Th e HONORABLE DAVID S. DOTY, United States District Judge for th e 1 District of Minnesota. United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 97-1412

___________ AKA Distributing Company, * * Plaintiff - Appellant, * * Appeal from the United States
v. * District Court for the * District of Minnesota. Whirlpool Corporation, * * Defendant - Appellee. *

___________ Submitted: October 23, 1997 Filed: March 6, 1998

___________ Before RICHARD S. ARNOLD, Chief Judge, LOKEN and HANSEN, Circuit Judges.

___________ LOKEN, Circuit Judge.
AKA Distributing Company appeals the district court’s grant of summary 1 judgme nt dismissing breach of contract, fraud, constructive fraud, and negligen t misrepresentation claims against Whirlpool Corporation. We conclude the contrac t claim is go verned by the Uniform Commercial Code and time-barred, the fraud claim is bar red by Minnesota’s economic loss doctrine, and the constructive fraud an d negligent misrepresentation claims are without merit. Accordingly, we affirm.-2-

The facts rele vant to the issues on appeal can be briefly stated. AKA’s owner, Allen Allstad

t, has been in the vacuum cleaner sales and service business since 1974. He fo rmed AKA in 1979 for the wholesale distribution of floor care products

. Whirlpool approached Allstadt in 1984 about distributing a newline of branded upright and cani ster vacuum cleaners. Allstadt examined the new products and suggeste d improvements to Whirlpool. AKA then signed a dis tributor contract in February 1985. The written contract prescribed a one-year term, bu t Whirlpool representatives assured All stadtthat the relationship would be a long one. In early 1986, with the contrac t about to expire, Allstadt met wi th John Geehring, Whirlpool’s national sales manager. They agreed t

hat the relationship would continue without a written contract under the terms of the 1985 contract. Geehring again assured Allstadt tha t the relationship would be a long-term one. Geehring repeated that assurance to Allstadt at a July 198 6 distr ibutors meeting, and David Allen, Whirlpool’s Division Vice President, gave a similar assurance in the presence of all the distributors.

The new Whirlpool line was beset with product problems. Allstadt and othe r AKA employees forwarded ma ny engineering suggestions to Whirlpool in an effort to impro ve the products and to meet AKA’s contractual obligation to resolve custome r complain ts. Geehring agreed that AKA’s suggestions substantially improved th e products an d in one instance prevented a recall. However, on January 6, 1988 , Whirlpool gave notice it would terminate the floor care line and AKA’s distributorship effe ctive April 1, 1988, the same day that Whirlpool announced a major vacuu m cleaner purchase commitment from Sears Roebuck and Company.

AKA commenced this ac tion on December 28, 1993. In essence, AKA alleges that Whirlpool fraudulent

ly told distributors they would be selling Whirlpool products fora l ong time, concealing its secret plan to manufacture private label cleaners fo r Sears. Whirlpool thereby lured AKA and others into signing distributor contracts for branded produc ts so it could capture their engineering talents in developing a product line acceptable to Sears.For contrary authority, AKA relies on our decision in United Indus. Syndicate, 2 Inc. v. Western Auto Supply Co. , 686 F.2d 1312, 1315-16 (8th Cir. 1982). Bu t Missouri law g overned that case, and Missouri rejects “the general view.” Vigano v. Wylain, Inc. , 633 F.2d 522, 525 n.3 (8th Cir. 1980). -3- I. The Contract Claim.

The dist rict court dismissed AKA’s breach of contract claim as time-barred by the four-year st atute of limitations in Article 2 of the Minnesota Uniform Commercial Code. See Minn. Stat. § 336.2-725. Article 2 applies to “transactions in goods. ” Mi nn. Stat. § 336.2-102. On appeal, AKA argues that Article 2 does not apply to its distributor contrac t with Whirlpool. That contract primarily involved the provision of servi ces, AKA reasons, because of the engineering services it provided to improv e Whirlpool products an d the “enormous efforts” expended by AKA to remedy product defects and resolve customer complaints.

The distributor contract, as opposed to a particular order for vacuum cleaners, involved a mix of goods and services. Minnesota courts use the “predominan t purpose” test to det ermine whether Article 2 applies to such a contract or transaction. See Vesta State Bank v. Independent State Bank , 518 N.W.2d 850, 854 (Minn. 1994).

The test [for mixed contracts is] whether their predominant factor, their thru st, their purpose, reasonably stated, is the rendition of service, with goods incidentally in volved ( e.g. , contract with artist for painting) or is a transaction of sale, with labor incidentally involved ( e.g. , installation o f a water heater in a bathroom).

Bonebrake v. Cox , 499 F.2d 951, 960 (8th Cir. 1974). Applying this test, most courts have concl uded that contracts for the distribution of goods are governed by Article 2. Se e Ralph’s Distrib. Co. v. AMF, Inc. , 667 F.2d 670, 673 n.6 (8th Cir. 1981) (Iow a law); Kirby v. Chrysler Corp. , 554 F. Supp. 743, 748-50 (D. Md. 1982). 2-4-

We agree with the district court that the predominant purpose of AKA’ s “Associate Distributor Sales Agreement” with Whirlpool was the sale of goods

. Whir lpool wanted to sell floor care products at wholesale to AKA, and AKA wanted to resell those prod

ucts to retail customers. The sales agreement describes Whirlpool and AKA as “Vendor and Vendee.” It provides terms for establishing price, fillin g orders, and shipments. The serv ices AKA provided were incidental to selling vacuum cleaners, and there is no evidence Whirlpool paid AKA for services, other tha n payments for warranty rep airs governed by a separate Floor-Care Service Agreement. Thus , Article 2 governs the contract, and AKA’s breach of contract claim is time

barred by Article 2’s four-year statute of limitations.

II. The Tort Claims.

The district court held that Minnesota’s eco nomic loss doctrine bars AKA’s tort claims f or fraud, constructive fraud, and negligent misrepresentation because AK A suffere d only economic loss and therefore is limited to its contractual remedies under Article 2. AKA argues on appeal that the doctrine does not apply because AKA is not seeking to c ircumvent warranty remedies and in any event the doctrine does not bar fraud and misrepresentation claims.

In Superwood Corp. v. Siempelkamp Corp. , 311 N.W.2d 159, 160-62 (Minn

. 1981), a products liability case, the Minnesota Supreme Court firs t held that “economic losses arising out of commercial transactions are [not] recoverable under negligenc e and strict products liability theories.” Instead, plaintiffs in such cases are limited t o their co ntract and warranty remedies under the U.C.C. Although the discussion i n Superwood emphasized the need to ensure the integrity of the U.C.C.’s warrant y
re medies governing sales transactions, the Court later clarified that a “commercia l tran saction” for purposes of Superwood ’s economic loss doctrine “is a transactio n governe d by Article 2 of the Uniform Commercial Code.” McCarthy Well Co. v. St. Peter Creamery, Inc. , 410 N.W.2d 312, 314 (Minn. 1987). Thus, AKA’s contentionT he economic loss doctrine is now in part statutory. Acting in response t o 3 Hapka v. Paquin Farms , 458 N.W.2d 683 (Minn. 1990), which narrowed a Superwood exception to the doctrine, the Minnesota Legislature enacted Minn. Stat. § 604.10. But tha t statute is limited to sales of goods, whereas we deal here with a different type of Article 2 co ntract. We see no indication that the statute was intended to replace o r narrow the scope of the broader common law doctrine. See Lloyd F. Smith Co. v

. Den -Tal-Ez, Inc. , 491 N.W.2d 11, 17 & n.7 (Minn. 1992); Regents of the Univ. o f Minn. v. Chief Indus., Inc. , 106 F.3d 1409, 1411 (8th Cir. 1997). -5- that the doctrine does not apply because AKA is not seeking to circumvent warranty remedies is without merit. 3
Although Superwoodinvolved tort claims of negligence and strict product s li ability, the court more broadly discussed whether “tort liability in commercia l tr ansactions” should be allowed. 311 N.W.2d at 162. This, plus extension of th e doctrine in later cases to all contracts governed by Article 2, sugges t that the Minnesota Supreme Court would extend the doctrine to other kinds of torts asserted b y commercial claimants in cases where the poli cies underlying Superwoodfavor limiting
re medies to those in the U.C.C. However, the Minnesota Supreme Court has no t addressed whether the economic loss doctrine bars fraud and misrepresentation torts. Without such precedent, we must determine how that Court would likely apply th e doctrine in this case. See Toney v. WCCO Television, Midwest Cable & Satellite , Inc. , 85 F.3d 383, 389 (8th Cir. 1996). The Minnesota Court of Appeals he ld fraud and misrepresentation claims barred in one unpubl ished decision. See ETM Graphics, Inc. v. Cit y of St. Paul , 1992 WL 61394 (Minn. Ct. App. Mar. 31, 1992). The District of Minnesota

ruled similarly in a number of cases prior to its decision in this case. See In re Grain Land Coop Cases , 978 F. Supp. 1267 (D. Minn. 1997); Upsher- Smith Labs. v. Mylan Labs. , 944 F. Supp. 1411 (D. Minn. 1996); Nelson Distrib., Inc. v. StewartWar ner Corp. , 808 F. Supp. 684 (D. Minn. 1992); contra Northern States Power Co. v. International Tel. & Tel. Corp. , 550 F. Supp. 108 (D. Minn. 1982).“Remedies for material misrepresentation or fraud include all remedies available 4 under this article for nonfraudulent breach.” Minn. Stat. § 336.2-721.
-6- Thoug h some of these cases broadly state that fraud and misrepresentatio n clai ms are barred, we do not think the issue can be answered categorically. A s countless other cases illustrate and as § 2-72 1 of the U.C.C. confirms, the presence of 4 a governing commercial contract neithe r preempts nor eliminates the need for all fraud cl aims to which the parties’ dealings may give rise. See, e.g. , R.W. Murray Co. v

. Shatterp roof

Glass Corp. , 697 F.2d 818, 830-31 (8th Cir. 1983) (applying Missour i law ). A fraud claim independent of the contract is actionable, but it must be base d upon a misrepresentation that was outside of or colla teral to the contract, such as many claims of fraudulent inducement. That distinction has been drawn by courts applying traditional contract and tort remedy principles. See Bridgestone/Firestone, Inc. v

. Recove ry Credit Servs., Inc. , 98 F.3d 13, 19-20 (2d Cir. 1996); Kee v. Nationa l Reserve Li fe Ins. Co. , 918 F.2d 1538, 1543 (11th Cir. 1990); OHM Remediatio n Services Corp. v. Hughes Envtl. Systems, Inc. , 952 F. Supp. 120, 122-23 (N.D.N.Y. 1997). I t has been borrowed (not always with attribution) by courts applying th e economic loss doctrine to claims of fraud between parties to commercial transactions. See R aytheon Co. v. MgGraw-Edison Co. , 979 F. Supp. 858, 870-73 (E.D. Wis

. 1997); Allmand Assocs., Inc. v. Hercules Inc. , 960 F. Supp. 1216, 1227-28 (E.D

. Mich. 1997); Hotels of Key Largo, Inc. v. RHI Hotels, Inc. , 694 So.2d 74, 76-78 (Fla. Dist. Ct. App. 1997); Huron Tool and Eng’g Co. v. Precision Consulting Servs., Inc. , 53 2 N.W.2d 541, 544-46 (Mich. Ct. App. 1995). We think the Minnesota Suprem e Court would resolve the legal issue in this case by holding that, in a suit betwee n merchants, a fraud claim to recover economic losses must be indep endent of the Article 2 contract or it is precluded by the economic loss doctrine.

To ap ply this standard, we must examine the nature of AKA’s fraud an d misrepresen tation claims. The fraud claim is that Whirlpool lied when it said AKA would be a distributor for a long time. But duration was a term of the contract, andAKA’s time-barred theory was that Whirlpool breached the distributor contract 5 by termin ating without cause because the parties to a contract that is indefinite i n durat ionmay terminate at any time “unless otherwise agreed.” Minn. Stat. § 336.2

- 309(2).
-7- breach of that term was the basis for AKA’s time-barred contract claim. We agre e 5 withthe district court that this claim is not independent of the contract and it s performanc e, and therefore the economic loss doctrine limits AKA to its Article 2 remedies for breach of the co ntract’s duration terms. Compare General Aviation, Inc. v. Cessna Aircraft Co. , 13 F.3d 178, 183 (6th Cir. 1993) (fraud claim that dealer was promised “long-term” relationship “simply rehashes the breach of contract claim”). On the other hand, AKA’s constructive fraud and negligent misrepresentation claims were based upon Whirlpool’s failure to disclose its plan to capture additional Sears private label bu siness. That is the sort of collateral subject that can support an independen t fraud-in-the-inducement

claim. However, no affirmative misrepresentation is alleged, and Whirlpool had no duty to disclose to arm s-length distributors its unrelated plans to market private label products.
We have carefully con sidered AKA’s remaining contentions and conclude they are without merit. Accordingly, the judgment of the district court is affirmed.
A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.