Source: http://www.cisg.law.pace.edu/cisg/wais/db/cases2/061010u1.html
Timestamp: 2019-04-26 04:13:43+00:00

Document:
Updated excerpt from Joseph Lookofsky, "In Dubio pro Conventione? Some thoughts about opt-outs, computer programs and preëmptions under the 1980 Vienna Sales Convention (CISG)", 13 Duke J. of Comp. & Int'l L. 263 (2003), <http://www.law.duke.edu/shell/cite.pl?13+Duke+J.+Comp.+&+Int%271+L.+0263>. Reproduced with permission of the author.
Illustration 7: B in Vienna asks S in Rome for information regarding the performance of a given machine. S, who is anxious to generate income for his fledgling business, negligently provides information which applies to a more costly model with a higher maximum capacity. Acting in reliance on this information, B orders the machine. After delivery, B makes repeated, unsuccessful attempts to run the machine at the stated capacity. Three weeks after the final attempt, B gives notice of non-conformity to S.
"The Convention requires that S deliver goods which match the contract specifications. If S fails to perform the obligations set forth in the contract (and/or other obligations implied in Article 35), the buyer can claim the benefit of CISG remedies for breach. To this extent, the CISG contractual regime supplants (replaces, preëmpts) [*pg 285] corresponding domestic sales law remedies. But it does not necessarily follow that courts and arbitrators cannot allow a party access to other, non-contractual remedial rules. Under the domestic law of some countries (including some CISG Contracting States), a given set of facts can sometimes give rise to both a contractually based claim and to a tort-based, delictual liability claim as well. Given this possibility of competition between rule-sets in purely domestic situations, some CISG buyers might seek to supplement a Convention-based claim with a non-contractual claim pursuant to the otherwise applicable domestic law of delict. In Illustration 7, since B may not have notified S of the non-conformity within a "reasonable time," B may have lost the right to claim any CISG remedy, and those commentators who maintain that the Convention remedial rules "occupy" the entire non-conformity field would deny B access to alternative domestic law remedies (e.g.) for negligent misrepresentation. Other [*pg 286] commentators, arguing that remedies for misrepresentation lie outside the CISG scope, would allow B alternate access to such a competing domestic law claim.
"Although we need to 'have regard' to the need to 'promote uniformity' in Convention application, the CISG hardly requires decision-makers to preëmpt (trump) domestic rules designed to provide remedies for unfair or culpable conduct; indeed, the CISG was not designed to deal with issues like these. Contractual and delictual remedies have -- for good reasons -- coexisted in many jurisdictions for centuries, and a given State's ratification of the sales Convention does not imply its intention to 'merge' contract with tort. There is 'no difficulty in regarding the imposition of a duty of care in tort as independent of any contractual liability,' and the CISG was designed only to deal with the contractual side."
100. Under, for example, American domestic law, avoidance might be allowed for a fraudulent misrepresentation without concern for its materiality, FARNSWORTH, supra note 86, �� 4.10-4.15, whereas under CISG Article 49(1)(a), a fundamental breach is the condicio sine qua non for avoidance, Huber in SCHLECHTRIEM, COMMENTARY, supra note 13, at 416; Huber in SCHLECHTRIEM, KOMMENTAR, supra note 13, at 535.
101. For a discussion of this question see BERNSTEIN & LOOKOFSKY, supra note 1, � 4-6.
103. See also the Detailed Analysis of Article 7(2) in ALBERT KRITZER, 2 GUIDE TO THE PRACTICAL APPLICATION OF THE UN CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS, 77 (1994). While the (American) term "preëmption" may have no direct counterpart in continental European legal terminology, the concept is obviously familiar enough, as the discussion of Article 7(2) by French, German and other continental authors shows. Lawyers trained in the Civil law tradition are more used to a code-style of interpretation which is, arguably, what Article 7(2) calls for; accord AUDIT, VENTE INTERNATIONALE, supra note 13, nos. 53a, 54.
104. See e.g. Article 1108 of the French Civil Code (requiring an objet certain) and � 306 of the German Civil Code (dealing with "objective impossibility"). On the inapplicability of these and similar validity rules in "impediment" situations see (e.g.) the decision of Corte di Appello di Milano (Italy), 11 December 1998, available at <http://cisgw3.law.pace.edu/cases/981211i3.html>. See also Schlechtriem, P., INTERNATIONALES UN-KAUFRECHT (Tübingen 1996), Rd.Nr. 36 and BERNSTEIN & LOOKOFSKY, supra note 1, � 6-19 with note 234.
Since the hardship rules set forth in Ch. 6(2) of the UNIDROIT Principles do not "restate" generally applicable principles of international law, see Lookofsky, supra note 93, at 500-501, these rules should not be applied to supplement the CISG, even though, for example, a Finnish court might refer to CISG Articles 4 and 7 and supplement the Convention with its domestic "hardship" regime: see Tom Southerington, Impossibility of Performance and Other Excuses in International Trade, available at <http://cisgw3.law.pace.edu/cisg/biblio/southerington.html>.
105. See supra notes 50 and 68 and accompanying text. Accord MICHAEL BONELL, AN INTERNATIONAL RESTATEMENT OF CONTRACT LAW 73-82 (2d ed. 1997) (regarding the co-existence of the CISG and Unidroit Principles). Re. the applicability of domestic rules regarding letters of confirmation and the conclusion of CISG contracts by silence, see Morten Fogt, Gerichtsstand den Erfüllungsortes, IPRax 2001, 358-364 (with reference to the decision of the Danish Supreme Court, 15 February 2001, reported in UfR 2001.1039 H).
106. See, e.g. ,the decision of Corte di Appello di Milano, supra note 104. See also LG Aachen (Germany), 14 May 1993, RIW 1993, 760-761, available at <http://cisgw3.law.pace.edu/cases/930514g1.html> (application of CISG precluded recourse to domestic law regarding mistake as to the quality of the goods); compare the buyer's mistake in the case decided by Handelsgericht St. Gallen, supra note 84.
107. See BERNSTEIN & LOOKOFSKY, supra note 1, ch. 6.
108. In some of these systems, the contractual and delictual bases of liability are seen as "competing" with each other, at least in certain situations, so that (e.g.) a seller who makes a negligent or fraudulent "misrepresentation" concerning the quality of his goods might conceivably be sued in both contract and tort. Regarding English law see TREITEL, LAW OF CONTRACT, Ch. 9, Sec. 3; re. German law see Peter Schlechtriem, The Borderland of Tort and Contract - Opening a New Frontier?, 21 CORNELL INT. L. J. 469, 470 (1988). Regarding Scandinavian law see JOSEPH LOOKOFSKY, CONSEQUENTIAL DAMAGES IN COMPARATIVE CONTEXT (Copenhagen 1989) at 156-159 and ANDERSEN & LOOKOFSKY, supra note 72, sec. 5.1.e, 5.5.e. In other systems, the doctrine of non-cumul may prevent a buyer bound by contract, such as a sales contract, from bring a tort action against the seller for acts involving that relationship. Regarding French law see MAZEAUD & CHABAS, LÉÇONS DE DROIT CIVIL, OBLIGATIONS, THÉORIE GÉNÉRALE (8th ed. 1991) at p. 384-385 (no. 404). In most American jurisdictions, a similar view prevails as regards tort-based product liablity claims seeking compensation for "pure economic loss".
109. See generally Lookofsky, supra note 38. See also John Erauw, and Harry Flechtner, Remedies under the CISG and Limits to their Uniform Character, in, INTERNATIONAL SALE OF GOODS REVISITED 65 (Petar Sarcevic & Paul Volken eds., 2001) (stating that overlap between claims and remedies in tort and in contract are "unavoidable").
110. Regarding the strict application of Article 39(1), especially by German courts, see BERNSTEIN & LOOKOFSKY, supra note 1, � 4-9.
111. See MAGNUS, supra note 15, Art. 45, Rd.Nr. 43; Huber in SCHLECHTRIEM, KOMMENTAR, supra note 13, Art. 45, Rd.Nr. 54; Schlechtriem, supra note 108, at 469, 473; Schlechtriem, supra note 105, Rd.Nr. 42; PILTZ, supra note 2, � 2 Rd.Nrn. 127-129; Heuzé, supra note 87, no. 282 with note 76. These same authorities would also disallow rescission of the contract on the theory that the CISG rules on non-conformity occupy the field to the exclusion of non-contractual liability rules. Compare AUDIT, VENTE INTERNATIONALE, supra note 13, no. 121 (somewhat undecided). See also the decision of LG Aachen (Germany), supra note 106, and the commentary by Witz, supra note 9, nos. 21, 87. The same commentators might, however, allow negligent misstatements relating to something other than non-conformity to trigger non-contractual claims under domestic law. For example, incorrect information about the chance to resell the goods at a profit, or a seller's statement concerning his production capability, or a buyer's financial statement would fall within this category. Regarding culpa in contrahendo, see Schechtriem, supra note 108, at 474-75 and Schlechtriem, supra note 2, Rd.Nr. 81.
112. See Lookofsky, supra note 108, at 276 ff; Lookofsky, supra note 38, at 409; Lookofsky, supra note 46, � 63. See also JAN RAMBERG, KÖPLAGEN (Stockholm 1995) at 112 f. (arguing that sales contracts, like other contracts, are subject to general contract principles, and that domestic principles, such as culpa in contrahendo, can therefore supplement the CISG); but compare RAMBERG, J. & HERRE, J., INTERNATIONELLA KÖPLAGEN (Stockholm 2001) at 64 f. (adopting Honnold's position on misrepresentations).
113. See supra notes 82-87 and accompanying text and infra note 127 and accompanying text.
114. See, e.g., Andrew BURROWS, UNDERSTANDING THE LAW OF OBLIGATIONS (Oxford 1998) at 24 ff. (explaining concurrent liability under English law).
115. Id. at 28 (emphasis added here). On this point Professor Burrows' logic (emphasizing, as regards misrepresentation, the presence or absence of reasonable reliance) seems more focused and compelling than that of Professor Honnold, UNIFORM LAW, supra note 25, � 65 (arguing on the basis of "operative facts").
116. See CISG Article 4.
This matter is before the Court on Defendant Lebbing Engineering's Motion for Partial Judgment on the Pleadings (doc. 19), Plaintiff Miami Valley Paper's Memorandum in Opposition (doc. 26), and Defendant's Reply in Support (doc. 28). For the reasons stated herein, the Court DENIES Defendant's Motion for Partial Judgment on the Pleadings.
The facts in this case, taken from the Plaintiff's second amended complaint, are as follows. Plaintiff, Miami Valley Paper, LLC, is a Delaware company with its principal place of business in Franklin, Ohio (doc. 23). Defendant, Lebbing Engineering & Consulting GmbH, is a German limited liability company with its principal place of business in Germany (Id.). In the Spring of 2003, Plaintiff entered into a contract to purchase a used paper winder for $155,000.00 from Defendant to use at their Franklin, Ohio facility (Id.). Plaintiff specified the desired model and Defendant subsequently shipped the winder to the United States (Id.).
Plaintiff made partial payments on the winder until the item was received, at which point they ceased payments (Id.). Plaintiff claims that the winder did not conform to the requested specifications (doc. 15). Upon receiving the winder, Plaintiff notified Defendant that they rejected the machine (Id.). Then, Plaintiff sold the winder at public auction for One Thousand Dollars to one of its affiliates (Id.). Plaintiff claims it spent an additional One Thousand Dollars to have the winder auctioned (Id.).
Plaintiff filed its initial Complaint on October 28, 2005, which stated Defendant's principal place of business as New Jersey (doc. 1). On January 25, 2006, Plaintiff amended their Complaint, changing Defendant's principal place of business to Germany (doc. 4). On January 20, 2006 Plaintiff filed a Second Amended Complaint, alleging six causes of action: 1) breach of contract; 2) breach of express warranty; 3) breach of warranty of fitness for a particular purpose; 4) unjust enrichment; 5) fraudulent inducement; and 6) negligent misrepresentation (doc. 23). Defendant now moves for partial judgment on the pleadings on Counts IV-VI (docs.19, 28).
In reviewing a dismissal under Rule 12(b)(6), the court must accept as true all factual allegations in the complaint. Windsor v. The Tennessean, 719 F.2d 155, 158 (6th Cir.1983), cert. denied, 469 U.S. 826 (1984). The motion to dismiss must be denied unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle her to relief. Id. at 158; Conley v. Gibson, 355 U.S. 41 (1957). Jones, 824 F.2d at 1103.
The admonishment to liberally construe a plaintiff's claim when evaluating a Rule 12(b)(6) dismissal does not relieve a plaintiff of his obligation to satisfy federal notice pleading requirements and allege more than bare assertions of legal conclusions. Wright, Miller & Cooper, Federal Practice and Procedure: � 1357 at 596 (1969). "In practice, a complaint ... must contain either direct or inferential allegations respecting all of the material elements [in order] to sustain a recovery under some viable legal theory." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir.1984), cert. denied, 470 U.S. 1054 (1985) (quoting In Re: Plywood Antitrust Litigation, 655 F.2d 627, 641 (5th Cir.1981), cert. dismissed, 462 U.S. 1125 (1983)); see also Sutliffe, Inc. v. Donovan Companies, Inc., 727 F.2d 648, 654 (7th Cir.1984); Wright, Miller & Cooper, Federal Practice and Procedure: � 1216 at 121-23 (1969)). The United States Court of Appeals for the Sixth Circuit clarified the threshold set for a Rule 12(b)(6) dismissal: [W]e are not holding the pleader to an impossibly high standard; we recognize the policies behind Rule 8 and the concept of notice pleading. A plaintiff will not be thrown out of court for failing to plead facts in support of every arcane element of his claim. But when a complaint omits facts that, if they existed, would clearly dominate the case, it seems fair to assume that those facts do not exist. Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 437 (6th Cir.1988).
Defendant first asks the Court to dismiss Plaintiff's claim for unjust enrichment (docs.19, 28). Defendant concedes that Fed.R.Civ.P. 8(e)(2) provides a procedural basis to plead alternative claims, but argues that under Ohio law, an express contract eliminates any substantive basis to plead quasi-contract or tort claims that allege breach of that contract's terms (Id. (citing Hughes v. Oberholtzer, 162 Ohio St. 330, 335 (Ohio 1954), Davis & Tatera, Inc. v. Gray-Syracuse, Inc., 796 F.Supp. 1078, 1085 (S.D.Ohio 1992), and Klusty v. Taco Bell Corp., 909 F.Supp. 516, 521 (S.D.Ohio 1995)).
In opposition, Plaintiff cites several cases for the proposition that unjust enrichment and contract claims may be plead alternatively (doc. 26 (citing Resource Title Agency, Inc. v. Morreale Real Estate Services, Inc., 314 F.Supp.2d 763 (N.D.Ohio 2004), Tecknol v. Buechel, 1999 U.S. Dist. Lexis 22017 (S.D.Ohio Aug. 9, 1999), City of Elyria v. York Int'l Corp., 2005 U.S. Dist. Lexis 10889 (N.D.Ohio 2005)). Defendant argues that each of these cases is distinguishable from the instant case because the cases cited by Plaintiff involved disputed contracts, whereas here, there is no dispute that the parties had an express contract (doc. 28).
As is evident from the string of cases cited by each side on this issue, the case law on this point is not completely clear. While it is well-established that Ohio law does not permit recovery under the theory of unjust enrichment when an express contract covers the same subject, Ulmann v. May, 147 Ohio St. 468 (1947), "there is conflicting authority in this district as to whether a plaintiff may plead unjust enrichment as an alternative theory of recovery." Tecknol, 1999 U.S. Dist. Lexis 22017 at *6 (emphasis added). As the Court has previously held, it is the opinion of the Court that a plaintiff may set forth both causes of action as alternative theories, pursuant to Fed.R.Civ.P. 8(e)(2). United States v. Boeing Co. 184 F.R.D. 107, 112 (S.D.Ohio 1998). Therefore, the Court declines to dismiss Plaintiff's claim for unjust enrichment at this stage in the proceedings.
Defendant next moves the Court to dismiss Plaintiff's claims for negligent misrepresentation and fraudulent inducement (docs.19, 28). Defendant asserts two grounds for dismissal: 1) Defendant argues that the United States Convention on the International Sale of Goods ("CISG") preempts any common law claims that Plaintiff alleges under state law; and 2) Defendant contends that Plaintiff cannot plead tort claims for negligent misrepresentation or fraudulent inducement because Plaintiff merely asserts economic losses arising from an alleged failure of a machine to perform to contractual specifications (docs.19, 28).
Defendant first contends that the CISG preempts Plaintiff's claims for negligent misrepresentation and fraudulent inducement (Id.). Plaintiff argues that the CISG only preempts state contract law claims, and then only to the extent that such claims fall within the scope of the treaty (doc. 26 (citing Asante Technologies, Inc. v. PMC-Serra, Inc., 164 F.Supp.2d 1142, 1151-1152 (N.D.Cal.2001), Valero Marketing & Supply Co. v. Greeni Oy & Greeni Trading Oy, 373 F.Supp.2d 475, 480 (D.N.J.2005)). Having reviewed the case law, the Court finds Plaintiff's argument well-taken. "Indeed, the CISG drafters made no attempt ... to prescribe the legal effect of ... a seller's negligent or fraudulent misrepresentation." Joseph Lookofsky, In Dubio Pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Preemption under the 1980 Vienna Sales Convention (CISG), 13 Duke J. Comp. & Int'l L. 263, 280 (2003). Therefore, the Court finds that the CISG does not prevent Plaintiff from pleading negligent misrepresentation and fraudulent inducement.
Defendant's next basis for dismissal of Plaintiff's negligent misrepresentation and fraudulent inducement claims is that these claims are precluded by the economic loss rule (Id.) This doctrine "prevents a party from recovering economic losses in tort that result from 'a breach of duties assumed only by agreement.' " Onyx Environmental Services, LLC v. Maison, 407 F.Supp.2d 874, 879 (N.D.Ohio 2005) (citing Corporex Dev. & Constr. Mgmt., Inc. v. Shook, Inc., 106 Ohio St.3d 412, 414, 835 N.E.2d 701 (2005)). Defendant contends that Ohio law does not provide the right for a party to assert tort claims that simply restate breach of contract allegations, and does not provide a tort remedy to recover economic losses for alleged failure of a product to perform as warranted (doc. 28 (citing Chemtrol Adhesives, Inc. v. American Mfrs. Mt. Ins. Co., 42 Ohio St.3d 40, 45 (Ohio 1989); Wolfe v. Continental Cas. Co., 647 F.2d 705, 710 (6th Cir.1981); Battista v. Lebanon Trotting Assoc., 538 F.2d 111, 117 (6th Cir.1976)).
However, as this Court previously held in its opinion in Cincinnati Gas & Electric Company, et al. v. General Electric Company, et al., 656 F.Supp. 49 (S.D.Ohio 1986) ("CG & E"), the economic loss rule does not preclude a claim of fraudulent inducement. See also Onyx Environmental Services, LLC v. Maison, 407 F.Supp.2d 874, 879 (N.D.Ohio 2005). Additionally, as Plaintiff points out, the Sixth Circuit has found that the economic loss rule does not apply to claims for negligent misrepresentation. HDM Flugservice GMBH v. Parker Hannifin Corp., 332 F.3d 1025, 1032 (6th Cir.2003). Therefore, this Court finds that, under Ohio law, Plaintiff is not precluded from pleading negligent misrepresentation and fraudulent inducement by the economic loss doctrine.
For the foregoing reasons, the Court DENIES Defendant's Motion for Partial Judgment on the Pleadings. SO ORDERED.
1. In briefing, Defendant makes representations about the validity of Plaintiff's fraudulent inducement claim based on discovery in a previously-filed action in this case (doc. 28). Because this is a motion for judgment on the pleadings, the Court is confined to those facts pled in the complaint in ruling on the sufficiency of this claim. Fed.R.Civ.P. 12(b)(6).
2. Defendant urges the Court to rule consistently with its decision in CG & E, 656 F.Supp. 49, and the reasoning that was adopted by the Ohio Supreme Court in Chemtrol, 42 Ohio St.3d 40. However, as the Sixth Circuit's analysis HDM reveals, Chemtrol dealt with the economic loss doctrine's application to negligence claims, not negligent misrepresentation claims. HDM, 332 F.3d at 1025. To the extent that this Court applied the economic loss doctrine to negligent misrepresentation in CG & E, the Court is now bound by the Sixth Circuit ruling in HDM, 332 F.3d 1025.

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