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National Mulch and Seed, Inc. v. Rexius Forest By-Products Inc.

March 22, 2007

NATIONAL MULCH AND SEED, INC., ET AL., PLAINTIFFS,
v.
REXIUS FOREST BY-PRODUCTS INC., D/B/A REXIUS EXPRESS BLOWERS, DEFENDANT.



The opinion of the court was delivered by: Judge Holschuh

Magistrate Judge Kemp

MEMORANDUM OPINION AND ORDER

Plaintiff, National Mulch and Seed, Inc., ("National Mulch"),*fn1 brought this action alleging that certain trucks purchased from Defendant Rexius Forest By-Products, Inc., ("Rexius"), failed to perform as promised. Specifically, National Mulch asserts claims of breach of express warranty, negligent misrepresentation, breach of implied warranty of merchantability, and breach of implied warranty of fitness for a particular purpose. This matter is before the Court on Rexius's three motions for partial summary judgment (R. at 73, 75, 88), on National Mulch's motion for partial summary judgment (R. at 87), and on Rexius's objection to certain evidence submitted by National Mulch. (R. at 92.)

I. Background

In the middle to late part of 1999, Richard Fischer and Montford Will began discussing the possibility of starting a mulching and landscaping business. (Fischer Decl. ¶ 4, Feb. 13, 2006; Fischer Dep. 13-16.) After obtaining information regarding a similar business operated by Fischer's brother in Florida, Fischer and Will developed a business plan for the creation and operation of National Mulch in Ohio. (Fischer Dep. 13-30; Will Dep. 18-37.) Pursuant to this business plan, National Mulch contacted Rexius in November 1999 regarding the possibility of purchasing mulch-blowing trucks to be used in its mulching and landscaping business. (Fischer Decl. ¶ 5, Feb. 13, 2006.)

National Mulch contends that during negotiations regarding the purchase of Rexius's Express Blower 60 mulch-blowing trucks ("Express Blower," "EB-60," or "truck"), Rexius made various oral and written representations regarding the trucks' productivity, capability, and reliability. In particular, National Mulch alleges that Rexius made the following representations:

1. An Express Blower, using only one person, can blow 55 cubic yards per hour.

2. The Rexius Express Blower can be used effectively by only one person.

3. The Express Blower is trouble-free, of superior craftsmanship, economical to operate, and built and manufactured with high-quality material and workmanship.

4. The maintenance cost for the Rexius Express Blower is minimal.

5. As to National Mulch, the Rexius Express Blower would effectively die [sic] mulch.

(Fischer Decl. ¶ 6, Feb. 13, 2006; Compl. ¶ 7.)

National Mulch contends that the representations made by Rexius induced it to purchase the mulch-blowing trucks from Rexius. (Fischer Decl. ¶¶ 4-7, Feb. 13, 2006.) National Mulch personnel, including Fischer, traveled to Oregon in late March 2000 to observe Rexius's plant and receive training on the operation of the trucks. (Fax from Rick Fischer to Denny Drennan (Mar. 19, 2000), Def.'s Mot. Part. Summ. J. Certain Claimed Damages Ex. 9.) On April 3, 2000, National Mulch agreed to purchase its first EB-60 truck. (See Fischer Dep. 152-53.) While in Oregon, Fischer, on behalf of National Mulch, and Denny Drennan, on behalf of Rexius, signed a "Sales Quote" setting forth various terms and conditions of the sale. (Fischer Dep. 137-38; Sales Quote, Apr. 3, 2000, O'Neil Decl. Ex. 4, Mar. 16, 2006.) The Sales Quote is two pages in length with the second page appearing on the reverse side of the first. (Fischer Dep. 137; Sales Quote, Apr. 3, 2000.) The first page includes the quantity, description, and price of the goods sold; the names and addresses of the parties; the signatures of Fischer and Drennan; and an indication at the bottom noting that there are terms and conditions of the agreement contained on the reverse side. (Sales Quote, Apr. 3, 2000.) The reverse side lists thirteen "ADDITIONAL TERMS AND CONDITIONS OF SALE." (Id.)

Later, National Mulch agreed to purchase a second EB-60 truck. (Fischer Decl. ¶ 3, Feb. 13, 2006.) Rexius faxed a Sales Quote for this second truck, signed by Drennan, to National Mulch on May 20, 2000. (Fax from Denny Drennan to Rick Fischer (May 20, 2000), Def.'s Mot. Part. Summ. J. Certain Claimed Damages Ex. 59.) Although a copy of a Sales Quote signed by both parties with respect to the second purchase does not appear in the record, Fischer understood that the terms of the second sale and the forms used therewith were identical as National Mulch's first purchase. (Fischer Dep. 152-53.) Rexius appears to concur that the terms of the second sale were the same as the first.*fn2 National Mulch claims that the EB-60 trucks failed to meet the representations made by Rexius. Specifically, National Mulch contends that the EB-60 trucks could not blow 55 cubic yards of mulch per hour on most jobs, that it could not effectively operate an EB-60 truck with only one person, that the EB-60 trucks could not effectively dye mulch, and that the EB-60 trucks suffered various mechanical problems. (Fischer Decl. ¶ 14, Feb. 13, 2000.) National Mulch contends that this lack of productivity and reliability caused a loss of profits and ultimately caused it to go out of business. (Id. at ¶ 15-23.)

II. Rexius's Objections to Evidence

Rexius has objected to certain evidence submitted by National Mulch. In support of its motion for partial summary judgment, National Mulch submitted the declarations of several other purchasers of mulch-blowing trucks from Rexius. Rexius argues that this evidence is not relevant at this stage of the litigation and, alternatively, that the probative value of such evidence is substantially outweighed by the risk of unfair prejudice.

National Mulch contends that the purpose of the disputed evidence is to support its claim that certain representations made by Rexius constitute express warranties. Rexius, however, does not deny that certain representations were made in connection with the sale of the EB-60 trucks to National Mulch and, as will be made clear infra, this Court has not relied upon this disputed evidence in resolving National Mulch's motion for partial summary judgment, nor any other dispositive motion. Rexius's objection is therefore moot.

III. Motions for Partial Summary Judgment

A. Standard

The parties have filed multiple motions for partial summary judgment. Although summary judgment should be cautiously invoked, it is an integral part of the Federal Rules, which are designed "to secure the just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1). The standard for summary judgment is found in Federal Rule of Civil Procedure 56(c):

[Summary judgment] . . . shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

Summary judgment will be granted "only where the moving party is entitled to judgment as a matter of law, where it is quite clear what the truth is . . . [and where] no genuine issue remains for trial, . . . [for] the purpose of the rule is not to cut litigants off from their right of trial by jury if they really have issues to try." Poller v. Columbia Broad. Sys., 368 U.S. 464, 467 (1962) (quoting Sartor v. Ark. Natural Gas Corp., 321 U.S. 620, 627 (1944); see also Lansing Dairy, Inc. v. Espy, 39 F.3d 1339, 1347 (6th Cir. 1994).

Moreover, the purpose of the procedure is not to resolve factual issues, but to determine if there are genuine issues of fact to be tried. Lashlee v. Sumner, 570 F.2d 107, 111 (6th Cir. 1978). The court's duty is to determine only whether sufficient evidence has been presented to make the issue of fact a proper question for the jury; it does not weigh the evidence, judge the credibility of witnesses, or determine the truth of the matter. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Weaver v. Shadoan, 340 F.3d 398, 405 (6th Cir. 2003).

In a motion for summary judgment, the moving party bears the initial burden of showing that no genuine issue as to any material fact exists and that it is entitled to a judgment as a matter of law. Leary v. Daeschner, 349 F.3d 888, 897 (6th Cir. 2003). All the evidence and facts, as well as inferences to be drawn from the underlying facts, must be considered in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986); Wade v. Knoxville Util. Bd., 259 F.3d 452, 460 (6th Cir. 2001). Additionally, any "unexplained gaps" in materials submitted by the moving party, if pertinent to material issues of fact, justify denial of a motion for summary judgment. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157-60 (1970).

"[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48. A "material" fact is one that "would have [the] effect of establishing or refuting one of [the] essential elements of a cause of action or defense asserted by the parties, and would necessarily affect [the] application of [an] appropriate principle of law to the rights and obligations of the parties." Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984); see also Anderson, 477 U.S. at 248. An issue of material fact is "genuine" when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248; see also Leary, 349 F.3d at 897.

If the moving party meets its burden, and adequate time for discovery has been provided, summary judgment is appropriate if the opposing party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 322. The nonmoving party must demonstrate that "there is a genuine issue for trial," and it "cannot rest on her pleadings." Hall v. Tollett, 128 F.3d 418, 422 (6th Cir. 1997).

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

Fed. R. Civ. P. 56(e).

The existence of a mere scintilla of evidence in support of the opposing party's position is insufficient; there must be evidence on which the jury could reasonably find for the opposing party. Anderson, 477 U.S. at 252. The nonmoving party must present "significant probative evidence" to demonstrate that "there is [more than] some metaphysical doubt as to the material facts." Moore v. Phillip Morris Cos., 8 F.3d 335, 340 (6th Cir. 1993). The court may, however, enter summary judgment if it concludes that a fair-minded jury could not return a verdict in favor of the nonmoving party based on the presented evidence. Anderson, 477 U.S. at 251-52; Lansing Dairy, 39 F.3d at 1347.

B. Choice of Law

A federal court exercising diversity jurisdiction is required to apply the choice of law rules of the state in which it sits. Int'l Ins. Co. v. Stonewall Ins. Co., 86 F.3d 601, 604 (6th Cir. 1996). Accordingly, Ohio's choice of law rules apply in this diversity case. In Ohio, the rights and duties of parties to a contract are determined by the law of the state that has "the most significant relationship to the transaction and the parties." Ohayon v. Safeco Ins. Co. of Ill., 91 Ohio St. 3d 474, 477 (2001) (quoting Restatement (Second) of Conflict of Laws § 188(1)).

National Mulch is a corporation organized under the laws of Ohio with its principal place of business in Ohio. (Compl. ¶ 2.) Rexius is an Oregon corporation with its principal place of business in Oregon. (Notice Removal ¶ 2.) Although a conflict between Ohio law and the law of Oregon could possibly exist, neither party has identified any relevant conflict. Moreover, both National Mulch and Rexius have consistently relied upon Ohio law in their memoranda since this action's inception. Consequently, the Court need not engage in a choice of law analysis at this point, but will simply apply Ohio law. See Wilkes Assocs. v. Hollander Indus. Corp., 144 F. Supp. 2d 944, 949 n.4 (S.D. Ohio 2001) (citing ECHO, Inc. v. Whitson Co., 52 F.3d 702, 707 (7th Cir. 1995) ("Where neither party argues that the forum state's choice of law rules require the court to apply the substantive law of another state, the court should apply the forum state's substantive law.")). In any event, the parties appear to agree that Ohio law applies to the claims asserted in this case.

C. Negligent Misrepresentation Claim

In Count II of the Complaint, National Mulch asserts a claim for negligent misrepresentation. The Supreme Court of Ohio first recognized this cause of action in Haddon View Investment Co. v. Coopers & Lybrand, 70 Ohio St. 2d 154, 156 & n.1 (1988). Adopting the Restatement (Second) of Torts § 552, the Supreme Court of Ohio has defined a claim for negligent misrepresentation as follows:

One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Delman v. City of Cleveland Heights, 41 Ohio St. 3d 1, 4 (1989) (quotations, citations and emphasis omitted).

As a basis for its claim, National Mulch alleges that Rexius made the following representations:

a. The Rexius Express Blower, using only one person, can blow 55 cubic yards per hour.

b. The Rexius Express Blower could be used effectively by only one person.

c. The Rexius Express Blower was trouble-free, of superior craftsmanship, economical to operate, and built and manufactured with high quality material and workmanship.

d. The maintenance cost for the Rexius Express Blower was minimal.

e. As to National Mulch, the die [sic] feature of the Rexius Express Blower would effectively die [sic] mulch.

(Compl. ¶ 14.) Rexius has moved for summary judgment arguing that National Mulch's negligent misrepresentation claim is without merit because: (1) it is barred by the economic loss rule, (2) National Mulch has failed to establish the existence of a special relationship between itself and Rexius, and (3) National Mulch's claim is impermissibly based, at least in part, on omissions of fact.

1. Economic Loss Rule

The economic loss rule generally prevents recovery of damages for purely economic loss in connection with a tort claim. Corporex Dev. & Constr. Mgmt., Inc. v. Shook, Inc., 106 Ohio St. 3d 412, 414 (2005); Floor Craft Floor Coverings, Inc. v. Parma Cmty. Gen. Hosp. Ass'n, 54 Ohio St. 3d 1, 3 (1990). The Supreme Court of Ohio explained the reasoning behind the economic loss rule:

The reason for denying recovery in negligence for purely economic loss lies not in a failure to find "negligent" conduct by the manufacturer, nor in a lack of proximate relationship between that conduct and the consumer's injury. Rather, the key factor is the extent, and more important, the source, of the duty owed by the manufacturer to the consumer. In negligence, the law imposes upon the manufacturer of a product the duty of reasonable care. That duty protects the consumer from physical injury, whether to person or property. However the law of negligence does not extend the manufacturer's duty so far as to protect the consumer's economic expectations, for such protection would arise not under the law but rather solely by agreement between the parties.

Chemtrol Adhesives, Inc. v. Am. Mfgs. Mut. Ins. Co., 42 Ohio St. 3d 40, 45 (1989). The court later expounded upon this rationale by explaining that "[t]ort law is not designed . . . to compensate parties for losses suffered as a result of a breach of duties assumed only by agreement." Floor Craft,

54 Ohio St. 3d at 7. Rexius argues that, under the economic loss rule, National Mulch cannot maintain a negligent representation action because economic losses are not recoverable in tort between commercial entities that have contracted with each other.

Before deciding whether the economic loss rule applies, the Court must first determine the nature of the alleged losses resulting from Rexius's alleged negligent misrepresentation. Damages are generally characterized as either personal injury, property damage, or economic loss. E.g., HDM Flugservice GMBH v. Parker Hannifin Corp., 332 F.3d 1025, 1028 (6th Cir. 2003); Chemtrol, 42 Ohio St. 3d at 43. "Personal injury" involves, quite obviously, injury done to one's person. In an action involving the sale of goods, "property damage" includes damages to both the goods sold to the plaintiff and other property of the plaintiff. E.g., Chemtrol, 42 Ohio St. 3d at 43. "Economic loss" includes both direct and indirect loss. Id. "Direct" economic loss includes the loss attributable to the decreased value of the product itself.*fn3 "Indirect" economic loss includes the consequential losses sustained by the purchaser and can include items such as loss of time and profits. Id. at 44.

National Mulch alleges that reliance upon misrepresentations made by Rexius caused the complete failure of its business. Precisely, National Mulch claims that it incurred damages in the form of substantial additional costs because the Rexius trucks did not perform as represented. These costs included, inter alia, expenses for repairs, tools, labor, interest, insurance, general maintenance, and the expense of purchasing the trucks themselves. (See Def.'s Mot. Partial Summ. J. Certain Claimed Damages Ex. 3; see also Fischer Decl. ¶¶ 27-32, Feb. 13, 2006.) All of the damages claimed by National Mulch are properly characterized as economic losses because they either relate to the value of the trucks or additional expenses, i.e., lost profits, incurred as a consequence to relying upon Rexius's alleged misrepresentations. As such, National Mulch's claim is without merit if the economic loss rule applies to the tort of negligent misrepresentation.

The Supreme Court of Ohio has yet to specifically address the economic loss rule in the context of a claim for negligent misrepresentation; however, several Ohio appellate courts have done so.*fn4 A majority of these courts have recognized that a claim for negligent misrepresentation is actionable even when the plaintiff's damages consist only of economic loss. E.g., Universal Contracting Corp. v. Aug, No. C-030719, 2004 WL 3015325, at *3 (Ohio App. 1st Dist. Dec. 30, 2004); Ferro Corp. v. Blaw Knox Food & Chem. Equip. Co., 121 Ohio App. 3d 434, 440-41 (1997); McCarthy, Lebit, Crystal & Haiman Co. v. First Union Mgmt., Inc., 87 Ohio App. 3d 613, 631-32 (1993). In McCarthy, Lebit, the court reasoned that application of the economic loss rule to a negligent misrepresentation claim directly contradicts the express wording of the cause of action of negligent misrepresentation as stated by the Supreme Court of Ohio in Haddon View. McCarthy, Lebit, 87 Ohio App. 3d at 632. Under the tort of negligent misrepresentation, a person who supplies false information to others in breach of the common law duty not to do so is liable for "pecuniary loss" to them. Id. Because "'pecuniary loss' is by its very definition 'economic loss,'" the economic loss rule cannot logically be applied to a negligent misrepresentation claim. Id.

The Supreme Court of Ohio, although not directly addressing the issue, did provide some clarity regarding an action for negligent misrepresentation in Corporex. There, the plaintiff's negligence action was barred by the economic loss rule. Corporex, 106 Ohio St. 3d at 415-16. In rejecting the plaintiff's argument that Haddon View applied to its case, the court stated that liability for negligent misrepresentation is based upon a duty in tort that pre-exists any contractual terms or rights accompanying privity. See id. at 415. "When a duty in tort exists, a party may recover in tort. When a duty is premised entirely upon the terms of a contract, a party may recover based upon breach of contract." Id. Thus, the critical determination is the source of the defendant's duty.

The Sixth Circuit, relying on McCarthy, Lebit, has specifically stated that the economic loss rule does not apply to a claim of negligent misrepresentation. HDM, 332 F.3d at 1032. In HDM, an owner of a helicopter brought a claim, inter alia, of negligent misrepresentation against the manufacturer of the helicopter's landing gear after an accident. Id. at 1027. The court first discussed Ohio's economic loss rule at length and then applied the rule to the plaintiff's tort claims of strict liability and implied warranty, following "cautionary dicta" in Chemtrol. Id. at 1029-30. The court thereafter noted that it is incorrect to apply the economic loss rule to a negligent misrepresentation claim. Id. at 1032.

Rexius argues that the statement in HDM regarding negligent misrepresentation claims and the economic loss rule was dictum and should not control the decision in this case. Although the defendant in HDM may have ultimately agreed that the economic loss rule would not bar a negligent misrepresentation claim under Ohio law, the court initially noted that the defendant had originally sought summary judgment on the negligent misrepresentation claim because of a mistaken belief that the economic loss rule prohibits recovery for any type of tort claim. Id. The court then concluded that the plaintiff had correctly responded that the economic loss rule does not apply to claims for negligent misrepresentation. Id.

Rexius also argues that, in any event, McCarthy, Lebit, which was cited in HDM and relied upon by National Mulch, is not consistent with the Supreme Court of Ohio's holding in Floor Craft or subsequent decisions by the United States District Court for the Northern District of Ohio in Trgo v. Chrysler Corp., 34 F. Supp. 2d 581, 595 (N.D. Ohio 1998), and Picker International, Inc. v. Mayo Foundation, 6 F. Supp. 2d 685, 688-89 (N.D. Ohio 1998).

This Court cannot conclude that McCarthy, Lebit is inconsistent with Floor Craft. In Floor Craft, the plaintiff flooring installation contractor asserted a claim against an architectural firm for negligence in its design specifications. Floor Craft, 54 Ohio St. 3d at 2. It does not appear that the Floor Craft court directly addressed the application of the economic loss rule to a claim of negligent misrepresentation. Instead, the court held that in the absence of privity, a party could not recover economic damages in tort. Id. at 8. Although the claim in Floor Craft against the architectural firm was for negligence, the court did briefly entertain the argument that Haddon View applied to the firm's design flaws. However, it settled the issue quickly and decided that the plaintiff could not rely upon Haddon View because the architects' services were extended to an unlimited number of persons who could possibly rely upon them. Id. at 7. The court never directly addressed whether the economic loss rule applied to a claim of negligent misrepresentation. Thus, Floor Craft stands for the general proposition that in the absence of privity between the parties, the economic loss rule bars recovery of economic losses in tort. Id. at 8.

Consistent with this approach, McCarthy, Lebit recognizes that "[t]ort law is not designed . . . to compensate parties for losses suffered as a result of a breach of duties assumed only by agreement." McCarthy, Lebit, 87 Ohio App. 3d at 630 (quoting Floor Craft, 54 Ohio St. 3d at 7). The court in McCarthy, Lebit, however, also found that adoption of the economic loss rule in Floor Craft does not necessarily preclude recovery under a negligent misrepresentation claim. Id. at 631. The McCarthy, Lebit court decided that a plaintiff claiming only economic damages was not barred from asserting an action for negligent misrepresentation. This holding is not inconsistent with Floor Craft; the McCarthy, Lebit court recognized that an exception to the general rule from Floor Craft must logically exist based upon the elements of the tort of negligent misrepresentation as articulated in Haddon View.

Moreover, since Floor Craft and McCarthy, Lebit, the Ohio appellate courts have routinely allowed a negligent misrepresentation cause of action when damages are exclusively economic in nature. See Universal Contracting; Three-C Body Shops, Inc. v. Welsh Ohio, LLC, No. 02AP-523, 2003 WL 360958, 2003-Ohio-756 (Ohio App. 10th Dist. Feb. 20, 2003); Ferro; Bowling Trans., Inc. v. Gregg, 103 Ohio App. 3d 539 (1995); Lippy v. Society Nat'l Bank, 100 Ohio App. 3d 37 (1995); Foster Wheeler Enviresponse, Inc. v. Franklin County Convention Facilities Auth., 88 Ohio App. 3d 73 (1993).

This Court also finds Rexius's citations to Picker and Trgo unpersuasive. In Picker, the court stated that "[i]n Ohio it is well established that a party cannot bring a cause of action in tort (such as negligent misrepresentation) for economic losses." Picker, 6 F. Supp. 2d at 688-89. This proposition was supported by citations to Queen City Terminals, Inc. v. General American Transportation Corp., 73 Ohio St. 3d 609, 614 (1995), and Floor Craft. However, neither of these decisions discussed negligent misrepresentation in their analysis of the economic loss rule. In any event, the court in Picker ultimately dismissed the negligent misrepresentation claim on other grounds.

Although Trgo involves facts that are somewhat similar to this case, the court's reasoning is unpersuasive. In Trgo, purchasers of a truck brought a diversity action against the manufacturer alleging inter alia negligent misrepresentation. The court concluded that the plaintiffs were "barred from pursuing the negligent misrepresentation claim by the economic loss doctrine." Trgo, 34 F. Supp. 2d at 595. The authorities relied upon by the Trgo court, however, do not support this conclusion. The court first referred to Chemtrol and Midwest Ford, Inc. v. C.T. Taylor Co., 118 Ohio App. 3d 798, 801-05 (1997), in its discussion of the application of the economic loss rule to the plaintiffs' claim of tortious breach of warranty. Trgo, 34 F. Supp. 2d at 594. Neither Chemtrol nor Midwest Ford, however, specifically addressed the application of the economic loss rule to claims of negligent misrepresentation.*fn5 Trgo also cited Picker in support of its conclusion. Id. at 595. However, as was discussed supra, Picker is unpersuasive on this issue. In addition, the Court notes that both Picker and Trgo were decided prior to HDM and Corporex and appear to be contrary to those decisions.*fn6

Finally, Rexius attempts to distinguish cases cited by National Mulch as not involving commercial entities engaged in the sale of goods. Ohio courts, as Rexius notes, have stated that the economic loss rule denies recovery of purely economic damages when a commercial buyer has remedies available under article 2 of the U.C.C. See Sun Refining & Marketing Co. v. Crosby Valve & Gage Co., 68 Ohio St. 3d 397, 398 (1994) (citing Chemtrol); Chemtrol, 42 Ohio St. 3d at 51; Graphic Enters., Inc. v. TAS Int'l, Inc., No. 1999CA00085, 2000 Ohio App. LEXIS 961, at *15 (5th Dist. Mar. 13, 2000) (citing Chemtrol). However, each case stating this proposition involved a buyer claiming that the goods were either defective or nonconforming; none confronted the issue of whether the U.C.C. precluded a claim for negligent misrepresentation.*fn7

The primary concern of the economic loss rule is the source of the duty, i.e., whether the duty arises under tort law or from an agreement between the parties. See Chemtrol, 42 Ohio St. 3d at 45. The U.C.C. provides remedies for breaches of contractual duties; but, as was discussed supra, a cause of action for negligent misrepresentation is based upon a duty arising under the common law of torts. Ohio law does not support Rexius's contention that National Mulch cannot assert a negligent misrepresentation claim simply because it also has remedies available under the U.C.C.

Thus, for the reasons stated, the Court does not believe that under Ohio law a negligent misrepresentation claim is barred by the economic loss rule. Summary judgment on this ground is therefore denied.

2. Special Relationship

Next, Rexius argues that National Mulch's negligent misrepresentation claim lacks merit because National Mulch has failed to establish a "special relationship" between itself and Rexius. National Mulch argues in response that it is not required to establish a special relationship to succeed on its negligent misrepresentation claim. This Court agrees that a special relationship is not a formal element of a negligent misrepresentation claim under Ohio law. Instead, as was stated supra, in order to assert a negligent misrepresentation claim under Ohio law, a plaintiff must establish that the defendant supplied false information for the guidance of the plaintiff in its business transactions, that the plaintiff was justified in relying on the information, and that the defendant failed to exercise reasonable care or competence in obtaining and/or communicating the information. Delman, 41 Ohio St. 3d at 4.

To the extent Ohio courts discuss a special relationship in connection with a negligent misrepresentation claim, the discussion appears to be related to the requirement that a defendant supply false information for the guidance of the plaintiff in its business transactions.*fn8 The "for the guidance of" language directs the court's attention to the duty owed and serves to limit the class of potential plaintiffs. As explained by the Supreme Court of Ohio, liability for negligent misrepresentation is limited to "the person or one of a limited group of persons for whose benefit and guidance [the defendant] intends to supply the information or knows that the recipient intends to supply it." Gutter v. Dow Jones, Inc., 22 Ohio St. 3d 286, 288 (1986); accord Haddon View, 70 Ohio St. 2d at 157 (not requiring any special relationship but limiting liability to misrepresentations made to a foreseeable class of persons). "A contrary result would in effect extend liability to all the world and not a limited class . . . ." Gutter, 22 Ohio St. 3d at 289.

Understanding this, a person may not maintain an action for negligent misrepresentation when the alleged misrepresentation is intended to reach an extensive, unresolved class of persons. Representations made to the public-at-large cannot result in liability. E.g., id. (newspaper reader not a member of a limited group of persons intended to benefit from representation in newspaper); Amann v. Clear Channel Commc'ns, Inc., 165 Ohio App. 3d 291, 298-99 (2006) (radio station's general audience not a limited group); Federated Mgmt. Co. v. Coopers & Lybrand, 137 Ohio App. 3d 366, 384-85 (2000) (investing public is an unlimited class of persons that cannot hold company's auditor liable for alleged negligent misrepresentations).

Conversely, liability may exist when the plaintiff is a person or member of a limited class of persons whom the defendant intends to benefit or guide with the information supplied. See, e.g., Haddon View, 70 Ohio St. 2d at 157 (representation made to small group of limited partners); Merrill v. William E. Ward Ins., 87 Ohio App. 3d 583, 590-91 (1993) (beneficiaries of a life insurance policy were a foreseeable limited class intended to benefit from information supplied by insurance agent); Sindel v. Toledo Edison Co., 87 Ohio App. 3d 525, 528 (1993) (representation made to single customer of defendant electric company). All that is necessary is for "'the maker of the representation [to] intend[] to reach and influence either a particular person or persons, known to him, or a group or class of persons, distinct from the much larger class who might reasonably be expected sooner or later to have access to the information.'" Amann, 165 Ohio App. 3d at 299 (quoting Restatement (Second) of Torts § 552 cmt. h (1977)). Thus, National Mulch can prevail on its negligent misrepresentation claim only if the alleged misrepresentations were intended to benefit or guide a group of persons with a definable limit, and National Mulch was a member of that group.

The determination of whether the plaintiff is a member of a limited class of foreseeable persons is dependent upon the factual circumstances of the representations made and the relationship between the parties. See id. at 298. In this case, the alleged misrepresentations appear in marketing materials produced by Rexius. Certainly, the potential exists for these materials to be seen by a large, limitless group of people. However, it is undisputed that Rexius sent the materials directly to National Mulch via mail in response to the latter party's interest in the Rexius trucks. (Will Dep. 53-55; Def.'s Mem. Supp. Mot. Partial Summ. J. 3, R. at 88-2; see Pl.'s Mem. Contra Def.'s Mot. Partial Summ. J. ...


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