Kaloti Enterprises, Inc. v. Kellogg Sales Co.
Wisconsin Supreme Court
699 N.W.2d 205 (2005)
Kaloti Enterprises, Inc. (plaintiff), a food wholesaler, had for years bought Kellogg Sales Company (defendant) products through broker Geraci & Associates (defendant) and resold them to large retail stores, a resale arrangement both Geraci and Kellogg fully understood. After Kellogg acquired Keebler and decided to start selling directly to those same retail stores, Kellogg and Geraci entered a confidentiality agreement to keep that strategy shift secret. Without telling Kaloti about the change, Geraci solicited another order on May 14, 2001; Kaloti bought the product from Kellogg as usual but then found the stores wouldn't buy it, since they were now purchasing directly from Kellogg. When Kaloti tried to cancel the order and return the product, Kellogg refused, and Kaloti sued Kellogg and Geraci for fraudulent misrepresentation. The trial court dismissed the case, Kaloti appealed, and the court of appeals certified the disclosure-duty question to the Wisconsin Supreme Court.
Whether a party to a contract has a duty to disclose a material fact when it knows the other party is entering the contract under a mistake about that fact, the fact is exclusively within its own knowledge, and the mistaken party would reasonably expect disclosure.