Daanen & Janssen, Inc. v. Cedarapids, Inc.

573 N.W.2d 842 (1998)

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Nature of the Case

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Facts

P crushes and sells rock it removes from the quarries. To crush the rock, P utilizes machines known as primary, secondary, and tertiary crushers that include a component called a 'pitman.' D is an Iowa corporation that manufactures and sells new crushing equipment and spare parts to distributors that then resell the products to quarry owners. In January 1991, P's pitman failed, necessitating replacement. P purchased from Aring a replacement pitman manufactured by D. In its distributorship agreement with Aring, D provided Aring with a standard express warranty which applied to all of Ds' products, including the pitman eventually sold to P; the warranty states that it applies to Aring's customers. P was unaware of Ds' warranty, and Aring did not pass this warranty to P. P did not request or receive from Aring, a warranty on the replacement pitman; P's invoice from Aring stated that Aring disclaimed all warranty and liability. P installed the replacement part in two of its crushers, and the machines began to break down. From the 1991 purchase until 1993 there were five or six serious breakdowns of the crushing equipment. These breakdowns were eventually attributed to manufacture and design problems in Ds' pitman. After examining the defective pitmans, D ordered replacement parts for P. P declined to accept the replacements and eventually filed suit in the Brown County Circuit Court, alleging that D sold it a defective product that caused over $400,000 in damages, including repair costs, lost revenue, and prejudgment interest. P originally alleged claims against D based in both contract and tort law but has since dropped the contract claims so that only tort claims of common law negligence and strict liability remain. P has not alleged that the defective pitman caused personal injury or damage to property other than the pitman. Pursuant to 28 U.S.C. § 1332, and based on diversity of citizenship, D removed the case to the United States District Court for the Eastern District of Wisconsin, and filed a motion for summary judgment, arguing that under Wisconsin law P could not recover in tort for solely 'economic losses.' The district court, postulating as to how this court would determine the issue, granted Ds' motion for summary judgment and concluded that the 'economic loss' doctrine precludes the plaintiff's tort claims, even in the absence of privity between the plaintiff and defendant. P appealed.