Aug. 5, 2013 – A concrete salesperson told a customer, a corporation, that previous problems with the product had been cured. That wasn’t true. Recently, the Wisconsin Supreme Court ruled that the customer has a viable fraudulent misrepresentation claim.

In United Concrete & Construction Inc. v. Red-D-Mix Concrete Inc., 2013 WI 72 (July 12, 2013), a majority clarified that “puffery” is not always jury question, in addition to rulings on the “economic loss doctrine” and “speculative damages.”

It all started with John Clark, a salesman for Red-D-Mix, who told representatives at United that its product was “good and durable,” and the problem that doomed previous construction projects that used Red-D-Mix concrete was no longer a problem.

United relied on Clark’s assurances to enter into a contract with Red-D-Mix. But United’s customers soon began complaining about concrete defects that are caused by excessive “bleed water,” which adversely impacts concrete’s stability.

United sued on various contract and tort grounds. It said Red-D-Mix violated Wis. Stat. section 100.18, which prohibits any person or corporation from making untrue, deceptive, or misleading statements of fact about products or services.

United, whose affected customers assigned their tort claims to United to sue on their behalf, also sued Red-D-Mix for a negligently defective product. Red-D-Mix moved for summary judgment on various grounds, and the circuit court granted the motion.

The circuit court agreed that the economic loss doctrine barred all tort claims and the damages were too speculative for contract claims to survive. It also ruled that Clark did not falsely misrepresent the product, and in any event, the statute only protects “members of the public.”

An appeals court reversed.

On review, the supreme court affirmed in part and reversed in part. It said the misrepresentation claim must stand and damages were not too speculative. But it also ruled that the economic loss doctrine barred claims that were assigned to United.

Sales Pitch Not Puffery

Salespersons sometimes exaggerate about the benefits of their products to make the sale, the majority acknowledged. Such “puffery” is not the basis for a lawsuit when those exaggerations turn out to be untrue, because customers should know better.

But “puffery” has boundaries, and Red-D-Mix crossed them when a salesperson claimed that a specific and technical problem with its concrete had been resolved, the majority explained. Clark crossed the line by making misrepresentations of fact.

“Clark’s promise to United that Red-D-Mix remedied the bleed water issues cannot reasonably be regarded as puffery,” wrote Justice Michael Gableman. “Excessive bleed water is a technical problem, with a technical definition and a technical solution.”

In addition, determining whether a statement is “puffery,” the majority explained, is not always a fact question for the jury, as the appeals court stated.

Judges can decide the issue, if the facts in the light most favorable to the movant leave no room for debate, the majority explained. “In sum, the circuit court should have held as a matter of law that the remark was not puffery for purposes of summary judgment, and on remand it is instructed to do so,” Justice Gableman wrote.

Assigned Claims Impermissible

United could not sue Red-D-Mix on behalf of property owners who assigned their claims, the majority ruled, because the economic loss doctrine “prevents a homeowner from suing a subcontractor in tort for purely economic losses.”

The economic loss doctrine bars tort claims for solely economic damages when the defective product is a “component part of an integrated structure or finished product.”

The rule recognizes that in such circumstances, homeowners have contractual remedies against general contractors, which have remedies against subcontractors.

“If the homeowners cannot file an action against Red-D-Mix, then United cannot do so in their name,” Justice Gableman wrote. The majority’s opinion instructed the circuit court “to dismiss the claims asserted through assignments.”

In a concurring opinion, Chief Justice Shirley Abrahamson and two justices said United’s complaint never asserted any claims through assignments, so the majority should have been more “concrete” about precisely what claims should be dismissed.

Justice Gableman responded: “[W]e do not believe the circuit court or parties will have to guess as to which claims were filed in the homeowners’ name, given that all of them have repeatedly referred to those claims throughout the litigation. …”

United’s Claims Can Proceed

Finally, the majority ruled that the claims asserted by United its own name can proceed, and damages were not too speculative, as Red-D-Mix had argued.

“[A] competent supplier of concrete knows that if it sells a substandard product, their end-users will likely see their properties marred,” Justice Gableman wrote.

“Red-D-Mix was aware of that inevitability as well, or should have been, so the damages were ‘reasonably foreseeable at the time the contract was made as a probable result of the breach.”

The concurring justices would have upheld the appeals court’s decision to reverse the circuit court’s summary judgment order, and remanded for trial with no instructions.