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The Sherwin-Williams Company, Plaintiff v. Bei Enterprises

November 30, 2012

THE SHERWIN-WILLIAMS COMPANY, PLAINTIFF,
v.
BEI ENTERPRISES, INC. DOING BUSINESS AS BEI AUTO BODY AND JOSEPH BELLISARIO AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Terrence F. McVerry United States District Judge

MEMORANDUM OPINION AND ORDER OF COURT

Now pending before the Court is PLAINTIFF/COUNTER-DEFENDANT'S MOTION TO DISMISS COUNTS III, IV AND V OF FIRST AMENDED COUNTERCLAIM (Document No. 29) filed by The Sherwin-Williams Company ("Sherwin-Williams").*fn1

Defendants/Counterclaimants (collectively "BEI") filed a response; Sherwin Williams filed a reply; and the motion is ripe for disposition.

As a result of the thorough briefing by the parties, only one discrete legal dispute remains. Specifically, the parties dispute whether the "fraudulent inducement" claim in Count III is governed by the Pennsylvania parol evidence rule or the Ohio parol evidence rule. The choice of law is dispositive because under Pennsylvania law, a fully--integrated contract bars claims for fraudulent inducement, while under Ohio law, fraudulent inducement claims remain cognizable. Sherwin-Williams also moved to dismiss the fraudulent and negligent misrepresentation claims in Counts IV and V based on the "gist of the action" doctrine, which BEI has not contested.

Factual and Procedural Background

BEI is a Pennsylvania corporation which is in the business of repairing and painting automobiles. Sherwin-Williams is an Ohio corporation which sells automotive paint products. In May 2010, representatives of Sherwin-Williams came to the BEI shop in Pittsburgh, Pennsylvania to solicit business. BEI avers that the representatives made a number of material misrepresentations regarding the operation and performance of the Sherwin-Williams products and systems, which induced BEI to enter into a Supply Agreement. In particular, BEI contends that the Sherwin-Williams representatives mis-stated the color matching abilities of the system.

On May 28, 2010 the parties entered into a Supply Agreement. Of particular relevance to this case, the Agreement provided: *fn2

(1) "This Agreement shall be governed by the internal laws of the State of Ohio"; and

(2) "This Agreement constitutes the entire understanding and agreement between the parties hereto with reference to its subject matter. No statement or agreement, oral or written, made prior to this Agreement shall vary or modify the written terms hereof."

In July 2011, the parties' business relationship deteriorated to the point that BEI stopped purchasing paint from Sherwin-Williams. This litigation followed.

Legal Analysis

The parties agree that the "choice of law" analysis will be dispositive of the fraudulent inducement claim. The first step, as a federal court exercising diversity of citizenship jurisdiction, is to apply the choice of law rules of Pennsylvania-the state in which this court exists. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Pennsylvania courts have adopted § 187 of the Restatement (Second) of Conflict of Laws, which provides:

(1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.

(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision ...


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