Squish La Fish, Inc. v. Thomco Specialty Products, Inc.

Citations: 149 F.3d 1288; 1998 U.S. App. LEXIS 18635; 1998 WL 466570Docket: 97-8595

Court: Court of Appeals for the Eleventh Circuit; August 11, 1998; Federal Appellate Court

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The Eleventh Circuit Court of Appeals is reviewing the case of Squish La Fish, Inc. v. Thomco Specialty Products, Inc., following a district court's grant of summary judgment favoring Thomco. The district court determined that Squish could not recover under the negligent misrepresentation exception to the economic loss rule under Georgia law, as Squish did not demonstrate reliance on Thomco's alleged misrepresentation. The appellate court disagrees with this conclusion and intends to reverse and remand the decision.

The case involves Squish La Fish's patented product, the "Tuna Squeeze," for which Squish entered a contract with American Body Building Products for the sale of 10,000 units, with an additional agreement for 2,000,000 units. To package these units, Squish hired ProPack, Inc., which sought advice from Thomco regarding adhesive selection. Disputed testimony exists regarding whether Thomco's salesperson, Kelly Guinsler, provided accurate information about the adhesive's properties, specifically regarding its strength and water solubility. While Squish claims that Guinsler assured ProPack that the adhesive would easily wash off the Tuna Squeeze, Guinsler's testimony suggests he advised testing the adhesive for water solubility, indicating uncertainty about its removability.

Munson denies having been instructed by Guinsler to test the adhesive, which he did not do. He relied on Guinsler’s expertise and representation as a representative of 3M regarding the adhesive's solubility. ProPack did not conduct any tests on the adhesive for water solubility or removability before use. Communication occurred between ProPack and Michael Evante of Squish La Fish, who suggested Munson and Guinsler choose the best and most economical adhesive. Munson relayed that Guinsler recommended the 976 adhesive, to which Evante agreed, trusting Guinsler's expertise. ProPack ordered 48 rolls of the adhesive on November 9, 1994, and an additional 24 rolls on November 17, subsequently using it on about 8,600 of 10,000 Tuna Squeeze units before discovering it could not be washed off. ProPack resolved the issue by soaking the units in mineral oil and re-adhering them with two-sided tape, then shipping them to American Body Building on December 2, 1994. However, American Body Building returned many units due to residue issues. On December 15, they requested a written guarantee for an oral contract of 2,000,000 units, which Evante could not provide due to ongoing packaging problems. Subsequently, in February 1995, American Body Building canceled both a written contract for 10,000 units and an oral agreement for the additional 2,000,000 units. Squish La Fish then filed a tort suit against Thomco, alleging negligence in recommending the adhesive and seeking damages for lost profits. Thomco denied liability and sought summary judgment, claiming the complaint was barred by Georgia's economic loss rule. The district court granted summary judgment, concluding that Squish La Fish did not rely on Thomco's representations, which excluded their claim from the negligent misrepresentation exception. The case was appealed, and it is governed by Georgia law, with jurisdiction established under 28 U.S.C. § 1291. The standard of review for summary judgment is de novo, affirming only if no genuine material fact issue exists.

The court addressed the issue of whether Squish La Fish could claim negligent misrepresentation under Georgia law, given that the economic loss rule typically prohibits tort recovery for purely economic losses without personal injury or property damage. The economic loss rule allows recovery only through contract warranty actions. However, Georgia recognizes exceptions, including the negligent misrepresentation exception established in Robert Co. Assoc. v. Rhodes-Haverty Partnership, which holds that those providing information in a business context owe a duty of care to foreseeable users of that information. The court outlined the elements of negligent misrepresentation: 1) negligent provision of false information, 2) reasonable reliance on that information, and 3) resulting economic injury.

The district court granted summary judgment for Thomco, concluding that Squish did not directly rely on Thomco's representations, but Squish argued that Georgia law allows for indirect reliance. The appellate court found that the district court erred by not recognizing that Squish's indirect reliance through ProPack could meet the negligent misrepresentation exception. It emphasized that Squish, as the manufacturer of a product using Thomco's adhesive, was a foreseeable user of the information provided by Thomco. The court also noted that material factual disputes regarding the alleged false information and Squish's reliance remained unresolved. Consequently, the appellate court reversed the district court's summary judgment and remanded the case for further proceedings.