In the

United States Court of Appeals

For the Seventh Circuit

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No. 07-1948

ST. PAUL MERCURY INSURANCE COMPANY,

Plaintiff-Appellant,

v.

THE VIKING CORPORATION,

Defendant-Appellee.

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Appeal from the United States District Court

for the Eastern District of Wisconsin.

No. 04 C 1124—William E. Callahan, Jr., Magistrate Judge.

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ARGUED NOVEMBER 9, 2007—DECIDED AUGUST 21, 2008

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Before BAUER, MANION, and WILLIAMS, Circuit Judges.

WILLIAMS, Circuit Judge. St. Paul Mercury Insurance

Company sued The Viking Corporation, a fire sprinkler

manufacturer, for breach of warranty over an allegedly

defective sprinkler that damaged a building owned by St.

Paul’s insured, Johnson Bank. Because there was no

agreement between Johnson Bank and Viking when the

sprinkler was purchased, privity of contract did not exist,
2 No. 07-1948

so we conclude that the magistrate judge properly

granted summary judgment in favor of Viking.

I. BACKGROUND

On October 25, 2002, a fire sprinkler manufactured by

Viking became activated at the Johnson Bank Building in

Racine, Wisconsin. This was not supposed to happen, since

there was no fire. The water did not stop gushing until the

fire department arrived to shut down the system, and by

then, the water had seriously damaged the bank.

At the time of the incident, Johnson Bank had occupied

the newly-built building for only about six months. It had

contracted with M.A. Mortenson Co. to build the bank; this

contract had a one-year warranty effective until May 2003.

Mortenson in turn subcontracted with Wenninger Company to install a fire suppression system, including fire

sprinklers, which was also under a one-year warranty

effective until May 2003.

As a subcontractor, Wenninger bought the sprinklers for

the fire suppression system from Viking. This sprinkler

contract included a one-year warranty for replacement of

defective sprinkler heads, though this warranty was

explicitly limited to the original purchaser, Wenninger.

There is no evidence that Johnson Bank ever received any

warranty information, advertising, or other literature from

Viking regarding the sprinklers prior to the accident.

After the accident, Johnson Bank’s insurer, St. Paul

Mercury Insurance Company, reimbursed Johnson Bank

fully for the water damage. St. Paul then asked an engi-
No. 07-1948 3

When inactive, the glass bulb fit together with a screw to block 1

water that was in a connected pipe. The bulb contained a

temperature-sensitive liquid, which was designed to expand and

cause the bulb to burst when the ambient temperature rose

above a certain level. This would then permit the water to flow

out and douse the heat source.

neer, John Mertens, to examine the sprinkler head. After

eliminating many potential causes, Mertens and St. Paul

concluded that a defective glass bulb in the sprinkler most

likely caused the sprinkler to activate. Mertens could not 1

eliminate improper installation or handling as possible

causes.

Viking’s Manager of Technical Services, George Wirsch,

also inspected the sprinkler. According to Wirsch (who had

inspected hundreds of activated sprinklers in his twentyfive years of experience), a sprinkler head will activate for

only one of four reasons: (1) heat, (2) mechanical trauma,

(3) ice in the line, or (4) defects in the workmanship or

materials for the sprinkler head. Although Wirsch could

not determine what had caused the sprinkler to activate, he

claimed not to see any evidence of improper installation or

mechanical trauma, and could not eliminate defects in

workmanship or materials as possible causes.

Viking also asked another individual, Professor John

Gland, to inspect the sprinkler. Dr. Gland has a Ph.D. in

physical chemistry and twelve years of experience conducting microscopic analysis of materials in the private

sector. Although he did not have a background in fire

protection systems, he had worked on three other sprinkler

activation cases. As part of his analysis, Dr. Gland exam-
4 No. 07-1948

St. Paul also raised tort claims for negligence and strict 2

liability, and a false advertising claim under the Wisconsin

Deceptive Trade Practices Act, but it has abandoned these

claims on appeal.

ined the sprinkler under a microscope and compared it to

an exemplar sprinkler. Based on this comparison, Dr.

Gland concluded there was no evidence that the subject

sprinkler was defective. Dr. Gland also saw foreign fibers

and “witness marks” near where the glass bulb had been,

which suggested to him that someone had applied force or

removed the sprinkler after it had been installed. He could

not eliminate the glass bulb as the cause of activation,

given that the bulb had shattered and was missing.

On September 30, 2004, St. Paul stepped into Johnson

Bank’s shoes via subrogation and filed a four-count

complaint, including a claim for breach of warranty,

against Viking in Wisconsin state court. Viking removed

the case to federal court on diversity grounds and the

parties agreed to proceed before a magistrate judge. Viking

then moved for summary judgment, which the magistrate

judge granted, concluding that a lack of privity between

Viking and Johnson Bank barred St. Paul’s breach of

warranty claim. The parties also filed cross-motions to

exclude their adversaries’ expert witnesses, but in light of

the summary judgment grant, these motions were denied

as moot.

St. Paul now appeals the grant of summary judgment on

its breach of warranty claim. It also appeals the magistrate 2

judge’s denial of its motion to exclude the expert testimony

of Viking’s expert, Dr. Gland.
No. 07-1948 5

II. ANALYSIS

A. A lack of privity between Johnson Bank and Viking

bars St. Paul’s breach of warranty claim.

Both St. Paul and Viking agree that “Wisconsin law

requires privity of contract between the parties before

liability can be founded on breach of express or implied

warranty.” Twin Disc, Inc. v. Big Bud Tractor, 582 F. Supp.

208, 215 (E.D. Wis. 1984) (citing Paulson v. Olson Implement

Co., 319 N.W.2d 855 (Wis. 1982)). The magistrate judge

found that privity was lacking here because Viking’s

warranty was limited to the original purchaser

(Wenninger), and did not encompass Johnson Bank or, by

extension, its subrogee St. Paul. St. Paul challenges this

finding on the grounds that we discuss below.

1. There was no agency relationship between Johnson Bank and Wenninger that would establish

privity between Johnson Bank and Viking.

St. Paul first argues that privity exists between Johnson

Bank and Viking because Wenninger acted as Johnson

Bank’s agent when Wenninger bought the sprinklers from

Viking. To establish agency under Wisconsin law, a

principal must: (1) manifest an express or implied intent to

have another party act for him, (2) retain the right to

control the details of the other party’s work, and (3)

operate in a distinct occupation or business from the other

party. See James W. Thomas Constr. Co. v. Madison, 255

N.W.2d 551, 554 (Wis. 1977); Peabody Seating Co. v. Jim

Cullen, Inc., 201 N.W.2d 546, 549 (Wis. 1972). Here, the

record does not suggest that either of the first two require-
6 No. 07-1948

ments was met. The parties agree there is no evidence of

any agreement or any pre-accident contact between

Johnson Bank and Wenninger, let alone an arrangement

that would suggest the existence of an agency relationship.

St. Paul concedes that Johnson Bank did not even know

Viking sprinklers were installed until after the accidental

activation, and Johnson Bank’s corporate representative

testified that Johnson Bank never saw any warranty or

written materials from Viking before installation.

St. Paul makes much of the fact that Johnson Bank

eventually paid for the sprinklers, but presumably it paid

Mortenson (the general contractor) not Wenninger (the

subcontractor). At any rate, St. Paul does not explain how

this payment, without more, created an agency relationship. Indeed, accepting St. Paul’s argument would essentially allow any homeowner to sue a subcontractor on a

warranty claim, even though no contract exists between

them. Such an approach would be inconsistent with

existing Wisconsin law. See, e.g., Linden v. Cascade Stone Co.,

699 N.W.2d 189, 199 (Wis. 2005) (“[H]omeowners retain

contractual remedies against the general contractors, who

in turn have their own remedies against the subcontractors.”).

St. Paul twists this argument a bit and notes that Wis.

Stat. § 779.01 gives a subcontractor a lien on the property

on which the subcontractor works. St. Paul reasons that

this lien shows that Johnson Bank was the real party

purchasing the Viking sprinkler heads. This argument does

not make sense. Whether a statute creates a lien by operation of law to protect a subcontractor’s rights has no

bearing on whether the landowner (Johnson Bank) is in
No. 07-1948 7

privity of contract with a manufacturer (Viking) whose

product is being used by the subcontractor (Wenninger).

See Hunzinger Constr. Co. v. SCS of Wis., Inc., 694 N.W.2d

487, 490 (Wis. Ct. App. 2005) (“A general purpose of [the

construction lien] laws is to ensure the payment of construction project subcontractors and material suppliers.”);

see also id. at 491 (“[A] construction lien is a matter in rem

and not in personam. Absent a contractual relationship

between the lienor and the property owner, a personal

judgment against the property owner cannot be maintained.”).

On the second prong of the agency test, St. Paul suggests

that the magistrate judge confused Johnson Bank’s admitted decision not to control the details of Wenninger’s work

with Johnson Bank’s right to control those details. But St.

Paul does not explain how Johnson Bank retained a “right

to control” Wenninger’s work—for example, St. Paul does

not cite to any provision of the Mortenson contract showing that Johnson Bank had the right to override a subcontractor’s choice of materials. St. Paul persists that Johnson

Bank told Mortenson only to use high quality products that

have a warranty. But at best this shows that Johnson Bank

had some control over Mortenson; it does not show that

Johnson Bank had any control over Wenninger, who

actually bought the sprinklers and was covered under

Viking’s warranty.

St. Paul also maintains the existence of an agency relationship is a factual question that should be left to a jury.

But as we have seen, there is no evidence in the record to

suggest that Wenninger acted as Johnson Bank’s agent. So
8 No. 07-1948

there is no genuine factual dispute on this issue and no

reason for it to proceed to a jury. See, e.g., Beer Capitol

Distrib. v. Guinness Bass Imp. Co., 290 F.3d 877, 879 (7th Cir.

2002).

2. There is no equitable basis to find privity here.

St. Paul also raises what appears to be an estoppel

argument, claiming that Viking acted as if St. Paul were

covered by the warranty policy by sending St. Paul letters

denying liability. St. Paul does not cite (and there does not

appear to be) any Wisconsin case law discussing whether

privity of contract can be established by estoppel. Indeed,

we doubt whether estoppel even makes sense here, given

that there was no relationship (contractual or otherwise)

between Viking and Johnson Bank when the sprinklers

were purchased and no good reason for St. Paul to believe

that Viking’s warranty extended to Johnson Bank. But even

if estoppel could apply here, St. Paul has not shown why it

should apply, as St. Paul has not demonstrated any

detriment that it incurred because of Viking’s alleged

actions toward it. See Russ v. Russ, 734 N.W.2d 874, 885

(Wis. 2007) (“The elements for equitable estoppel include

(1) an action or non-action that induces (2) reliance by

another, either in the form of action or non-action, (3) to his

or her detriment.” (emphasis added)).

3. The privity requirement for warranty claims still

exists under Wisconsin law.

Finally, St. Paul claims that Wisconsin law is evolving

toward eliminating the privity requirement for remote
No. 07-1948 9

purchasers of products. St. Paul believes this requirement

is unfair and outmoded, and may leave remote users

without a remedy given Wisconsin’s recent expansion of

the economic loss doctrine, which bars tort claims sounding in contract. See Daanen & Janssen v. Cedarapids, Inc., 216

Wis. 2d 395, 397 (1998). St. Paul also notes that other states

have eliminated similar privity requirements. See, e.g.,

Spring Motors Distrib., Inc. v. Ford Motor Co., 489 A.2d 660,

676 (N.J. 1985).

Whether fair or not, the most recent pronouncement by

the Wisconsin Supreme Court on this issue suggests that

privity of contract still applies for warranty claims like the

one here, even if there is no corresponding tort claim. See

Daanen, 216 Wis. 2d at 402 (economic loss doctrine bars tort

claims even when there is no privity of contract). We

decline St. Paul’s invitation to step ahead of our colleagues

on the Wisconsin courts to change the status quo. See

Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1093

(7th Cir. 1999) (“Lacking any inherent power to make state

law such as a state court might have . . . a federal court

must be careful to avoid the temptation to impose upon a

state what it, or other jurisdictions, might consider to be

wise policy.”). It is far from clear that the privity requirement leads us to an “unfair” outcome here, as St. Paul

could have avoided its troubles simply by suing the

general contractor, Mortenson, with whom Johnson Bank

had contracted.
10 No. 07-1948

B. The magistrate judge did not abuse his discretion in

allowing Viking’s expert to testify.

Because St. Paul’s breach of warranty claim against

Viking is barred as a matter of law, we merely note in

passing that we also reject St. Paul’s alternate argument

that the magistrate judge abused his discretion in allowing

Viking’s witness, Dr. John Gland, to testify as an expert.

Dr. Gland’s extensive experience in microscopy was

certainly relevant to his testimony that wear and tear on

the sprinkler suggested the possibility of tampering. And

there was nothing problematic about Dr. Gland’s use of

process of elimination in reaching this conclusion. See Jahn

v. Equine Servs., PSC, 233 F.3d 382, 390 (6th Cir. 2000) (“In

order to be admissible on the issue of causation, an expert’s

testimony need not eliminate all other possible causes of

the injury. The fact that several possible causes might

remain ‘uneliminated’ only goes to the accuracy of the

conclusion, not to the soundness of the methodology.”

(internal quotation marks, omission, and citation omitted)).

Moreover, while some of the foreign fibers that Dr. Gland

observed might have been visible to the naked eye (and

hence, as St. Paul notes, visible to jurors), that doesn’t

necessarily mean there was no need for an expert. Indeed,

the significance of the fibers might not have been clear

absent expert testimony, especially since St. Paul’s expert

did not identify the fibers in his report.
No. 07-1948 11

III. CONCLUSION

The judgment is AFFIRMED.

8-21-08