Thursday, February 28, 2013

Below v. Norton, Irrelevant After All These Years

Five years ago this week, I argued two cases before the Wisconsin Supreme Court.  The first of these cases was Below v. Norton, which I argued on the morning of Tuesday February 26, 2008.

The trial court and the Court of Appeals had both held that my client's intentional misrepresentation claim against her sellers was barred by the economic loss doctrine, which disfavors tort claims (such as negligence and strict liability claims) between contracting parties.  The Wisconsin Supreme Court had held that the economic loss doctrine barred most intentional fraud claims between commercial parties, see Kaloti Enters., Inc. v. Kellogg Sales Co., 2005 WI 111, and even intentional fraud claims brought by consumers.  See Tietsworth v. Harley-Davidson, Inc., 2004 WI 32.  The Wisconsin Supreme Court had also held that the economic loss doctrine barred some misrepresentation claims in commercial real estate transactions, see Van Lare v. Vogt, Inc., 2004 WI 110, and negligent construction claims by homeowners.  See Linden v. Cascade Stone Co., 2005 WI 113.  Somehow, I convinced the Wisconsin Supreme Court to accept my petition for review in the face of this daunting precedent and also convinced it not to dismiss my petition for review as improvidently granted after it decided Wickenhauser v. Lehtinen, 2007 WI 82.  Unfortunately, despite my best efforts and the best efforts of amicus curiae Wisconsin Academy of Trial Lawyers (now the Wisconsin Association for Justice), the Wisconsin REALTORS Association, the University of Wisconsin Consumer Law Litigation Clinic (whose students also "mooted" my arguments), AARP, Consumer Justice Law Center LLC, Legal Action of Wisconsin, and the Legal Aid Society of Milwaukee, the Wisconsin Supreme Court was unwilling to recognize an exception to the economic loss doctrine for intentional fraud claims brought by noncommercial purchasers of residential real estate.  It held that the economic loss doctrine bars common law intentional misrepresentation claims in all real estate transactions.  See Below v. Norton, 2008 WI 77.

Realtors and lawyers advised their clients on the implications of the Below decision until the legislature abrogated its holding by enacting Wis. Stat. 895.10.  Under this statute, a purchaser of residential real estate may pursue a tort claim against his or her seller for fraud or intentional misrepresentation arising from a residential real estate transaction completed on or after April 23, 2009.  See Shister v. Patel, 2009 WI App 163, n.6. 

If you've purchased a defective home, well-meaning friends and family may tell you that you have no legal remedy.  Thank them for their advice, but please recognize that what they've heard is urban legend.  If you purchased your home on or after April 23, 2009, Below v. Norton does not bar your common law intentional misrepresentation claim.  Even without Wis. Stat. s. 895.10, purchasers of defective residential property still had claims for violation of Wis. Stat. s. 100.18 and breach of contract, as the Below decision itself pointed out.  Furthermore, the Wisconsin Court of Appeals has since held that the economic loss doctrine does not bar claims for violation of Wis. Stat. ss. 895.446 and 943.20.  See Ferris v. Location 3 Corp., 2011 WI App 134.

While it was quite an experience arguing before the Wisconsin Supreme Court, the Below decision is largely irrelevant to claims arising from the purchase of defective residential real estate as we sit here today.  If you're considering buying a home, please follow the advice in my previous post regarding Real Estate Condition Reports.  If you've already discovered that you've bought a home with defects, please review my post regarding statutes of limitations.