Grain Exchange Condominium Ass’n, Inc. v. Burke, 341 Wis. 2d
489, 815 N.W.2d 406, 2012 WL 1351240 (Wis. App.), 2012 WI App 62
The Association and its members sued the developer of its
building, the Milwaukee Grain Exchange, which the developer had converted into
residential condos. The Exchange was
required to have its façade inspected, and inspection revealed that repairs
were required. The Association brought
various claims against the defendants, most of which were dismissed. A claim of false advertising based on the use
of the phrase “newly renovated” survived for trial for one plaintiff, and the
jury found in favor of defendants. The
Association appealed.
Under Wisconsin’s false advertising law, a plaintiff must
show that (1) the defendant made a representation to the public with the intent
to induce obligation; (2) the representation was untrue, deceptive, or
misleading; and (3) the representation materially induced (caused) the
plaintiff a pecuniary loss. The
Association alleged that defendants falsely advertised that “the building, or
elements of the building” were “ ‘newly renovated,’ ‘new construction,’ and an
‘engineered masterpiece.’” The trial
court granted summary judgment on “engineered masterpiece” as puffery and “new
construction” because the condos were plainly not being sold as new
property. The trial court found a
factual issue on the falsity of “newly renovated,” though only one owner
presented evidence that she saw this statement and thus was allowed to go to
trial.
On appeal, the Association argued that “new construction”
should have been actionable, but the court of appeals disagreed: as a matter of
law, the term didn’t materially induce the plaintiffs to buy because any
reliance would not be reasonable. Reasonable
reliance is not a separate element, but a factor to consider in determining
causation. When a plaintiff’s belief is
unreasonable, her reliance may also be unreasonable, and a court may determine
that a representation didn’t materially induce her decision and that she would
have acted in the absence of the representation. The undisputed facts showed that the Grain
Exchange building was advertised as an historic building and that the buyers
were aware that the building was old, not new.
Thus, it would have been unreasonable to rely on “new construction” and
this representation didn’t materially induce the plaintiffs to act.
As to “newly renovated,” the Association argued that
reliance wasn’t a required element. But
only one plaintiff presented any evidence that she saw this ad claim before
buying. If a plaintiff didn’t see the
claim, it couldn’t have caused her a pecuniary loss. Reasonable reliance isn’t required, but some reliance is.
The court also affirmed the dismissal of other claims,
including contract-based claims barred by the economic loss doctrine and
warranty claims.
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