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Painter Loses in Sherwin-Williams Case

Thursday, October 24, 2013

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A Missouri commercial painting contractor who accused the Sherwin-Williams Company of negligently misrepresenting one of its products has lost again in court.

The U.S. Court of Appeals for the Eighth Circuit has affirmed a federal court’s decision to bar Dannix Painting LLC’s lawsuit against the Cleveland, OH-based paint maker under the state’s "economic loss doctrine," according to an opinion made public Monday (Oct. 21).

Eglin Air Force Base
U.S. Air Force photo / Samuel King Jr.

The case involves painting work at newly constructed buildings at the Eglin Air Force Base in Florida.

That doctrine blocks commercial buyers from recovering in tort for economic losses associated with the contractual relationship, according to the decision written by Chief Judge William Jay Riley.

In other words, accusing a manufacturer of negligent misrepresentation, a cause of action in tort law, about a defective product while alleging purely economic losses is barred, as the issue is best decided under contract or warranty law.

Coating Failures Alleged

The court documents provide the following background of the case.

Dannix Painting, of St. Louis, was hired to paint exterior and interior surfaces of newly constructed buildings at Eglin Air Force Base in Florida. The products used were unidentified.

The plaintiff first used a product manufactured by Sherwin-Williams on the project, but then claimed the paint was defective and asked for alternatives from Sherwin-Williams’ representatives, the documents said.

Another Sherwin-Williams product was then suggested; however, the contractor said that coating gave off noxious odors and was therefore unacceptable.

A third product was then recommended, which Dannix ultimately used on the buildings. However, that product later delaminated from some of the interior and exterior surfaces where it was applied, according to the plaintiff.

Paint can and brush

©iStock.com/blackwaterimages

In oral argument, Dannix Painting alleged that a product recommended by Sherwin-Williams representatives delaminated, or "didn't stick" because it "didn't have the chemical and bonding properties that allowed it to adhere to the surface ..."

Dannix Painting claimed it then suffered a financial loss of $1.35 million when it had to remove the defective coating and redo the work, according to the case documents. The company did not allege any property damage in the complaint, the documents said.

Negligence Alleged

Dannix Painting sued Sherwin-Williams on Aug. 13, 2012, in U.S. District Court, claiming that the paint manufacturer “failed to exercise reasonable care or competence in investigating the accuracy of its recommendation and in specifying the [r]ecommended [p]roduct.”

The case centered on the recommendation of the third product.

On Dec. 3, 2012, the court dismissed the claim for negligent misrepresentation, agreeing with Sherwin-Williams that the suit was barred by Missouri’s "economic loss doctrine."

Applying the Doctrine

The appellate court agreed.

The "economic loss doctrine" prohibits a commercial buyer of goods “from seeking to recover in tort for economic losses that are contractual in nature,” the court said, citing Missouri case law.

(Tort law is designed for accidents that cause personal injury or property damage, whereas contract law is a body of law designed for resolving purely commercial disputes.)

Dannix's negligent misrepresentation claim, a cause of action in tort, is derived from its disappointed commercial expections, a failure of paint, the court said.

The failure is essentially a warranty cause of action under contract law, through which a contracting party can seek to recoup the benefit of its bargain, the court said.

Better Suited in Contract

Losses due to repair costs, lost profits or decreased value are essentially the failure of the buyer to receive the benefit of its bargain—the core of contract law, the court further explained.

Dannix  argued the "economic loss doctrine" did not apply because the fault was not attached to the product, but rather the recommendation.

Dannix argued that its claim for negligent misrepresentation was based on Sherwin-Williams’ product recommendation and it was “seeking damages for the loss it suffered when the recommended product proved unsuitable.”

Paint application

©iStock.com/BanksPhotos

The St. Louis-based paint contractor claimed it suffered financial loss of $1.35 million when it had to remove the defective coating and redo the work, according to the case documents.

“Dannix’s attempt to circumvent the [Uniform Commercial Code] bargaining process and avoid the parties’ agreed allocation of risk is unavailing,” the court said.

The Parties Contract

In a footnote, the court added that Dannix could have negotiated via its contract with Sherwin-Williams to receive greater warranties to “set the terms of compensation for product failure” and been compensated for its loss, according to case law.

“Because Dannix did not negotiate such warranties, it 'likely receive[d] a lower price in return.'”

“Allowing Dannix to maintain a negligent misrepresentation claim at this point would rewrite the parties’ contract and reallocate the risk of loss,” the court said.

Exception Not Applicable

The Eighth Circuit further rejected Dannix’s contention that the case fell within an "other property damage" exception to the "economic loss doctrine" because the company did not allege property damage of the surfaces painted in its complaint.

Under Missouri case law, the "economic loss doctrine" does not apply where damage is claimed to property other than the product sold, the court said.

Representatives from Sherwin-Williams or Dannix Painting did not immediately respond to a request for comment on the case.

   

Tagged categories: Business matters; Coating failure; Contracts; Delamination; Lawsuits; Painters; Sherwin-Williams

Comment from Dennis Carrington, (10/24/2013, 9:30 AM)

IMO It would be interesting to learn what the root cause is for the delamination and less detail about the finer points of the law.


Comment from john schultz, (10/25/2013, 7:57 AM)

It would also be interesting to see who wrote the spec and whether it had any bearing on the spec'd paint or its application.


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