The full case caption appears at the end of this opinion.
Bauer, Circuit Judge. After a real estate dealfell apart, Home Valu, Inc. sued Pep Boys –Manny, Moe & Jack of Delaware, Inc. for the tortsof negligent misrepresentation, strictresponsibility misrepresentation, and intentionalmisrepresentation. Home Valu also brought abreach of contract claim. Exercising jurisdictionover this state law dispute under 28 U.S.C. sec.1332, the district court dismissed Home Valu’scomplaint for failure to state a claim upon whichrelief can be granted. Home Valu appeals. Weaffirm. I. Background Home Valu operated a retail store under thename “Drexel” located at 8787 West Brown DeerRoad in Milwaukee, Wisconsin. Drexel sold repairand home improvement goods. Although its Drexelstore was profitable, Home Valu decided to closeit and sell the property to Pep Boys–then arapidly growing retailer of automotive parts andservices–to accommodate Pep Boys’ plannedexpansion into Wisconsin. Home Valu and Pep Boys executed a writtenAgreement of Sale on May 15, 1997. The Agreementgave Pep Boys 180 days to satisfy certaincontingencies, such as obtaining local and statepermits to operate its auto service business andto verify environmental and other characteristicsof the property. Once the contingencies were met,the parties were to close within 30 days. TheAgreement provided, however, that if Pep Boyscould not satisfy the contingencies, Pep Boys hadthe option of terminating the Agreement, aftergiving notice to Home Valu, or the right to waivethe contingencies and finalize without referenceto the contingencies. About 30 days before the time the Agreementgave Pep Boys to complete the contingencies, theparties extended the closing date to December 31,1997. Then, roughly a month later, the partiesentered into a written Amendment of theiroriginal Agreement of Sale. [FOOTNOTE 1]
The Amendmentextended the deal’s closing date again, this timeuntil March 1, 1998. At some point, Pep Boys experienced a downturnin revenue. Shortly before it negotiated theAmendment, Pep Boys’ Chairman and CEO commentedin a written memorandum that “It is definitelyNOT business as usual at Pep Boys. Literallyeverything we do is being revalidated–nothing issacred.” Pep Boys’ CEO also stated that thecompany’s 1998 expansion rate would be lower andthat Pep Boys did not know how many new states itwould enter because expansion plans wereundeveloped. Pep Boys notified Home Valu in mid-February1998 that it would not purchase the Drexelproperty. The contract contained a liquidateddamages clause which limited Pep Boys’ liabilityfor breach of the contract to $50,000. Pep Boysinvoked the liquidated damages clause and offeredto pay Home Valu $50,000 for the breach. HomeValu refused the offer. Home Valu was unhappy with the $50,000 offerbecause, shortly after extending the closing dateuntil March 1, 1998, Home Valu began theexpensive process of closing its Drexel store.Home Valu spent more than $800,000 closing downDrexel in preparation for the scheduled March 1,1998 sale. Rather than accepting $50,000 tocompensate it for $800,000 in expenses, Home Valufiled suit against Pep Boys in Wisconsin statecourt. Pep Boys removed the case to federaldistrict court and Home Valu filed an amendedcomplaint. Home Valu’s seven-count amendedcomplaint alleged two counts of negligentmisrepresentation, two counts of strictresponsibility misrepresentation, two counts ofintentional misrepresentation, and one count ofbreach of contract. Home Valu’s misrepresentation claims can bedivided into two groups. The first groupconcerned statements Pep Boys made which inducedHome Valu into executing the Amendment. In thesepre-Amendment statements, Pep Boys repeatedlyassured Home Valu that it would purchase theproperty if the closing date were extended toMarch 1, 1998. Home Valu claimed that thesestatements were false and that when Pep Boys madethem it had no intention of purchasing theproperty. Home Valu claimed that Pep Boys madethese false statements for the sole purpose ofinducing Home Valu into executing the Amendmentand that Pep Boys had an economic interest inextending the closing date. According to HomeValu, these false statements constitutednegligent, strict responsibility, and intentionalmisrepresentations. The second group of claimed misrepresentationsrelated to statements that Pep Boys made afterthe parties executed the Amendment extending thepurchase date. In these claims, Home Valu saidthat it became concerned about whether Pep Boyswould honor its obligation under the Amendmentand proceed with the purchase on March 1, 1998.As a result of these concerns, Home Valu againasked Pep Boys about its intent to finalize thereal estate transaction on the scheduled closingdate. In response to these inquiries, Pep Boystold Home Valu on several occasions that it wouldin fact purchase the property on or before theclosing date. According to Home Valu, thesestatements were false and Pep Boys knew them tobe false when it made them. Home Valu assertedthat these untrue statements caused it tocontinue closing its Drexel store when it wouldhave abandoned the process and avertedsubstantial financial losses if it had known thatPep Boys was not going to consummate the deal.Based on these facts, Home Valu stated that PepBoys had committed the torts of negligent, strictresponsibility, and intentionalmisrepresentation. In its breach of contract claim, Home Valufirst made the simple allegation that Pep Boysbreached the contract by failing to purchase theproperty by March 1, 1998. In addition to thisclaim, Home Valu alleged that Pep Boys violatedthe covenant of good faith and fair dealing. HomeValu stated that it began closing its Drexelstore because Pep Boys waived the applicablecontingencies and this waiver required Home Valuto begin shutting down Drexel. Home Valu assertedthat “in exercising its right to require HomeValue to undertake the expensive process ofclosing down its profitable Drexel . . . store,Pep Boys had a continuing duty to act in goodfaith and fair dealing and to cooperate with HomeValu.” According to Home Valu, Pep Boys breachedthis duty of good faith by repeatedly reassuringHome Valu that it would purchase the propertyeven though “Pep Boys knew in 1997 and in Januaryand February of 1998 that it might not honor itsAgreement to close on the purchase of theproperty.” The district court dismissed Home Valu’scomplaint under Federal Rule of Civil Procedure12(b)(6) for failure to state a claim upon whichrelief can be granted. Home Valu now challengesthe district court’s ruling. II. Analysis We review the district court’s grant of amotion to dismiss under Rule 12(b)(6) de novo. Henderson v. Sheahan
, 196 F.3d 839
, 845 (7th Cir.1999). In reviewing a dismissal, we accept allfactual allegations in the plaintiff’s complaintas true and draw all reasonable inferences in theplaintiff’s favor. Klug v. Chicago Sch. ReformBd. of Trustees, 197 F.3d 853
, 858 (7th Cir.1999). We will affirm only if it appears beyonda doubt that the plaintiff cannot prove any setof facts that would entitle it to relief. Conleyv. Gibson, 355 U.S. 41, 45-46 (1957); Frederickv. Simmons Airlines, 144 F.3d 500
, 502 (7th Cir.1998). Finally, by virtue of the parties’agreement, we apply Wisconsin tort and contractlaw to this dispute. See Harter v. Iowa GrainCo., Nos. 98-3010 & 98-3817, 2000 WL 426366, at*15 n.12 (7th Cir. April 21, 2000) (we foregochoice of law analysis when the parties agree onthe law that governs a dispute and there is areasonable relation between the dispute and theforum whose law has been selected). Because resolution of the issues in this casedepends on Wisconsin law, “we must apply the lawthat would be applied in this context by theWisconsin Supreme Court.” McGeshick v. Choucair,9 F.3d 1229, 1232 (7th Cir. 1993) (citing Greenv. J.C. Penney Auto Ins. Co., 806 F.2d 759, 761(7th Cir. 1986)). If the Wisconsin Supreme Courthas not spoken on the issue, we generally treatdecisions by the state’s intermediate appellatecourts as authoritative “unless there is acompelling reason to doubt that [those] courtshave got the law right.” Rekhi v. WildwoodIndus., 61 F.3d 1313, 1319 (7th Cir. 1995). Whenwe are faced with two opposing and equallyplausible interpretations of state law, “wegenerally choose the narrower interpretationwhich restricts liability, rather than the moreexpansive interpretation which createssubstantially more liability.” Birchler v. GehlCo., 88 F.3d 518, 521 (7th Cir. 1996) (citingTodd v. Societe Bic, S.A., 21 F.3d 1402, 1412(7th Cir. 1994)). A. Misrepresentation Claims The district court dismissed all six of HomeValu’s misrepresentation claims as barred byWisconsin’s economic loss doctrine. The WisconsinSupreme Court has followed “the majority ofcourts across the country in applying theeconomic loss doctrine to commercialtransactions.” State Farm Mut. Auto Ins. Co. v.Ford Motor Co., 592 N.W.2d 201, 208 (Wis. 1999).Under the economic loss doctrine, Wisconsin lawbars tort claims which seek only “economiclosses” related to a commercial transaction.Wausau Tile, Inc. v. County Concrete Corp., 593N.W.2d 445, 451 (Wis. 1999). Wisconsin’s highestcourt draws the line between economic and non-economic loss by emphasizing that economic lossis damage “which does not cause personal injuryor damage to other property.” Daanen & Janssen,Inc. v. Cedarapids, Inc., 573 N.W.2d 842, 845(Wis. 1998). In contrast, non-economic damages,which are recoverable in tort, involve some”physical harm” or other “unreasonable risk ofinjury to person or property.” Northridge Co. v.W.R. Grace and Co., 471 N.W.2d 179
, 185 (Wis.1991). In reviewing the district court’s dismissal ofHome Valu’s several misrepresentation claims, wedo not write on a clean slate. Rather, we havepreviously upheld the dismissal of tort claimsfor negligent misrepresentation and strictresponsibility misrepresentation as barred byWisconsin’s economic loss doctrine. See BadgerPharmacal, Inc. v. Colgate-Palmolive Co., 1 F.3d621, 628 (7th Cir. 1993). In Badger Pharmacal, weapplied Wisconsin law and reasoned that “‘tortlaw provides no remedy in a case in which theplaintiff is seeking to recover for a commercialloss rather than damage to person, property, orreputation.’” Id. (quoting Midwest KnittingMills, Inc. v. United States, 950 F.2d 1295, 1300(7th Cir. 1991) (also applying Wisconsin law)).Since our holding in Badger Pharmacal, noWisconsin court has ruled to the contrary. Wetherefore adhere to our view that the WisconsinSupreme Court would not recognize tort claims fornegligent or strict responsibilitymisrepresentation “when two corporations, withthe benefit of counsel, negotiate a commercialtransaction at arms length.” Badger Pharmacal, 1F.3d at 627. Having found that Judge Stadtmueller correctlydismissed the negligent and strict responsibilitymisrepresentation claims, we consider Home Valu’stwo allegations that Pep Boys committed the tortof intentional misrepresentation. However, thisissue, too, has been addressed before now. InCooper Power Systems, Inc. v. Union CarbideChems. & Plastics Co., Inc., 123 F.3d 675, 682(7th Cir. 1997), we noted that this court “hasalready predicted that Wisconsin would not allowa negligence or strict [responsibility]misrepresentation claim seeking to recovereconomic damages. We perceive no basis fortreating . . . [an] intentional misrepresentationclaim any differently.” Our decision in CooperPower dooms Home Valu’s two claims of intentionalmisrepresentation. Home Valu tries to avoid the economic lossdoctrine and preserve at least one of its tortclaims by citing Douglas-Hanson Co., Inc. v. BFGoodrich Co., 598 N.W. 262 (Wis. Ct. App. 1999).In Douglas-Hanson, the Wisconsin Court of Appealsreviewed a jury verdict in the plaintiff’s favor.After concluding that the jury had found that theplaintiff was fraudulently induced to enter acontract, the court confronted the issue of”whether the economic loss doctrine prohibits aplaintiff from recovering tort damages when anintentional misrepresentation fraudulentlyinduces a plaintiff to enter a contract.” Id. at268. The court answered this question in thenegative and held that “the economic lossdoctrine does not bar claims for intentionalmisrepresentation when the misrepresentationfraudulently induces a party to enter acontract.” Id. at 270-71. In reaching thisconclusion, the court noted tension with ourdecision in Cooper Power, but found that the”better public policy” was to allow such tortclaims. Id. at 270. Armed with this decision,Home Valu asserts that Douglas-Hanson saves itsintentional misrepresentation claim that Pep Boysfraudulently induced it into signing theAmendment which extended the closing date toMarch 1, 1998. Although we usually treat decisions by stateintermediate appellate courts as authoritative,Rekhi, 61 F.3d at 1319, we are neverthelessrequired to rule as we believe the Supreme Courtof Wisconsin would rule in this context.McGeshick, 9 F.3d at 1232. In this case, we finda compelling reason to refrain from following theWisconsin Court of Appeals’ decision in Douglas-Hanson. Specifically, a few weeks after we heardoral argument in this case, the Supreme Court ofWisconsin (which had granted a petition to reviewthe intermediate appellate court’s opinion inDouglas-Hanson) issued a per curiam statementthat “the court is equally divided on thequestion of whether the published decision of thecourt of appeals . . . should be affirmed orreversed.” Douglas-Hanson Co., Inc. v. BFGoodrich Co., 607 N.W.2d 621 (Wis. 2000). Whilethis evenly divided court resulted in anaffirmance under Wisconsin law, id., Smith v.State, 163 N.W.2d 8 (Wis. 1968), it did not makethe Wisconsin Court of Appeals’ Douglas-Hansondecision binding authority of the WisconsinSupreme Court. See Neil v. Biggers, 409 U.S. 188,192 (1972) (an affirmance by an equally dividedcourt is not entitled to precedential weight);State ex rel. Thompson v. Jackson, 546 N.W.2d140, 142 (Wis. 1996) (“a majority of theparticipating justices must agree on a particularpoint for it to be considered the opinion of thecourt”). Because the Wisconsin Supreme Court did notgarner a majority to affirm the Wisconsin Courtof Appeals’ holding that the economic lossdoctrine does not bar claims for intentionalmisrepresentation that allege fraudulentinducement, the issue remains unresolved. And, asexhibited by the equally divided WisconsinSupreme Court, whether the economic loss doctrinedoes bar such a tort claim is an issue over whichthere is considerable disagreement. Where, as inthis case, we are faced with two equallyplausible interpretations of state law, “wegenerally choose the narrower interpretationwhich restricts liability, rather than the moreexpansive interpretation which createssubstantially more liability.” Birchler, 88 F.3dat 521. We therefore take the approach that isrestrictive of liability and conclude thatWisconsin’s economic loss doctrine bars HomeValu’s intentional misrepresentation claim thatit was fraudulently induced into executing theAmendment. Accordingly, we affirm the districtcourt’s decision to dismiss Home Valu’smisrepresentation claims as barred by Wisconsin’seconomic loss doctrine. B. Breach of Contract Claim Although it brought only one breach of contractcount in its complaint, Home Valu actuallyalleges two separate breaches. Home Valu firstcomplains that Pep Boys breached the expressterms of the contract when it failed to purchasethe property by March 1, 1998. The district courtdenied this claim because the contract’sliquidated damages clause limited Pep Boys’liability for breach to $50,000 and Pep Boys hadalready offered to pay Home Valu $50,000. Findingno legal basis for recoverable damages beyond the$50,000 that Pep Boys had already offered to pay,Judge Stadtmueller held that Home Valu did notstate a claim upon which relief could be granted. We agree with the district judge that Home Valuhas no further claim for breach of contract. Theparties bargained for and agreed on a liquidateddamages clause that clearly and unambiguouslylimited Pep Boys’ liability for a breach to$50,000. Pep Boys offered to pay Home Valu$50,000 for its failure to buy the property andthat money has been placed into an escrow accountpending the outcome of this litigation. In theevent that Pep Boys prevails in this appeal(which it now has), Home Valu can collect the$50,000 in liquidated damages from the escrowaccount. That fully satisfies the question ofdamages for the breach. Home Valu’s second breach of contract theoryalleges that Pep Boys violated the covenant ofgood faith and fair dealing by telling Home Valuthat it would purchase the property even thoughPep Boys knew it would not go through with thedeal. The district court held that the duty ofgood faith and fair dealing is an impliedprovision of the contract and therefore anybreach of this term simply triggers theliquidated damages clause. No additional damagesare available, even assuming the correctness ofthe claim of violation of fair dealing or goodfaith. It is well-settled that Wisconsin law recognizesthe implied contractual duty of good faith andfair dealing in commercial contracts. See MarketSt. Assocs. Ltd. Partnership v. Frey, 941 F.2d588, 593-94 (7th Cir. 1991); Hauer v. Union StateBank of Wautoma, 532 N.W.2d 456, 463-64 (Wis. Ct.App. 1995). However, the implied covenant “doesnot support an independent cause of action forfailure to act in good faith under a contract.”Hauer, 532 N.W.2d at 464. Instead, the duty ofgood faith is meant to “give the parties whatthey would have stipulated for” at the time ofcontracting if they could have foreseen allfuture problems of performance. Market St.Assocs., 941 F.2d at 596. As the district courtpointed out, the requirement of good faith “wasnot of a duty independent of the contract, but ofthe contract itself.” Because a breach of theduty of good faith is the same as a breach of anyother contract term, Home Valu is entitled to itscontractual liquidated damages, but nothing more. We affirm the decision of the district court. :::FOOTNOTES::: FN1
The original Agreement of Sale and the subsequentAmendment collectively govern the parties’contractual rights. Because these two agreementswork together, we will treat them as one andrefer to them collectively as “the contract.”
Home Valu, Inc., v. Pep Boys — Manny, Moe and Jack of Delaware, Inc. In the United States Court of Appeals for the Seventh Circuit Home Valu, Inc., Plaintiff-Appellant, v. Pep Boys — Manny, Moe and Jack of Delaware, Inc., Defendant-Appellee. No. 99-1168 Appeal from the United States District Court for the Eastern District of Wisconsin. No. 98-C-531–J.P. Stadtmueller, Chief Judge. Argued: February 14, 2000 Decided: May 24, 2000 Before: BAUER, FLAUM, and EVANS, Circuit Judges.