OC Tint Shop, Inc. v. CPFilms, Inc. et al
Filing
44
MEMORANDUM OPINION. Signed by Judge Richard G. Andrews on 9/27/2018. (nms)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
OC TINT SHOP, INC. ,
Plaintiff,
V.
Civil Action No. 17-1677-RGA
CPFILMS, INC. , EASTMAN CHEMICAL
COMPANY, EASTMAN PERFORMANCE
FILMS, LLC, and DOES 1 through 100,
inclusive,
Defendants.
MEMORANDUM OPINION
John C. Phillips, Jr and David A. Bilson, PHILLIPS GOLDMAN MCLAUGHLIN & HALL,
P.A. , Wilmington, DE.
Attorneys for Plaintiff.
Donald E. Reid, Thomas W. Briggs, Jr. , and Anthony D. Raucci, MORRIS , NICHOLS , ARSHT
& TUNNEL LLP, Wilmington, DE.
Attorneys for Defendants.
September'J2 2018
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~
. DISTRICT JUDGE:
Defendants CPFilms, Eastman Chemical Company, and Eastman Performance Films
filed a motion to dismiss Plaintiff OC Tint Shop's First Amended Complaint for failure to state a
claim. (D.I. 36). The Court has considered the parties' briefing. For the following reasons, the
Court GRANTS in part and DENIES in part Defendants' motion to dismiss for failure to state a
claim.
I.
BACKGROUND
As alleged by the Complaint, the facts are as follows . Plaintiff has been in the business of
installing window tinting film for approximately twelve years. (D.I. 35 at 3). Plaintiff has
"purchased SunTek window tinting film from Defendants at their Anaheim location" for a
number of those years. Id. From early 2016 on, Plaintiff noticed that the quality of the film
purchased from Defendants had diminished considerably. Id. Plaintiff has found that the film
will often not peel off the liner before installation or is so sticky that it causes difficulty when
installing the product. Id. Plaintiff has also noticed specks on the liner and experienced the liner
not having enough had adhesive from proper installation. Id. at 3-4. Due to these defects,
Plaintiff has incurred substantial losses due to providing warranty work for its customers to
replace or repair the defective film . Id. at 4.
Plaintiff alleges that the degradation of quality resulted from Defendants' decision to cut
costs by removing an ingredient from the manufacturing of the film. Id. Plaintiff has alleged
substantial incurred costs in the following amounts: "$275 ,000.00 for defective window tinting
film purchased from Defendants, dating back to 2016;" $720,000.00 in "additional costs in
paying its employees to re-install the new tinting film ; $10,000.00 for defective film purchased,
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but still in Plaintiffs possession; $46,000.00 incurred in warranty work as a result of the
defective window tinting film ; and approximately $176,000.00 in lost revenue." Id. at 5.
Plaintiff brought this action against Defendants CPFilms and Eastman Chemical
Company in the Superior Court of California, Orange County. Plaintiff seeks recovery for
Breach of Contract, Breach of Warranties, Breach of Good Faith and Fair Dealing, Violation of
CA Unfair Competition law, Intentional Interference with Prospective Economic Relations,
Negligent Interference with Prospective Economic Relations, Intentional Interference with
Contractual Relations, Intentional Misrepresentation, Negligent Misrepresentation, and
Concealment. (D.I. 35). Plaintiff also seeks a Declaratory Judgment. Id.
Defendants removed the case pursuant to 28 U.S.C. § 1332 (diversity jurisdiction). (D.I.
1). Defendants then filed a Motion to Dismiss Complaint Under Forum Non Conveniens, or in
the Alternative to Transfer Action to District of Delaware based upon a choice-of-forum clause
in the sales contract. (D.I. 10). The United States District Court for the Central District of
California granted the Motion the Transfer. (D.I. 23). By stipulation, the Parties agreed that
Plaintiff could amend its Complaint. (D.I. 34). After Plaintiff filed its First Amended Complaint
(D.I. 35), Defendants filed their motion to dismiss. (D.I. 36).
II.
LEGALSTANDARD
When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), the Court must accept the complaint's factual allegations as true. See Bell At!. Corp. v.
Twombly, 550 U.S . 544, 555-56 (2007). Rule 8(a) requires "a short and plain statement of the
claim showing that the pleader is entitled to relief." Id. at 555. The factual allegations do not
have to be detailed, but they must provide more than labels, conclusions, or a "formulaic
recitation" of the claim elements. Id. ("Factual allegations must be enough to raise a right to
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relief above the speculative level . .. on the assumption that all the allegations in the complaint
are true (even if doubtful in fact)."). Moreover, there must be sufficient factual matter to state a
facially plausible claim to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The facial
plausibility standard is satisfied when the complaint' s factual content "allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged." Id. ("Where a
complaint pleads facts that are merely consistent with a defendant' s liability, it stops short of the
line between possibility and plausibility of entitlement to relief. " (internal quotation marks
omitted)).
Rule 9(b) of the Federal Rules of Civil Procedure requires a party alleging fraud or
mistake to "state with particularity the circumstances constituting fraud or mistake. " "A pleading
is sufficient under Rule 9(b) if it states the time, place and specific content of the false
representations as well as the identities of the parties to the misrepresentation." In re Sony, 758
F. Supp. 2d 1077, 1087 (S.D. Cal. 2010) (internal quotations marks omitted); see also Gerbitz v.
ING Bank, FSB, 967 F. Supp. 2d 1072, 1078 (D. Del. 2013) (laying out "the who, what, where,
when, how, and why" of plaintiffs fraud claims).
III.
DISCUSSION
A. Choice of Law
A federal court sitting in diversity must apply the law of the forum state. In Delaware, the
"most significant relationship test" governs the choice of law analysis for both contract and tort
claims. Deuley v. DynCorp Intern. , Inc., 8 A.3d 1156, 1160 (Del. 2010); Travelers Indem. Co. v.
Lake, 594 A.2d 38, 47 (Del. 1991). "The Delaware Supreme Court has determined that for
contract claims, the Court must consider several factors in determining which forum ' s law to
apply, including ' the place of contracting, the place of negotiation, the place of performance, the
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location of the subject matter of the contract, and the domicile, residence, nationality, place of
incorporation and place of business of the parties. "' Enzo Sci. , Inc. v. Adipogen Corp. , 82 F.
Supp. 3d 568, 595 (D. Del. 2015) (quoting In re Am. LaFrance, LLC, 461 B.R. 267,272 (Bankr.
D. Del. 2011)). Under Delaware law, choice-of-law provisions are generally enforceable. Enzo
Sci. , Inc., 82 F. Supp. at 595 (citing Weiss v. Nw. Broad. Inc. , 140 F. Supp. 2d 336, 442 (D. Del.
2001)).
For tort claims, courts must consider several factors including the place where the injury
occurred, the place where the conduct causing the injury occurred, the domicile, residence,
nationality, place of incorporation and place of business of the parties, and the place where the
relationship, if any, between the parties is centered. Travelers Indem. Co. , 594 A.2d at 47.
Furthermore, "the effect of misrepresentation, duress, undue influence and mistake upon a
contract is determined by the law selected by application of the rules of [Restatement (Second)
of Conflict of Law]§§ 187-88. In turn, § 187 allows the law of the state chosen by the parties to
govern contractual rights and duties unless the chosen state lacks a substantial relationship to the
parties or transaction or applying the law of the chosen state will offend a fundamental policy of
a state with a material greater interest." Abry Partners V, L.P. v. F & W Acquisition LLC, 891
A.2d 1032, 1047 (Del. Ch. 2006).
Here, the contract between the parties states that Delaware law governs any dispute
arising from the contract. The Court sees no reason to disturb that choice-of-law provision as
applied to the contract claims. Additionally, Plaintiffs tort claims center on Defendants'
misrepresentations and those misrepresentations ' effect on the contractual relationship between
the parties. Under Delaware law, the law of the state chosen by the parties to govern contractual
rights and duties should therefore apply to Plaintiffs tort claims as well.
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B. Contract Claims (Counts I-IV)
Plaintiffs Complaint alleges the following causes of action in contract: breach of contract
(Count I), breach of the implied warranty of merchantability (Count II), breach of the express
warranty of merchantability (Count III), and breach of implied warranty of fitness for a particular
purpose (Count IV). Defendants assert that Plaintiffs contract claims are precluded by (1 ) the
contract's express exclusion of express and implied warranty claims and (2) the contract' s
limitation ofliability provision. (DJ. 37 at 3-4). Plaintiff argues that Defendants are retroactively
barred from arguing that the Contract' s disclaimer of warranties exempts Defendants from
liability because Plaintiff had been purchasing Defendants' product before receiving the contract
in early 2016. (DJ. 40 at 4-5). Plaintiff also argues that the limitation of liability provision (1) is
unconscionable and (2) "fails of its essential purpose." Id. at 6-9.
i. The Disclaimer of Warranties and the Limitation of Liability Provision are
Permitted under Delaware Law
1. Disclaimer of Warranties
Delaware law permits contracting parties to exclude warranties of merchantability and
fitness in commercial contracts. Del. Code Ann. tit. 6 § 2-316(2). The contract language "must
mention merchantability and in case of a writing must be conspicuous" to exclude the warranty
of merchantability. Id. To exclude the implied warranty of fitness, the contract language must be
"a writing and conspicuous." Id. Here, the contract language mentions merchantability, is in
writing, and is clearly conspicuous. Specifically, the warranty disclaimer is set off from the
surrounding text of the contract in all capitals text. (DJ. 37, Ex.Bat ,r 2). This language is
sufficient to preclude all such warranty claims.
Plaintiffs argument that Defendants are retroactively barred from asserting the
warranty disclaimer for all of Plaintiffs purchases is incorrect. While Plaintiff has been
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purchasing product from Defendant since before early 2016, Defendants provided Plaintiff with
the new contract in January 2016. As Plaintiff alleges in its Complaint, the breach of contract
began in early 2016, around the same time that the new contract was provided. (D.I. 35 at 4).
Even taking these facts in the light most favorable to Plaintiff, Defendants are not barred from
asserting the disclaimer of warranties as to any purchases after Plaintiff received the new
contract terms in January 2016. Plaintiff chose to continue purchasing Defendants' products
despite the new terms of sale, and thereby accepted the warranties disclaimer. Plaintiff's claims
are therefore subject to the warranty disclaimer.
ii. The Limitation of Liability Provision
Delaware law permits parties to "limit or alter the measure of damages recoverable"
under a contract and specifically permits consequential damages to be " limited or excluded
unless the limitation or exclusion in unconscionable." Del. Code Ann. tit. 6 § 2-719(1), (3).
There are two types of unconscionability- procedural and substantive. Procedural
unconscionability alleges defects in the process adopting the contract provision. James v. Nat 'l
Fin. , LLC, 132 A.3d 799, 815 (Del. Ch. 2016). Substantive unconscionability has to do with the
content of the contract provision. Id. (" An agreement is substantively unconscionable if the terms
evidence a gross imbalance that shocks the conscience.") (internal quotations omitted). However,
the unconscionability analysis considers both in unity with each other. Id. Delaware law specifies
that the "limitation of damages where the loss is commercial is not" prima facie unconscionable.
Del. Code Ann. tit. 6 § 2-719(3) (emphasis added). In determining whether a contract provision
is unconscionable, the burden of proof lies on the party claiming unconscionability. Pig Imp. Co.
v. Middle States Holding Co. , 943 F. Supp. 392, 402 (D. Del 1996); James, 132 A.3d at 814.
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Plaintiff argues that the limitation of liability provision is unconscionable because
Defendants changed the ingredients in manufacturing the window tint film, causing the quality of
the film to decline without Plaintiffs knowledge. (D.I. 40 at 6). Plaintiff further alleges that
Defendants changed the contract without engaging in negotiation with Plaintiff. However, where
both parties are commercial actors, the threshold for a finding of procedural unconscionability is
high. Here, Defendants provided the contract to Plaintiff in January 2016, stating that it would
govern all purchases going forward. (D.I. 37, Ex. A at 2.) Plaintiff could have negotiated
different terms or purchased film from a different supplier if it did not like the terms in the
contract. They did not do so. There was no procedural unconscionability in Plaintiffs acceptance
of the Contract terms. Furthermore, the limitation of liability provision is not substantively
unconscionable. The contract did not preclude all remedies, but merely limited the remedies
under the contract to a refund for or replacement of defective film. (Id. at Ex. B ,i 3.) Moreover,
the losses Plaintiff allege~ are solely commercial losses which weighs against a finding of
substantive unconscionability.
iii. The Limitation of Liability Provision Does Not Fail of its Essential Purpose
Delaware law provides that limitation of liability provisions will not be enforced where
circumstances cause the limited remedy to "fail of its essential purpose." Del. Code Ann. tit. 6
§ 2-719(1 )(a), (2). Where a provision limits remedies to repair or replacement, Delaware law
requires that the defect be corrected within a reasonable time to avoid a "failure of its essential
contractual purpose." 1 JA. Jones Constr. Co. v. City of Dover, 372 A.2d 540, 550 (Del. Super.
Ct. 1977).
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Stated differently, when a contract limits a remedy to repair or replacement, the repair or
replacement is designed to promptly put the purchaser of goods into a position where it gets the
benefit of the bargain it made. When it does not get the repair or replacement promptly, it does
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Plaintiff argues that the limitation of liability provision does not apply because it failed of
its essential purpose; Plaintiff did not receive a refund or a replacement within a reasonable time.
Defendants counter that Plaintiffs complaint does not contain these allegations and therefore
must be dismissed .
Federal Rule of Civil Procedure 12(d) provides, "If on a motion under Rule 12(b)(6),
matters outside the pleadings are presented to and not excluded by the court, the motion must be
treated as one for summary judgment under Rule 56. All parties must be given a reasonable
opportunity to present all the material that is pertinent to the motion." Where there has not been
sufficient discovery for all parties to be in a position to present all material pertinent to a motion
for summary judgment, courts may exclude affidavits from consideration in deciding a motion.
Ospina v. Dep 't of Corrections, State of Del. , 749 F. Supp. 572, 574 (D. Del 1990) (citing Melo
v. Hafer , 912 F.2d 628, 634 (3d Cir. 1990)). In this case, no discovery has taken place.
Therefore, the Patel Declaration (D.I. 41) is excluded from consideration of this motion.
However, Plaintiff has alleged facts in its Complaint that would give rise to a reasonable
inference that the limitation of remedies provision had failed of its essential purpose. (D.I. 35 ~32
("Plaintiff has taken reasonable steps to notify Defendants of these defects and has provided
Defendants with reasonable time to remedy this situation as evidenced in Plaintiffs letter dated
June 9, 2017 ... , but Defendants failed to do so."),~ 39-40, ~ 51).
For the reasons stated above, the Court GRANTS Defendants' motion to dismiss
COUNTS I-IV.
not get the benefit of the bargain, and it then has damages. See JA . Jones Constr. Co., 372 A.2d
at 550 (discussing rationale of Beal v. General Motors Corp., 354 F. Supp. 423 (1973)).
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C. Good Faith and Fair Dealing (Count XI) 2
To sufficiently allege a claim for breach of the implied covenant of good faith and fair
dealing, a plaintiff must allege ( 1) a specific obligation implied in the contract, (2) a breach of
that obligation, and (3) resulting damages. Koloni Reklam, Sanayi, Ticaret LTD/ST! v. Bellator
Sport Worldwide LLC, 2017 WL 5172397, at *3 (D. Del. Nov. 8, 2017); Fortis Advisors LLC v.
Dialog Semiconductors PLC, 2015 WL 401371 , at *3 (Del. Ch. Jan. 30, 2015). Plaintiff alleges
in the Complaint that Defendant has breached their implied duty of good faith and fair dealing by
failing to provide conforming goods. Specifically, Plaintiff alleges that Defendants changed the
ingredients used in the manufacturing of the window tint film which decreased the quality of the
product.
In Delaware, the implied duty of good faith and fair dealing is a "limited and
extraordinary remedy," which only "requires a party in a contractual relationship to refrain from
arbitrary or unreasonable conduct which has the effect of preventing the other party to the
contract from receiving the fruits of the bargain." Ne mec v. Shrader, 991 A .2d 1120, 1128 (Del.
2010) (internal quotation marks omitted). The implied covenant of good faith and fair dealing
cannot be used by a party to expand its contract rights where the contract speaks to that party' s
rights. Allied Capital Corp. v. GC-Sun mdgs., LP., 910 A.2d 1020, 1032 (Del. Ch. 2006)
("implied covenant analysis will only be applied when the contract is truly silent with respect to
the matter at hand"). To determine whether the implied covenant applies, the Court must first
determine whether there is a contractual gap. "If a contractual gap exists, then the court must
determine whether the implied covenant should be used to supply a term to fill the gap. Not all
2
Plaintiffs Complaint has two "ninth causes of action." I have renumbered the second Count IX
and subsequent counts.
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gaps should be filled, however, because filling the gap with the implied covenant grants parties
' contractual protections that they failed to secure for themselves at the bargaining table. "'
Reklam, 2017 WL 5172397, at *5 (quoting Aspen Advisors LLC v. United Artists Theatre Co.,
843 A.2d 697, 707 (Del. Ch. 2004)).
Here, the contract specifically addresses the conduct that Plaintiff has alleged as
Defendant' s breach of the duty of good faith and fair dealing. Specifically, the contract provides
that Defendant "warrant[s] that the products when shipped will meet [their] written
specifications" but disclaims the warranties of merchantability and fitness for any particular
purpose. (D.I. 37, Ex B ,i 2.) As stated above, the implied covenant applies only when the
contract is "truly silent" as to the claimed conduct. Allied Capital Corp., 910 A.2d at 1032.
Therefore, CPFilm' s motion to dismiss COUNT XI, for breach of the implied covenant of good
faith and fair dealing, is GRANTED.
D. Torts Claims (Counts V-X)
Plaintiffs complaint alleges six tort claims: intentional interference with prospective
economic relations (Count V), negligent interference with prospective economic relations (Count
VI), intentional interference with contractual relations (Count VII), intentional misrepresentation
(Count VIII), negligent misrepresentation (Count IX), and concealment (Count X). As discussed
above, Delaware law governs these claims.
Defendants argue that Plaintiffs tort claims must be dismissed because the claims (1) fail
to state a claim independent from the breach of contract claims, (2) are precluded by the
economic loss doctrine, and (3) for the misrepresentation and concealment counts, the Complaint
does not satisfy the pleading requirements of Rule 9(b). (D.I. 37 at 6-9). Plaintiff responds that
the tort claims are not based upon a failure to perform under the contract, but upon Defendants'
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sale of defective products to the public at large and misrepresentations of the product's quality.
(D.I. 42 at 6-7). Plaintiff failed to respond to Defendants' argument about the economic loss
doctrine. (D.1. 42).
i. Negligent Interference with Prospective Economic Relations (Count VI)
As a matter of law, Delaware does not recognize a cause of action for negligent
interference with prospective economic relations. See Insur. Co. of N Am. v. Waterhouse, 424
A.2d 675 , 678 (Del. Super. Ct. 1980). Therefore, CPFilm' s motion to dismiss COUNT VI is
GRANTED.
ii. Impermissible Duplication of Contract Claims as Tort Claims
The prevailing law in Delaware requires that "a plaintiff bringing a claim based entirely
upon a breach of the terms of a contract generally must sue in contract, and not in tort." Data
Mgmt. Int., Inc. v. Saraga, 2007 WL 2142848, at *3 (Del. Super. Ct. July 25, 2007). Delaware
courts have held, "Even an intentional, knowing, wanton, or malicious action by the defendant
will not support a tort claim if the plaintiff cannot assert wrongful conduct beyond the breach of
the contract itself." Id. However, if the alleged contractual breach is accompanied by the breach
of an independent duty imposed by law, the same factual assertions may support both a breach of
contract and tort claim. Id. In other words, " [t]o be viable, the tort claim must ' involve violation
of a duty which arises by the operation of law and not by the mere agreement of the parties. "'
Cornell Glasgow, LLC v. La Grange Props., LLC, 2012 WL 2106945, at *8 (Del. Super. Ct.
June 6, 2012) (quoting Data Mgmt. Int., 2007 WL 2142848, at *3).
Here, Plaintiff alleges in Counts I-IV of the Complaint that Defendants' breach of
contract and warranties stemmed from Defendants' decision to "cut costs" by removing an
ingredient from the film manufacturing process. (D.I. 35 at 7, 9, 11 , 14.) This change, as Plaintiff
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alleges, led to a degradation of quality in the window tint film, violating the terms of the
contract. Defendants argue that Plaintiff fails to state a claim in Counts V-X because Plaintiff
alleged these same facts to support the tort claims. (D.I. 37 at 7.)
A detailed examination of the tort claims3 reveals that Defendants' assertion is only
partially correct. Plaintiffs Complaint supports Count V and Count VII by alleging that
Defendants' decision to cut costs and manufacture a defective product alone created the
intentional interference with prospective economic relations and intentional interference with
contractual relations. (D.I. 35 at 16-17, 20-22.) Therefore, under Data Management
Internationale and La Grange Properties, LLC, Plaintiff does not assert sufficient facts to
support either Count V or Count VII because no wrongful conduct beyond the breach of contract
is alleged.
In contrast, Counts VIII-X do allege wrongful conduct beyond Defendants ' breach of
contract. To support Counts VIII-X, Plaintiff alleges both that Defendants manufactured
defective products and that Defendants ' misrepresentations and concealment of the change in
their product from Plaintiffs led to the harm suffered. (D.I. 35 at 22-27.) As set out in the Federal
Rules, the pleading requirements ask "whether the factual allegations of the Complaint-not the
precise pleading of a specific statute or law- provide [Defendant] with fair notice of the claims
asserted against it." Yeiser Research & Dev. LLC v. Teknor Apex Co., 281 F. Supp. 3d 1021 ,
1037 (S .D. Cal 2017) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The
allegations, construed in the light most favorable to Plaintiff, include the wrongful conduct of
3
Excluding Count VI as the Court has already determined that the stated cause of action does not
exist under Delaware law.
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fraud in the inducement of the contract, not just breach of the contract. Therefore, these claims
may not be dismissed under Data Management Internationale and La Grange .
iii. Economic Loss Doctrine
Defendants also allege that Plaintiff's tort claims are barred by the economic loss
doctrine. Plaintiff failed to respond to these contentions. The economic loss doctrine limits a
contracting party ' s ability to recover in tort to losses "accompanied by bodily harm or property
damages" and prohibits recovery for losses that are "solely economic in nature. " JC Trading
Ltd. v. Wal-Mart Stores, Inc., 947 F. Supp. 2d 449, 459 (D. Del. 2013); see also Commonwealth
Constr. Co. v. Endecon, Inc., 2009 WL 609426, at *4 (Del. Super. Ct. Mar. 9, 2009) ("Contractwarranty law has evolved to protect a different interest: . .. the "bargained for expectations of
both contracting parties and other foreseeable users who suffer loss when a product is unfit for its
intended use.") (quoting Danforth v. Acorn Structures, Inc., 608 A.2d 1194, 1195-96 (Del.
1992)). However, even cases cited by Defendants recognize that there are some exceptions to the
economic loss doctrine for intentional torts. See Kuhn Constr. Co. v. Ocean & Coastal
Consultants, Inc., 844 F. Supp. 2d 519, 529 (D. Del. 2012) ("Fraudulent inducement is, however,
a recognized exception to this doctrine."); see also Cavi v. Evolving Sys., Inc. , 2017 WL 658470,
at *7 (D. Del. Feb. 17, 2017) ("Allegations of fraud that go directly to the inducement of the
contract, rather than its performance, present a viable claim" not barred by the economic loss
rule). Thus, the intentional torts of Counts VII and X may proceed.
A cause of action for negligent misrepresentation may be permitted by an exception to
the economic loss doctrine. To maintain a cause of action for negligent misrepresentation
notwithstanding the economic loss doctrine, "a plaintiff must prove: 1) defendant supplied the
information to plaintiff for use in business transactions with third parties; and 2) defendant is in
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the business of supplying information." Kuhn Constr. Co. , 844 F. Supp. 2d at 527. If the
information provided is "merely ancillary to the sale of a product or service .. . defendant will not
be found to be in the business of supplying information." Id. (quoting RLI Ins. Co. v. Indian
River Sch. Dist. , 556 F. Supp. 2d 356, 362. (D . Del. 2008)). Here, any provision of information
by Defendant to Plaintiff about the quality of the film was incidental to the sale of that film .
Therefore, Defendant is not " in the business of supplying information" and the exception to the
economic loss doctrine does not apply. Therefore, the Court GRANTS Defendants ' motion to
dismiss COUNT IX.
iv. Heightened Pleading Standard
Therefore, the Court must consider whether Plaintiff has provided sufficient factual
allegations to support Counts VIII and X. As stated above, claims of fraud must be pied with
particularity under Rule 9(b). Specifically, Complaints must include the "who, what, when,
where, why, and how" to be sufficient under Rule 9(b). Defendants argue that Plaintiffs tort
claims fail to meet Rule 9(b) ' s standard because they "fail to sufficiently plead the time, place,
and content of the alleged misrepresentations." D.I. 37 at 6.
"To state a claim for intentional misrepresentation, the following elements must be pled:
(1) deliberate concealment by the defendant of a material past or present fact, or silence in the
face of a duty to speak; (2) that defendant acted with scienter; (3) an intent to induce plaintiffs
reliance on the concealment; (4) causation; (5) damages resulting from concealment." Pandora
Jewelry, Inc. v. Stephen 's Je welers, LLC, 2012 WL 2371043 (Del. Com. Pl. June 22, 2012)
(citing Nicolet, Inc. v. Nutt, 525 A.2d 146, 149 (Del. 1987)). Under Delaware law, fraudulent
concealment has the same elements as intentional misrepresentation. See Davis v. First Horizon
Home Loan Corporation, 2016 WL 9000111 , at *2 (Del. Com. Pl. Jan. 21, 2016) (quoting
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Commonwealth Land Title Ins. Co. v. Funk, 2015 WL 1870287, at *3 (Del. Super. Apr. 22,
2015)). "The majority of Delaware courts hold that an affirmative act is an essential element of
fraudulent concealment." Studiengesellschaft Kahle, mbHv. Hercules, Inc., 748 F. Supp. 247,
253 (D. Del 1990).
Plaintiffs Complaint alleges sufficient facts to permit its claims for intentional
misrepresentation and concealment to go forward. Specifically, Plaintiffs Complaint alleges (1)
Defendants deliberately concealed the change in the manufacturing of the window tint; (2)
Defendants acted with scienter; (3) Defendants intended Plaintiff to rely on the quality of the
previous product formulation; and (4) Defendants' concealment and misrepresentation led to (5)
Plaintiffs purchase of defective product. Plaintiff meets the pleading standard under Rule 9(b ).
Plaintiff has alleged:
WHO: Llumar, an authorized agent of Defendants;
WHAT: Failed to inform Plaintiff that manufacturing and quality of film had changed;
WHEN: Starting in early 2016 and on an ongoing basis;
WHERE: In conversations with Defendants' agents at its Anaheim location;
HOW: Defendants failed to inform Plaintiff of the changes to the film's quality;
WHY: Plaintiff would continue to purchase Defendant' s product.
Therefore, Defendants' motion to dismiss is GRANTED in part and DENIED in part.
Defendants' motion is GRANTED as to Counts V-VII & IX. Defendants' motion is DENIED as
to Counts VIII and X.
E. Unfair Competition (Count XII)
Defendants assert that Count XII of Plaintiffs Complaint must be dismissed because (1)
it is based on inapplicable law under the Contract's choice-of-law provision and (2) even if
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California law does apply, Plaintiff has failed to sufficiently plead the claim under Rule 9(b ).
Plaintiff responds, "Delaware has a similar unfair competition law that mirrors California' s
unfair competition law," and therefore Plaintiffs claim should be permitted to move forward .
The pleading requirements as set out in the Federal Rules ask "whether the factual
allegations of the Complaint- not the precise pleading of a specific statute or law-provide
[Defendant] with fair notice of the claims asserted against it." Yeiser Research & Dev. LLC, 281
F. Supp. 3d at 1037 (citing Twombly, 550 U.S. at 555); see also In re Oakwood Homes Corp. ,
340 B.R. 510, 526 (Bankr. D. Del. 2006) ("Under the Federal Rules, the failure in a complaint to
cite a statute, or to cite the correct one, in no way affects the merits of a claim.") (internal
quotation marks omitted).
Here, the contract' s choice-of-law provision states the applicable state law is Delaware
law. However, Plaintiffs citation of the California unfair competition law in their Complaint
does not, as Defendants argue, require that the Complaint be dismissed for the failure to state a
claim. If a cause of action under Delaware law would be supported by Plaintiffs factual
allegations, then the claim may proceed.
Plaintiff argues that a violation of Delaware' s Uniform Deceptive Trade Practices Act
("the Act") would be supported by the factual allegations in Plaintiffs Complaint. The Act
states :
a) A person engages in a deceptive trade practice when, in the course of his
business, . .. he:
(3) Causes likelihood of confusion or of misunderstanding as to affiliation,
connection, or association with, or certification by, another; .. .
(5) Represents that goods or services have sponsorship, approval,
characteristics, ingredients, uses, benefits, or quantities that they do not have;
Del. Code Ann. tit. 6, § 2532(a)(3), (5).
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The Act also requires that that for a plaintiff to have standing to assert it, the plaintiff
must have a "horizontal" business relationship with the defendant. Livery Coach Solutions, LLC
v. Music Express/East, Inc., 245 F. Supp. 3d 639,648 (D. Del. 2017). "A horizontal business
relationship is one that 'exists between at least two businesses on the same market level, because
they manufacture similar products in the same geographic region, or are direct competitors."' Id.
(quoting Chase Bank USA, NA. v. Hess, 2013 WL 867542, at *5 (D. Del. Mar. 7, 2013)).
Because Plaintiff and Defendant are not direct competitors, Plaintiff lacks standing to bring a
claim under the Act. Therefore, Defendants ' motion to dismiss Count XII is GRANTED.
F. Declaratory Judgment (Count XIII)
The Parties agree that Delaware State Univ. Student Housing Found v. Ambling Mgmt.
Co. sets out the correct standard for determining whether a claim for declaratory relief may be
heard. 556 F. Supp. 2d 367 (D. Del. 2008). In determining whether to permit a declaratory
judgment claim to move forward, the court "must ask whether the requested declaratory
judgement will (1) clarify and settle legal relations in issue and (2) terminate and afford greater
relied from the uncertainty, insecurity, and controversy giving rise to present action." 556 F.
Supp. 2d at 374. As this Court has previously recognized,
[c]ourts have discretion to dismiss a declaratory judgment claim when issuing a
declaratory judgment would serve no useful purpose. Aluminum Co. ofAm. v.
Beazer E. , Inc., 124 F.3d 551,560 (3d Cir. 1997). A declaratory judgment would
serve no useful purpose when, for example, the controversy would be resolved by
the disposition of another claim in the case. JJCK, LLC v. Project Lifesaver Int'/,
2011 WL 2610371 , at *6 (D. Del. July 1, 2011) (" If the declaratory judgment
claim bears complete identity of factual and legal issues with another claim being
adjudicated by the parties, the Court is within its discretion to dismiss the
declaratory judgment action." (quoting A/dens, Inc. v. Packel, 524 F.2d 38, 52 (3d
Cir. 1975)) (internal quotation marks omitted)). Additionally, "[a] declaratory
judgment is inappropriate solely to adjudicate past conduct." Del. State Univ.
Student Haus. Found. v. Ambling Mgmt. Co., 556 F. Supp. 2d 367, 374 (D . Del.
2008) (internal quotation marks omitted).
18
Christiana Care Health Servs., Inc. v. PMSLIC Ins. Co., 2015 WL 6675537, at *5 (D. Del. Nov.
2, 2015).
Here, Plaintiff asks the court to permit a declaratory judgment claim solely to adjudicate
past conduct. As Defendant notes, Plaintiffs declaratory judgment claim relies on the same facts
and allegations as the prior counts of the Complaint. These facts and allegations solely concern
past commercial transactions between the parties, not prospective ones. Therefore, Defendants'
motion to dismiss COUNT XIII, for declaratory judgment, is GRANTED.
IV.
CONCLUSION
For the reasons stated, Defendants' motion to dismiss will be GRANTED as to Counts I-
VII, IX, and XI-XIII and will be DENIED as to Counts VIII and X.
A separate order will be entered.
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