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Kaloti Enterprises7/8/2005
se same stores, and that Kellogg's new mode of marketing would largely deny Kaloti its customary market. Third, while the Kellogg-Keebler merger may have been publicly announced, we infer from the confidentiality agreement between Kellogg and Geraci that the decision of Kellogg to engage in direct sales, rather than to sell through distributors or wholesalers, was not publicly announced. Accordingly, the fact that Kellogg had changed its mode of marketing was peculiarly and exclusively within Kellogg and Geraci's knowledge, and Kaloti could not reasonably be expected to have discovered this fact. Finally, because Kaloti had bought products from Kellogg for the purpose of acting as a secondary supplier for a number of years, it would be reasonable for Kaloti to expect that if Kellogg was going to sell these products directly to the same stores to which Kaloti customarily sold, Kellogg and its agent, Geraci, would advise Kaloti of this.
Kellogg and Geraci argue that they had no duty of disclosure to Kaloti because they were sophisticated, commercial entities engaged in an arm's-length transaction. As support for this proposition, they cite two federal court cases, Guyer v. Cities Service Oil Co., 440 F. Supp. 630 (E.D. Wis. 1977) and Badger Pharmacal, Inc. v. Colgate-Palmolive Co., 1 F.3d 621 (7th Cir. 1993). First, federal cases applying Wisconsin law provide persuasive, but not precedential, authority. See Daanen & Janssen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 400, 573 N.W.2d 842 (1998) ("This court is not bound by a federal court's interpretation of Wisconsin law."). In the 1977 Guyer decision, the district court concluded that the defendant oil company did not have a duty to disclose a change in marketing strategy to its gas station operators and lessees because there was no fiduciary relationship between the parties. Guyer, 440 F. Supp. at 633. Guyer was decided several years before our decision in Ollerman that recognized a broadening of Wisconsin law regarding the duty of disclosure and is therefore not persuasive. See id.; Ollerman, 94 Wis. 2d at 29-42. In Badger Pharmacal, the Seventh Circuit stated that " hen 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." Badger Pharmacal, 1 F.3d at 627. This mischaracterizes Wisconsin law by speaking too broadly and by failing to recognize that there are exceptions to the traditional "no duty to disclose" rule. See Ollerman, 94 Wis. 2d at 29-42.
Kellogg and Geraci further argue that an expansion of tort law will "wreak uncertainty on commercial arrangements that depend on order and certainty" and that, rather than rely on tort law, Kaloti should have acted diligently and negotiated contract terms to address the allocation of the risk at issue here. However, we are satisfied that our narrow holding in this case balances the general requirement that each party to a transaction must diligently protect its own self-interest, Ollerman, 94 Wis. 2d at 30, against the business community's interest in formulating business judgments without being intentionally misled by others, id.
Kellogg also argues that it had no duty of disclosure to Kaloti because the fact at issue did not satisfy the "basic fact" threshold, as that term was proposed in the Restatement (Second) of Torts ยง 551(2)(e), a standard that Ollerman drew upon. However, we declined in Ollerman to adopt the "basic fact" element of the Restatement standard, holding instead that it was the materiality of the fact that mattered. Ollerman, 94 Wis. 2d at 42. We similarly decline to adopt the "basic fact" versus "material fact" distinction and reaffirm that the re
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