Antitrust Law Daily Wrap Up, ADVERTISING—W.D. Wis.: Software company did not misrepresent it “worked closely” with Wisconsin agency, (May 14, 2015)

By Greg Hammond, J.D.

Douglas County, Wisconsin and the City of Superior could not proceed with false advertising, misrepresentation, and fraudulent inducement claims against software applications company Springbrook Software, Inc. The federal district court in Madison granted the software company summary judgment, finding that its representation that it “worked closely” with the Wisconsin Department of Transportation was not a misrepresentation of fact (Springbrook Software, Inc. v. Douglas County, May 13, 2015, Crocker, S.).

Background. Springbrook provides licensed software applications, technology solutions, and professional services to local governments, utilities, and special districts. The company responded to Douglas County’s and the City of Superior’s formal Request for Proposals (RFP), seeking bidders from qualified firms to “supply and install Financial System Software.” Springbrook’s 261-page RFP response included a one-page advertisement that stated it “worked closely with the Wisconsin Department of Transportation to develop a highway department solution that is fully compliant with state requirements.” Springbrook was selected for the job, but Douglas County and Superior later became dissatisfied with the Springbrook software and stopped working towards implementation. Springbrook notified Superior that it owed nearly $160,000 for products, services, associated fees, and expenses.

Springbrook eventually sued Douglas County and Superior for breach of contract. Douglas County and Superior counterclaimed, bringing causes of action for misrepresentation, fraudulent inducement, false advertising, among others. Springbrook moved for summary judgment.

Economic loss doctrine. Springbrook first argued that the defendants’ fraudulent inducement and misrepresentation claims were barred by Wisconsin’s economic loss doctrine. The defendants countered that their tort claims were not barred because they met the exception for claims of fraudulent inducement. The court rejected the defendants’ argument, finding that any representations Springbrook made about the capabilities of its software were interwoven with the agreement and that the agreement contains various provisions that established that the parties intended the agreement to address and allocate risk in the event the software did not meet the defendants’ expectations. Any alleged misrepresentations regarding the performance and capabilities of Springbrook’s software were therefore interwoven with the agreement and subject to the economic loss doctrine. Springbrook’s motion for summary judgment dismissing the defendant’s claims for fraudulent inducement and misrepresentation was therefore granted.

Deceptive trade practices. The defendants’ claim under the Wisconsin Deceptive Trade Practices Act, however, survived the economic loss doctrine. The claim rested on Springbrook’s statement in its flyer that it “worked closely” with the Wisconsin Department of Transportation to develop a highway department solution that was fully compliant with state reporting requirements. The court granted Springbrook summary judgment on the false advertising claim, finding: (1) there was no causal connection between the allegedly misleading representation and the pecuniary loss allegedly suffered by the defendants; and (2) Springbrook’s use of the phrase “worked closely” is not legally actionable, because it merely expresses the company’s judgment as to the nature of its relationship with the Department of Transportation, not a specific fact that can be substantiated or refuted.

The court also granted summary judgment in favor of Springbrook’s breach of contract claim for failing to pay invoices when due. The only claim that was denied summary judgment in favor of Springbrook was the defendant’s counterclaim for breach of duty of good faith and fair dealing. Springbrook failed to present any grounds for the court to grant summary judgment on that claim, despite it appearing to have little merit.

The case number is 13-cv-760-slc.

Attorneys: Melissa J. Papaleo (Hinshaw & Culbertson LLP) for Springbrook Software, Inc. Kristine Marie Boylan (Briggs and Morgan, PA) for Douglas County, and City of Superior, Wisconsin.

Companies: Springbrook Software, Inc.; Douglas County; City of Superior

Cases: Advertising StateUnfairTradePractices WisconsinNews