 139, ¶15, 276 Wis. 2d 361, 688
N.W.2d 462.
¶26 Next, we are asked to review the court of appeals'
conclusion that Hinrichs' claim under Wis. Stat. § 100.18(1) may
proceed. In our review, we must interpret §§ 100.18(1) and Wis.
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No. 2017AP2361
Stat. 802.03(2). Statutory interpretation likewise presents a
question of law we review independently without deference to the
interpretations of the circuit court or court of appeals. Maple
Grove Country Club Inc. v. Maple Grove Estates Sanitary Dist.,
2019 WI 43, ¶25, 386 Wis. 2d 425, 926 N.W.2d 184.
III
¶27 We address first whether the economic loss doctrine bars
Hinrichs' common law misrepresentation claims. For context, we
initially set forth the legal principles underlying the economic
loss doctrine. Subsequently, we address the applicability of the
"fraud in the inducement" and "other property" exceptions to the
economic loss doctrine in this case.
¶28 Second, we address whether the court of appeals properly
determined that Hinrichs' Wis. Stat. § 100.18 claim survives Dow's
motion to dismiss. In our review, we analyze whether the economic
loss doctrine can bar claims made pursuant to § 100.18(1). Next,
we examine whether Hinrichs is properly "the public" for purposes
of § 100.18(1). We then address whether a claim pursuant to
§ 100.18(1) is subject to the heightened pleading standard set
forth by Wis. Stat. § 802.03(2) for claims of fraud and whether
Hinrichs' complaint meets the applicable standard.
A
¶29 The economic loss doctrine is a judicially created
doctrine with three primary purposes. Van Lare v. Vogt, Inc.,
2004 WI 110, ¶17, 274 Wis. 2d 631, 683 N.W.2d 46 (citing Daanen &
Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 403, 573
N.W.2d 842 (1998)). First, the doctrine exists to "maintain the
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No. 2017AP2361
fundamental distinction between tort law and contract law . . . ."
Id. Second, it protects "commercial parties' freedom to allocate
economic risk by contract . . . ." Id. Third, the doctrine
encourages "the party best situated to assess the risk [of]
economic loss, the commercial purchaser, to assume, allocate, or
insure against that risk." Id. The doctrine has been part of our
jurisprudence since it was first adopted by this court in
Sunnyslope Grading, Inc. v. Miller, Bradford and Risberg, Inc.,
148 Wis. 2d 910, 437 N.W.2d 213 (1989).
¶30 We have described the economic loss doctrine as holding
that "a commercial purchaser of a product cannot recover solely
economic losses from the manufacturer under negligence or strict
liability theories . . . ." Van Lare, 274 Wis. 2d 631, ¶18.
"Economic loss" in the context of the doctrine is defined as "the
loss in a product's value which occurs because the product is
'inferior in quality and does not work for the general purposes
for which it was manufactured and sold.'" Insurance Co. of N.
Am., 276 Wis. 2d 361, ¶23 (quoting Wausau Tile, Inc. v. Cty.
Concrete Corp., 226 Wis. 2d 235, 246, 593 N.W.2d 445 (1999)). Both
direct and consequential economic loss are encompassed within this
definition. Daanen & Janssen, Inc., 216 Wis. 2d at 401.
¶31 The upshot of the economic loss doctrine is that it
"requires transacting parties in Wisconsin to pursue only their
contractual remedies when asserting an economic loss claim, in
order to preserve the distinction between contract and tort." Ins.
Co. of N. Am., 276 Wis. 2d 361, ¶24 (quoting Digicorp, Inc. v.
Ameritech Corp., 2003 WI 54, ¶34, 262 Wis. 2d 32, 662 N.W.2d 652).
10
No. 2017AP2361
It "precludes parties under certain circumstances from eschewing
the more limited contract remedies and seeking tort remedies."
Id.
B
¶32 We have recognized several exceptions to the economic
loss doctrine, two of which are at issue here. See John J.
Laubmeier, Demystifying Wisconsin's Economic Loss Doctrine, 2005
Wis. L. Rev. 225, 228 (2005). First, we address the "fraud in the
inducement" exception. Subsequently, we turn to the "other
property" exception.
¶33 This court has recognized "a narrow fraud in the
inducement exception" to the economic loss doctrine. Kaloti
Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, ¶42, 283
Wis. 2d 555, 699 N.W.2d 205. We have emphasized the limited nature
of this exception. See id.
¶34 As explained by the Michigan court of appeals, on whose
opinion we relied in Kaloti Enters.,
Fraud in the inducement presents a special situation
where parties to a contract appear to negotiate freely—
—which normally would constitute grounds for invoking
the economic loss doctrine——but where in fact the
ability of one party to negotiate fair terms and make an
informed decision is undermined by the other party's
fraudulent behavior.
Huron Tool and Eng'g Co. v. Precision Consulting Servs., Inc., 532
N.W.2d 541, 545 (Mich. Ct. App. 1995).
¶35 Pursuant to this exception, "a fraud in the inducement
claim is not barred by the economic loss doctrine where the fraud
is extraneous to, rather than interwoven with, the contract."
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No. 2017AP2361
Kaloti Enters., 283 Wis. 2d 555, ¶42 (citations and internal
quotation omitted). To invoke the "fraud in the inducement"
exception, a plaintiff must demonstrate three elements: (1) that
the defendant engaged in an intentional misrepresentation; (2)
that the misrepresentation occurred before the contract was
formed; and (3) that the alleged misrepresentation was extraneous
to the contract. Id. Stating the third element differently, the
misrepresentation must "concern[] matters whose risk and
responsibility did not relate to the quality or the characteristics
of the goods for which the parties contracted or otherwise involved
performance of the contract." Id.
¶36 A misrepresentation relates to the quality or
characteristics of the goods sold if it is expressly dealt with in
the contract's terms. Id., ¶43. If not addressed explicitly in
the contract, a misrepresentation is still related to the quality
or characteristics of the goods sold, precluding the application
of the "fraud in the inducement" exception, if the
misrepresentation informs the reasonable expectations of the
parties to the risk of loss in the event the goods purchased did
not meet the purchaser's expectations. Id. (citations omitted).
¶37 Hinrichs urges us to apply the "fraud in the inducement"
exception here to preclude application of the economic loss
doctrine. He contends that his prior purchases of adhesive from
Dow do not preclude a claim where a subsequent purchase is induced
by a misrepresentation.
¶38 We disagree with Hinrichs. His argument ignores a fatal
shortcoming: that the alleged misrepresentation regarding the
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No. 2017AP2361
effectiveness of Dow's adhesive is related to the quality and
characteristics of the product in question and is thus not
extraneous to the contract. As the court of appeals correctly
stated, "[w]hether the Dow adhesive was properly functioning on
the acrylic used in JeeTops directly relates to its quality and
characteristics——in particular its ability to maintain a water-
tight seal, which was one of its main functions." Hinrichs, No.
2017AP2361, unpublished slip op., ¶14. Hinrichs therefore cannot
fulfill the third necessary element for application of the "fraud
in the inducement" exception.
¶39 Therefore, we conclude that the "fraud in the
inducement" exception to the economic loss doctrine does not apply
to allow Hinrichs' common law misrepresentation 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.
C
¶40 We turn now to the "other property" exception to the
economic loss doctrine. Pursuant to this exception, the economic
loss doctrine "does not bar a commercial purchaser's claims based
on personal injury or damage to property other than the product,
or economic loss claims that are alleged in combination with
noneconomic losses." Daanen & Janssen, Inc., 216 Wis. 2d at 402;
Grams v. Milk Products, Inc., 2005 WI 112, ¶24, 283 Wis. 2d 511,
699 N.W.2d 167. In other words, the economic loss doctrine bars
"the recovery of purely economic losses in consumer transactions
through tort remedies where the only damage is to the product
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No. 2017AP2361
purchased by the consumer." State Farm Fire and Cas. Co. v. Hague
Quality Water, Int'l, 2013 WI App 10, ¶6, 345 Wis. 2d 741, 826
N.W.2d 412 (citing State Farm Mut. Auto. Ins. Co. v. Ford Motor
Co., 225 Wis. 2d 305, 341, 348, 592 N.W.2d 201 (1999)).
¶41 To determine whether the "other property" exception
applies, we apply a two part test. Id. First, we consider whether
the defective product and the damaged property are part of an
"integrated system." Id., ¶7. If the product and damaged property
are part of such a system, then any damage to that property is
considered to be damage to the product itself. Id. That is, "once
a part becomes integrated into a completed product or system, the
entire product or system ceases to be 'other property' for purposes
of the economic loss doctrine." Selzer v. Brunsell Bros., Ltd.,
2002 WI App 232, ¶38, 257 Wis. 2d 809, 652 N.W.2d 806 (citations
omitted).6
6 Hinrichs urges us to adopt a new test he terms the "product
bargained for" test in determining whether products constitute an
"integrated system." He explains such a test as based on "what
the buyer agreed to buy and what the seller agreed to sell." In
Hinrichs' view, the adhesive and JeeTops were not an integrated
system because the bargain he entered into with Dow was for the
purchase of the adhesive as a standalone product and not as part
of a fully integrated system.
We decline to adopt Hinrichs' "product bargained for"
analysis. Hinrichs does not identify any infirmity in the current
test that would require us to depart from our prior case law.
Further, we observe that the Wausau Tile court rejected a similar
contention that the "integrated system" rule does not apply where
a party buys only a component and not the fully integrated system.
See Wausau Tile, Inc. v. Cty. Concrete Corp., 226 Wis. 2d 235, 252
n.10, 593 N.W.2d 445 (1999).
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No. 2017AP2361
¶42 If the damaged property and the defective product are
not part of an integrated system, we then apply the second part of
the "other property" test——the "disappointed expectations" test.
State Farm Fire and Cas. Co., 345 Wis. 2d 741, ¶7. In doing so,
we focus on the product's expected function and whether the
purchaser should have foreseen that the product could cause the
damage at issue. Id. When claimed damages are merely the result
of disappointed expectations of a product's performance, the
exception will not apply and the economic loss doctrine will bar
recovery in tort. Grams, 283 Wis. 2d 511, ¶3.
¶43 The court of appeals here concluded that the JeeTops and
the adhesive were components of an integrated system. Hinrichs,
No. 2017AP2361, unpublished slip op., ¶15. It reasoned that
"[t]hey became components of an integrated system once the adhesive
was applied to bond the JeeTops to the motor vehicle. At that
point, they were integral parts of a greater whole and did not
serve an independent purpose." Id. Accordingly, the court of
appeals concluded that the "other property" exception did not
apply. Id.
¶44 We agree with the court of appeals that the JeeTops and
the adhesive formed an integrated system.7 Wausau Tile, 226
7Because we determine that the JeeTops and adhesive were
components of an integrated system, we need not consider the second
part of the "other property" test——disappointed expectations. See
State Farm Fire and Cas. Co. v. Hague Quality Water, Int'l, 2013
WI App 10, ¶7, 345 Wis. 2d 741, 826 N.W.2d 412 ("If the damaged
property is not part of an integrated system with the defective
product, then courts apply the 'disappointed expectations'
test . . . .") (emphasis added).
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No. 2017AP2361
Wis. 2d 235, provides a useful analogy. In that case, Wausau Tile
purchased cement from Medusa Corporation for use in manufacturing
concrete paving blocks. Id. at 241. Wausau Tile claimed that the
concrete it received from Medusa was defective and brought claims
against Medusa sounding in both contract and tort. Id. at 242.
¶45 This court determined that the economic loss doctrine
barred Wausau Tile's tort claims. Id. at 241. Rejecting Wausau
Tile's argument that the "other property" exception applies, this
court reasoned that "the pavers were integrated systems comprised
of several component materials, including Medusa's cement." Id.
at 251. "[V]arious substances incorporated into finished products
constitute integral components of those products." Id. (citation
omitted).
¶46 Similarly here, when the adhesive joins a JeeTops to the
body of a Jeep, it creates an integrated system. An adhesive does
not function on its own——its basic purpose is to integrate two
parts by adhering them together. Like the court of appeals did,
we see no relevant difference between the products here and others
that courts have determined to be components of an integrated
system, such as the cement in a concrete paving block in Wausau
Tile, a window in a house,8 a gear in a printing press,9 a generator
8 Selzer v. Brunsell Bros., Ltd., 2002 WI App 232, ¶38, 257
Wis. 2d 809, 652 N.W.2d 806.
9 Cincinnati Ins. Co. v. AM Int'l, Inc., 224 Wis. 2d 456, 463,
591 N.W.2d 869 (Ct. App. 1999).
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No. 2017AP2361
connected to a turbine,10 and a drive system in a helicopter.11
Hinrichs, No. 2017AP2361, unpublished slip op., ¶15 n.2 (citing
Selzer, 257 Wis. 2d 809, ¶¶38-39).
¶47 Accordingly, we conclude that the "other property"
exception to the economic loss doctrine does not apply to allow
Hinrichs' common law misrepresentation claims to go forward
because the JeeTops and adhesive are components of an integrated
system.
IV
A
¶48 We address next Hinrichs' claim under Wis. Stat.
§ 100.18. Section 100.18(1) provides in relevant part:
No person, firm, corporation or association, or agent or
employee thereof, with intent to
sell . . . merchandise . . . or with intent to induce
the public in any manner to enter into any contract or
obligation relating to the purchase, . . . shall make,
publish, disseminate, circulate, or place before the
public, or cause, directly or indirectly, to be made,
published, disseminated, circulated, or placed before
the public, . . . an advertisement, announcement,
statement or representation of any kind to the
public . . . contain[ing] any assertion, representation
or statement of fact which is untrue, deceptive or
misleading.
¶49 This section is part of Wisconsin's Deceptive Trade
Practices Act, the purpose of which is "to protect consumers from
10Midwhey Powder Co., Inc. v. Clayton Indus., 157
Wis. 2d 585, 590-91, 460 N.W.2d 426 (Ct. App. 1990).
11Midwest Helicopters Airways, Inc. v. Sikorsky Aircraft,
Div. of United Technologies Corp., 849 F. Supp. 666, 672 (E.D.
Wis. 1994), aff'd Nos. 94-1645, 94-1700, 1994 WL 682906 (7th Cir.
1994).
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No. 2017AP2361
untrue, deceptive or misleading representations to promote the
sale of a product." Bonn v. Haubrich, 123 Wis. 2d 168, 173, 366
N.W.2d 503 (Ct. App. 1985). It is also intended "to deter sellers
from making false and misleading representations in order to
protect the public." Novell v. Migliaccio, 2008 WI 44, ¶30, 309
Wis. 2d 132, 749 N.W.2d 544.
¶50 As a threshold matter, we consider whether the economic
loss doctrine bars claims made pursuant to Wis. Stat. § 100.18.
The court of appeals has previously concluded that the economic
loss doctrine does not serve as such a bar. Kailin v. Armstrong,
2002 WI App 70, ¶43, 252 Wis. 2d 676, 643 N.W.2d 132.
¶51 In Kailin, the court of appeals rejected an argument
that Wis. Stat. § 100.18 does not create a new cause of action,
but instead provides a remedy for common law claims. Id., ¶42.
Because Wis. Stat. § 100.18 creates a new cause of action, the
court of appeals therefore saw "nothing supporting [the]
conclusion that the economic loss doctrine applies to claims under
§ 100.18." Id. The Kailin court further found "no argument to
link the rationale for the economic loss doctrine to the purpose
of § 100.18 . . . ." Id.
The legislature has plainly chosen in § 100.18 to
provide protection and remedies for false advertising
that do not exist at common law. The underpinnings of
the economic loss doctrine——protecting parties' freedom
to allocate economic risk by contract, encouraging the
purchaser to assume, allocate, or insure against that
risk, and maintaining the fundamental distinction
between tort and contract law——are either irrelevant to,
or inconsistent with, that legislative choice.
Id.
18
No. 2017AP2361
¶52 Dow urges us to reject Kailin's approach and apply the
economic loss doctrine to bar the Wis. Stat. § 100.18 claim in
this case. It contends that Kailin was decided in the context of
a consumer relationship, and is therefore distinguishable from the
sophisticated commercial relationship in which the claim arises
here.
¶53 For support, Dow turns to two federal district court
cases. First, in MBI Acquisition Partners, L.P. v. Chronicle
Publ'g Co., 301 F. Supp. 2d 873, 885-86 (W.D. Wis. 2002), the court
granted the defendants summary judgment on the plaintiff's Wis.
Stat. § 100.18 claims on the basis of the economic loss doctrine.
Second, in Weather Shield Mfg., Inc. v. PPG Indus., Inc., No. 97-
C-707-S, 1998 WL 469913, at *6 (W.D. Wis. June 11, 1998), the court
applied the economic loss doctrine to § 100.18 claims, reasoning,
"exempting § 100.18 claims from the effects of the economic loss
doctrine would virtually nullify the doctrine since § 100.18 is
broad enough to encompass nearly every misrepresentation claim in
the commercial sales context, and claims arising from product
failure can readily be recast as misrepresentation claims."
¶54 The federal court cases on which Dow relies are not
binding on this court. State v. Wood, 2010 WI 17, ¶18, 323
Wis. 2d 321, 780 N.W.2d 63. Further, MBI Acquisition Partners,
the one published case Dow cites in support, applied the economic
loss doctrine to § 100.18 claims with little in the way of
analysis. See MBI Acquisition Partners, 301 F. Supp. 2d at 885-
86.
19
No. 2017AP2361
¶55 We reject Dow's argument. Rather than adopting
nonbinding authority with scant analysis, we instead reaffirm the
Kailin court's determination on this issue. Wisconsin Stat.
§ 100.18 created a new cause of action, providing "protection and
remedies for false advertising that do not exist at common law."
Kailin, 252 Wis. 2d 676, ¶42; see also K & S Tool & Die Corp. v.
Perfection Mach. Sales, Inc., 2007 WI 70, ¶36, 301 Wis. 2d 109,
732 N.W.2d 792 (determining that "the legislature created a
distinct cause of action" pursuant to § 100.18). As the Kailin
court stated, the policies underlying the economic loss doctrine—
—the allocation of risk and the distinction between tort and
contract law——are irrelevant to the legislature's choice to
provide a purely statutory cause of action and remedy by way of
§ 100.18. Kailin, 252 Wis. 2d 676, ¶42. A common law restriction
like the economic loss doctrine therefore does not apply to
Hinrichs' statutory claim.
¶56 Therefore, we conclude that the economic loss doctrine
does not serve as a bar to claims made under Wis. Stat. § 100.18.
B
¶57 Having determined that the economic loss doctrine does
not bar claims made pursuant to Wis. Stat. § 100.18, we turn now
to Dow's assertion that Hinrichs is not "the public" for purposes
of the statute.
¶58 To prevail on a claim under Wis. Stat. § 100.18, a
plaintiff must demonstrate that the defendant made a
representation to "the public." K & S Tool & Die Corp., 301
20
No. 2017AP2361
Wis. 2d 109, ¶19. "The public" is not defined in § 100.18,
although courts have interpreted the term. Id., ¶20.
¶59 In the seminal case on the subject, Automatic
Merchandisers, a company was alleged to have engaged in a marketing
scheme to sell vending machines at prices in excess of their actual
value. 64 Wis. 2d at 660. The company placed classified
advertisements in newspapers, and subsequently contacted those who
responded to the advertisement at their homes with deceptive
promotional materials and oral representations. Id.
¶60 In its analysis, the Automatic Merchandisers court
examined "whether or not Sec. 100.18(1), Stats. applies to oral
representations made in private conversations to prospective
purchasers of the defendants' products." Id. at 662. The court
determined that the statute applies in such a situation: "While
the representations were made privately to prospective purchasers
their only relationship to the defendants was that they had
responded to advertisements in the classified sections of
newspapers. These persons were members of 'the public' as that
term is used in this statute." Id. at 663.
¶61 Further, the court recognized that "the number of people
involved is not controlling and that 'the public' may be only one
person." Id. at 664 (citing Ford Hydro-Electric Co. v. Town of
Aurora, 206 Wis. 489, 240 N.W. 418 (1932)). "The use of the term
'the public' does not mean that the statements be made to a large
audience." Id. Indeed, the use of the term "contemplates the
individual action of one member of the public." Id. Rather than
21
No. 2017AP2361
the number of people involved, "[t]he important factor is whether
there is some particular relationship between the parties." Id.
¶62 Following Automatic Merchandisers, Wisconsin courts have
consistently applied the "particular relationship" test in
determining whether a plaintiff is a member of "the public" for
purposes of Wis. Stat. § 100.18(1). See, e.g., K & S Tool & Die
Corp., 301 Wis. 2d 109, ¶27; Kailin, 252 Wis. 2d 676, ¶44. The
test provides that "a plaintiff remains a member of 'the public'
unless a particular relationship exists between him or her and the
defendant." K & S Tool & Die Corp., 301 Wis. 2d 109, ¶27. Whether
such a relationship exists is a question of fact that depends on
the peculiar facts and circumstances of the case. Id., ¶¶27, 30
(citing Cawker v. Meyer, 147 Wis. 320, 326, 133 N.W. 157 (1911)).
¶63 Dow contends that our previously established framework
of analysis strays from the plain language of Wis. Stat.
§ 100.18(1). Specifically, it asserts that one person cannot be
"the public" and that consequently we should overrule Automatic
Merchandisers. In Dow's view, Automatic Merchandisers is
inconsistent with the plain meaning of "public."
¶64 We decline Dow's invitation to overrule Automatic
Merchandisers. First, as Automatic Merchandisers states, the use
of "the public" in Wis. Stat. § 100.18(1) "contemplates the
individual action of one member of the public." Automatic Merchs.,
64 Wis. 2d at 664; see also Wis JI——Civil 2418 (2017) (referring
to a representation made to "one or more members of the public").
"While the readily apparent legislative goal underlying the
enactment of § 100.18 is to protect all members of [the] public
22
No. 2017AP2361
from fraudulent advertisements and deceptive marketing practices,
in its practical application, the section individually protects
each member of the public." Jersild v. Aker, 775 F. Supp. 1198,
1205 (E.D. Wis. 1991).
¶65 For example, in Automatic Merchandisers, the
misrepresentation induced action when any individual member of the
public entered into a private interaction with the vending machine
company. See Automatic Merchs., 64 Wis. 2d at 660. If only one
person saw the newspaper ad at issue, responded, and formed a
relationship with Automatic Merchandisers, Wis. Stat. § 100.18(1)
was implicated. Similarly here, a single representation to a
single person is enough to trigger § 100.18(1)'s protections.
¶66 Second, the doctrine of stare decisis12 militates against
the precipitous change in the law that Dow seeks. Stare decisis
is fundamental to the rule of law. Johnson Controls, Inc. v.
Emp'rs Ins. of Wausau, 2003 WI 108, ¶94, 264 Wis. 2d 60, 655
N.W.2d 227. Indeed, "[t]his court follows the doctrine of stare
decisis scrupulously because of our abiding respect for the rule
of law." Id.
¶67 "Fidelity to precedent ensures that existing law will
not be abandoned lightly. When existing law is open to revision
12"Stare decisis" refers to the principle that requires
courts to "stand by things decided." State v. Harrell, 199
Wis. 2d 654, 667, 546 N.W.2d 115 (1996) (Abrahamson, J.,
concurring); see Black's Law Dictionary 1626 (10th ed. 2014)
(defining "stare decisis" as "[t]he doctrine of precedent, under
which a court must follow earlier judicial decisions when the same
points arise again in litigation").
23
No. 2017AP2361
in every case, deciding cases becomes a mere exercise of judicial
will, with arbitrary and unpredictable results." Schultz v.
Natwick, 2002 WI 125, ¶37, 257 Wis. 2d 19, 653 N.W.2d 266 (internal
quotation and citations omitted). Accordingly, any departure from
stare decisis requires "special justification." Id.
¶68 Our case law has identified several criteria for
overturning prior cases. Johnson Controls, Inc., 264 Wis. 2d 60,
¶98. "First, changes or developments in the law have undermined
the rationale behind a decision." Id. "Second, there is a need
to make a decision correspond to newly ascertained facts." Id.
"Third, there is a showing that the precedent has become
detrimental to coherence and consistency in the law." Id. We
also consider "whether the prior decision is unsound in principle,
whether it is unworkable in practice, and whether reliance
interests are implicated." Id., ¶99.
¶69 In this case, these criteria do not support overturning
Automatic Merchandisers. As analyzed above, its interpretation is
consistent with both the plain language and the purpose of Wis.
Stat. § 100.18(1). Cases subsequent to Automatic Merchandisers
have consistently and coherently followed it. See, e.g., K & S
Tool & Die Corp., 301 Wis. 2d 109, ¶¶23-27; Bonn, 123 Wis. 2d at
173 n.4. The particular relationship test is clear and workable.
¶70 Accordingly, we reaffirm 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
24
No. 2017AP2361
"the public" component of a § 100.18 claim in this case was in
error.
¶71 We emphasize that we are not determining in this opinion
whether Hinrichs is in fact a member of "the public," but rather
that we agree with the court of appeals that dismissal on that
ground was in error. See Hinrichs, No. 2017AP2361, unpublished
slip op., ¶22. Whether Hinrichs and Dow were in a "particular
relationship" so as to remove Hinrichs from the realm of "the
public" pursuant to Wis. Stat. § 100.18(1) remains an open question
to be determined by the circuit court after further discovery.
See K & S Tool & Die Corp., 301 Wis. 2d 109, ¶27.
C
¶72 Finally, we address whether Hinrichs' claim pursuant to
Wis. Stat. § 100.18 is subject to the heightened pleading standard
set forth by § 802.03(2) for claims of fraud and whether Hinrichs'
complaint states a claim under the appropriate standard. This is
an issue of first impression that was not addressed by the court
of appeals in this case.
¶73 Wisconsin Stat. § 802.03(2) provides in relevant part:
"In all averments of fraud . . . the circumstances constituting
25
No. 2017AP2361
fraud . . . shall be stated with particularity."13 To put
defendants on notice so that they can prepare meaningful responses,
this statute requires that allegations of fraud specify the
particular individuals involved, where and when misrepresentations
occurred, and to whom the misrepresentations were made. Kaloti
Enters., Inc., 283 Wis. 2d 555, ¶21 (citations omitted). In other
words, "[p]articularity means the 'who, what, when, where and
how.'" Ferris v. Location 3 Corp., 2011 WI App 134, ¶10, 337
Wis. 2d 155, 804 N.W.2d 822 (citing Friends of Kenwood v. Green,
2000 WI App 217, ¶14, 239 Wis. 2d 78, 619 N.W.2d 271).
¶74 Dow asserts that Wis. Stat. § 802.03(2)'s heightened
pleading requirements apply to Hinrichs' claim under Wis. Stat.
§ 100.18(1). Hinrichs apparently concedes this point and
accordingly contends that his complaint was sufficient to meet the
heightened standard.
¶75 However, we are not bound by Hinrichs' apparent
concession of law. See Fletcher v. Eagle River Memorial Hosp.,
Inc., 156 Wis. 2d 165, 179, 456 N.W.2d 788 (1990). Consequently,
The Wis. Stat. § 802.03(2) pleading standard for fraud
13
claims is more stringent than the standard employed for most other
claims. Generally, for claims not subject to § 802.03(2) a
plaintiff need only plead "[a] short and plain statement of the
claim, identifying the transaction or occurrence or series of
transactions or occurrences out of which the claim arises and
showing that the pleader is entitled to relief." Wis. Stat.
§ 802.02(1)(a); see Cattau v. Nat'l Ins. Servs. of Wis., 2019 WI
46, ¶4, 386 Wis. 2d 515, 926 N.W.2d 756 (per curiam); Data Key
Partners v. Permira Advisers LLC, 2014 WI 86, ¶21, 356 Wis. 2d 665,
849 Wis. 2d 693 (citing Strid v. Converse, 111 Wis. 2d 418, 422-
23, 331 N.W.2d 350 (1983)). Thus, we refer to § 802.03(2) as
creating a "heightened" standard.
26
No. 2017AP2361
we examine the question Dow poses and arrive at a contrary
conclusion.
¶76 By its terms, Wis. Stat. § 802.03(2) applies to "all
averments of fraud." Although entitled "Fraudulent
representations," the text of Wis. Stat. § 100.18 does not include
the word "fraud." The title of a statute may be helpful in
resolving ambiguities in a statute, but it is not part of the
statute. State v. Dorsey, 2018 WI 10, ¶30, 379 Wis. 2d 386, 906
N.W.2d 158; Wis. Stat. § 990.001(6). Therefore, we cannot rely on
the title of "fraudulent representations" to determine that
§ 100.18 is a "fraud" statute to which § 802.03(2) applies.
¶77 Case law has previously indicated that Wis. Stat.
§ 100.18 creates a new cause of action and does not simply provide
a remedy for common law fraud claims. See Kailin, 252 Wis. 2d 676,
¶42. Through the enactment of § 100.18, "[t]he legislature has
plainly chosen . . . to provide protection and remedies for false
advertising that do not exist at common law." Id. Kailin thus
indicates that common law restrictions do not apply to § 100.18.
See id. That Wis. Stat. § 802.03(2) may apply to common law fraud
claims therefore does not affect our determination of whether it
also applies to purely statutory claims under § 100.18.
¶78 Further, considering the purpose of Wis. Stat. § 100.18
we arrive at the conclusion that the application of heightened
pleading standards would run counter to that purpose. As stated,
§ 100.18 serves a dual purpose of protecting consumers and
deterring sellers from making deceptive representations. See
supra, ¶49; Bonn, 123 Wis. 2d at 173; Novell, 309 Wis. 2d 132,
27
No. 2017AP2361
¶30. It is aimed at preventing "certain activities deemed harmful
to citizens' economic and social well-being." Tim Torres Enters.,
Inc. v. Linscott, 142 Wis. 2d 56, 72, 416 N.W.2d 670 (Ct. App.
1987).
¶79 "Section 100.18 has maintained its central importance in
consumer protection for more than a century since its enactment."
John S. Greene, Navigating Wisconsin's Consumer Protection System,
90 Wis. Law. 22, 24 (Sept. 2017); see also James D. Jeffries,
Protection for Consumers Against Unfair and Deceptive Business
Practices in Wisconsin, 57 Marq. L. Rev. 559, 595-605 (1974). "The
state, individual consumers, and business consumers regularly
invoke Wis. Stat, section 100.18 to pursue claims of deceptive
representations." Greene, supra, at 24.
¶80 Consistent with this history and purpose, Wis. Stat.
§ 100.18(11)(b)2. provides for a private cause of action.14 As
14 Wis. Stat. § 100.18(11)(b)2. provides:
Any person suffering pecuniary loss because of a
violation of this section by any other person may sue in
any court of competent jurisdiction and shall recover
such pecuniary loss, together with costs, including
reasonable attorney fees, except that no attorney fees
may be recovered from a person licensed under ch. 452
while that person is engaged in real estate practice, as
defined in s. 452.01(6). Any person suffering pecuniary
loss because of a violation by any other person of any
injunction issued under this section may sue for damages
therefor in any court of competent jurisdiction and
shall recover twice the amount of such pecuniary loss,
together with costs, including reasonable attorney fees,
except that no attorney fees may be recovered from a
person licensed under ch. 452 while that person is
engaged in real estate practice, as defined in s.
452.01(6).
28
No. 2017AP2361
such, a successful plaintiff is entitled to recover pecuniary
losses, costs, and reasonable attorney fees. § 100.18(11)(b)2.;
see Mark R. Hinkston, Protecting Consumers in the Modern Age:
Wisconsin's Deceptive Trade Practices Act, 81 Wis. Law. 14, 16
(Oct. 2008). Double damages are available for any violation of an
injunction previously issued pursuant to § 100.18.
§ 100.18(11)(b)2.; see Wis. Stat. § 100.18(11)(d) (authorizing the
Department of Agriculture, Trade, and Consumer Protection, the
Department of Justice, or any district attorney to seek a temporary
or permanent injunction of "any violation of this section").
¶81 "We have previously recognized that an individual who
brings an action to enforce a statutory right may be acting as a
'private attorney general' to enforce the public's rights under
the statute." Watkins v. Labor and Indus. Review Comm'n, 117
Wis. 2d 753, 764, 345 N.W.2d 482 (1984) (citing Shands v.
Castrovinci, 115 Wis. 2d 352, 358, 340 N.W.2d 506 (1983)). Absent
such a private right of action and the prospect of attorney fees,
many victims of deceptive representations "would not be in an
economic position to advance the private and public interest at
stake." Estate of Miller v. Storey, 2017 WI 99, ¶58, 378
Wis. 2d 358, 903 N.W.2d 759. We must look at Wis. Stat. § 100.18
through this lens when examining the applicable pleading standard.
¶82 Heightened pleading requirements may prevent private,
pro se parties from seeking redress for deceptive representations.
Such a requirement would run counter to Wis. Stat. § 100.18's
purpose as a consumer protection statute with a broad scope. See
Tim Torres Enters., Inc., 142 Wis. 2d at 72 ("The broad remedial
29
No. 2017AP2361
scope of sec. 100.18 and its protective purpose make it similar to
the remedial provisions of the federal antitrust laws in that to
eliminate or rectify a wrong the traditional standards of proof
may be relaxed if necessary.").
¶83 Accordingly, 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.
¶84 We therefore apply general pleading standards to
determine if Hinrichs' complaint states a claim. Thus, we must
examine whether Hinrichs' complaint pleads facts, which if true,
would entitle him to relief. See Cattau v. Nat'l Ins. Servs. of
Wis., 2019 WI 46, ¶4, 386 Wis. 2d 515, 926 N.W.2d 756 (per curiam);
Data Key Partners v. Permira Advisers LLC, 2014 WI 86, ¶21, 356
Wis. 2d 665, 849 Wis. 2d 693 (citing Strid v. Converse, 111
Wis. 2d 418, 422-23, 331 N.W.2d 350 (1983)).
¶85 Specifically with regard to a claim made pursuant to
Wis. Stat. § 100.18(1), a plaintiff must allege facts that would
fulfill three elements: (1) the defendant made a representation
to one or more members of the public with the intent to induce an
obligation; (2) the representation was untrue, deceptive or
misleading; and (3) the representation materially induced a
pecuniary loss to the plaintiff. Novell, 309 Wis. 2d 132, ¶49;
see Wis JI——Civil 2418 (2017) (referring to "one or more members
of the public[,]" consistent with this court's conclusion in
Automatic Merchs., 64 Wis. 2d at 663-64). Hinrichs' complaint
alleges facts that, if true, meet each of these elements.
30
No. 2017AP2361
¶86 First, as analyzed above, the complaint alleges that Dow
made a representation to "the public" within the meaning of Wis.
Stat. § 100.18. The complaint further alleges that the
representation was made "with the intent of inducing Mr. Hinrichs
to continue purchasing Dow adhesives."
¶87 Second, as the court of appeals determined, "the
complaint sufficiently alleges that Dow made representations that
were untrue, deceptive or misleading." Hinrichs, No. 2017AP2361,
unpublished slip op., ¶23. Specifically, the complaint alleges
that "[t]he report prepared and produced by Dow claimed the Dow
adhesive was properly functioning on the acrylic used by Mr.
Hinrichs in the JeeTops panels . . . ." The complaint further
alleges that this representation was untrue, deceptive, or
misleading in that the Dow adhesive actually was the cause of the
structural breakdown of the JeeTops panels.
¶88 Finally, the complaint amply alleges that the
representation materially induced a pecuniary loss to Hinrichs.
Hinrichs alleges that Dow's representations destroyed his ability
to sell further JeeTops panels by negatively affecting the
product's reputation. The complaint specifically references
negative commentary on social media and elsewhere within the Jeep
enthusiast community, as well as allegations that high profile
customers stopped purchasing the product and that dealers dropped
JeeTops from their product lines.
¶89 We therefore conclude that Hinrichs' complaint states a
claim under the general pleading standard.
31
No. 2017AP2361
V
¶90 In sum, with regard to 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 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.
¶91 Concerning Hinrichs' statutory claims, 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 § 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.
¶92 Accordingly, we affirm the decision of the court of
appeals.
By the Court.—The decision of the court of appeals is
affirmed.
32
No. 2017AP2361
¶93 DANIEL KELLY and BRIAN HAGEDORN, JJ., did not
participate.
33
No. 2017AP2361.rgb
¶94 REBECCA GRASSL BRADLEY, J. (concurring in part,
dissenting in part). I agree with the majority's decision to
affirm the court of appeals' dismissal of Hinrichs'1 common law
misrepresentation claims because the economic loss doctrine bars
them, and the "other property" and "fraudulent inducement"
exceptions to that doctrine do not apply. Accordingly, I join
parts I, II, and III of the majority opinion. However, the
majority's interpretation of Wis. Stat. § 100.18(1) (2015-2016)2
does not apply the plain meaning of "the public," which would
exclude Hinrichs based upon the particularized statements Dow made
solely to Hinrichs within the context of the ongoing business
relationship between the parties. I would therefore reverse the
court of appeals' decision, which allows Hinrichs' § 100.18
fraudulent representation claim against Dow to proceed despite the
absence of any "advertisement, announcement, statement or
representation" "to the public" or "to induce the public" as
required under the statute. Accordingly, I dissent from part IV.B
of the majority opinion.3
1 Like the majority, I use "Hinrichs" to refer to Chris
Hinrichs and Autovation Limited collectively.
2 All subsequent references to the Wisconsin Statutes are to
the 2015-16 version unless otherwise indicated.
3 Because I conclude Hinrichs is not a member of "the public"
within the meaning of Wis. Stat. § 100.18(1) and the statute
therefore does not provide an avenue for Hinrichs' claim, I need
not address whether the economic loss doctrine bars a claim under
this statute (part IV.A of the majority opinion) or whether the
heightened pleading requirements apply to § 100.18(1) (part IV.C
of the majority opinion).
1
No. 2017AP2361.rgb
I
¶95 The foundation for Wis. Stat. § 100.18(1) arose in 1913,
when the Wisconsin Legislature first enacted a law prohibiting
untrue and deceptive advertisements to induce the purchase of a
good. See § 1, ch. 510, Laws of 1913. In 1925, the legislature
adopted the precursor to the current version of § 100.18(1). See
§ 2, ch. 264, Laws of 1925. In the text of the original Act, like
the current language of § 100.18(1), the phrase "the public"
appeared five times. See § 100.18(1); § 2, ch. 264, Laws of 1925.
The text of § 100.18(1) currently comprises a single lengthy
sentence, prompting one court to remark "its length would put even
Dickens to shame."4 Eliminating repetitive words, as well as those
portions inapplicable in this case, condenses the statute to the
following more readable statement:
No . . . corporation . . . with intent to sell . . .
any . . . merchandise . . . to the public . . . or with
intent to induce the public . . . to enter into any
contract or obligation relating to the purchase . . . of
any . . . merchandise . . . shall make . . . or place
before the public, or cause . . . to be made . . . or
placed before the
public, in this state . . . an advertisement . . .
statement or representation of any kind to the public
relating to such purchase . . . which
advertisement, . . . statement or representation
contains any assertion, representation or statement of
fact which is untrue, deceptive or misleading.
§ 100.18(1) (emphasis added). Based merely on the number of times
the phrase appears in the statutory text, "the public" has manifest
importance to the law's meaning.
4 Uniek, Inc. v. Dollar General Corp., 474 F. Supp. 2d 1034,
1036 (W.D. Wis. 2007).
2
No. 2017AP2361.rgb
¶96 This court's first interpretation of the meaning of the
phrase "the public" appeared in State v. Automatic Merchandisers
of Am., Inc., 64 Wis. 2d 659, 663-64, 221 N.W.2d 683 (1974). A
full recitation of that case is unnecessary here, as the majority
already outlined it. See majority op., ¶¶59-61. In Automatic
Merchandisers, the court held Wis. Stat. § 100.18(1) reaches
private face-to-face oral representations between a seller and
prospective purchasers responding to newspaper advertisements.
Automatic Merchs. of Am., Inc., 64 Wis. 2d at 663. The court
recognized that "in some situations one person can constitute the
public" and the alleged misrepresentation need not be communicated
to a wide audience. Id. at 664. Generally, the court concluded
§ 100.18 "protect[s] the residents of Wisconsin from any untrue,
deceptive or misleading representations made to promote the sale
of a product." Id. at 663. The court identified as "[t]he
important factor" in defining "the public" whether there is a
"particular relationship" between the parties. Id. at 664 (citing
Cawker v. Meyer, 147 Wis. 320, 326, 133 N.W. 157 (1911)).
¶97 In this case, the majority expands Automatic
Merchandisers' interpretation of "the public" beyond the plain
meaning of Wis. Stat. § 100.18. While just a single individual
may receive a representation prohibited under § 100.18, in order
for the representation to run afoul of that statute, it must have
been "made . . . or placed before the public." See Automatic
Merchs., 64 Wis. 2d at 664; majority op., ¶¶64-65. In Automatic
Merchandisers, "the representations were made privately to
prospective purchasers" whose "only relationship" to the sellers
3
No. 2017AP2361.rgb
consisted of responding "to advertisements in the classified
sections of newspapers." Automatic Merchs., 64 Wis. 2d at 663.
The court's statement that "'the public' may be only one person"
simply recognized that even if only one prospective purchaser
responded to the advertisement and heard the misrepresentation
from the seller, then that person would have a claim under
§ 100.18(1) as a member of "the public." See id. at 664 (citations
omitted). In contrast, at the time Hinrichs alleges Dow made a
misrepresentation regarding its adhesive, Hinrichs and Dow were
businesses in a commercial relationship. Because Hinrichs alleges
Dow's misrepresentation was made solely to Hinrichs, and in regard
to Hinrichs' unique application of Dow's adhesive to Hinrichs'
particular product, unlike the generalized representations made
privately in Automatic Merchandisers to anyone responding to
classified advertisements, Dow's representation was not made to
"the public," and therefore does not fall within the scope of
§ 100.18.
¶98 A textual approach to statutory interpretation gives
language "its common, ordinary, and accepted meaning . . . ."
State ex rel. Kalal v. Circuit Court for Dane Cty., 2004 WI 58,
¶45, 271 Wis. 2d 633, 681 N.W.2d 110. We presume the "legislature
says in a statute what it means and means in a statute what it
says there." Milwaukee Dist. Council 48 v. Milwaukee Cty., 2019
WI 24, ¶25, 385 Wis. 2d 748, 924 N.W.2d 153 (quoting Connecticut
Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992)); see also
Kalal, 271 Wis. 2d 633, ¶39 (quoting the same). As a fundamental
tenet of statutory interpretation, where possible, we render no
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word in a statute surplusage, but instead give meaning to every
word. See, e.g., Enbridge Energy Co., Inc. v. Dane Cty., 2019 WI
78, ¶28, 387 Wis. 2d 687, 929 N.W.2d 572 (Statutory construction
should not "create[] an avoidable surplusage problem[;]" rather,
"'[i]f possible, every word and every provision is to be given
effect (verba cum effectu sunt accipienda). None should be
ignored. None should needlessly be given an interpretation that
causes it . . . to have no consequence.'" (quoting Antonin Scalia
& Bryan Garner, Reading Law: The Interpretation of Legal Texts
174 (2012))); see also Kalal, 271 Wis. 2d 633, ¶46 ("Statutory
language is read where possible to give reasonable effect to every
word, in order to avoid surplusage." (citations omitted)); State
v. Martin, 162 Wis. 2d 883, 894, 470 N.W.2d 900 (1991) ("A statute
should be construed so that no word or clause shall be rendered
surplusage and every word if possible should be given effect."
(quoting Donaldson v. State, 93 Wis. 2d 306, 315, 286 N.W.2d 817
(1980))).
¶99 "[T]he ordinary and common meaning of a doubtful word
may be established by the definition of a recognized dictionary."
In re Nottingham's Estate, 46 Wis. 2d 580, 588, 175 N.W.2d 640
(1970). Wisconsin Stat. § 100.18(1) uses the word "public" as a
noun. When used in this manner, the word "public" refers to people
in the general community. See Public, Black's Law Dictionary (11th
ed. 2019) ("The people of a country or community as a
whole . . . ."); Public, American Heritage Dictionary (5th ed.
2011) ("The community or the people as a whole."); Public, Oxford
Dictionary (6th ed. 2007) ("People collectively; the members of
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the community."); see also Public, Funk & Wagnalls New Standard
Dictionary (1923) ("The people collectively, or in general, as of
a particular locality, state, or nation, or of the world at
large . . . ."); Public, Black's Law Dictionary (2d ed. 1910) ("As
a noun, the word 'public' denotes the whole body politic, or the
aggregate of the citizens of a state, district, or municipality."
(citations omitted)). Read in conjunction with Automatic
Merchandisers, these definitions inform the interpretation of "the
public" under § 100.18(1), indicating that the prohibited
"representation" must be "made" or "placed before" people within
the general community. See Automatic Merchs., 64 Wis. 2d at 664.
In Automatic Merchandisers, the prohibited representations were
made to whomever responded to the seller's classified newspaper
advertisements published to the general community. Id. at 664.
¶100 The majority's construction of "the public," as used in
Wis. Stat. § 100.18(1), would include a business in an ongoing
commercial relationship with another business whose alleged
misrepresentation relates to a particularized use of the product
and was directed at no one other than that purchaser. Automatic
Merchandisers does not support this reading. Instead, that case
interpreted § 100.18(1) as protecting "the residents of
Wisconsin"——meaning anyone who happened to respond to classified
advertising directed at the community in general. Automatic
Merchs., 64 Wis. 2d at 663-64. In similar fashion, "[t]he word
'public' has been construed under comparable statutes to mean that
any person who invites the trade of the general populace in a given
area, or who is engaged in his principal business, is dealing with
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the 'public.'" James D. Jeffries, Protection for Consumers Against
Unfair and Deceptive Business Practices in Wisconsin, 57 Marq. L.
Rev. 559, 561 n.14 (1974) (emphasis added) (citing to cases in
Texas, Michigan, Missouri, and Wisconsin). The email from Dow's
agent to Hinrichs conveyed lab testing reports and results——
requested by Hinrichs——regarding the application of Dow's adhesive
to Hinrichs' product. The representation in that email responded
to Hinrichs' unique concerns and in no way invited the trade of
the general populace in a given area.
¶101 The majority broadens the meaning of a "representation"
"made . . . or placed before the public" to encompass an email
between two businesses in a commercial relationship. See majority
op., ¶70.5 Under the majority's interpretation, "the public" means
everyone and therefore has no meaning, which creates an avoidable
surplusage problem: the majority causes "the public" to have no
operative effect whatsoever in the statute. As the District Court
for the Western District of Wisconsin has recognized, this court's
ever-expanding construction of "the public" under Wis. Stat.
5 The majority blurs the boundary between statutory claims
under Wis. Stat. § 100.18(1) (the Deceptive Trade Practices Act)
and breach of contract claims under general contract law. See
generally Donald R. Stroud III, Beyond Deception: Finding
Prudential Boundaries Between Breach of Contract and Deceptive
Trade Practices Act Violations in Wisconsin, 93 Marq. L. Rev. 1157
(2010) (criticizing this court's decision in K & S Tool & Die Corp.
v. Perfection Machinery Sales, Inc., 2007 WI 70, 301 Wis. 2d 109,
732 N.W.2d 792, allowing for the possible extension of § 100.18(1)
claims to commercial parties, and discussing the impact on contract
law). The majority in this case permits commercial parties to
avoid negotiated contract terms by bringing DTPA claims in lieu of
breach of contract actions, thereby escaping bargained-for
liability limitations and remedies and upending the parties'
allocation of risk. See Stroud, supra at 1159, 1164-72.
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§ 100.18(1) renders it "anachronistic to interpret 'the public' as
having any limitation" and now "any person or entity is a member
of the public." Uniek, Inc. v. Dollar General Corp., 474 F. Supp.
2d 1034, 1038 (W.D. Wis. 2007). However outmoded under this
court's errant jurisprudence, "the public" must have some
parameters in order to avoid being rendered superfluous. Excising
"the public" from the statutory text yields the same meaning the
majority gives it:
No . . . corporation . . . with intent to sell . . .
any . . . merchandise . . . shall make . . . in this
state . . . an advertisement . . . statement or
representation of any kind . . . relating to such
purchase . . . which advertisement, . . . statement or
representation contains any assertion, representation or
statement of fact which is untrue, deceptive or
misleading.
The majority reads "the public" out of the statute entirely by
"needlessly" giving that phrase "an interpretation that causes
it . . . to have no consequence." See Scalia & Garner, supra ¶98,
at 174.
¶102 In cases with similar facts, other courts concluded that
"the public" cannot mean two businesses in an ongoing commercial
relationship. For example, the Uniek court held a distributor was
not a member of "the public" within the meaning of Wis. Stat.
§ 100.18(1) because it had a 13-year business relationship with
the defendant. Uniek, 474 F. Supp. 2d at 1039-40. The Uniek court
reasoned that if anything were to distinguish the distributor from
"the public," surely this longstanding business relationship
would. Id. at 1040. Although not specifically based on
§ 100.18(1), our court of appeals clarified the common, ordinary,
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and accepted meaning of "the public" by differentiating private
clubs patronized by members only, from restaurants "open to the
public." See City of Wausau v. Jusufi, 2009 WI App 17, ¶¶14-16,
315 Wis. 2d 780, 763 N.W.2d 201. In Jusufi, the court of appeals
concluded a smoking ban ordinance did not violate equal protection
even though it treated restaurants differently than private clubs.
See id., ¶1. The court of appeals held there was a rational basis
for "distinguishing private clubs from other restaurants," namely,
the protection of "the greatest number of restaurant patrons, while
preserving the right to associate in truly private clubs that are
not open to the public." Id., ¶14 (emphasis added). The court of
appeals recognized that while restaurants are open to everyone in
the community, i.e. "the public," private clubs are not. See id.,
¶16. While the canons of statutory construction compel giving
"the public" this common, ordinary, and accepted meaning, the
majority instead continues the capricious approach of supplanting
the text of § 100.18(1) with a judicially-preferred standard.
II
¶103 The majority perpetuates the judicially-created
"particular relationship" test for determining whether a person is
part of "the public" within the meaning of Wis. Stat. § 100.18(1).
Majority op., ¶62. This test has no foundation in the statutory
text. Automatic Merchandisers introduced the "particular
relationship" test in attempting to divine "the intent of the
legislature," in particular whom "the legislature intended to
protect." 64 Wis. 2d at 663. The court's entire analysis in that
case rests on the defective foundation of the fiction commonly
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called "legislative intent."6 "An interpretation based on what
the legislature intended a statute to mean is improper." State v.
Lopez, 2019 WI 101, ¶39, __ Wis. 2d __, 936 N.W.2d 125 (Rebecca
Grassl Bradley, J., concurring). Aside from the impossibility of
assigning a collective "intent" motivating a body of individual
lawmakers, "[i]t is the enacted law, not the unenacted intent,
that is binding on the public." Kalal, 271 Wis. 2d 633, ¶44. "It
is the law that governs, not the intent of the lawgiver[,]" and
"[m]en may intend what they will; but it is only the laws that
they enact which bind us." Id., ¶52 (emphasis omitted) (quoting
Antonin Scalia, A Matter of Interpretation: Federal Courts and
the Law 17 (Princeton University Press 1997)). "[I]t is the text's
meaning, and not the content of anyone's expectations or
intentions, that binds us as law." Id., Lawrence H. Tribe, Comment
in Scalia, A Matter of Interpretation at 66; see also Winebow,
Inc. v. Capitol-Husting Co., 2018 WI 60, ¶40, 381 Wis. 2d 732, 914
N.W.2d 631 (Rebecca Grassl Bradley, J., dissenting)
("[L]egislative intent behind enactment of a law . . . cannot
govern statutory interpretation. Rather, our analysis must focus
on the statutory language itself[.]"); State v. Grandberry, 2018
WI 29, ¶55, 380 Wis. 2d 541, 910 N.W.2d 214 (Kelly, J., concurring)
6 See Antonin Scalia & Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 391-96 (2012) ("[C]ollective intent
is pure fiction because dozens if not hundreds of legislators have
their own subjective views on the minutiae of bills they are voting
on[.]"); see also Robert E. Keeton, Keeton on Judging in the
American Legal System 210-11 (Lexis Pub. 1999) ("'[L]egislative
intent' . . . is a legal fiction. Only a natural person can have
a state of mind such as intent. No legal entity such as a
legislature can have an 'intent' in a strictly factual sense.").
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("[W]e give effect only to what the legislature does, not what it
tried to do." (footnote omitted)).
¶104 Rather than displacing the actual text of the statute
with a judicially-created "particular relationship" test to define
"the public" in the context of Wis. Stat. § 100.18(1), courts
should instead determine who constitutes "the public," based on
the plain meaning of § 100.18(1). See supra ¶¶98-102. Using the
"particular relationship" test in the context of § 100.18(1)
inappropriately adds words to the statutory text that the
legislature did not write into the law, while introducing
additional ambiguity into the meaning of "the public." In
construing a statute, "we interpret the words the legislature
actually enacted into law" and "[u]nder the omitted-case canon of
statutory interpretation, '[n]othing is to be added to what the
text states or reasonably implies (casus omissus pro omisso
habendus est).'" State v. Fitzgerald, 2019 WI 69, ¶30,
Wis. 2d 384, 929 N.W.2d 165 (quoting Lopez-Quintero v. Dittman,
2019 WI 58, ¶18, 387 Wis. 2d 50, 928 N.W.2d 480 (quoting Scalia &
Garner, Reading Law at 93)); see also Fond du Lac Cty. v. Town of
Rosendale, 149 Wis. 2d 326, 334, 440 N.W.2d 818 (Ct. App. 1989)
("One of the maxims of statutory construction is that courts should
not add words to a statute to give it a certain meaning." (citation
omitted)).
¶105 Instead of analyzing the words the legislature actually
wrote in Wis. Stat. § 100.18(1)——whether a person is a member of
"the public"——courts have digressed into a consideration of
whether the parties have a "particular relationship." Applying
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this test only raises additional questions, such as whether the
parties have a contractual relationship or (as Hinrichs advances)
an "effective contractual relationship," thereby disconnecting the
analysis even further from the actual statutory text. For example,
in K & S Tool & Die Corp. v. Perfection Machinery Sales, Inc., the
court stated that "a plaintiff is no longer a member of 'the
public' for the purpose of § 100.18(1) once he or she has entered
into a contract to purchase the offered item." 2007 WI 70, ¶26,
301 Wis. 2d 109, 732 N.W.2d 792 (citation omitted). K & S Tool &
Die Corp. relied on Kailin v. Armstrong for this proposition. Id.
In Kailin, the court of appeals held "[o]nce the contract was made,
the Kailins were no longer 'the public' under
[§ 100.18(1)] . . . ." Kailin, 2002 WI App 70, ¶44, 252
Wis. 2d 676, 643 N.W.2d 132. However, "[i]f the Wisconsin courts
had intended to exclude from the law only contracting parties, it
could have stated the rule as whether the parties had a
'contracting relationship,' but they have employed the more
general language, 'particular relationship.'" Uniek, 474 F. Supp.
2d at 1039. This muddying of the plain language of the statute
prompted one federal court, struggling to discern a clear rule of
law by which to apply § 100.18(1), to "question whether" Wisconsin
courts' adoption of the extra-textual "particular relationship"
test "leads to the most logical distinctions between those
plaintiffs that fall within the statute and those that are
excluded." Id. It doesn't, but returning to the proper plain
meaning approach certainly would.
III
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¶106 Even if Hinrichs did constitute a member of "the public"
under Wis. Stat. § 100.18(1), Dow's statement to Hinrichs cannot
be deemed "untrue, deceptive or misleading," as required by the
statutory text. The majority does not address this requirement in
its analysis of § 100.18(1). See majority op., ¶¶57-71. Nothing
in the Complaint creates even an inference of this element. The
Complaint characterizes as "untrue, deceptive or misleading" Dow's
statement that "[n]o evidence of any crazing or surface cracking
was observed." Complaint, ¶¶24-25 (emphasis added). Hinrichs
does not allege that Dow disclaimed its adhesive as the cause of
the cracking. To the contrary, Hinrichs alleges Dow advised "we
are assisting in determining the root cause of the issue and
apologize for the inconvenience." Complaint, ¶27. Hinrichs
alleges only that Dow stated it did not observe any crazing or
cracking during testing. Nothing in the Complaint supports even
an inference that at the time Dow made this statement, it knew the
statement was "untrue", or that the statement was "deceptive or
misleading." Accordingly, Hinrichs' § 100.18(1) claim should not
be allowed to proceed.
IV
¶107 The plain meaning of "the public" under Wis. Stat.
§ 100.18(1), as confirmed by dictionaries, common parlance, and
cases, means people in the general community, not businesses in an
ongoing commercial relationship. "On its face, a statement made
to 'the public' suggests an attempt to communicate with a large
audience rather than a private message directed at one party."
Uniek, 474 F. Supp. 2d at 1037 (citing to an additional dictionary
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beyond those mentioned in ¶99, referring to "public" as a
collective entity). As the majority acknowledges, statutory
interpretation presents a question of law and it is therefore
beyond the province of the factfinder to determine the meaning of
"the public" as used in § 100.18(1). Majority op., ¶26 ("Statutory
interpretation likewise presents a question of law we review
independently . . . ."). As a matter of law, Hinrichs was not a
member of "the public" under § 100.18(1) when Dow made the
statement Hinrichs alleges to be a misrepresentation because Dow
directed the statement to Hinrichs alone, not "the public"
generally. Because the majority's interpretation of "the public"
empties the phrase of any meaning, I respectfully dissent.
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