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Leadfree Enterprises Inc. v. United States Steel Corp.

decided: July 21, 1983.

LEADFREE ENTERPRISES, INC., AN IOWA CORPORATION, AND LARRY WHITE, AN INDIVIDUAL, PLAINTIFFS-APPELLANTS,
v.
UNITED STATES STEEL CORPORATION, A DELAWARE CORPORATION, INRYCO, INC., A DELAWARE CORPORATION, AND ALLIED STRUCTURAL STEEL COMPANY, A DELAWARE CORPORATION, DEFENDANTS-APPELLEES, V. PITTSBURGH TESTING LABORATORY, THIRD-PARTY DEFENDANT-APPELLEE



Appeal from the United States District Court for the Western District of Wisconsin. No. 81 C 232 -- James E. Doyle, Senior Judge.

Pell, and Coffey, Circuit Judges, and Weigel, Senior District Judge.*fn*

Author: Pell

PELL, Circuit Judge.

In this case we decide whether Wisconsin tort law allows the appellants to recover for lost profits and other purely economic losses caused when a bridge was closed as a result of allegedly defective construction by the appellees.

I. FACTS

The appellees Allied Structural Steel Co. and Inryco, Inc. contracted with Iowa and Wisconsin to construct a bridge over the Mississippi River between Marquette, Iowa and Prairie du Chien, Wisconsin. United States Steel Corp., another appellee in the case, provided the steel used in the construction of the bridge. The bridge was completed in 1974.

Wisconsin inspectors discovered a crack in an arch of the bridge on October 2, 1979. Testing indicated that the steel was of inferior quality. On January 16, 1981, Iowa and Wisconsin closed the bridge. The states reopened the bridge on August 12, 1981, after some repairs were made and structural supports added. The states brought an action against the appellees in a Wisconsin court, which is still pending.

On March 25, 1981, Leadfree Enterprises, Inc. and its president Larry White brought an action in the circuit court of Crawford County, Wisconsin on behalf of the class of people who suffered incidental and consequential damages as a result of the closing of the bridge.*fn1 They sought $75,000,000 from the three appellees. They asserted that the closing of the bridge caused them loss of business, employment, income, time, and "numerous personal activities and opportunities." They asserted six claims based upon breach of warranty, negligence, and product liability theories. They did not contend that they suffered any physical damage to their property nor that they had any property interest in the bridge.

On April 21, 1981, the case was removed to the United States District Court for the Western District of Wisconsin. On April 22, United States Steel Corp. filed a third-party complaint against Pittsburgh Testing Co., alleging that the company had negligently failed to discover the defect in the steel.

On April 23, 1981, Inryco, Inc. filed a motion to dismiss for failure to state a claim on which relief can be granted, Fed. R. Civ. P. 12(b)(6). The other appellees filed similar motions. On September 10, 1982, the district court granted the motion. The court held that under Wisconsin law a plaintiff cannot recover unless he has suffered physical injury, property damage, or damage to something in which he has at least some ownership or property interest. The court said that there was no sensible stopping point for the liability the appellants sought to impose on the appellees.

II. DISCUSSION

Under Wisconsin law, which applies in this diversity case, a plaintiff in a negligence action must establish that the defendant owes a duty of care, that he breached that duty, that there was a causal relation between the conduct and the injury, and that there was actual loss or damage as a result of the injury. Ollerman v. O'Rourke Co., 94 Wis. 2d 17, 46, 288 N.W.2d 95, 109 (1980).

Rather than limiting liability by principles of foreseeability or remoteness of harm, Wisconsin's policy, once negligence is established, is to determine whether liability nevertheless may be denied because of any one of six possible grounds:

"Even where the chain of causation is complete and direct, recovery may sometimes be denied on grounds of public policy because: (1) The injury is too remote from the negligence; or (2) the injury is too wholly out of proportion to the culpability of the negligent tort-feasor; or (3) in retrospect it appears too highly extraordinary that the negligence should have brought about the harm; or (4) because allowance of recovery would place too unreasonable a burden on the negligent tort-feasor; or (5) because allowance of recovery would be too ...


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