Order Michigan Supreme Court

Lansing, Michigan 

December 12, 2008 Clifford W. Taylor,

 Chief Justice 

135117 Michael F. Cavanagh 

Elizabeth A. Weaver 

Marilyn Kelly 

Maura D. Corrigan 

GENERAL MOTORS CORPORATION, Robert P. Young, Jr. 

Stephen J. Markman, Plaintiff-Appellee, Justices 

v SC: 135117 

 COA: 270430 
 Wayne CC: 04-422587-CB

ALUMI-BUNK, INC., and ERIC JAIN,

Defendants-Appellants. 

_________________________________________/ 

On order of the Court, leave to appeal having been granted, and the briefs and oral 

arguments of the parties having been considered by the Court, we hereby REVERSE in 

part the July 24, 2007 judgment of the Court of Appeals, for the reasons stated in the 

Court of Appeals dissenting opinion. The trial court did not err in granting the 

defendants’ motion for summary disposition on the plaintiff’s claim of fraudulent 

inducement. Therefore, the ruling of the Wayne Circuit court is AFFIRMED in all 

respects. 

YOUNG, J. (concurring). 

I concur with the Court’s order to reverse the Court of Appeals resolution of the 

fraudulent inducement claim. I write separately to indicate that, contrary to Justice 

Kelly’s dissenting statement, the tort claim raised in this case is clearly barred by the 

economic loss doctrine because it is inextricably interwoven with plaintiff’s claim of 

breach of contract. 

The alleged basis for the contract was defendant’s promise to “upfit” (modify) the 

vehicles it purchased from plaintiff in exchange for a discounted price. Contrary to 

Justice Kelly’s analysis, this singular “promise” is the sole reason for the dispute between 

the parties. Indeed, a reader will be hard-pressed to find a distinction between the two 

complaint averments that Justice Kelly quotes in support of her dissenting statement. 

Plaintiff claims that defendant made this upfit promise during the negotiation 

phase, but it was never made a part of the contract. Nevertheless, plaintiff contends that 
 

 

2 

defendant breached its promise to upfit the vehicles it purchased and that defendant never 

intended to upfit when it promised to do so. Thus, this promise to upfit is both the basis 

for the breach of contract claim and the fraudulent inducement claim. 

The trial court and the Court of Appeals correctly determined that plaintiff’s 

breach of contract claim, based on the violation of this promise, must be dismissed given 

that plaintiff failed to include this central term in the written contract. Moreover, there is 

no way to characterize these identical allegations as separate claims for breach of contract 

and fraudulent inducement. Accordingly, the trial court was required, as it did, to dismiss 

the fraud claim to prevent contract law from “drown[ing] in a sea of tort.” Neibarger v 

Universal Coop, Inc, 439 Mich 512, 531 (1992). The Court of Appeals erred in reversing 

that decision. 

KELLY, J. (dissenting). 

I respectfully dissent from the Court’s order reversing in part the judgment of the 

Court of Appeals. I believe that the Court of Appeals majority correctly held that 

defendants are not entitled to summary disposition on the fraudulent inducement of 

plaintiff, General Motors Company. Accordingly, I would affirm. 

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 

In 2003, defendants sought to purchase hundreds of pickup trucks from a General 

Motors Corporation (GMC) dealer. Defendants ultimately purchased 148 trucks and 

obtained from plaintiff a Competitive Assistance Program (CAP) discount of $7,200 for 

each vehicle. Plaintiff contends that it granted the discount only because defendants 

agreed, both orally and in writing, to modify or “upfit” the vehicles before selling them. 

In this way, the vehicles would not compete with other, unmodified, GMC vehicles 

already on the market. However, the written contract contained no such requirement 

and defendants later sold the vehicles without modifications. 

Plaintiff filed a complaint setting forth counts of negligent, innocent, and/or 

intentional misrepresentation, fraud, and breach of contract, among others. Defendants 

moved for summary disposition under MCR 2.116(C)(8) and (10), arguing that 

plaintiff’s claims were untenable because the written contract memorializing the CAP 

discount did not contain a requirement that the vehicles be “upfitted.” Defendants also 

argued that the economic loss doctrine1

 applied to this case and barred plaintiff’s tort 

1

 The economic loss doctrine provides that “[w]here a purchaser’s expectations in a sale 

are frustrated because the product he bought is not working properly, his remedy is said 

to be in contract alone, for he has suffered only economic losses.” Neibarger v Universal 

Cooperatives, Inc, 439 Mich 512, 520 (1992) (internal citations and quotation marks 

omitted). 
 

 

3 

claims. Also, it asserted, plaintiff was limited to the remedies available under the 

Uniform Commercial Code2

 (UCC). Plaintiff responded that the economic loss doctrine 

was inapplicable to plaintiff’s fraudulent inducement claim, and, even if applicable, the 

claim remained viable because the fraud occurred before the contract existed. 

The trial court granted defendants’ motion for summary disposition, ruling that 

the fraud claim was not independent of the contract claim and was thus barred by the 

economic loss doctrine. The Court of Appeals majority affirmed in part and reversed in 

part, finding no error in the trial court’s conclusion that the economic loss doctrine 

governed because “the contract regarding the CAP discount involved the conducting of 

business concerning trucks, which are ‘goods’ under the UCC.”3

 However, the Court 

held that the trial court erred in concluding that the alleged fraud was so interwoven with 

the breach of contract claim that it could not be considered separately.4

 The Court 

concluded that outstanding questions of fact existed regarding the fraud claim. It 

referred to credible evidence that defendants had improperly induced plaintiff to enter 

into the contract by agreeing to “upfit” the vehicles without having a present intent to do 

5 so.

We granted leave to appeal to determine (1) whether an exception to the 

economic loss doctrine exists for claims of fraudulent inducement, and (2) whether the 

fraud claims in this case are sufficiently distinguishable from the contract claims for 

purposes of applying the fraudulent inducement exception.6 

II. ANALYSIS 

This Court officially recognized the economic loss doctrine in Neibarger v 

Universal Cooperatives, Inc.

7 Neibarger involved a plaintiff seeking economic loss 

damages as the result of a defective product. Commenting on the differences between an 

individual consumer’s tort remedy for product liability compared with a commercial 

party suffering economic losses, the Court stated: 

[I]n a commercial transaction, the parties to a sale of 

goods have the opportunity to negotiate the terms and 

2

 MCL 440.1101 et seq. 

3 Gen Motors Corp v Alumi-Bunk, Inc, unpublished opinion per curiam of the Court of 

Appeals, issued July 24, 2007 (Docket No. 270430), at 4. 

4 Id. at 7. 

5 Id. at 7-8. 

6 Gen Motors Corp v Alumi-Bunk, Inc, 480 Mich 1193 (2008). 

7

 439 Mich 512 (1992). 
 

4 

specifications, including warranties, disclaimers and limitations 

of remedies. Where a product proves to be faulty after the 

parties have contracted for sale and the only losses are 

economic, the policy considerations supporting products 

liability in tort fail to serve the purpose of encouraging the 

design and production of safer products.[8] 

The Court went on to hold that “where a plaintiff seeks to recover for economic loss 

caused by a defective product purchased for commercial purposes, the exclusive remedy 

is provided by the UCC . . . .9

 The Neibarger Court also noted the policy rationale behind the economic loss 

doctrine: 

The purpose of a tort duty of care is to protect society’s 

interest in freedom from harm, i.e. the duty arises from policy 

considerations formed without reference to any agreement 

between the parties. A contractual duty, by comparison, arises 

from society’s interest in the performance of promises. 

Generally speaking, tort principles . . . are better suited for 

resolving claims involving unanticipated physical injury . . . . 

Contract principles, on the other hand, are generally more 

appropriate for determining claims for consequential damages 

that the parties have, or could have, addressed in their 

agreement.[10] 

MCL 440.1103 provides the basis for plaintiff’s assertion that there is an 

exception to the economic loss doctrine for claims of fraud: 

Unless displaced by the particular provisions of [the 

UCC], the principles of law and equity, including the law 

merchant and the law relative to capacity to contract, principal 

and agent, estoppel, fraud, misrepresentation, duress, coercion, 

mistake, bankruptcy, or other validating or invalidating cause 

shall supplement its provisions.

[11] 

8 Id. at 523. 

9 Id. at 527-528. 

10 Id. at 521 (internal quotation marks and citation omitted). 

11 Emphasis added. 
 

 

5 

Huron Tool & Engineering Co v Precision Consulting Services, Inc12 is the 

leading case discussing the fraudulent inducement exception to the economic loss 

doctrine.13 Huron Tool involved the defendant manufacturer’s claims for breach of 

contract, breach of warranty, fraud and misrepresentation arising out of defective 

software purchased by the plaintiff. After determining that the plaintiff’s breach of 

contract claim was barred by the UCC’s statute of limitations, the Court of Appeals 

addressed the viability of the plaintiff’s fraudulent inducement claim: 

With regard to the specific intentional tort of fraud, 

courts generally have distinguished fraud in the inducement as 

the only kind of fraud claim not barred by the economic loss 

doctrine. We believe this distinction is warranted in light of 

the rationale of the economic loss doctrine. 

* * * 

In light of this rationale, we decline to adopt defendants’ 

position that the economic loss doctrine precludes any fraud 

claim. Fraud in the inducement presents a special situation 

where parties to a contract appear to negotiate freely—which 

normally would constitute grounds for invoking the economic 

loss doctrine—but where in fact the ability of one party to 

negotiate fair terms and make an informed decision is 

undermined by the other party’s fraudulent behavior.14 

The Court of Appeals limited its holding, however, stating that “a plaintiff may only 

pursue a claim for fraud in the inducement extraneous to the alleged breach of contract.15 

12 Huron Tool & Engineering Co v Precision Consulting Services, Inc, 209 Mich App 

365 (1995). 

13 Numerous jurisdictions have relied on Huron Tool for the proposition that an exception 

to the economic loss doctrine exists for claims of fraudulent inducement. See, e.g., 

Werwinski v Ford Motor Co, 286 F3d 661, 676 (CA 3, 2002); Marvin Lumber & Cedar 

Co v PPG Industries, Inc, 223 F3d 873, 885 (CA 8, 2000); Giles v Gen Motors 

Acceptance Corp, 494 F3d 865, 875 (CA 9, 2007); Dinsmore Instrument Co v 

Bombardier, Inc, 999 F Supp 968, 970 (ED Mich 1998); Kaloti Enterprises, Inc v 

Kellogg Sales Co, 283 Wis 2d 555, 581 (2005); Valleyside Dairy Farms, Inc v AO Smith 

Corp, 944 F Supp 612, 616 (WD Mich 1995). 

14 Huron Tool, supra at 371-373 (emphasis in original). 

15 Id. at 374. 
 

 

6

 Applying the principles expounded in Neibarger, MCL 440.1103, and Huron Tool 

to this case, it is clear that the majority’s decision to reverse the Court of Appeals and 

grant summary disposition to defendants is unwarranted. This case involves a 

“transaction in goods.” The UCC thus provides the relevant governing law,16 and the 

economic loss doctrine would generally bar claims for economic loss related to the 

transaction, including breach of contract claims.17 However, MCL 440.1103 explicitly 

recognizes that certain categories of claims are exempt from the economic loss doctrine. 

Specifically, claims for fraud are authorized by statute as a supplement to the remedies 

normally available under the UCC.18 This is the premise that governs this dispute. 

Moreover, as recognized in Huron Tool, fraudulent inducement claims are proper 

despite the limitations of the economic loss doctrine “where parties to a contract appear 

to negotiate freely . . . but where in fact the ability of one party to negotiate fair terms and 

make an informed decision is undermined by the other party’s fraudulent behavior.”19 

Huron Tool addressed claims of fraud interwoven with claims of breach of contract. It 

held that, in such claims, the alleged misrepresentations relate to the breaching party’s 

performance of the contract and do not give rise to an independent cause of action in 

tort.20 This type of fraud is not extraneous to the contractual dispute between the parties. 

It is another thread in the fabric of plaintiff’s contract claim, supported by factual 

allegations identical to those supporting its breach of contract counts.21 Such fraud does 

not induce a plaintiff to enter into a contract nor does it cause harm to a plaintiff distinct 

from that caused by the breach of contract.22 

As determined by the Court of Appeals majority in the instant case, the fraud 

alleged by plaintiff was not interwoven with its breach of contract claim. Rather, the 

alleged fraud induced plaintiff to enter into the contract; it did not relate to the breach of 

contract itself. In fact, plaintiff’s complaint specifically alleges, in pertinent part: 

FRAUD 

32.	 Defendants . . . knowingly misrepresented that any fleet 

vehicles purchased under the Competitive Assistance 

16 MCL 440.2102. 

17 Neibarger, supra at 520. The issue whether the trial court properly dismissed 

plaintiff’s breach of contract claims is not the subject of this appeal. 

18 MCL 440.1103. 

19 Huron Tool, supra at 372. 

20 Id. at 373. 

21 Id. 

22 Id. 
 

7 

Program would be upfitted before the resale of those 

vehicles to the general public. . . . 

* * * 

NEGLIGENT, INNOCENT AND/OR INTENTIONAL MISREPRESENTATION 

39.	 Defendants . . . represented to [plaintiff] on several 

occasions that any fleet vehicles purchased under the 

Competitive Assistance Program would be upfitted 

before the resale of those vehicles to the public.[23] 

Plaintiff’s complaint thus makes clear that its fraud and misrepresentation claims are not 

based on a breach of the contract itself. They are based, instead, on defendants’ 

representations made before the contract was executed. Accordingly, the Court of 

Appeals correctly distinguished the two intrinsically different allegations of misconduct 

by defendant—fraudulent inducement and breach of contract—in holding that defendants 

are not entitled to summary disposition. 

This analysis is also consistent with the Court’s holding in Rutan v Straehly.

24 In 

Rutan, the Court held that fraud claims generally cannot be predicated on future actions. 

However, the Court stated that “an unfilled promise to perform in the future is actionable 

when there is evidence that it was made with a present undisclosed intent not to 

perform.25 I agree with the Court of Appeals majority, which relied on Rutan. The Court 

concluded that plaintiff presented ample evidence of an unfulfilled promise to perform on 

the part of defendants. It presented ample evidence that, while defendants agreed to 

“upfit” the vehicles, defendants had a present intent to sell the vehicles without doing so. 

This situation fits squarely within Rutan, MCL 440.1103, the fraudulent inducement 

exception to the economic loss doctrine, and Huron Tool. 

The majority’s reliance on the Court of Appeals dissent is unfounded. The dissent 

misapplies Huron Tool and ignores the import of MCL 440.1103 and Rutan.

26 The 

dissenting opinion correctly states that, pursuant to Huron Tool, a plaintiff must allege a 

claim for fraudulent inducement separate from a claim of breach of contract. However, it 

disregards documentary and testimonial evidence presented by plaintiff that during the 

negotiating process, defendants made several misrepresentations, both written and oral, 

23 Plaintiff’s complaint at 7, 9 (emphasis added). 

24 Rutan v Straehly, 289 Mich 341 (1939). 

25 Id. at 348-349. 

26 In fact, Justice Young’s concurrence and the Court of Appeals dissent both fail to cite 

MCL 440.1103 or Rutan. Justice Young also fails to recognize the significance of Huron 

Tool whatsoever. 
 

 

8 

that the purchased vehicles would be “upfitted.” Therefore, the dissenting opinion’s 

statement that “there is a glaring absence of any evidence at all that would even 

inferentially support [plaintiff’s claim for fraudulent inducement]” is inaccurate.27

 Similarly, Huron Tool evinces no intent to subvert the foundational rule of 

Michigan jurisprudence, embodied in MCR 2.111(A)(2), that a party may plead in the 

alternative even “where proof of one claim must defeat the existence of another.”28 A 

plaintiff’s “antithetical pleadings” are not grounds for summary judgment.29 Thus, the 

fact that plaintiff pleaded alternate theories of liability flowing from the same facts— 

fraudulent inducement and breach of contract—does not support a rejection of its 

fraudulent inducement claim. The proper scope of analysis under Huron Tool is the fraud 

claim itself, as stated in plaintiff’s complaint. That claim should be analyzed to 

determine if it relates to a contractual provision or to the separate breach of contractual 

theory of liability alleged in the complaint. If it relates to a contractual provision, the 

economic loss doctrine bars the fraud claim. If not, the claim survives on its own. 

It is undisputed that the contract at issue has no provision for “upfitting.” Hence, 

plaintiff’s fraudulent inducement claim does not relate to a contractual provision, and the 

claim should proceed. Speculation about whether plaintiff should have included an 

“upfit” provision in the contract is an issue involving the contract, wholly irrelevant to 

the fraudulent inducement claim. 

III. CONCLUSION 

I believe that the Court of Appeals majority correctly held that defendants are not 

entitled to summary disposition on plaintiff’s claims for fraudulent inducement. 

27 Gen Motors Corp v Alumi-Bunk, Inc, unpublished Court of Appeals dissenting opinion 

by Kelly, J., issued July 24, 2007 (Docket No. 270430), at 5. 

28 Abel v Eli Lilly & Co, 418 Mich 311, 335 (1984). 

29 Id. 
 _________________________________________ 

 

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Pursuant to MCL 440.1103, Huron Tool, and Rutan, claims of fraudulent inducement are 

not barred by the economic loss doctrine. Plaintiff presented credible evidence of 

defendant’s precontractual fraud and misrepresentations distinct from its claims of breach 

of contract. Therefore, it is entitled to its day in court. Accordingly, because questions of 

fact remain unanswered regarding plaintiff’s allegations, I would affirm the judgment of 

the Court of Appeals. 

CAVANAGH, J., joins the statement of KELLY, J. 

1211 

I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the 

foregoing is a true and complete copy of the order entered at the direction of the Court. 

December 12, 2008 

 Clerk