PERUTO et al v. TIMBERTECH LTD et al

Filing 43

MEMORANDUM OPINION FILED. Signed by Chief Judge Jerome B. Simandle on 12/10/15. (js)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

JOHN M. PERUTO, et al.,

HONORABLE JEROME B. SIMANDLE

Plaintiff,
Civil Action
No. 15-2166 (JBS/JS)

v.
TIMBERTECH LTD, et al.,

MEMORANDUM OPINION
Defendant.

SIMANDLE, Chief Judge:
Before the Court is Defendant1 CPG’s partial motion to
dismiss Plaintiffs’ Amended Class Action Complaint. [Docket Item
33.] Defendant argues that Plaintiffs’ claims under the New
Jersey Consumer Fraud Act (“NJCFA”) should be dismissed for
failure to adequately allege unlawful conduct and causation.
Defendant’s motion will be denied. The Court finds the
following:
1.

Plaintiffs John M. Peruto and Lori A. Peruto began

purchasing and installing TimberTech’s XLM decking product line
(“XLM decking”) for their second home in Margate, New Jersey in
May 2012. (Am. Compl. ¶¶ 48, 49.) Prior to purchase, Plaintiffs

1

The parties have agreed in their submissions to refer only to
CPG as the singular Defendant, reflecting CPG’s current name and
successor interest in TimberTech, and represent that they will
file an amendment correcting the case caption. The Court will
follow the parties’ lead and refer to “Defendant” or “CPG” in
the singular.

and their contractor J.P. Leeds, Jr. Builder, Inc. (“Leeds”)
researched several decking products and decided to purchase and
install XLM decking “due to its purported superior weathering
and low maintenance properties.” (Id.) Defendants provided
purchasers of XLM decking a Limited 25-Year Residential Warranty
(“Limited Warranty”) that expressly states the following in
pertinent part:
TimberTech Limited (“TimberTech”) warrants to Purchaser
that, for a period of twenty five (25) years
(Residential) & ten (10) years (Commercial) from the
date of the original purchase, residential or commercial
as the case may be, (the “Term”), under normal use and
service conditions, that: (1) the decking Materials will
be free from material defects in workmanship and
materials, and will not check, split, splinter, rot or
suffer structural damage from termites or fungal decay.
(Id. ¶ 22.) Plaintiffs paid between $45.60 and $56.00 per board
for XLM decking when at the same time standard-treated wood
decking would have cost approximately $9.00 per board for the
same size. (Id. ¶ 17.) However, the XLM decking began to
discolor shortly after the final installation. (Id. ¶¶ 50, 51.)
Leeds promptly reported the discoloration to Defendant on
Plaintiffs’ behalf. (Id. ¶ 52.) Defendant, however, refused to
consider the discoloration a defect breaching the Limited
Warranty and instead only offered Plaintiffs a treatment
solution for the XLM decking’s discoloration. (Id.) Defendant
refused to warrant that the treatment solution would remedy and
permanently correct the problem. (Id. ¶¶ 52, 53.)
2 

2.

Plaintiffs filed a putative class action Complaint on

February 11, 2015 against TimberTech Ltd. (“TimberTech”) and CPG
International LLC (“CPG”) in the Superior Court of New Jersey,
Atlantic County, Law Division. Plaintiffs allege that Defendant
marketed XLM decking as a high-quality, low-maintenance, and
long-lasting alternative to traditional wooden decking
materials, but that XLM decking is prone to discoloration and
fading soon after installation. Plaintiffs asserted claims for
breach of implied warranty, breach of express warranty, unjust
enrichment, negligent misrepresentation, violation of the NJCFA,
and declaratory and injunctive relief. On March 25, 2015,
Defendant removed this action to the District of New Jersey
pursuant to 28 U.S.C. §§ 1332(d), 1446, 1453 and the Class
Action Fairness Act of 2005. [Docket Item 1].
3.

Defendant previously filed a motion to dismiss

Plaintiffs’ complaint in its entirety. [Docket Item 9.] In their
opposition to Defendant’s motion, Plaintiffs agreed to withdraw
their breach of implied warranty and unjust enrichment claims.
[Docket Item 21.] On August 26, 2015, this Court granted in part
and denied in part the remainder of Defendant’s motion to
dismiss. [Docket Item 24.] The Court dismissed Plaintiffs’
breach of express warranty claim based on the Limited Warranty,
Plaintiffs’ negligent misrepresentation claim based on an
omission, and Plaintiffs’ NJCFA claim without prejudice to
3 

Plaintiffs’ right to file an amended complaint curing
deficiencies. [Id.] In particular, the Court found that
Plaintiffs’ NJCFA claim failed to adequately allege an
ascertainable loss. [See Docket Item 23 at 22.] Plaintiffs filed
an amended complaint on September 16, 2015. [Docket Item 30.]
4.

Defendant now moves to dismiss Plaintiffs’ amended

NJCFA claim. [Docket Item 33.] Defendant argues that although
Plaintiffs have amended their complaint to adequately allege an
ascertainable loss, they still have demonstrated neither
unlawful conduct by CPG nor causation. This Court did not
address either of these elements of Plaintiffs’ claim under the
NJCFA on Defendant’s first motion to dismiss. Plaintiffs have
filed opposition [Docket Item 37] and Defendant filed a reply.
[Docket Item 40.]
5.

Pursuant to Rule 8(a)(2), Fed. R. Civ. P., a complaint

need only contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.” While a
complaint is not required to contain detailed factual
allegations, the plaintiff must provide the “grounds” of his
“entitle[ment] to relief”, which requires more than mere labels
and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
555 (2007). A motion to dismiss under Rule 12(b)(6), Fed. R.
Civ. P., may be granted only if, accepting all well-pleaded
allegations in the complaint as true and viewing them in the
4 

light most favorable to the plaintiff, a court concludes that
the plaintiff failed to set forth fair notice of what the claim
is and the grounds upon which it rests. Id. A complaint will
survive a motion to dismiss if it contains sufficient factual
matter to “state a claim to relief that is plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). Although a
court must accept as true all factual allegations in a
complaint, that tenet is “inapplicable to legal conclusions,”
and “[a] pleading that offers labels and conclusions or a
formulaic recitation of the elements of a cause of action will
not do.” Id. at 678.
6.

In addition, Rule 9(b), Fed. R. Civ. P., imposes a

heightened pleading standard on fraud-based claims, requiring a
party to “state the circumstances constituting fraud with
particularity.” Klein v. Gen. Nutrition Companies, Inc., 186
F.3d 338, 344 (3d Cir. 1999); see also Frederico v. Home Depot,
507 F.3d 188, 202-03 (3d Cir. 2007) (applying Fed. R. Civ. P.
9(b) to an NJCFA claim). To satisfy this standard, the plaintiff
must “plead the date, time, and place of the alleged fraud, or
otherwise inject precision into the allegations by some
alternative means.” In re Riddell Concussion Reduction Litig.,
77 F.Supp.3d 422, 433 (D.N.J. 2015). This requirement is
intended “to place the defendants on notice of the precise
misconduct with which they are charged.” Seville Indus. Mach.
5 

Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir.
1984).
7.

Under the NJCFA, “a plaintiff must allege three

elements: (1) unlawful conduct; (2) an ascertainable loss; and
(3) a causal connection between the defendants’ unlawful conduct
and the plaintiffs’ ascertainable loss.” Int’l Union of
Operating Eng’rs Local No. 68 Welfare Fund v. Merck & Co., 929
A.2d 1076, 1086 (N.J. 2007). Defendant concedes that the Amended
Complaint adequately alleges an ascertainable loss.
8.

Actionable unlawful conduct under the NJCFA includes

“any unconscionable commercial practice, deception, fraud, false
promise, misrepresentation, or the knowing concealment,
suppression, or omission of any material fact with intent that
others rely upon such concealment, suppression or omission.”
N.J.S.A. § 56:8-2. In other words, a plaintiff must claim that
the defendant engaged in unlawful conduct that includes
employing a misrepresentation or intentionally omitting a
material fact. Menkes v. Prudential Ins. Co. of America, 762
F.3d 285 (3d Cir. 2014). Here, Defendant does not seek to
dismiss Plaintiffs’ NJCFA claim on an affirmative
misrepresentation theory; even disregarding the marketing
statements this Court previously found to be mere puffery (see

6 

Aug. 26 Op. [Docket Item 23] at 19-20),2 the Amended Complaint
undeniably describes assurances of fact on which Plaintiffs and
their contractor could have reasonably relied. Rather, Defendant
argues that Plaintiffs’ NJCFA claim should be dismissed “to the
extent Plaintiffs seek to proceed on an omission theory” because
they have not shown with enough particularity “that the
defendant acted with knowledge.” (Def. Mot. to Dismiss at 2.)
9.

“When the alleged consumer fraud consists of an

omission, the plaintiff must show that the defendant acted with
knowledge, and intent is an essential element of the fraud.” Cox
v. Sears Roebuck & Co., 647 A.2d 454, 462 (N.J. 1994).3 Defendant
asserts that the Amended Complaint merely generally alleges that
Defendant “knew or should have known” about the discoloration
defect and intended that consumers would rely on that
concealment, and thus fails to meet Rule 9(b)’s heightened
pleading standard. Plaintiffs counter that Rule 9(b) permits
that intent and knowledge may be alleged generally.

2

Of the statements quoted in the Amended Complaint, only two can
be construed as actionable assurances of fact: 1) “designed to
withstand the elements [so] you’re not going to have to do the
traditional painting and staining you would with a traditional
wood deck;” and 2) “designed not to rot, wrap or splinter and
contain a 25-year warranty.” (Am. Compl. ¶ 34.)
3 There is no intent requirement under the NJCFA when plaintiffs
allege that the unlawful conduct was an affirmative
misrepresentation. Id.
7 

10.

Plaintiffs are correct that the Rule permits intent

and knowledge to be alleged generally. Plaintiffs may not rest
upon conclusory statements to generally allege knowledge and
intent any more than they can for any other element of a claim
under Ashcroft v. Iqbal. “Even under a relaxed application of
Rule 9(b), boilerplate and conclusory allegations will not
suffice.” In re Burlington Coat Factory Sec. Litig., 114 F.3d
1410, 1418 (3d Cir. 1997.) The Amended Complaint alleges, inter
alia, that “Defendants knew, or had reason to and should have
known, that the PVC it used for fabricating the XLM Decking made
it susceptible to premature failure” (Am. Compl. ¶ 19), that
“Defendants also knew that TimberTech Decking had a history of
failures and was prone to premature wear and premature
discoloration, yet Defendants failed and/or omitted to inform
their distributors, their customers and the eventual owners of
the product of these material issues” (Id. ¶ 24), that “despite
knowing of these defects in TimberTech Decking, Defendants have
not developed a workable solution to rectify or cure the problem
in the materials” (Id. ¶ 25), that “Defendants had knowledge of
these shortcomings in its XLM Decking product but continued to
nonetheless sell it to consumers such as Plaintiffs at a premium
price without informing them beforehand” (Id. ¶ 26), and that
“despite numerous customer complaints over a period of years,
Defendants failed to implement any changes to their XLM decking,
8 

marketing, or warranty procedures to remedy those defects.” (Id.
¶ 28.)

The amended complaint alleges plausible grounds for

knowledge and intent to omit accurate information about the
product’s shortcomings, based upon their receiving reports of
defects and failures of the product’s essential characteristics.
One can readily infer that the Plaintiffs allege that Defendant
received reports of premature wear and discoloration in this
product, and that Plaintiffs’ decking suffered from the same
deficiency, and yet Defendant continued to sell the product
without improving it, while maintaining silence about the
deficiencies that were contradicted by its sales materials
touting their resistance to fading and wear.
11.

The Court is mindful of the Third Circuit’s directive

that “in applying Rule 9(b), courts should be sensitive to
situations in which sophisticated defrauders may successfully
conceal the details of their fraud.” In re Able Labs. Sec.
Litig., Civ. 05-2681, 2008 WL 1967509, at *11 (D.N.J. Mar. 24,
2008) (quoting Burlington Coat Factory, 114 F.3d at 1418).
Knowledge and intent are exempt from Rule 9(b)’s particularity
requirement, so long as the circumstances surrounding such
general allegations of knowledge suffice to infer “what
defendant is alleged to have known and when.” In re AZEK
Building Prods., Inc. Marketing and Sales Practices Litig., 82
F. Supp. 3d 608, 623 (D.N.J. 2015) (citing Rait v. Sears,
9 

Roebuck & Co., Civ. 08-2461, 2009 WL 250309, at *4 (D.N.J. Feb.
3, 2009)); see also Maniscalco v. Brother Intern. Corp. USA, 627
F. Supp. 2d 494, 499 (D.N.J. 2009) (plaintiffs sufficiently
plead intent and knowledge when their complaint alleged the
source and year of defendants’ knowledge).4 While it may be
insufficient for Plaintiff to allege that Defendant “must have
known” about the defect, In re Advanta Corp. Sec. Litig., 180
F.3d 525, 539 (3d Cir. 1999), abrogated on other grounds by 551
U.S. 308 (2007), the surrounding circumstances alleged in the
amended complaint suffice to adequately allege an actionable
intentional material omission of failing to inform consumers,
including these Plaintiffs, of defects in the decking materials
in terms of color fading and wear characteristics prior to sale
of such products to Plaintiffs. The basis for Defendant’s
alleged knowledge is the reports of deficiencies that Defendant
received and suppressed, according to the amended complaint.

4

Plaintiffs ask the Court to take judicial notice of public
complaints posted online and a similar complaint filed in the
District of Massachusetts in support of their allegation that
Defendant knew of XLM decking’s discoloration defect. The Court
will decline to do so because the Third Circuit has directed
that “[o]nly in the clearest of cases should a district court
reach outside the pleadings for facts necessary to resolve a
case at that point.” Victaulic Co. v. Tieman, 499 F.3d 227, 236
(3d Cir. 2007). These are matters outside the pleadings and not
referenced in the pleadings or indisputably authentic, and
therefore may not be utilized. Plaintiffs may, of course, pursue
such documents in discovery and seek to construct an evidentiary
foundation for admissibility as the case progresses.
10 

This suffices to give Defendant the notice of the nature of
Plaintiffs’ NJCFA claim to which Defendant is entitled. The
question of whether Plaintiffs will ultimately succeed in
proving such knowledge and intent is not before the Court in
this Rule 12(b)(6) motion. The Court simply holds that the
general averral of knowledge and intent, backed by the
circumstantial grounds for such knowledge and intent as alleged
here, is sufficiently plausible to sustain a NJCFA claim for
material omission.
12.

Defendant also seeks to dismiss the entirety of

Plaintiffs’ NJCFA claim, including those allegations based on an
affirmative misrepresentation theory, for lack of causation.
Defendant argues that because Plaintiffs do not identify where
or when they saw which specific marketing materials, they cannot
sufficiently allege a causal nexus between Defendant’s
misrepresentations and Plaintiffs’ ascertainable loss to satisfy
Rule 9(b).
13.

Unlike ordinary fraud claims, this Court has found

that a plaintiff pursuing an action under the NJCFA usually need
not prove reliance. Smajlaj v. Campbell Soup Co., 782 F. Supp.
2d 84, 98 n. 9 (D.N.J. 2011). However, for NJCFA claims based on
an affirmative misrepresentation, there must still be “a direct
causal connection between the misrepresentation and the
plaintiff’s defeated expectations about the product.” Id. at
11 

100. Plaintiffs identify specific statements made by Defendant
that convinced them and Leeds to purchase XLM decking. (Am.
Compl. ¶¶ 34, 38.) Plaintiffs allege that, if not for
Defendant’s advertising materials, “Plaintiffs and the members
of the Class would not have purchased the products, paid a
premium price for the product, and/or installed them in their
properties.” (Id.) “To survive a motion to dismiss . . . it is
sufficient if a plaintiff avers that had the alleged defect been
disclosed, consumers would not have purchased defendant’s
product.” Mickens v. Ford Motor Co., 900 F. Supp. 2d 427, 447
(D.N.J. 2012) (citing Maniscalco, 627 F. Supp. 2d at 503).
Moreover, this Court already found in its August 26 Opinion on
Defendant’s first motion to dismiss that Plaintiffs sufficiently
alleged reliance on Defendant’s marketing and advertising claims
for the purposes of pleading causation for their breach of
express warranty claims. Defendants offer no reason this Court
should decide differently now.
14.

Defendants argue that because Plaintiffs have not

alleged when or where they saw these specific statements, and
where or when they were communicated to Plaintiffs individually,5

5

Defendants put too much stock in cases holding that a
misrepresentation must be made to a plaintiff individually to be
actionable. (Def. Reply at 4, citing Smajlal v. Campbell Soup
Co., 782 F. Supp. 2d 84, 100 (D.N.J. 2011)). Rather than
standing for the proposition that advertisements disseminated to
the general public alone cannot support causation under the
12 

their allegations fail to satisfy Rule 9(b)’s heightened
standard. Defendants forget that a plaintiff may satisfy Rule
9(b) by “otherwise inject[ing] precision into the allegations by
some alternative means.” In re Riddell Concussion Reduction
Litig., 77 F. Supp. 3d 422, 433 (D.N.J. 2015). Plaintiffs have
identified specific statements by Defendant, and have “alleged
facts within [their] knowledge, which, if true, could form the
basis of a causal nexus.” Mickens, 900 F. Supp. 2d at 447. So
long as a plaintiff avers that he saw the alleged
misrepresentation and that but for those statements, he would
not have made a purchase, New Jersey courts have found his
pleading sufficient. See Dzielak v. Whirlpool Corp., 26 F. Supp.
3d 304, 335 (D.N.J. 2014); Smajlaj v. Campbell Soup Co., 782 F.
Supp. 2d 84, 100 (D.N.J. 2011); Gross v. Johnson & Johnson-Merck
Consumer Pharms. Co., 696 A.2d 739, 798 (N.J. Super. 1997).
Plaintiffs have thus adequately alleged a claim under the NJCFA
under an affirmative misrepresentation theory. The Amended
Complaint identifies actionable unlawful conduct, an
ascertainable loss, and causation. The Court will deny
Defendant’s motion to dismiss to the extent it seeks to dismiss

NJCFA, these cases instead merely reject importing a fraud on
the market theory from securities litigation into the consumer
fraud arena. See Int’l Union of Operating Eng’rs Local No. 68
Welfare Fund v. Merck & Co., 929 A.2d 1076, 1087-88 (N.J. 2007)
(ascertainable loss cannot be proven by statistical analysis
replacing reliance).
13 

Plaintiffs’ NJCFA claim under an affirmative misrepresentation
theory.
15.

An accompanying Order will be entered denying

Defendant’s motion.

December 10, 2015
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge

14