All-Tech Telecom, Inc. v. Amway Corp.

Brief Fact Summary.

All-Tech was created to be an Amway distributor of Amway’s new TeleCharge phone service. For reasons beyond All-Tech’s control, TeleCharge was a flop.

Synopsis of Rule of Law.

The economic loss doctrine forbids commercial contracting parties from escalating their contract dispute into a charge of tortious misrepresentation if they could have easily protected themselves from the misrepresentations now complained of in their contract.

When there is an express contract governing the relationship out of which a promise emerged, and no issue of consideration, there is no gap in the remedial system for promissory estoppel to fill.

Facts.

Amway’s “TeleCharge” phone allowed customers at hotels and restaurants to place long-distance calls by credit card, with line charges divided between the hotel or restaurant and distributor. All-Tech was created to be an Amway distributor of TeleCharge phones. For reasons beyond All-Tech’s control, TeleCharge was a flop. All-Tech sued for intentional and negligent misrepresentation of the promising nature of TeleCharge.

Issue.

Should the trial court have granted Amway’s motion for summary judgment on the claims of intentional misrepresentation and promissory estoppel?

Held.

Affirmed.

The trial court was correct to grant Amway’s motion for summary judgment on the claims of intentional misrepresentation and promissory estoppel.

Discussion.

The common law economic loss doctrine limited who could bring a tort suit for personal injury or damages to property to the injured person or owner of the damaged property and not persons with commercial links to the owner. The rationale was that neither party should have to pay for a tort’s indirect beneficial and harmful consequences when insurance or contractual provisions would provide for a better remedy.

Where well-developed contractual remedies provide for instances of breach of warranty, tort remedies would unnecessarily duplicate the contract remedies or undermine contract law protections of, for example, the parol evidence rule.

Here, the misrepresentations were based in warranties, and All-Tech failed to present any evidence of an actionable misrepresentation, as some of the alleged misrepresentations were corrected before All-Tech even purchased the TeleCharge phones and some of the representations were not even made by Amway but rather one of its independent contractors.

Likewise, the doctrine of promissory estoppel does not apply. Promises are usually forward-looking. Amway’s promise was not a promise to do something in the future, but rather a warranty of a past or existing condition. A warranty may induce reasonable reliance in limited circumstances, but not as a run-around to the parol evidence rule or the fact that puffery is not actionable as a misrepresentation.