Kaloti Enterprises, Inc., Plaintiff-Appellant v. Kellogg Sales Company and Geraci & Associates, Inc…

Summary

On certification from the court of appeals, the Wisconsin Supreme Court reversed the dismissal of Kaloti's amended complaint alleging intentional misrepresentation against Kellogg Sales Company and its agent Geraci & Associates. Accepting the allegations as true, the court held that Kellogg and Geraci had a duty to disclose Kellogg's change to direct-sales marketing — a fact material to the transaction, peculiarly within their knowledge, and one whose disclosure Kaloti reasonably expected given the parties' established course of dealing — and adopted a narrow fraud in the inducement exception to the economic loss doctrine, under which the claim was not barred because the alleged fraud was extraneous to, rather than interwoven with, the contract. Chief Justice Abrahamson, joined by Justices Bradley and Butler, concurred in the result but disputed the majority's expansion of the duty to disclose beyond the Restatement and its adoption of the narrow Huron Tool exception, which she would replace with a rule placing all actionable fraud outside the economic loss doctrine.