Reis Robotics USA, Inc. v. Concept Industries, Inc.
462 F.Supp.2d 897 (2006)
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Rule of Law:
Under the Illinois economic loss doctrine, a party cannot recover in tort for purely economic losses, and the narrow exception for negligent misrepresentation does not apply to a manufacturer who provides information that is merely ancillary to the sale of a tangible product.
Facts:
- Reis Robotics USA, Inc. ('Reis') manufactures and supplies industrial robotics equipment.
- Concept Industries, Inc. ('Concept') manufactures automotive parts and sought to purchase a robotic laser cutting machine from Reis.
- Prior to entering a contract, a Reis sales manager allegedly made oral and written promises to Concept that the machine would achieve a 'cycle time' of 60-70 seconds per part.
- On or about February 24, 2005, the parties entered into a written agreement for the purchase of the machine, which did not include the 60-70 second cycle time promise but did contain other technical specifications.
- The agreement also included a non-reliance clause stating that the buyer was not relying on any representation not specifically included in the written agreement.
- After the machine was delivered and installed, Reis informed Concept in writing that its actual cycle time would be between 150-195 seconds per part.
- Concept alleged this significantly slower speed was a 'fatal' defect that prevented it from manufacturing parts in the volumes required by its customers.
- A dispute arose over payment, with Reis claiming Concept owed an unpaid balance and Concept refusing to pay the full amount due to the machine's performance failures.
Procedural Posture:
- Reis Robotics USA, Inc. filed a diversity action for breach of contract against Concept Industries, Inc. in the U.S. District Court for the Northern District of Illinois.
- Concept filed an answer, asserted six affirmative defenses, and brought seven counterclaims against Reis, including fraudulent inducement, negligent misrepresentation, and breach of contract.
- Reis filed a motion to strike and dismiss Concept's affirmative defenses under Rule 12(f).
- Reis filed a motion to strike portions of Concept's answer under Rule 12(f).
- Reis filed a motion to dismiss all of Concept's counterclaims for failure to state a claim upon which relief can be granted under Rule 12(b)(6).
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Issue:
Does the Illinois economic loss doctrine bar a claim for negligent misrepresentation against a manufacturer of tangible goods when the alleged misrepresentations about the product's performance were made in connection with the sale of those goods?
Opinions:
Majority - Castillo, J.
Yes, the Illinois economic loss doctrine bars the claim for negligent misrepresentation. This doctrine, established in Moorman Mfg. Co. v. Nat’l Tank Co., prohibits a plaintiff from recovering under a negligence theory for purely economic damages not arising from personal injury or property damage. While an exception exists for defendants 'in the business of supplying information for the guidance of others in their business transactions,' that exception is construed narrowly. The court found that Reis is in the business of manufacturing and selling tangible goods—robotic equipment. Any information Reis provided about the machine's cycle time was merely ancillary to the sale of that product. Because the 'true purpose' of the parties' agreement was the sale of a product, not the provision of information, Reis does not fall under the exception, and the Moorman doctrine bars Concept's negligent misrepresentation counterclaim.
Analysis:
This opinion reinforces the strength and breadth of the Illinois economic loss doctrine, also known as the Moorman doctrine. It strictly delineates the boundary between contract remedies and tort remedies in commercial disputes involving defective products. The court's analysis clarifies that manufacturers providing information about their own products are not considered to be 'in the business of supplying information,' thereby preventing buyers from sidestepping contractual limitations (like integration clauses) by pleading negligent misrepresentation. This decision effectively channels disputes over product performance and unmet expectations into the realm of contract law, specifically breach of contract and breach of warranty, rather than allowing them to proceed as tort claims.
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