Hinrichs v. DOW Chemical Co. (Fraudulent Representation)

In Hinrichs v. DOW Chemical Co. (2017AP2361), the Court of Appeals District II dismissed misrepresentation claims on the basis of the economic loss doctrine, but ruled the plaintiffs might be considered “the public” for the purposes of bringing forth a fraudulent representation claim.

 

Facts

Chris Hinrichs developed acrylic skylight panels for vehicles and owned Autovation Limited, which manufactured, distributed, and installed the panels. Autovation used a DOW Chemical adhesive to install the panels. When Hinrichs discovered some of the panels were cracking, an agent from DOW issued him a report stating that the adhesives were properly functioning. However, Hinrichs later discovered that the adhesives in the panels were in fact failing, damaging his products and significantly affecting his sales. Hinrichs and Autovation filed the instant claims of negligent misrepresentation, intentional misrepresentation, strict responsibility misrepresentation, and violation of Wisconsin’s fraudulent representations statute (Wis. Stat. § 100.18).

 

Economic Loss Doctrine

The court barred Hinrichs’s misrepresentation claims on the basis of the economic loss doctrine, which provides that plaintiffs cannot sue to recover solely economic losses from the nonperformance of a contract.

The court ruled the “fraud in inducement” exception to the economic loss doctrine did not apply because the misrepresentation did not occur before Hinrichs’s contract with DOW was formed and because the alleged misrepresentation was not extraneous to the contract. The “other property” exception to the economic loss doctrine did not apply because the damaged panels and the adhesive the parities contracted for were parts of an integrated system. Furthermore, Hindrichs could have foreseen that failure of the adhesives would damage the panels.

In short, Hinrichs and DOW had the opportunity to address these circumstances in their contract and, since they declined to do so, Hinrichs is not entitled to damages for economic loss.

 

Fraudulent Representation

 The court found that the plaintiffs’ complaint against DOW made a sufficient case for the claim of untrue, deceptive, or misleading representations under Wis. Stat. § 100.18 to go forward. However, the court was still unclear on whether Hinrichs and Autovation are members of “the public” who can bring a fraudulent representation claim against DOW. The appeals court remanded this aspect of the case, asking the circuit court to address whether Hinrichs and Autovation had a significant enough relationship with DOW to prohibit them from claiming fraudulent representation.

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