False Advertising Case Analysis

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A footnote in the court’s opinion, and two pending Supreme Court cases, are noteworthy in future cases involving false advertising claims under sec. 100.18.

In footnote 5, the court noted that Perfection was not challenging the instruction that was given to the jury on whether K&S was a member of “the public.”

In the court of appeals, it did challenge the jury instruction, and the court of appeals opinion contains a lengthy discussion of the issue. K&S Tool & Die Corp. v. Perfection Machinery Sales, Inc., 2006 WI App, 295 Wis.2d 298, 720 N.W.2d 507, 517-19.

At the trial level, the court added the following guidance to the standard jury instruction, WIS JI-CIVIL 2418:

“The public does not include parties with pre-existing ‘particular relationships.’ Determination of whether or not parties had a ‘particular relationship’ includes, without limitation, consideration of whether the parties had entered into a contract and the number of persons to whom the alleged false advertising was given.”

As noted, the jury instruction was not challenged in the Supreme Court, so the court of appeals’ holding — that it was not an erroneous exercise of discretion to give the instruction — remains the only precedent on the issue.

However, while only Perfection challenged the instruction in the court of appeals, K&S also challenged it at the circuit court level, and the court of appeals’ discussion expressed sympathy with K&S’ objections to it.

The court wrote, “We do not hold that the instruction is in all other respects an accurate statement of the law.”

K&S was justified in objecting to the following language: “The number of persons to whom the alleged false advertising was given.” This should not be a proper factor for a jury to consider, inasmuch as long-standing precedent provides that a private representation made to one person is still a representation to the public.

That precedent may be unsound, but it is precedent nonetheless, and this part of the instruction invites juries to find for the defendant based on an irrelevant factor.

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Also noteworthy are two pending Supreme Court cases: Stuart v. Weisflog’s Showroom Gallery, Inc., No. 2005AP886 (“If the underlying contract is primarily for products, then are the claims of a homeowner under ch. ATCP 110 barred by the economic loss doctrine”); and Below v. Norton, No. 2005AP2855 (“Does the economic loss doctrine bar causes of action under Wis. Sat. sec. 895.446 for alleged violations of Wis. Stat. sec. 943.20?”).

In Kailin v. Armstrong, 2002 WI App 70, 252 Wis.2d 676, 643 N.W.2d 132, 147-49, the Wisconsin Court of Appeals held that the economic loss doctrine does not bar sec. 100.18 claims.

However, if the Supreme Court were to hold in Stuart that a homeowner’s claim for statutory fraud under the Home Improvements Act is barred by the doctrine, where the contract was primarily for services, or that a homeowner may not sue for statutory fraud based on a residential contract, the holding in Kailin would be highly suspect.

If homeowners’ statutory fraud claims are barred by the doctrine, the doctrine would certainly bar a statutory fraud claim between two sophisticated businesses for the sale of a punch press.

Thus, if the court applies the doctrine in Stuart or Below, the Supreme Court’s discussion of “the public” in the case at bar may be irrelevant, as the claim could be barred by the doctrine altogether.

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David Ziemer can be reached by email.