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Kaloti Enterprises7/8/2005
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Ollerman represents an expansion of the duty to disclose under the circumstances, in that case, of a consumer sale, from " he traditional legal rule that there is no duty to disclose in an arm's-length transaction [which] is part of the common law doctrine of caveat emptor . . . ." Ollerman also represents an expansion of § 551(2)(e) in imposing a duty to disclose material facts instead of just basic facts.
Ollerman itself specified that it was a "narrow holding," and in 2004 in Tietsworth v. Harley-Davidson, Inc., which involved the sale of motorcycles, the court reiterated that Ollerman was a "'narrow holding,' premised on certain policy considerations present in non-commercial real estate transactions." In fact, the Tietsworth court explained that "it is an open question whether the duty to disclose recognized in Ollerman extends more broadly to sales of consumer goods. This is a significant common-law policy issue."
I have attempted to examine numerous cases citing Ollerman. Most of the cases involve real estate . In commercial real estate transactions, sometimes the court declares a duty to disclose and sometimes not. Other than in the instant case, Ollerman has not been used, as far as I can tell, to extend a duty to disclose material facts outside of the real estate context.
At least two federal courts interpreting Wisconsin law have rejected the application of Ollerman to commercial transactions between businesses.
The Seventh Circuit Court of Appeals declined to impose a duty in the context of negligent misrepresentation in Badger Pharmacal, Inc. v. Colgate-Palmolive Co. The court wrote: "When two corporations, with the benefit of counsel, negotiate a commercial transaction at arms length, neither owes nor assumes a duty to disclose information to the other."
Recently, in Fleming Cos., Inc. v. Krist Oil Co., the district court, quoting Ollerman, declared that the parties to a business transaction are to "use their faculties and exercise ordinary business sense" and "not call on the law to stand in loco parentis to protect them in their ordinary dealings with other business people."
As I see it, the majority's holding extends beyond the facts in the instant case to impose a duty on parties in commercial transactions to disclose material facts under certain circumstances. Specifically, the majority holds:
party to a business transaction has a duty to disclose a fact where: (1) the fact is material to the transaction; (2) the party with knowledge of that fact knows that the other party is about to enter into the transaction under a mistake as to the fact; (3) the fact is peculiarly and exclusively within the knowledge of one party, and the mistaken party could not reasonably be expected to discover it; and (4) on account of the objective circumstances, the mistaken party would reasonably expect disclosure of the fact.
I conclude that based on the facts before us, the instant case may be shoehorned into the duty to disclose set forth in Restatement (Second) of Torts § 551(2)(e) and that it is not necessary to extend the duty to disclose beyond the Restatement.
For those who favor more disclosure in business transactions rather than less, the majority opinion's expansion of the duty to disclose material facts in commercial transactions will be welcome news. As we said in Ollerman, over the years society's attitudes toward good faith and fair dealing in business transactions have undergone (and continue to undergo) significant change from the traditional caveat emptor rule, and this change is reflected in the law.
II.
Accepting that Kel
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