Wind Wire is a South Bend, Indiana, installer of residential wind turbines.
In August 2010 Roger and Patricia Finney sued Wind Wire in Indiana state court for alleged greenwashing in connection with a residential wind turbine system.
The Finneys’ central charge was that the company fraudulently induced them to purchase a wind turbine for their home by knowingly making false or misleading statements as to cost savings the turbine would provide. After a trial court judgment for the Finneys Wind Wire appealed.
In a recent opinion the Court of Appeals of Indiana affirmed the judgment for the Finneys. At issue in the case was a Wind Wire brochure making a number of representations about the cost savings of the wind turbine, including the following:
the average household would save “approximately 75% to 100% of current electric service”;
the customer would see a return on investment or ”payoff span of 3-4 years”;
the wind turbine system could “generate an average of 700 K wh (sic) per hour”; and
the homeowner would receive a “substantial refund” on taxes by installing the wind turbine system.
Apparently, through its representatives, Wind Wire echoed all of the claims from the brochure in its communications with the Finneys. A sales rep repeated the cost saving claims to the Finneys. Wind Wire also erroneously told them that AEP, the Finneys’ utility, would purchase the excess energy produced by their wind turbine.
The company also told the Finneys that they would be entitled to a tax credit, the amount of which would be based on a percentage of the purchase price of the turbine when, in fact, the credit was fixed at $900 for the Finneys.
Since the Finneys’ wind turbine was installed, it has produced no excess power and has had no effect on their electric bills. According to AEP, it typically takes not 3-4 years, but 25 years for a residential wind turbine to pay for itself. Instead of the advertised 700 kWh, after about one year of use the Finneys’ turbine has produced a total of only 134.2 kWh of electricity.
In perhaps the most tragicomic manifestation of greenwashing here, the wind turbine actually consumes energy when it is idle. Similarly absurd was the revelation that the sales rep dealing with the Finneys had no prior wind turbine experience and “the extent of [his]formal training was a one-hour ‘webinar.’”
The trial court held that Wind Wire had breached its contract with the Finneys, in particular both the express warranties and the implied warranty of fitness of the turbine, and that it fraudulently induced the Finneys to enter into the contract by knowingly misrepresenting its experience and expertise and the cost savings of the turbine.
In view of all the egregious evidence on record, perhaps it’s no surprise that Wind Wire’s strategy on appeal was to steer away from the facts of the case and instead rely on a purely legal argument based on a provision of its contract with the Finneys.
In particular, Wind Wire contended that the Finneys could not justifiably rely on any of its representations about the wind turbine because their contract contained an “integration” clause. An integration clause is a provision stating that the contract contains the parties’ entire agreement to the exclusion of any outside statements or representations.
The appellate court disagreed and affirmed because it found no clear error with the trial court’s judgment. As to Wind Wire’s argument, the appellate court noted that under Indiana contract law a party can overcome the effect of an integration clause if it shows it had a right to rely on the alleged misrepresentations and did rely on them in executing the integration clause.
An interesting side note is that Southwest Windpower, the manufacturer of the turbines Wind Wire installs, placed the installer on six months’ probation because of concerns over Wind Wire’s marketing materials and customer satisfaction.
Thanks to the DSV Construction Law Blog’s post on this, which brought the story to my attention.
Eric Lane is a patent attorney at McKenna Long & Aldridge LLP in San Diego and the author of Green Patent Blog. Mr. Lane can be reached at firstname.lastname@example.org