Triad Group, Inc. v. Vi-Jon, Inc.

870 F. Supp. 2d 645, 2012 U.S. Dist. LEXIS 63262, 2012 WL 1580438
CourtDistrict Court, E.D. Wisconsin
DecidedMay 4, 2012
DocketCase No. 11-CV-766-JPS
StatusPublished
Cited by4 cases

This text of 870 F. Supp. 2d 645 (Triad Group, Inc. v. Vi-Jon, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Triad Group, Inc. v. Vi-Jon, Inc., 870 F. Supp. 2d 645, 2012 U.S. Dist. LEXIS 63262, 2012 WL 1580438 (E.D. Wis. 2012).

Opinion

ORDER

J.P. STADTMUELLER, District Judge.

On August 12, 2011, defendant Vi-Jon, Inc. (“Vi-Jon”), removed this action from state court on the basis of diversity jurisdiction. (Docket # 1). Simultaneously, Vi-Jon filed a motion to dismiss the claims of plaintiff Triad Group, Inc. (“Triad”). (Docket # 4). The Court denied Vi-Jon’s motion in part. (Docket # 12 (denying Vi-Jon’s motion to dismiss Triad’s first and second claims, but granting Vi-Jon’s motion with respect to Triad’s third claim)). Vi-Jon then filed its answer, alleging counterclaims against Triad. (Docket # 13). Triad, in turn, filed a motion to dismiss those counterclaims (Docket # 14), which the Court denied (Docket # 18), allowing Vi-Jon to amend its answer to avoid dismissal (Docket # 19).

Now, Triad again moves this Court to dismiss Vi-Jon’s counterclaims, this time raising new arguments under Wisconsin’s economic loss doctrine. (Docket # 24). From the outset, the Court notes that it is unclear why Triad failed to raise this issue in its first motion to dismiss; little changed in Vi-Jon’s pleadings between their first Answer (Docket # 13) and their Amended Answer (Docket# 19), so the Court is unsure why it should yet again evaluate that claim for dismissal — it seems that Triad simply wants a second bite at the apple. But, no matter how it may displease the Court to evaluate a second motion to dismiss what is practically the same claim, the arguments against which could have been made in the first motion to dismiss, the Court dutifully turns to its task. And, evaluating the merits of Triad’s newest motion, the Court deter[648]*648mines that such motion should be denied, allowing Vi-Jon’s counterclaim to stand.

1.BACKGROUND

Given that this is the third motion to dismiss addressed by the Court in this case, the Court provides an abbreviated rendition of the factual and procedural history of this case. A more detailed description can be gleaned from reading the Court’s prior orders. (Docket # 12, # 18).

1.1 Factual History

Vi-Jon and Triad have had an ongoing business relationship for several years, in which Vi-Jon has contracted with Triad for the production of healthcare products. (Compl. ¶ 7). Under the typical transaction between the two businesses, Vi-Jon provided raw materials to Triad, along with a forecast of how much product would be needed; Triad, in turn, purchased further materials, and then manufactured the product. (Compl. ¶¶ 8-10).

The parties entered such a transaction again in 2011, but encountered a speed-bump when the U.S. Marshal Service seized a number of products (including some products used in manufacturing Vi-Jon’s products) from Triad’s facilities due to contamination concerns. (Compl. ¶¶ 10, 13, 15, 19-22). Thereafter, Vi-Jon instructed Triad to cease the production of Triad’s products and also stopped paying Triad; this left Vi-Jon owing a substantial amount on their contract with Triad. (Compl. ¶¶ 23-27, 31).

Thus, Triad instituted this action, seeking amounts owing on their contract, under breach of contract and promissory estoppel theories. (See Compl. ¶¶ 28^4).

1.2 Procedural History

Vi-Jon removed this action to this Court from state court, on the basis of diversity, and simultaneously filed a motion to dismiss. (Docket #1, # 4). The Court granted that motion in part and denied it in part. (Docket # 12). Shortly thereafter, Vi-Jon filed an answer, incorporating counter-claims for breach of contract, breach of warranty, and fraudulent inducement to contract. (Ans.lffl 104-130). Triad moved to dismiss those counterclaims. (Docket # 14). The Court denied their motion, allowing Vi-Jon to amend its answer. (Docket # 18).

After Vi-Jon amended its answer (Docket # 19), Triad moved to dismiss Vi-Jon’s amended fraudulent inducement counterclaim. (Docket # 24). That motion to dismiss the fraudulent inducement counterclaim is now before the Court, having been fully briefed by the parties. (Docket # 25, # 26, # 27).

2. STANDARD OF REVIEW

To survive a motion to dismiss, a pleading must contain a short and plain statement of facts that establish that the party pleading those facts is entitled to relief under his or her claim. Fed.R.Civ.P. 8(a)(2). In evaluating pleadings challenged by a motion to dismiss, the Court must accept the factual allegations in the pleading as true. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). And, so long as those facts set forth “sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Mirbeau of Geneva Lake, LLC v. City of Lake Geneva, 746 F.Supp.2d 1000, 1006 (E.D.Wis.2010) (emphasis removed) (citing Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009), Twombly, 550 U.S. at 555, 127 S.Ct. 1955).

3. DISCUSSION

Triad raises two arguments in favor of dismissal of Vi-Jon’s fraudulent inducement counterclaim: first, that Wisconsin’s Economic Loss Doctrine bars such a claim [649]*649(Br. in Supp. 4-7); second, that Vi-Jon’s alleged facts do not establish the elements of a fraudulent inducement claim (Br. in Supp. 7-11). The Court will address those arguments in due course, but first must determine whether Wisconsin law does, in fact, apply to this claim. (See Resp. 2, Reply 1-4).

3.1 Applicable Law

The Court must first determine whether Wisconsin law (as opposed to Missouri law — the place of business of Vi-Jon) applies. This is relevant because Wisconsin law applies the economic loss doctrine fairly broadly, barring many types of claims that arise as a result of contracts, see White v. Marshall, 693 F.Supp.2d 873, 878-879 (E.D.Wis.), Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis.2d 395, 400, 573 N.W.2d 842 (1998), whereas Missouri recognizes the doctrine only in the product liability context, Self v. Equilon Enterprises, LLC, 2005 WL 3763533, *8 (E.D.Mo. Mar. 30, 2005).

The parties’ contract states that: “This Purchase Order and the Agreement shall be construed under the laws of the State of Missouri.” (Docket # 13, Ex. B). Thus, from the face of the contract, it appears that Missouri law should govern this dispute.

Upon further inspection, though, it becomes apparent that the contract’s plain language should not be deemed to control the application of law to this tort action. This Court must apply the choice of law rules of Wisconsin, because Wisconsin is the forum state. See, e.g., Tanner v. Jupiter Realty Corp., 433 F.3d 913, 915 (7th Cir.2006), Taurus IP v. Daimler-Chrysler Corp., 519 F.Supp.2d 905, 923 (W.D.Wis.2007) (noting that, in diversity suits, federal courts apply the choice of law principles of the jurisdiction in which it sits). And under Wisconsin choice of law principles, “[t]ort claims generally fall outside of choice of law provisions” included in contracts. Taurus IP, 519 F.Supp.2d at 923 (citing CERAbio LLC v.

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870 F. Supp. 2d 645, 2012 U.S. Dist. LEXIS 63262, 2012 WL 1580438, Counsel Stack Legal Research, https://law.counselstack.com/opinion/triad-group-inc-v-vi-jon-inc-wied-2012.