Chris Hinrichs and Autovation Limited, Plaintiffs-Appellants-Petitioners,
The DOW Chemical Company d/b/a Dow Automotive, Defendant-Respondent-Petitioner.
Submitted on Briefs: Oral Argument: October 3, 2019
OF DECISION OF THE COURT OF APPEALS Reported at 386 Wis.2d
351, 927 N.W.2d 156 (2019 - unpublished)
Circuit Court Waukesha County L.C. No. 2016CV1544 Kathryn W.
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.
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.
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
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
Both parties to this case seek review of aspects of an
unpublished, per curiam decision of the court of
appeals. 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) .
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.
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 applies to claims made under § 100.18,
and that Hinrichs' complaint fails to meet those
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.
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.
Accordingly, we affirm the decision of the court of appeals.
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
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.
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."
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
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 further
informed Hinrichs that the primer would be tested with the
acrylic used in JeeTops.
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.
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 . . . ."
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.
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.
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
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). Dow moved to
dismiss the complaint for failure to state a claim upon which
relief can be granted.
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"
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."
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).
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 law misrepresentation claims, and Dow
cross-petitioned for review of the § 100.18(1) issue.
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
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.
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.
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.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.
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.
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
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 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).
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');">593 N.W.2d 445 (1999)). Both direct and
consequential economic loss are encompassed within this
definition. Daanen & Janssen, Inc., 216 Wis.2d
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) . It "precludes parties under certain circumstances
from eschewing the more limited contract remedies and seeking
tort remedies." Id.
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"
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
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).
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." 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 ...