DZIELAK et al v. WHIRLPOOL CORPORATION et al
Filing
78
OPINION. Signed by Judge Kevin McNulty on 6/16/2014. (nr, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CHARLENE DZIELAK, SHELLEY BAKER,
FRANCIS ANGELONE, BRIAN MAXWELL,
JEFFREY MCLENNA, JEFFERY REID,
HART
PARSONS,
CHARLES
BEYER,
JONATHAN
COHEN,
and
JENNIFER
SCHRAMM,
Civ. No. 2:12-0089 (KM)
OPINION
Plaintiffs,
V.
WHIRLPOOL
CORPORATION,
LOWE’S
COMPANIES, INC., SEARS HOLDINGS
CORPORATION, the HOME DEPOT, INC.,
FRY’S ELECTRONICS, INC., APPLIANCE
RECYCLING CENTERS of AMERICA, INC.,
and LOWE’S HOME CENTER,
Defendants.
KEVIN MCNULTY, U.S.D.J.:
This matter comes to the Court on Defendants’ motions (Docket Nos. 37
and 38), pursuant to Fed. R. Civ. 12(b)(6), to dismiss the First Amended
Consolidated Complaint (“FAG,” Docket No. 29) in this putative class action.
For the reasons set forth below, the motions to dismiss will be granted in part
and denied in part. These dismissals are without prejudice to the filing of a
Second Amended Complaint.
The named plaintiffs, purchasers of Maytag washing machines, are
Charlene Dzielak, Francis Angelone, Shelley Baker, Brian Maxwell, Jeffrey
McLenna, Jeffery Reid, Kari Parsons, Charles Beyer, Jonathan Cohen, and
Jennifer Schramm. The first named defendant is the Maytag washing
machines’ manufacturer, Whirlpool Corporation (“Whirlpool”).’ The remaining
Whirlpool is a Delaware corporation with its principal place of business in
Benton Harbor, Michigan; Lowe’s is a North Carolina corporation with its principal
1
defendants are the retailers from whom the plaintiffs purchased the Maytag
washers: Lowe’s Home Center (“Lowe’s”), Sears Holding Corporation (“Sears”),
2
The Home Depot, Inc. (“Home Depot”), Fry’s Electronics, Inc. (“Fry’s”), and
Appliance Recycling Centers of America, Inc. (“AReA”)
.
The Department of Energy (DOE) Energy Star program authorizes
manufacturers to affix an Energy Star label signifying that an appliance meets
certain standards of energy efficiency. Each Maytag washing machine at issue
in this case bore an Energy Star label at the time of purchase. Thereafter,
however, DOE determined that Maytag Centennial washing machine model
number MVWC6ESWW1 did not comply with Energy Star requirements, and
EPA disqualified the machine from the Energy Star program. That
noncompliance determination and disqualification allegedly apply equally to
Maytag Centennial model numbers MVWC6ESWWO, MVWC6ESWW 1, and
4
MVWC7ESWWO.
place of business in Mooresville, North Carolina; Sears is a Delaware corporation with
its principal place of business in Hoffman Estates, Illinois; The Home Depot is a
Delaware corporation with its principal place of business in Atlanta, Georgia; Fry’s
Electronics is a California corporation with its principal place of business in Sari Jose,
California; and ARCA is a Minnesota corporation with its principal place of business in
Minneapolis, Minnesota. FAC ¶J 4—6.
Via stipulation, Plaintiffs voluntarily dismissed Lowe’s Companies, Inc., a party
named in the First Amended Complaint. Docket No. 63. Lowes Home Center, a wholly
owned subsidiary of Lowe’s Companies, Inc., agreed to be substituted as a named
defendant in the case, as it is responsible for the sale of the appliances at issue in this
action. Id.
2
The original complaint, filed January 1, 2012, Dzielak, et al v. Whirlpool Corp.,
et al., No. 12-cv-0089, alleged claims against Whirlpool, Sears, and Lowe’s. Docket No.
1. Those Defendants proposed to consolidate Dzielak with a related case, Angelone i.’.
Whirlpool Corporation, et al, 12-cv-1039. Home Depot, a defendant only in Angelone,
consented to the consolidation. Docket No. 28. On April 30, 2012, Plaintiffs filed the
First Amended Consolidated Complaint (i.e., the FAC that is the subject of these
motions to dismiss). The FAC includes claims against defendants Home Depot, Frye’s
Electronics, and ARCA, in addition to the defendants originally named in the
unconsolidated Dzielak case. Docket No. 29. ARCA has not, to date, filed a motion to
dismiss, and it does not appear to have been served.
3
Plaintiffs allege that MVWC6ESWW 1 is the “basic model” machine. According to
Plaintiffs, MVWC6ESWW1 adds an EMI/RFI filter to reduce electrical and radio
4
2
According to the FAC, Energy Star-qualified washing machines cost
more
than others, but save consumers money over time because they
consume less
energy. The FAC alleges that Plaintiffs paid a price premium
attributable to
“their Mislabeled Washing Machine’s supposed energy efficiency
and ENERGY
STAR® qualification.” FAC ¶ 46. But those non-compliant machin
es, say
Plaintiffs, wound up costing more to operate than a truly Energy
Starcompliant machine. Id. ¶ 47.
Plaintiffs assert causes of action for breach of express warranty, breach
of the implied warranty of merchantability, unjust enrichment, violati
on of the
Magnuson-Moss Warranty Act, 15 U.S.C.
§ 2301, et seq. (“MMWA”), and
violations of New Jersey, California, Michigan, Florida, Ohio,
Indiana, and
Texas consumer fraud statutes. Other purchasers of these washing
5
machines,
they say, stand in precisely the same shoes, and Plaintiffs have therefo
re filed
their action as a putative class action on behalf of such purcha
sers. Named
plaintiffs Dzielak and Angelone bought their washers in New
Jersey; Baker,
Maxwell in California; McLenna in Michigan; Reid in Florida; Parson
s in Ohio;
Beyer in Indiana; Cohen in Texas; and Schramm in Virginia. The putativ
e class
comprises subclasses of purchasers in those states—New Jersey,
California,
Michigan, Florida, Ohio, Indiana, Texas, and Virginia—eight subcla
sses in all.
The first motion to dismiss is filed jointly by Whirlpool, Fry’s, Lowe’
s, and
Sears, Docket No. 37. The second is filed by Home Depot, Docke
t No. 38.
interference, while MVWC7ESWWO adds a glass top for cosmetic
purposes. The
interior and exterior parts are otherwise virtually identical and the
machines have
identical energy usage, water usage, and load capacity. The three model
s share the
same motor, cabinet, electric wiring, control knobs, timer knobs,
wash basket,
agitator, drive tube, pump, and clutch. FAC 2, n. 1.
¶
Those state consumer fraud statutes are: New Jersey Consumer Fraud
Act,
N.J.S.A. § 56:8-1; California Consumer Legal Remedies Act, Civil
Code § 17200, et
seq.; California Unfair Competition Law, Bus. & Prof. Code 17200, et
seq.; California
§
False Advertising Law, Business and Professions Code
§ 17500, et seq.; Michigan
Consumer Protection Act, Mich. Comp. Laws 445.90 1, et seq.; Florida Decep
§
tive and
Unfair Trade Practices Act, Fla. Stat. § 501.201, et seq.; Ohio Consu
mer Sales
Practices Act, Ohio Rev. Code Ann. § 1345.01, et seq.; Indiana Decep
tive Consumer
Sales Act, md. Code Ann. § 24-5-0.5-1, et seq.; and Texas Deceptive
Trade Practices
Act, Tex. Bus. Corn. Code § 17.41, etseq.
5
3
Defendants argue that that the Complaint’s allegations are insufficient as a
matter of law. Defendants deny that they have engaged in any wrongful
conduct or otherwise misrepresented any information in connection with the
sales of the washers in question. They also allege that Plaintiffs have failed to
plead claims sounding in fraud with the requisite particularity.
Defendants’ motions to dismiss will be granted. The dismissals are
without prejudice to the filing of a Second Amended Complaint that corrects
the pleading deficiencies of the First.
I.
6
BACKGROUND
A. The Energy Star Program
The Energy Policy and Conservation Act of 1975 (“EPCA”), 42 U.S.C. §
6291, et seq., together with the National Energy Conservation Policy Act of
1978 (“NECPA”) and National Appliance Energy Conservation Act of 1987
(“NAECA”), established an energy conservation program for major household
appliances. These statutes and related regulations led to the Energy Star
program, “a voluntary program to identify and promote energy-efficient
products and buildings in order to reduce energy consumption, improve energy
security, and reduce pollution through voluntary labeling of, or other forms of
communication about, products and buildings that meet the highest energy
conservation standards.” 42 U.S.C. § 6294(a). To qualify for the Energy Star
program, a product must meet certain efficiency standards promulgated by the
Department of Energy (“DOE”). See C.F.R. § 430.1, et seq.
For the Energy Star program, DOE has established minimum standards
for energy and water efficiency. Qualified machine models must use
approximately 37% less energy and 50% less water than standard models. FAC
¶ 2. The DOE has instituted a pilot program under which it tests retail
products to ensure conformity with Energy Star program guidelines. DOE and
the Environmental Protection Agency (“EPA”) jointly administer the program.
42 U.S.C. § 6294a.
The allegations of the Complaints have not yet been tested by any fact finder.
Solely for the purpose of analyzing the Rule 12(b)(6) motions, the Court, as it must,
assumes their truth.
6
4
Energy Star program participants may affix the trademarked and
federally-owned Energy Star logo to qualifying products. FAC 26. The Energy
¶J
Star logo is an important marketing tool. Energy Star labeled machin
es are
more expensive than standard models, but “come with the promis of
e
reduced
energy and water bills that, over time, will generate enough saving to
recoup
the higher price.” Id. ¶ 2. As characterized by Plaintiffs, the Energy
Star
program rests on a fundamental bargain: pay more up front, but
save on
energy bills in the long run. Id.
B. Disqualification from the Energy Star Program
As of 2009, certain Maytag washing machines (the FAC calls them “the
Mislabeled Machines”) were already on the market with the Energy Star
label.
As part of the pilot program, DOE tested the efficiency of Maytag
washing
machine model number MVWC6ESWW1. On September 20, 2010,
DOE
informed Whirlpool that model number MVWC6ESWW1 did not
meet the
Energy Star efficiency requirements. Id.
¶ 40. After consultation with
Whirlpool, DOE agreed to test additional units. Id.
¶ 41. From January 3 to
January 12, 2011, Springboard Engineering laboratories tested four additio
nal
units of the Maytag Centennial MVWC6ESWW1 model. These units, too,
failed
to comply with DOE standards. Id. at 42. On January 19, 2011, DOE notifie
¶
d
Whirlpool of the results of that second round of testing. Id. 43. Therea
fter, on
¶
March 16, 2011 DOE referred the matter to the EPA, which is the
brand
manager for Energy Star.
According to the FAC, “Whirlpool avoided a formal disqualification from
the Energy Star program by representing” to the EPA “that it had discon
tinued
the sale or manufacture of the Mislabeled Washing Machines, and
that none
were remaining in inventory—rendering a formal disqualification moot
by the
time the issue was presented to the EPA.” Id.
45. Whirlpool and the EPA
¶
“reached an informal and private agreement whereby Whirlpool agreed
to cease
and desist from the manufacture or sale of the Mislabeled Washing Machi
nes.”
Id. The FAC alleges that “persons who had already purchased these Mislab
eled
Washing Machines, including Plaintiffs, were given no notice of this agreem
ent,
or of the Mislabeled Washing Machines’ noncompliance with the Energy
Star
standard.” Id.
That situation apparently has changed to some extent. According to
an
exhibit attached to Plaintiffs’ Opposition Brief (“Non-Lighting
Products
Disqualified from the ENERGY STAR® Program”), the EPA did in fact disqua
lify
5
machine model number MVWC6ESWW1 on May 7, 2012. Docke No.
t
47-3 at 2.
That issue is discussed below.
C. The Plaintiffs’ Washing Machine Purchases
The named plaintiffs purchased washers in their home states,
and
purport to represent subclasses of purchasers in those eight
states: New
Jersey, California, Michigan, Florida, Ohio, Indiana, Texas, and
Virginia. The
washers at issue are alleged to be Maytag Centennial model
numbers
MVWC6ESWWO, MVWC6ESWW1, and MVWC7ESWWO.
As to each plaintiff, the FAC identically alleges the following: The washin
g
machine bore the Energy Star logo in two places. The purchaser
saw the logo
before and at the time of purchase. The purchaser understood
the logo to be a
representation and warranty by both the manufacturer and retailer
that the
machine met Energy Star standards of efficiency. The plaintiff purcha
ser would
not have bought the machine if he or she had known it did not in
fact comply.
Thus each plaintiff allegedly relied on the Energy Star logo when
making the
purchase.
As to the specific purchases by each named plaintiff, the FAC separa
tely
alleges the following:
On November 27, 2009, Francis Angelone purchased
a “Maytag
Centennial MVWC6ESWW* washing machine at a Home Depot retail
store in
Deiran, New Jersey.” Angelone paid $299.00, plus tax. FAC 29.
¶
On November 27, 2009, Brian Maxwell purchased a “Maytag Centen
nial
MVWC6ESWW* washing machine at a Fry’s
Electronics retail store in Roseville,
California.” Maxwell paid $399.00, plus tax. Id. 30.
¶
On November 28, 2009, Jonathan Cohen purchased a
“Maytag
Centennial MVWC6ESWW* washing machine at a Home Depot
retail store in
Houston, Texas.” She paid $299.00, plus tax. Id. 31.
¶
On November 30, 2009, Charlene Dzielak purchased a “Mayt
ag
Centennial MVWC6ESWW* washing machine at a Lowe’s retail
store near her
home in Middlesex County,” New Jersey. She paid $409.0 plus
0,
tax. Id. ¶ 32.
6
In January 2010, Jennifer Schramm purchased a “Maytag Centennial
MVWC6ESWW* washing machine” at a Lowe’s retail
store in Alexandria,
Virginia. Id. ¶ 33. The purchase price is not given.
On February 27, 2010, Jeffery McLenna purchased a “Maytag Centennial
MVWC6ESWW* washing machine” at a Home Depot retail
store in Lapeer,
Michigan.” He paid $476.10, plus tax. Id. ¶ 34.
On March 27, 2010, Kari Parsons purchased a “Maytag Centennial
MVWC6ESWW* washing machine” at an ApplianceSmart Factor
y Outlet retail
store in Columbus, Ohio.” She paid $492.99, plus tax. Id. 35.
¶
On March 18, 2010, Plaintiff Charles Beyer purchased a “Maytag
Centennial MVWC6ESWW* washing machine at a Sears retail store in
Martinsville, Indiana.” He paid $457.49, plus tax. Id. 36.
¶
On December 1, 2010, Plaintiff Shelly Baker purchased a “Maytag
Centennial MVWC6ESWW* washing machine” at a Sears retail store in
Ontario, California.” She paid $439.93, plus tax and delivery. Id. 37.
¶
In 2010, Plaintiff Jeffrey Reid, who lives in Florida, purchased a “Maytag
Centennial MVWC6ESWW1 washing machine from nearby Air Force base.” He
paid for the machine in cash. Id. ¶ 38.
H.
LEGAL STANDARDS
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a
complaint, in whole or in part, if it fails to state a claim upon which relief can
be granted. The moving party, ordinarily the defendant, bears the burden of
showing that no claim has been stated. Hedges t’. United States, 404 F.3d 744,
750 (3d Cir. 2005). For purposes of a motion to dismiss, the well-pleaded
factual allegations of the complaint must be taken as true, with all reasonable
inferences drawn in plaintiff’s favor. Phillips v. County of Allegheny, 515 F.3d
224, 231 (3d Cir. 2008) (established “reasonable inferences” principle not
undermined by intervening Supreme Court case law).
In recent years, the United States Supreme Court has elaborated on the
standards that a court is to apply in analyzing a Rule 12(b)(6) motion to
dismiss, particularly in light of the pleading requirements of Federal Rule of
7
Civil Procedure 8(a)(2). Although a complaint need not contain detailed factual
allegations, “a plaintiffs obligation to provide the ‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do.” Bell Ati. Corp. v. Twombly, 550
U.s. 544, 555 (2007). Thus the factual allegations must be sufficient to raise a
plaintiff’s right to relief above a speculative level, demonstrating that it is
“plausible on its face.” See id. at 570; see also Urniand v. PLANCO Fin. Servs.,
Inc., 542 F.3d 59, 64 (3d Cir. 2008). A claim has “facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While “[tjhe
plausibility standard is not akin to a ‘probability requirement’
it asks for
more than a sheer possibility.” Iqbal, 556 U.s. at 678.
.
.
.
The United 5tates Court of Appeals for the Third Circuit has explicated
the Twombly/Iqbal standard on several occasions. See, e.g., Argueta v. U.S.
Immigration & Customs Enforcement, 643 F.3d 60, 70-73 (3d Cir. 2011);
Santiago v. Warminster Twp., 629 F.3d 121, 129-30 (3d Cir. 2010); Fowler v.
UPMC Shadyside, 578 F.3d 203, 209-211 (3d Cir. 2009). The Court of Appeals
recently summarized the three-step process for analyzing a Rule 12(b)(6)
motion:
To determine whether a complaint meets the pleading standard,
our analysis unfolds in three steps. First, we outline the elements
a plaintiff must plead to a state a claim for relief. See [Iqbal, 556
U.S.] at 675; Argueta, 643 F.3d at 73. Next, we peel away those
allegations that are no more than conclusions and thus not
entitled to the assumption of truth. See Iqbal, 556 U.S. at 679;
Argueta, 643 F.3d at 73. Finally, we look for well-pled factual
allegations, assume their veracity, and then “determine whether
they plausibly give rise to an entitlement to relief.” Iqbal, 556 U.S.
at 679; Argueta, 643 F.3d at 73. This last step is “a context-specific
task that requires the reviewing court to draw on its judicial
experience and common sense.” Iqbal, 556 U.S. at 679.
Bistrian v. Levi, 696 F.3d 352, 365 (3d Cir. 2012).
Defendants assert that the state consumer protection law claims sound
in fraud and therefore must be pleaded with heightened particularity. For
claims of fraud, Federal Rule of Civil Procedure 9(b) imposes a heightened
pleading requirement, over and above that of Rule 8(a). Specifically, it requires
8
that “in all averments of fraud or mistake, the circumstances constituting the
fraud or mistake shall be stated with particularity.” Fed. R. Civ. P. 9(b).
“Malice, intent, knowledge, and other conditions of a person’s mind,” however,
“may be alleged generally.” Id. That heightened pleading standard requires the
plaintiff to “state the circumstances of the alleged fraud with sufficient
particularity to place the defendant on notice of the precise misconduct with
which it is charged.” Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007)
(internal quotation and citation omitted).
In general, “[t]o satisfy this heightened standard, the plaintiff must plead
or allege the date, time, and place of the alleged fraud or otherwise inject
precision or some measure of substantiation into a fraud allegation.” Id.
“Plaintiff must also allege who made the misrepresentation to whom and the
general content of the misrepresentation.” Lum v. Bank of Am., 361 F.3d 217,
224 (3d Cir. 2004) (internal citation omitted); In re Suprema Specialties, Inc.
Sec. Litig., 438 F.3d 256, 276—77 (3d Cir. 2006) (“Rule 9(b) requires, at a
minimum, that plaintiffs support their allegations of fraud with all of the
essential factual background that would accompany the first paragraph of any
newspaper story—that is, the who, what, when, where and how of the events at
issue.”) (internal quotation and citation omitted)).
[Plaintiffsj need not, however, plead the “date, place or time” of the
fraud, so long as they use an “alternative means of injecting
precision and some measure of substantiation into their
allegations of fraud.” The purpose of Rule 9(b) is to provide notice
of the “precise misconduct” with which defendants are charged and
to prevent false or unsubstantiated charges. Courts should,
however, apply the rule with some flexibility and should not
require plaintiffs to plead issues that may have been concealed by
the defendants.
Rob v. City Investing Co. Liquidating Trust, 155 F.3d 644, 658 (3d Cir. 1998)
(quoting Seville Indus. Machinery v. Southmost Machinery, 742 F.2d 786, 791
(3d Cir. 1984) and citing Christidis v. First Pennsylvania Mortg. Trust, 717 F.2d
96, 99 (3d Cir. 1983)).
III.
LEAVE TO AMEND/JUDICIAL NOTICE
Both motions to dismiss assert that the FAC does not properly plead that
plaintiffs have suffered an injury in fact. To look at the issue another way,
defendants assert that the FAC does not state a cause of action unless it is
9
supplemented by judicial notice in a manner that is at least awkward, if not
wholly unwarranted.
Judicial notice is a discretionary doctrine. See Fed. R. Evid. 201; Buck v.
Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006) (“In evaluating a
motion to dismiss, we may consider
items subject to judicial notice,
matters of public record, orders, [andj items appearing in the record of the
case.”) (citing Wright & Miller, Federal Practice & Procedure: Civil 3d
§ 1357;
internal citations omitted)). Rather than deal with evolving facts and arguments
by means of independent research, I will grant Plaintiffs leave to replead their
allegations in complete and updated form.
.
.
.
Some doubt surrounds the specific model number(s) of Maytag washers
that are the subject of this action. Only one plaintiff, Reid, is squarely alleged
to have purchased model number MVWC6ESWW 1, the one actually tested by
DOE and found noncompliant. The remaining nine plaintiffs are alleged to have
purchased model number MVWC6ESWW*. That asterisk designation leaves
some ambiguity as to precisely what model was purchased. (And it may
implicitly rest on plaintiff’s assertion that three models (not just one) should be
considered disqualified, see infra.)
Plaintiffs have invoked judicial notice as to subsequent developments
that may significantly alter the basis or scope of their claims. As to the fact of
disqualification, the plaintiffs have requested that the Court take judicial notice
of an EPA document attached to their Opposition Brief (Non-Lighting Products
Disqualified from the ENERGY STAR® Program). Docket No. 47-3 at 2. That
document, they say, establishes that model number MVWC6ESWW1 was
disqualified from the Energy Star Program by the EPA on May 7, 2012. That
disqualification, subsequent to the complaint and FAC, may moot certain
arguments for dismissal. (Defendants contend, for example, that they cannot
be faulted for failure to “disclose” an event that had not occurred as of the date
the complaint or FAC was filed.) Alternatively it may shift the basis of the
claims, or suggest other lines of attack. Even standing alone, this development
suggests that it might be more productive to permit Plaintiffs to revise their
allegations.
This exhibit is a public document, seemingly created by the DOE and EPA and
accessible
on
the
federal
government’s
Energy
Star
website.
See
www.energystar.gov / ia/ partners / downloads / Disqualified Non-LightingProducts.pdf.
7
l0
Plaintiffs have also invoked judicial notice in an attempt to establish that
the EPA’s disqualification of model number MVWC6ESWW 1 should be deemed
to include the MVWC6ESWW0 and MVWC7ESWWO models (assuming that any
plaintiff bought them, which is unclear). In a Joint Status Report, Plaintiffs
asserted that this was so “because disqualifications and noncompliance
determinations affect all units of the same ‘Basic Model.”’ Docket No. 54 at 5.
In a request for judicial notice, Docket No. 53, Plaintiffs cite a federal
regulation, 10 CFR § 430.2, which defines the term “basic model.” Defendants
respond that the version of the regulation provided by Plaintiffs has been
ineffective since April 6, 2011. Docket No. 62-1 at 38 And they dispute
Plaintiffs’ legal assertion that this definition brings the other Maytag models
within the scope of the noncompliance and disqualification determinations.
9
I could opine about these legal issues but I am not confident that judicial
notice can straighten this out. The briefing has not adequately explored the
The current version of 10 CFR § 430.2 (eff. May 21, 2014) defmes “basic model”
as follows:
8
“Basic model means all units of a given type of covered product (or class
thereof) manufactured by one manufacturer, having the same primary
energy source, and which have essentially identical electrical, physical,
and functional (or hydraulic) characteristics that affect energy
consumption, energy efficiency, water consumption, or water efficiency.
Plaintiffs have requested that the Court take judicial notice of a prior version of
the regulation, which defines basic model as follows:
Basic model means all units of a given type of covered product (or class
thereof) manufactured by one manufacturer and—.
(10) With respect
to clothes washers, which have the same primary energy source, which
have electrical characteristics that are essentially identical, and which do
not have any differing physical or functional characteristics that affect
energy consumption.
.
.
This version appears to have been effective from January 18 through April 5, 2011.
Plaintiffs also submit a screen shot of the homepage of the Energy Star website
and a copy of “National Awareness of Energy Star for 2011: Analysis of CEE
Household Survey.” The intent seems to be to support Plaintiff’s express warranty
claim that the energy star logo, standing alone, signifies certain specific
representations regarding energy efficiency.
11
effect of the amendments to the regulations. And even if I had a clear picture of
the law, I would still lack a clear set of allegations to which to apply that
analysis. In short, a properly pleaded complaint must tell the reader which
plaintiff purchased exactly which model—a fact probably easy to ascertain from
the
machine
itself.
See
“Locate
Your
Model
Number,”
www.maytag.com / owners-center! locate-model-number. content.html. And it
must set forth Plaintiffs’ plausible basis for concluding that the regulatory
noncompliance and disqualification determinations covered that particular
model.
Were I to update and supplement the allegations of the complaint in the
manner suggested, I would be shadowboxing. The better course is to grant the
Plaintiffs leave to amend the FAC so they can reframe their allegations in their
currently operative form. Any amended pleading should allege exactly who
bought which washer and should plausibly allege how the particular machine
was affected by the EPA/DOE noncompliance and disqualification
determinations.
IV.
DISCUSSION OF THE CLAIMS
In the interests of judicial economy, I will discuss Defendants’ other
asserted grounds for dismissal of claims as if I had not entered the blanket
dismissal in Part III, supra. My disposition of the other asserted grounds for
dismissal of Plaintiffs’ claims may guide the drafting of any amended pleading.
I here assume for purposes of discussion that each plaintiff purchased a
“mislabeled” washing machine (although only Reid has clearly alleged that he
did so).
I note also that the FAG tends to lump all plaintiffs and claims together.
Each plaintiff may, for example, sue the retailer from whom she bought the
washer under the consumer protection laws of the state where the purchase
occurred. As it currently reads, however, the FAG could be interpreted to assert
claims by each plaintiff against all defendants under the laws of all eight states.
The following discussion proceeds on the assumption that this was not
intended. See Section IV.E, infra. In the inevitable Second Amended Complaint,
this should be clarified.
12
A. Breach of Express Warranty (Count II)
I find that the FAC sufficiently alleges that the Energy Star logo
constitutes an express warranty, which defendants breached. Any disclaimer in
the user manual’s Limited Warranty is ineffective; at any rate, such a
disclaimer cannot be presumed effective as a matter of law for purposes of a
motion to dismiss.
1. Choice of state law as to privity
I must decide which state’s law applies to each state-law express
warranty claim as to each plaintiff-defendant pair. See Gray v. Bayer Corp.,
Civ. No. 08-4716, 2011 WL 2975768, at *5 (D.N.J. July 21, 2011) (Linares, J.)
(“While it might be desirable for the sake of efficiency to settle upon one state,
such as New Jersey, and apply its law in lieu of the other 49 jurisdictions, due
process requires individual consideration of the choice of law issues raised by
each class member’s case before certification.”) (quoting Chin v. Chrysler Corp.,
182 F.R.D. 448, 457 (D.N.J. 1998)).
a diversity action, a district court must apply the choice of law rules
of the forum state to determine what law will govern the substantive issues of a
case.” Warriner v. Stanton, 475 F.3d 497, 499-500 (3d Cir. 2007) (citing Klaxon
Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). New Jersey uses the
most-significant-relationship test, which consists of two prongs. Maniscalco v.
Brother Int’l Corp. (USA), 793 F. Supp. 2d 696, 704 (D.N.J. 2011), affd sub nom.
Maniscalco v. Brother Int’l (USA) Corp., 709 F.3d 202 (3d Cir. 2013). First, the
court must determine whether a conflict actually exists between the potentially
applicable laws. P.V. v. Camp Jaycee, 197 N.J. 132, 143, 962 A.2d 453, 460
(2008) (“Procedurally, the first step is to determine whether an actual conflict
exists. That is done by examining the substance of the potentially applicable
laws to determine whether there is a distinction between them.”) (internal
quotations omitted). “[Ijf no conflict exists, the law of the forum state applies.”
Snyder v. Famam Companies, Inc., 792 F. Supp. 2d 712, 717 (D.N.J. 2011)
(quoting P.V., 197 N.J. at 143, 962 A.2d at 453).
If a conflict exists, the court then moves to the second prong: it must
determine “which state has the ‘most significant relationship’ to the claim at
issue by weighing the factors” in the applicable section of the Restatement
(Second) of Conflict of Laws. For contract claims, the applicable Restatement
13
section is § 188. Gilbert Spruance Co. v. Pennsylvania Mfrs. Ass’n Ins. Co., 134
N.J. 96, 102, 629 A.2d 885, 888 (1993).
The parties agree that New Jersey law does not require direct privity to
support an express warranty claim. Defendants contend that California,
Indiana, and Michigan law conflict with the New Jersey no-privity rule because
those three states require that a plaintiff stand in direct privity with a
defendant to bring a claim of breach of express warranty. See Docket No. 37 at
34) (citing Garcia v. M-FAthletic Co., Inc., No. Civ. 11-2430, 2012 WL 531008,
at *2 (E.D. Cal. Feb. 17, 2012); In re SCBA Liquidation, Inc., 451 B.R. 747, 770
(Bankr. W.D. Mich. 2011); Pizel v. Monaco Coach Corp., 364 F. Supp. 2d 790,
793 (N.D. md. 2005)). Such a conflict, if it existed, would be consequential
because Plaintiffs Baker, Maxwell, Beyer, and McLenna assert claims under
California, Indiana, and Michigan law against the manufacturer, Whirlpool, an
entity with which they are not in privity. (Putative class members, all retail
purchasers, are similarly unlikely to be in privity with the manufacturer.) On
further examination, however, I conclude that there is no true conflict, except
as to the law of Michigan.
Calfomia: No conflict. Privity is not a requirement where the express
warranty appears on the product’s label or advertising. “Privity is generally not
required for liability on an express warranty because it is deemed fair to impose
responsibility on one who makes affirmative claims as to the merits of the
product, upon which the remote consumer presumably relies.” Cardinal Health
301, Inc. v. Tyco Electronics Corp., 169 Cal. App. 4th 116, 143-44, 87 Cal. Rptr.
3d 5, 27 (2008) (emphasis in original). Thus California’s privity requirement
does not apply where a purchaser bases an express warranty claim on a
manufacturer’s written representations in labels or advertising. See Sanders v.
City of Fresno, 65 Fed. R. Serv. 3d 960 (E.D. Cal. 2006) (recognizing
“exceptions to the privity requirement, such as: (1) reliance on the
manufacturer’s written representations in labels or advertising materials”).
Indiana: No conflict. The Indiana authorities cited by Defendants do not
address the privity requirement as it relates to express warranties. And the
state’s intermediate court of appeals, reversing summary judgment for
defendant, has allowed a purchaser to assert an express warranty claim
against a manufacturer despite the absence of privity. Prairie Prod., Inc. v.
Amchem Div.-Pennwalt Corp., 514 N.E.2d 1299, 1302 (md. Ct. App. 1987). In
that case, as here, the plaintiff alleged that the manufacturer made express
warranties in the form of “advertisements, brochures and product labels.” Id.
14
Michigan: Conflict. The highest court of Michigan has not yet spoken on
the express warranty/privity issue. I am therefore required to predict how that
court, if confronted by the issue, would rule. Hunt v. U.S. Tobacco Co., 538 F.3d
217, 220-2 1 (3d Cir. 2008).
The Sixth Circuit has held that “it seems clear to us that Michigan’s
rejection of privity is not limited to tort actions as opposed to actions based on
warranty whether express or implied.” Reid v. Volkswagen of Am., Inc., 512
F.2d 1294, 1298 (6th Cir. 1975). That language, however, is general and the
case is nearly 40 years old. A bankruptcy court within the Sixth Circuit,
speaking in 2011, was not so sure: “under current Michigan law, it is unclear
whether purchasers may successfully maintain breach of warranty claims
against a remote manufacturer if the parties are not in privity of contract.” In re
SCBA Liquidation, Inc., 451 B.R. at 770.
Michigan’s intermediate appellate court, writing in 2009, concluded that
privily is required:
Our Supreme Court in Piercefield [v. Remington Arms Co., Inc., 375
Mich. 85, 133 N.W.2d 129 (1965)] and Spence [v. Three Rivers
Builders & Masonry Supply, Inc., 353 Mich. 120, 90 N.W.2d 873
(1958)] considered the issue of privily in the context of implied
warranties. Our research has revealed no modern case in which
the Supreme Court has ever held that privily of contract is
unnecessary to enforce and express warranty. Indeed, because an
express warranty is a term of the contract itself, MCL 440.2313; 1
Hawkland, Uniform Commercial Code Series, § 2-313:2, pp. 526527, we conclude that privily of contract is necessary for a remote
purchaser to enforce a manufacturer’s express warranty.
Heritage Res., Inc. v. Caterpillar Fin. Servs. Corp., 284 Mich. App. 617, 774
N.W.2d 332, 343 n.12 (2009).
Heritage Resources is the best guide I can find as to the law of Michigan
on this question. I will not disregard this authoritative statement of the Court
of Appeals based on more generalized impressions about the “better” view or
the “emerging trends” in the law. I conclude that, under Michigan law, an
express warranty claim requires privily.
15
The FAC does not clearly allege that plaintiff McLenna, who purchased a
washer from a retail intermediary, was in privily with the manufacturer,
Whirlpool. McLenna’s express warranty claim, as against Whirlpool only, is
dismissed for lack of privity.
I therefore set aside the Michigan express warranty claims against
Whirlpool for purposes of the rest of this discussion. Otherwise, the parties
have not identified any other potential conflict as to the elements of an express
warranty claim. Accordingly, I find that there is no true conflict between the
laws of the various states (except Michigan) as to a claim for breach of express
warranty based on a manufacturer’s advertisement. Snyder, 792 F. Supp. at
717 ((quoting P.V., 197 N.J. at 142—43, 962 A.2d at 453). I will apply the law of
the forum, New Jersey, to those express warranty claims.’
0
2. Analysis
Under New Jersey law, to state a claim for breach of express warranty,
“Plaintiffs must properly allege: (1) that Defendant made an affirmation,
promise or description about the product; (2) that this affirmation, promise or
description became part of the basis of the bargain for the product; and (3) that
10
Before going forward, I briefly address Defendants’ argument that the claims for
both breach of express warranty and breach of implied warranty of merchantability
must be dismissed for failure to provide pre-suit notice. Pre-litigation notice, a
requirement of New Jersey, Florida, Indiana, Michigan, Ohio, Texas, and Virginia law,
would potentially affects Plaintiffs Dzielak, Angelone, Reid, Beyer, McLenna, Parsons,
Cohen, and Schramm.
Plaintiffs maintain that two Plaintiffs, Baker and Maxwell, provided notice to
Whirlpool (and Sears, in the case of Baker) in letters attached to the Complaint.
Plaintiffs maintain that these letters were provided on behalf of “all other persons
similarly situated’ which includes the next eight plaintiffs that joined the lawsuit.”
Docket No. 47 at 12. Plaintiffs maintain that “[tjwo letters is enough notice. Ten is
overkill.” Id. In addition, although not all of the same Defendant-retailers were
involved, a class action involving the same product, Savett u. Whirlpool Corp., 12 CV
310, 2012 WL 3780451 (N.D. Ohio) was filed on February 28, 2012.
For purposes of a motion to dismiss (and because the issue might be better
handled in connection with an amended pleading, on summary judgment, or at the
class certification stage), I find the allegation of notice adequate.
16
the product ultimately did not conform to the affirmation, promise or
description.” Snyder, 792 F. Supp. 2d at 721 (citing N.J. Stat. Ann.
§ 12A:2—
313) (other internal citation omitted). See also Liberty Lincoln-Mercury, Inc. v.
Ford Motor Co., 171 F.3d 818, 824 (3d Cir. 1999). Defendants contend that that
the Energy Star logo is not an express affirmation or promise about the
product, and that the FAC fails to identify the specific affirmations that became
a part of the basis of the bargain. I disagree, and will deny the motion to
dismiss on this ground.
a. Energy Star logo as an affirmation or promise
The New Jersey
warranty” as:
UCC
Section
12A:2—313(1)
defines
an
“express
(a) Any affirmation of fact or promise made by the seller to the
buyer which relates to the goods and becomes part of the basis
of the bargain creates an express warranty that the goods shall
conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis of
the bargain creates an express warranty that the goods shall
conform to the description.
(c) Any sample or model which is made part of the basis of the
bargain creates an express warranty that the whole of the
goods shall conform to the sample or model.
“A statement can amount to a warranty, even if unintended to be such
by the seller, ‘if it could fairly be understood
to constitute an affirmation or
representation that the {product] possesse[sJ a certain quality or capacity
relating to future performance.” L.S. Heath & Son, Inc. v. AT & Tlnfo. Sys., Inc.,
9 F.3d 561, 570 (7th Cir. 1993) (applying New Jersey law and quoting Gladden
v. Cadillac Motor Car Div., General Motors Corp., 416 A.2d 394, 396, 83 N.J.
320 (1980)), abrogated on other grounds by Lexmark Int’l, Inc. v. Static Control
Components, Inc., 134 S. Ct. 1377, 188 L. Ed. 2d 392 (2014). “[Wjhether a
given statement constitutes an express warranty is normally a question of fact
for the jury.” Snyder, 792 F. Supp. 2d at 72 1-22; see also Union Ink Co., Inc. v.
AT & T Corp., 352 N.J. Super. 617, 645, 801 A.2d 361 (N.J. Super. Ct. App.
Div. 2002) (“Whether the advertisements contained material misstatements of
fact, or were merely puffing, as alleged by defendants, presents a question to be
determined by the trier of fact.”).
.
17
.
.
The FAC alleges that DOE requires that Energy Star-qualified washers
exceed certain minimum standards for energy efficiency. In particular, qualified
machine models must use approximately 37% less energy and 50% less water
than standard models. FAC ¶ 2. “Defendants as the designer, manufacturer,
marketers, distributors, or sellers expressly warranted that the Mislabeled
Washing Machines were fit for their intended purpose in that would function
properly as energy efficient washing machines within the parameters
established by federal law and the ENERGY STAR® program.” FAC ¶ 73. The
FAC further alleges that Plaintiffs saw the logo before and at time of sale;
understood the logo to mean that the machine complied with the program’s
efficiency standards; and would not have purchased the washers had their true
energy efficiency had been known. As a result of their understanding, they paid
a price premium attributable to the labeling of the machines as Energy starqualified; that the mislabeled machines did not perform as promised; and that
Plaintiffs have and will continue to pay higher energy costs as long as they
continue to use the mislabeled machines. Id. at 22. That is a legally sufficient
allegation that, by attaching the Energy Star label to the washing machines,
Defendants affirmed that the washers qualified for the program and met its
efficiency standards. See Taylor v. JVC Americas Corp., Civ. No. 07-4059, 2008
WL 2242451, at *5 (D.N.J. May 30, 2008) (warranty claim sufficiently pled by
allegations that packaging said the product was a “lO8Op” television, but
television did not accept a lO8Op signal).
In an earlier opinion, I distinguished certain cases holding that the
Energy Star logo, standing alone, did not support a claim for breach of express
warranty. See Auram v. Samsung Elecs. Am., Inc., No. 1 1—CV--6973 KM, 2013
WL 3654090 (D.N.J. July 11, 2013). For example, in Savett v. Whirlpool Corp.,
the court found that the complaint failed to allege any particular statement or
promise that the logo was understood to convey. No. 12-CV-310, 2012 WL
3780451, at *9 n.8 (N.D. Ohio Aug. 31, 2012) (“Notably, plaintiff does not allege
the he saw or understood any purported meaning of the logo.”). Here, however,
Plaintiffs allege that they understood the logo to mean that the machine was
compliant with the federal program and that compliant machines use
approximately 37% less energy and 50% less water than standard models.
Rossi v. Whirlpool Corp., Civ. No. 12-125, 2013 WL 1312105 (E.D. Cal. Mar. 28,
2013), cited by both sides, relies on California law; New Jersey law is broader.
See Hemy v. Perdue Farms, Inc., No. 11-CV-888, 2013 WL 1338199, at *7, *10
(D.N.J. Mar. 31, 2013) (complaint sufficiently alleges that a “humanely raised”
label would be understood by consumers to encompass the slaughtering
18
process); Taylor, supra, 2008 WL 2242451 at 5. In any event, the Rossi Court
later found that a second amended complaint did state a claim for breach of
express warranty. It held that “affixing this logo to the product satisfies the
definition of an express warranty” because it was “an affirmation of fact that
the product adheres to the Energy Star product, and because “it sufficiently
describes the product as meeting the Energy Star requirements.” Rossi v.
Whirlpool Corp., No. 12-CV-00 125, 2013 WL 5781673, at *4 (E.D. Cal. Oct. 25,
2013) (citing Avram, 2013 WL 3654090).
Applying New Jersey law, I find that the Amended Complaint adequately
alleges that the Energy Star logo would be understood by consumers as an
affirmation of fact or a promise regarding the energy efficiency of the washing
machines—namely, that the machines met the efficiency standards set forth as
part of the Energy Star program. The Rossi Court reasoned that it could not
“fathom any other reason to affix an Energy Star logo to a product other than
for the purpose of expressing that the product meets the Energy Star
requirements.” Rossi, No. 12-CV-00125, 2013 WL 5781673, at * 5 (E.D. Cal.
Oct. 25, 2013). I agree and find that the FAC adequately alleges an express
warranty claim.
b. Basis of the bargain and breach
“Under New Jersey law, a representation is presumed to be part of the
basis of the bargain ‘once the buyer has become aware of the affirmation of fact
or promise’ and can be rebutted by ‘clear affirmative proof that the buyer knew
that the affirmation of fact or promise was untrue.”’ Viking Yacht Co. v.
Composites One LLC, 496 F. Supp. 2d 462, 469 (D.N.J. 2007) (quoting Liberty
Lincoln-Mercury, Inc. v. Ford Motor Co., 171 F.3d 818, 825 (3d Cir. 1999)
(internal quotation omitted)), on reconsideration in part, No. 05—CV-538, 2007
WL 2746713 (D.N.J. Sept. 18, 2007), affd sub nom. Viking Yacht Co., Inc. v.
Composite One LLC, 385 F. Appx 195 (3d Cir. 2010).
Here, Plaintiffs allege that they saw and relied on the Energy Star labels,
that they understood the labels to be a representation and warranty that the
machines met the Energy Star program efficiency standards, and that they
would not have purchased the machines if they had known the washers did not
comply. FAC ¶J 29—38. And they allegedly did not comply. FAC
¶ 1 (“In fact,
the Mislabeled Washing Machines do not meet the Energy Star standards.”).
Those allegations adequately set forth a claim that the warranty was part of the
basis of the bargain, and that Defendants breached it.
19
c. The one-year “Limited Warranty”
Finally, Defendants argue that a written one-year “limited warranty,”
confined to the cost of “factory specified parts and repair labor to correct
defects in materials or workmanship,” effectively precludes any broader express
warranty claim based on Energy Star. Docket No. 37 at 33. The limited
warranty, say Defendants, is exclusive, and it operates as a disclaimer of any
broader warranty regarding energy efficiency.
A disclaimer of express warranty is qualitatively different from a
disclaimer of an implied warranty. The courts have been particularly wary of
disclaimers that take away with one hand what was given with the other. Thus
a disclaimer of an express warranty must be “clear and conspicuous.” Viking
Yacht Co., 496 F. Supp. 2d at 470 (quoting Gladden v. Cadillac Motor Car Div.,
83 N.J. 320, 331—32, 416 A.2d 394 (1980)). “To be conspicuous, a disclaimer
must be ‘so written that a reasonable person against whom it is to operate
ought to have noticed it.” Id. (also quoting N.J.S.A. § 12A:1—201(10)). And even
a clear and conspicuous disclaimer may be deemed inoperative if it is
“unreasonably inconsistent” with an express warranty. Id.
I agree with Plaintiffs that this limited warranty, which does not so much
as mention energy efficiency, does not constitute an explicit and conspicuous
disclaimer of the Energy Star express warranty.’
2
Defendants argue that the limited warranty is relied on by Plaintiffs in the
Amended Complaint and is, therefore, properly before the Court on these motions.
Plaintiffs do not appear to contest this point. It is worth noting that the paragraphs
Defendants refer to (FAC ¶11 62—75) do not appear to rely on the limited warranty, but
instead rely on what Plaintiffs allege to be the express warranty invoked here—the
Energy Star logo. If the limited warranty is not referred to in the Amended Complaint,
it would not ordinarily be considered as part of a motion to dismiss. I nevertheless
consider it here and find it ineffective to the extent that Defendants argue that the
limited warranty precludes the finding of an express warranty.
1
Defendants cite Cooper v. Samsung Electronics Am., Inc., 374 F. Appx 250, 253
(3d Cir. 2010). There, the plaintiff explicitly based his breach of warranty claim on a
limited warranty that only covered “manufacturing defects in materials and
12
20
To summarize, then, I apply New Jersey law and deny the motion to
dismiss the express warranty claims, with one exception. The Michigan express
warranty claim of plaintiff McLenna is dismissed as against defendant
Whirlpool only, on grounds of lack of privity.
B. Breach of Implied Warranty of Merchantability (Count III)
Defendants argue that the implied warranty of merchantability claims
should be dismissed. The motion is granted in part, and the implied warranty
claims of plaintiffs Maxwell, Baker, Parsons, and Reid are dismissed as against
Whirlpool only. Under applicable Ohio, California, and Florida law, privity is
required, and these plaintiffs are not in privity with the manufacturer,
Whirlpool (as opposed to the retail seller). The motion is otherwise denied.
1. Choice of law and privity
The parties do not offer a choice of law analysis and generally agree that
New Jersey law governs the elements of the implied warranty claims.
Defendants do point out, however, that the states’ laws differ as to whether
privity is required. The analysis is parallel to, but not identical with, the
analysis of express warranty. See Section IV.A. 1., supra.
As to privity, the laws of New Jersey, Michigan, Indiana, Texas, and
Virginia are similar; privity is not required. As to those five states, the privity
issue presents a nonexistent or “false conflict,” wherein “the laws of the
jurisdictions would produce the same result on the particular issue presented.”
Williams v. Stone, 109 F.3d 890, 893 (3d Cir. 1997). New Jersey forum law will
therefore govern those claims.
There is a genuine conflict, however, between the law of New Jersey and
that of Ohio, California, and Florida (potentially affecting plaintiffs Maxwell,
Baker, Parsons, and Reid). Courts in those three states have held that, under
workmanship” in a television. Id. Substantively, however, his complaint was that the
television did not perform as promised in its advertisements and packaging. The Court
concluded that, because plaintiff had not alleged a manufacturing defect, his claim
under the limited warranty could not survive. Id. at 253—54. Here, Plaintiffs base their
claim on a separate express warranty—the Energy Star logo—not the limited warranty
provided by the manufacturer.
21
local law, privity of contract is required to assert a claim for breach of implied
warranty of merchantability. See McKinney v. Bayer Corp., 744 F. Supp. 2d
733, 757 (N.D. Ohio 2010) (“Consumer failed to allege privity of contract with
vitamin producer, as required to state claim for breach of implied warranty of
merchantability under Ohio law.”); Paramount Farms, Inc. v. Ventilex B. V., 735
F. Supp. 2d 1189, 1217 (E.D. Cal. 2010) (quoting US. Roofing, Inc. v. Credit
Alliance Corp., 279 Cal. Rptr. 533, 538 (Cal. Dist. Ct. App. 1991) (“Vertical
privily is a prerequisite in California for recovery on a theory of breach of the
implied warranties of fitness and merchantability.”); Smith v. Wm. Wrigley Jr.
Co., 663 F. Supp. 2d 1336, 1342 (S.D. Fla. 2009) (quoting Mesa v. BMW of N.
Am., LLC, 904 So.2d 450, 458 (Fla. Dist. Ct. App. 2005)) (“It is now well-settled
that, barring certain exceptions, ‘[u]nder Florida law, a plaintiff cannot recover
economic losses for breach of implied warranty in the absence of privity.”).’
3
A court that is presented with a genuine conflict must determine “which
state has the ‘most significant relationship’ to the claim at issue by weighing
the factors” in Section 188 of the Restatement (Second) of Conflict of Laws.
Gilbert Spruance Co., 134 N.J. at 102, 629 A.2d at 888. Those factors are: “(1)
the place of contracting, (2) the place of negotiation of the contract, (3) the
place of performance, (4) the location of the subject matter of the contract, and
(5) the domicile, residence, nationality, place of incorporation and place of
business of the parties.” Spence-Parker v. Delaware River & Bay Auth., 656 F.
Supp. 2d 488, 498-99 (D.N.J. 2009) (citing Restatement (Second) of Conflicts §
188(2)).
Those five Restatement factors dictate that the law of the state in which
the Plaintiffs purchased their machines (Ohio, California, or Florida) should
govern their implied warranty of merchantability claims against the
manufacturer, Whirlpool. The Plaintiffs shopped for, purchased, installed and
used their washing machines in their home states. They live there, and
presumably continue to use their washing machines there. Those facts imply
that the first four factors favor their home states. The fifth at best balances
evenly as between plaintiffs and defendants.
The plaintiffs are plausibly alleged to be in privily with the retailers who
sold them the washers, but there is no allegation that any plaintiff is in direct
Whatever special circumstances may undermine the privily requirement as to
an express warranty made by the manufacturer, see IV.A. 1, supra, are not urged here
with regard to implied warranty.
13
22
privily with the manufacturer, Whirlpool. Accordingly, the privily requirement
of Ohio, California, and Florida law would preclude an implied warranty of
merchantability claim against defendant Whirlpool.
The privity requirement of applicable Ohio, California, and Florida law
bars the implied warranty claims of Maxwell, Baker, Parsons, and Reid as
against defendant Whirlpool. Those claims are therefore dismissed for failure to
state a legal cause of action.
2. Analysis of the Remaining Claims
The rest of the implied warranty claims are not barred by any privity
requirement. Maxwell, Baker, and Parsons (whose warranty claims against
Whirlpool I have just dismissed) nevertheless may assert implied warranty
claims against the retail sellers, with whom they are in privity.’ All of the other
4
plaintiffs live in states where privily is not required, and therefore may assert
implied warranty claims against Whirlpool, as well as the retailers from whom
they bought their washers. Privily aside, the elements of a claim for breach of
the implied warranty of merchantability do not vary across the states. I
therefore analyze all of the remaining implied warranty claims under New
Jersey law.
Defendants move to dismiss the implied warranty claims because the
FAC fails to allege that the washers were not fit for their “intended and ordinary
purpose.” That ordinary purpose, say Defendants, is to clean clothes, not to
operate at any particular level of efficiency.
Plaintiffs respond that this appliance had a more particular “ordinary
purpose”: it was sold as a high-efficiency washer that would wash clothes in
compliance with Energy Star efficiency standards. Thus the FAC alleges that
“the goods were unfit for their intended and ordinary purpose in that they did
not function properly as energy efficient washing machines in the parameters
established by federal law and the Energy Star program.” FAC ¶ 78.
“[Tjhe UCC, as adopted by New Jersey, specifically states that an implied
warranty of merchantability ensures that goods sold are ‘fit for the ordinary
purposes for which such goods are used.” Arlandson u. Hartz Mountain Corp.,
Plaintiff Reid, who purchased the washer on a military base, does not sue any
retailer, but only the manufacturer, Whirlpool.
14
23
792 F. Supp. 2d 691, 706 (D.N.J. 2011) (quoting N.J. Stat. Ann. 12A:2—314(f);
§
Henderson v. Volvo Cars of N. Am., LLC, No. 09-CV-4 146, 2010 WL 2925913, at
*9, 2010 (D.N.J. July
21, 2010)). It “does not impose a general requirement
that goods precisely fulfill the expectation of the buyer. Instead, it provides for
a minimum level of quality.” Lieberson v. Johnson & Johnson Consumer
Companies, Inc., 865 F. Supp. 2d 529, 542 (D.N.J. 2011) (internal quotations
and citations omitted). “[M]erchantability is defined as the product sold ‘should
be of the general kind described and reasonably fit for the general purpose for
which it should have been sold.” Id. (quoting Ferrari v. American Honda Motor
Co., Inc., A-1532-07T2, 2009 WL 211702, at *3 (N.J. Super. Ct. App. Div. Jan.
30, 2009)) (other internal quotation and citation omitted) (emphasis added).
Generally, a court will find a good to be unfit for its ordinary purpose “when [it]
can identify one of three general types of defects: manufacturing defects, design
defects, and failure to give the buyer proper instructions with respect to the
goods.” Id.
An “ordinary purpose” of a product is one that is central to the product’s
value or function. Compare Zabriskie Chevrolet, Inc. u. Smith, 99 N.J. Super.
441, 450, 240 A.2d 195, 200 (Law Div. 1968) (where the car the plaintiff
purchased broke down less than a mile from the dealership, the car was
“substantially defective” and in breach of the implied warranty of
merchantability), with Green v. Green Mountain Coffee Roasters, Inc., 279
F.R.D. 275, 283 (D.N.J. 2011) (rejecting implied warranty of merchantability
claim that a single-cup brewing system, although it brewed beverages, failed to
brew precisely one cup), and Lieberson, 865 F. Supp. 2d at 543 (finding no
breach of the implied warranty of merchantability where soap and lotion did
not help babies sleep, as advertised, because the soap was “clearly
manufactured for the purpose of washing and moisturizing babies’ skin” and it
did do that).
I think that the Energy Star label is more analogous to the core
transportation function of the car in Zabriskie, and less analogous to the
incidental qualities of the coffeemaker in Green or the soap in Lieberson. As I
noted in Avram, 2013 WL 3654090 at *13, “[s}oporific qualities and precise
portion control do not, so far as I am aware, embody any settled consumer
expectation as to baby soap or coffee makers. An Energy Star logo, by contrast,
stands for a level of efficiency, defined in relation to statutory standards, for
which consumers allegedly are willing to pay a premium.”
24
Plaintiffs argue in the alternative that, even assuming that the washers’
ordinary purpose is limited to cleaning, they still flunk the implied warranty
test. That is, they would not “pass without objection in the trade under the
contract description,” or “conform to the promises or affirmations of fact made
on the container or label,” and that they are not “adequately
labeled.” Docket
No. 47 at 12 (quoting N.J.S.A. § 12A:2-314). In short, according to Plaintiffs,
they were not just promised that their clothes would be washed. The Energy
Star label, they say, impliedly promised that their clothes would be washed
efficiently.
...
The FAC adequately states a claim for breach of the implied warranty of
merchantability. The motion to dismiss on these grounds, except as to the
claims requiring privity, see Section B.1, above, is denied.
C. Unjust Enrichment (Count IV)
1. Choice of Law
The parties seemingly agree that there is no genuine conflict among the
eight states’ laws as to unjust enrichment.’ Indeed, many courts have
5
suggested that there are no significant disparities in the unjust enrichment
laws of the 50 states. See Snyder, 792 F. Supp. 2d at 723 (“Numerous courts
have held that unjust enrichment laws do not vary in any substantive manner
from state to state.”); In re Mercedes—Benz Tele Aid Contract Litig., 257 F.R.D.
46, 58 (D.N.J. 2009) (finding that any differences under the laws of the various
states are “not material and do not create actual conflict”); Agostino v. Quest
Diagnostics Inc., 256 F.R.D. 437, 464 (D.N.J. 2009) (concluding that “there are
no actual conflicts among the laws of unjust enrichment”); Powers v. Lycoming
Engines, 245 F.R.D. 226, 231 (E.D. Pa. 2007) (examining the unjust
enrichment laws of the 50 states and concluding that, “[a]lthough there are
numerous permutations of the elements of the cause of action in the various
states, there are few real differences”). Accordingly, I will apply New Jersey law.
Defendants note, however, that by analyzing this claim under New Jersey law,
they do not intend to waive any argument that another jurisdiction’s law should apply
to the non-New Jersey Plaintiffs.
15
25
2. Analysis
Under New Jersey law, to state a claim for unjust enrichment, “a plaintiff
must allege that (1) at plaintiffs expense (2) defendant received a benefit (3)
under circumstances that would make it unjust for defendant to retain benefit
without paying for it.” Snyder, 792 F. Supp. 2d at 723-24. At the pleading
stage, a plaintiff “need only allege facts sufficient to show: 1) Plaintiff conferred
a benefit on Defendant; and 2) circumstances are such that to deny recovery
would be unjust.” Palmeri v. LG Electronics USA, Inc., No. 07-CV-5706, 2008
WL 2945985, *5 (D.N.J. July 30, 2008) (citing Weichert Co. Realtors v. Ryan,
128 N.J. 427, 437, 608 A.2d 280 (1992)).
I will dismiss the unjust enrichment claim as against Whirlpool only,
because the Plaintiffs conferred no direct benefit on Whirlpool. The requirement
that a plaintiff must confer a benefit on the defendant “has been interpreted by
New Jersey courts as a requirement that ‘the plaintiff allege a sufficiently direct
relationship with the defendant to support the claim.” Snyder 792 F. Supp. 2d
at 724 (quoting Nelson v. Xacta 3000 Inc., Civ. No. 08—5426, 2009 WL 4119176,
at *3 (D.N.J. Nov. 24, 2009)); see also Cooper, 2008 WL 4513924, at *10
(dismissing an unjust enrichment claim where consumer’s purchase was
through a retailer, as there was no relationship conferring any direct benefit on
the manufacturer). “When consumers purchase a product from a third party,
they confer a benefit on that third party, not on the manufacturer.” Snyder,
792 F. Supp. 2d at 724. Each Plaintiff paid the purchase price to one of the
retailer-defendants, not to Whirlpool. They did not confer a sufficiently direct
benefit on Whirlpool to support an unjust enrichment claim.
I find, however, that Plaintiffs have adequately stated unjust enrichment
claims as against the defendants other than Whirlpool. The FAC alleges that
Plaintiffs conferred a direct benefit on the retailer-defendants. Plaintiffs
allegedly paid those retail defendants “a price premium due to the mislabeling
of the washing machines as Energy Star-qualified. They further allege that
Defendants have been unjustly enriched by retaining the revenues derived from
Plaintiffs’ purchases.” FAC ¶J 88, 89. That, I believe, sets forth the elements of
an unjust enrichment claim.
Unjust enrichment is a backstop cause of action that often turns out to
be superfluous if, for example, a breach of contract is shown. But Plaintiffs
plead this claim in the alternative, as they are permitted to do. See Fed. R. Civ.
P. 8(d)(2) (“A party may set out two or more statements of a claim or defense
26
alternatively or hypothetically, either in a single count or defense or in separate
ones.”) At this stage, it would be premature to dismiss an unjust enrichment
claim simply because it may later be eclipsed by some other cause of action.
See Palmieri, 2008 WL 2945985 at *7 (“unjust enrichment is, by its nature, an
alternative remedy to contract and tort remedies
It is inherent in a claim for
unjust enrichment that it is pled in the alternative to a claim for recovery on
the contract.”).
....
The unjust enrichment claims against Whirlpool will be dismissed for
failure to state a legal cause of action. As to the other defendants, the motion to
dismiss the unjust enrichment claims on these grounds is denied.
D. Magnuson-Moss Warranty Act (Count I)
Magnuson-Moss is “a remedial statute designed to protect the
purchasers of consumer goods from deceptive warranty practices.” Miller v.
Willow Creek Homes, Inc., 249 F.3d 629, 630 (7th Cir. 2001) (citation omitted).
The statute provides that “a consumer who is damaged by the failure of a
warrantor
to comply with any obligation under this chapter, or under a
written warranty, implied warranty, or service contract, may bring suit for
damages and other legal and equitable relief.” 15 U.S.C. § 2310. “Magnuson—
Moss claims based on breaches of express and implied warranties under state
law depend upon those state law claims.” Cooper, 2008 WL 4513924, at *6
(citing In re Ford Motor Co. Ignition Switch Prods. Liability Litig., 19 F. Supp. 2d
263, 267 (D.N.J. 1998)).16
.
.
.
Plaintiffs allege that the machines are consumer products as defined
under 15 U.S.C. Section 3301(1); that Plaintiffs and class members are
consumers as defined under Section 2301(3); that Defendants are suppliers
and warrantors under Section 2301(4), (5); that Defendants issued written
warranties as defined under Section 2301(6); and that Defendants violated
Plaintiffs and putative class members’ statutory rights under the MMWA when
the machines did not meet the energy efficiency requirements of the Energy
Plaintiffs argue that only implied warranty claims are dependent on state law,
while express warranty claims under the MMWA can be brought independent of state
law. The issue is not consequential to my denial of the motion to dismiss; one way or
the other, the FAC states a claim.
16
27
Star program, as warranted by the Energy Star logo.’ FAC at 21—22.
7
Defendants respond simply that the MMWA claims are invalid because the
underlying state law warranty claims are invalid. Additionally, they contend
that Plaintiffs’ claims under the MMWA based on “written warranties” fail
because the FCA fails to identify such a written warranty.
As discussed in Sections IV.A and B, above, all of the state-law causes of
action for breach of express and implied warranties are legally sufficient, except
for the express warranty claim brought by McLenna against Whirlpool and for
the implied warranty claims brought by Maxwell, Baker, Parsons, and Reid
against Whirlpool. The MMWA claim stands with them, and the motion to
dismiss is denied on this ground.
As to Defendants’ second argument, I look to the statutory definition of a
“written warranty.” A “written warranty” is:
(A) any written affirmation of fact or written promise made in
connection with the sale of a consumer product by a supplier to a
buyer which relates to the nature of the material or workmanship
and affirms or promises that such material or workmanship is
defect free or will meet a specified level of performance over a
specified period of time
which
becomes part of the basis of the bargain between a
supplier and a buyer for purposes other than resale of such
product.
.
15 U.S.C.
.
.
§ 2301(6).
As discussed above in Section IV.A, the FAC adequately alleges that the
Energy Star logo constitutes a written affirmation of fact relating to the
washers’ performance that became part of the basis of the bargain.
“Consumer product” is defined as any tangible personal property which is
distributed in commerce and which is normally used for personal, family, or
household purposes (including any such property intended to be attached to or
installed in any real property without regard to whether it is so attached or installed).
15 U.S.C. § 230 1(1). A “supplier” is any person engaged in the business of making a
consumer product directly or indirectly available to consumers. 15 U.S.C. § 2301(4).
There is no issue as to these elements.
17
28
Accordingly, the FAC states claims under MMWA, and the motions to dismiss
Count I for failure to state a legal cause of action are denied.
E. State Consumer Protection Statutes
A Plaintiff may bring state law claims only under the law of the state
where he or she lived and the alleged injury occurred. See, e.g., Cooper, 374 F.
Appx 250, 255 (3d Cir. 2010) (“Cooper, who purchased the television in his
home state of Arizona, is not entitled to sue under the New Jersey consumer
fraud statute.”). Although the wording of the FAC is broad and imprecise, I will
interpret it in accordance with that principle. Thus—particularly for purposes of
assessing standing at the motion-to-dismiss stage—I deem the NJ Consumer
Fraud Act claim to have been brought by Dzielak and Angelone individually
and (putatively) on behalf of the New Jersey subclass; the California-law claims
to have been brought by Baker and Maxwell individually and on behalf of the
California subclass; and so on. Each claim, moreover, is deemed to be directed
against the manufacturer, Whirlpool, and the particular retailer from whom the
particular plaintiff purchased his or her washer.
18
The reason for this approach should be clear. Article III standing requires that a
plaintiff demonstrate that he or she suffered an “injury in fact, that the injury is ‘fairly
traceable’ to the actions of the defendant, and that the injury will likely be redressed
by a favorable decision.” Conte Bros. Auto., Inc. v. Quaker State-Slick 50, Inc., 165 F.3d
221, 225 (3d Cir. 1998), abrogated on other grounds by Lexmark Int’l, Inc. v. Static
Control Components, Inc., 134 S. Ct. 1377, 188 L. Ed. 2d 392 (2014) (citations
omitted). The Supreme “Courts standing cases confirm that a plaintiff must
demonstrate standing for each claim he seeks to press.” DaimlerChrysler Corp. v.
Cuno, 547 U.S. 332, 335, (2006). The fact that a suit is brought as a class action
“adds nothing to the question of standing, for even named plaintiffs who represent a
class ‘must allege and show that they personally have been injured, not that injury
has been suffered by other, unidentified members of the class to which they belong
and which they purport to represent.”’ Simon v. E. Kentucky Welfare Rights Org., 426
U.S. 26, 40 (1976) (quoting Warth v. Seldin, 422 U.S. 490, 502 (1975). If this were not
the case, a “plaintiff would be able to bring a class action complaint under the laws of
nearly every state in the Union without having to allege concrete, particularized
injuries relating to those states, thereby dragging defendants into expensive
nationwide class discovery, potentially without a good-faith basis.” In re Magnesium
Oxide Antitrust Litig., 2011 WL 5008090, at *10.
18
Thus, in Hemy v. Perdue Farms, Inc., 2011 WL 6002463, the putative class
plaintiffs asserted claims with respect to the humane treatment of both “Harvestland”
and general “Perdue” brand chicken. It appears, however, that the named plaintiffs
29
1. New Jersey Consumer Fraud Act
9
To state a prima facie case under the New Jersey Consumer Fraud Act
(“NJCFA”), N.J.S.A. § 56:8-1 et seq., a plaintiff must allege three elements: “(1)
unlawful conduct by the defendant; (2) an ascertainable loss by the plaintiff;
and (3) a causal connection between the defendant’s unlawful conduct and the
plaintiffs ascertainable loss.” Bosland v. Warnock Dodge, Inc., 197 N.J. 543,
557, 964 A.2d 741 (2009) (citations omitted). Rule 9(b)’s heightened standard
for pleading fraud, see Section II, supra, applies to a NJCFA claim. Frederico v.
Home Depot, 507 F.3d 188, 200 (3d Cir. 2007).
had purchased only “Harvestland” chickens. They argued that, “while they did not
allege that they purchased ‘Perdue’ brand products, other potential class members
may have purchased such products.” Id. at * 11. Citing standing law, Judge Wolfson of
this Court ruled that “Plaintiffs claims wili be limited to only the Harvestland chicken
products. Accordingly, Plaintiffs’ challenges to the Perdue’ brand products are hereby
dismissed with prejudice and, for purposes of this motion, the Court will consider only
Plaintiffs’ allegations with regard to the Harvestland brand products.” Id. (quoting
Liebersori, 865 F. Supp. 2d at 537).
To be sure, courts have sometimes sidestepped Article III standing questions
when simultaneously faced with dispositive class certification issues. See Amchem
Prods. Inc. v. Windsor, 521 U.S. 591 (1997); Ortiz v. Fibreboard Corp., 527 U.S. 815
(1999) (exercising judicial discretion and declining to reach Article III standing
questions where class certification issues were dispositive). As clarified in In re
Magnesium Oxide Antitrust Litig.,
Amchem and Ortiz stand for the proposition that, in cases where a court
is presented with class certification and Article III standing issues
simultaneously, and the class certification issues are dispositive in that
they pertain to statutory standing—i.e. whether a statute authorizes a
given party to sue in the first place, the certification issues are “logically
antecedent” to the standing issues and the court may therefore elect to
address the certification issues first in the interest of judicial restraint.”
2011 WL 5008090, at * 10. That practical exception, employed for purposes of judicial
economy, must be confined to its proper context. A court presented squarely with an
issue of standing with respect to a named plaintiff must address that issue.
Dzielak and Angelone are deemed to have asserted this NJCFA claim against
Whirlpool, Lowe’s, and Home Depot.
30
a. Unlawful conduct
Unlawful conduct under the NJCFA falls into three general categories:
“affirmative acts, knowing omissions, and violation of regulations promulgated
under N.J. Stat. Ann. § 56:8—2, 56:8—4.” Hamish v. Widener Univ. Sch. of Law,
931 F. Supp. 2d 641, 648 (D.N.J. 2013), reconsideration denied, 12-CV-00608
WHW, 2013 WL 1890276 (D.N.J. May 3, 2013) (citing Cox v. Sears Roebuck &
Co., 138 N.J. 2, 17, 647 A.2d 454 (N.J. 1994).20
Plaintiffs maintain that they have sufficiently pleaded unlawful conduct
by alleging that Whirlpool promoted the washing machines as Energy Starcompliant and labeled the machines with the Energy Star logo. FAC
¶ 1. In
addition, the retailers allegedly “acted with knowledge and approval of
Whirlpool and/or as the agent of Whirlpool.” FAC
¶f 21, 29—38. In particular,
the retailers adopted Whirlpool’s misrepresentations as their own by promoting
and selling the machines as Energy Star-compliant. Id. at 8—16, ¶j 29—38.
Defendants’ arguments are by now familiar. They dispute that the Energy
Star logo constituted a specific representation of energy efficiency; that
Plaintiffs understood such representations; and that such representations were
factually false. See Viking Yacht Co., Inc. v. Composite One, LLC, 385 F. App’x
195, 200 (3d Cir. 2010) (explaining that whether a representation is false is
relevant to whether it is a misrepresentation). As previously discussed in
section IV.A.2, supra, the FAC adequately alleges that the Energy Star logo
would be understood by consumers as an affirmation of fact that the washers
met the efficiency standards of the Energy Star program. Plaintiffs allege that
they saw and understood the logo as such a representation, and that it was
false: i.e., that the machines “do not meet the Energy Star standards.” FAC
¶
20
The statute provides that
The act, use or employment by any person of any unconscionable
commercial practice, deception, fraud, false pretense, 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, in connection with the sale or
advertisement of any merchandise or real estate, or with the subsequent
performance of such person as aforesaid, whether or not any person has
in fact been misled, deceived or damaged thereby, is declared to be an
unlawful practice.
N.J. Stat. Ann. § 56:8—2.
31
Accordingly, I find Plaintiffs’ allegations sufficient to set forth a claim that
the Energy Star logo was an affirmative misrepresentation under the NJCFA.
.2
22
As I say, the foregoing is sufficient to sustain the claim. I note for
future reference, however, that the allegations that the retailer Defendants
acted as agents of Whirlpool have a conclusory quality, especially when
measured against the pleading standard of Fed. R. Civ. P 9(b). Plaintiffs also
maintain, however, that the retailers adopted the misrepresentations as their
own by promoting and selling the machines as Energy Star-certified devices.
Each plaintiff alleges that he or she understood the Energy Star label “as a
representation and warranty by both the manufacturer (which created and
affixed the labels) and the retailer (which displayed the labels) that the machine
met the standards of energy efficiency established by the Energy Star program
.“ FAC ¶j 29—38.
“A plaintiff must allege the ‘who, what, when, where, and how’ of’ a
NJCFA claim. Crozier v. Johnson & Johnson Consumer Companies, Inc., 901 F.
Supp. 2d 494, 506 (D.N.J. 2012) (quoting Lum v. Bank of Am., 361 F.3d 217,
224 (3d Cir. 2004)). Of course proof is another matter entirely, but the FAC
The subsequent disqualification of model number MVWC6ESWW1 on May 7,
2012 lends additional plausibility, but is not necessary.
21
There are certain arguments in the alternative that the Court need not address
at this time.
22
Plaintiffs assert that the unlawful conduct prong is satisfied because
Defendants are in violation of pertinent New Jersey regulations. Docket No. 47 at 15.
Defendants assert that Plaintiffs have not alleged with specificity the marketing
and promotional efforts (other than the Energy Star label) on which they rely. I agree
that Plaintiffs cannot base their unlawful conduct allegation on “general statements
and advertising” regarding the Energy Star program or the machines’ energy efficiency
unless they tie those representations to the Plaintiffs and their buying decisions. See
Lieberson, 2011 WL 4414214, at *6 (“Plaintiff has not identified whether these
statements were made in a television commercial, print advertisement, on a website or
elsewhere. Moreover, Plaintiff has not identified when these statements were made or
whether and when Plaintiff actually viewed them.”). See also Smajlaj u. Campbell Soup
Co., 782 F. Supp. 2d 84, 100 (D.N.J. 2011) (“Under New Jersey law,
misrepresentations made to the public generally but not the plaintiff do not bear a
sufficient nexus to an individual plaintiffs purchase and loss to satisfy the Consumer
Fraud Act . . . .“). In any amended pleading, plaintiffs may wish to avoid a risk of
dismissal by being more specific.
32
sufficiently alleges that the relevant defendants affirmatively misrepresented
that the machines were Energy Star-compliant by affixing and displaying the
Energy Star logo.
b. Ascertainable loss and causation
“New Jersey courts have been chary to ascribe the term [ascertainable
loss] a precise meaning.” Arcand v. Brother Int’l Corp., 673 F. Supp. 2d 282,
300 (D.N.J. 2009) (citing Thiedemann v. Mercedes—Benz USA, LLC, 183 N.J.
234, 248, 872 A.2d 783 (2005)). An ascertainable loss under the NJCFA
“occurs when a consumer receives less than what was promised.” Union Ink
Co., Inc. v. AT&T Corp., 352 N.J. Super. 617, 646, 801 A.2d 361, 379 (N.J.
Super. Ct. App. Div. 2002) (citation omitted). The statute does not, however,
“require that the loss be monetary [br that it must be pled beyond a reasonable
degree of certainty.” Arcand, 673 F. Supp. 2d at 300.
Accordingly, a plaintiff must allege that a misrepresentation induced an
objectively reasonable expectation about a product and that this expectation
was not met. Smajlaj, 782 F. Supp. 2d at 99—100. A cognizable injury, however,
must consist of more than just any unmet expectation. Id. (citing Koronthaly v.
L’Oreal USA, Inc., 374 Fed. Appx. 257, 259 (3d Cir. 2010)). Thus, for example,
“[a] consumer who expects a car that never requires resort to its comprehensive
or who expects the life of a toner cartridge to be linked precisely
warranty
has not experienced a loss when
to the amount of toner in the cartridge
that expectation is not met.” Id. (internal citations omitted). Only a consumer
who has received a product that is worth objectively less than he or she may
reasonable expect has endured an injury under the statute. Id. Under such a
benefit-of-the-bargain theory, a plaintiff must proffer a “quantification of the
difference in the value between the product received and the product
promised.” Id. The plaintiff need not, however, offer a calculation of the loss.
.
.
.
.
.
.
Here, Plaintiffs allege that, in the belief that the washer was Energy Starcompliant, they paid a premium price. Because the washer is not in fact
Energy Star-compliant, they pay higher electricity bills. As Plaintiffs allege, the
“fundamental bargain” of the Energy Star program is that “consumers pay a
higher up-front price initially but save more on energy bills.” FAG ¶ 2. It is thus
plausible to assert that the value of that bargain would be subverted by a false
statement that a washer is Energy-Star compliant.
33
The FAC alleges facts that would allow the Court to quantify a difference
in value and even suggests a means to calculate loss: the price premium paid,
plus increased energy costs over the lifetime of the appliance. FAC 46.23 The
precise amount of loss need not be known; it need only be measureable. See
Talalai v. Cooper Tire & Rubber Co., 360 N.J. Super. 547, 563, 823 A.2d 888,
898 (Ch. Div. 2001). Rule 9(b) does not require that a plaintiff allege a specific
dollar amount to survive the pleadings stage. Torres-Hemandez v. CVT Prepaid
Solutions, Inc., 3:08-CV-1057--FLW, 2008 WL 5381227, at *7 n.3 (D.N.J. Dec.
17, 2008) (“Although there is no specific dollar amount alleged in Plaintiffs
Complaint, that level of specificity is not required by the case law and Rule
9(b).”). For their money, Plaintiffs “received something less than, and different
from, what they reasonably expected in view of defendant’s presentations. That
is all that is required to establish ‘ascertainable loss’ . . . .“ Miller v. Am. Family
Publishers, 284 N.J. Super. 67, 90-9 1, 663 A.2d 643, 655 (Ch. Div. 1995).
Finally, I consider whether the FAC adequately pleads a causal nexus
between the unlawful conduct and ascertainable loss. Plaintiffs saw the Energy
Star logo before and at the time of purchase, understood the logo to signify that
the machine was compliant with Energy Star standards, and purchased the
machine at a premium with the understanding that they would save in energy
costs over time. The machines allegedly did not comply with Energy Star
standards and, as a result, Plaintiffs paid a price premium for the machines
and increased energy costs. That is a sufficient allegation of causation.
Accordingly, the New Jersey purchasers, Dzielak and Angelone, have
stated a claim under the NJCFA.
2. California Consumer Protection Statutes
24
a. Consumer Legal Remedies Act
And, of course, unquantified is not the same as unquantifiable. “The amount of
the price premium can be reasonably quantified by an appropriate market study of the
prices for comparable washing machines sold with and without the Energy Star logo,
or through a contingent variation study, or through other means regularly employed
by economic and valuation experts.” FAC ¶ 46.
23
The California consumer protection statutory claims may properly be brought
by California purchasers Baker and Maxwell against Whirlpool, Sears, and Fry’s
Electronics.
24
34
California’s Consumer Legal Remedies Act (“CLRA”) prohibits “unfair
methods of competition and unfair or deceptive acts or practices undertaken by
any person in a transaction intended to result or which results in the sale or
lease of goods or services to any consumer.” Cal. Civ. Code § 1770(a). Conduct
that is “likely to mislead a reasonable consumer” violates the CLRA. Colgan v.
Leatherman Tool Gip., Inc., 38 Cal. Rptr. 3d 36 (Cal. Ct. App. 2006) (quoting
Nagel v. Twin Labs., Inc., 134 Cal. Rptr. 2d 420 (Ct. App. 2003)). The claim is
subject to the heightened pleading requirements of Fed. R. Civ. p. 9(b). Rossi,
2013 WL 5781673, at *9 To satisfy this heightened pleading requirementyu,
“the allegations must be ‘specific enough to give defendants notice of the
particular misconduct which is alleged to constitute the fraud charged so that
they can defend against the charge and not just deny that they have done
anything wrong.” Rossi, 2013 WL 5781673, at * 9. (quoting Bruton v. Gerber
Products Co., No. 12—CV—02412—LHK, 2013 WL 4833413, at *4 (N.D. Cal. Sept.
6, 2013)).
The CLRA provisions cited by Plaintiffs are:
(5) Representing that goods or services have sponsorship, approval,
characteristics, ingredients, uses, benefits, or quantities which
they do not have or that a person has a sponsorship, approval,
status, affiliation, or connection which he or she does not have.
(7) Representing that goods or services are of a particular
standard, quality, or grade, or that goods are of a particular style
or model, if they are of another.
(9) Advertising goods or services with intent not to sell them as
advertised.
Cal. Civ. Code
§ 1770(a)(5), (7), (9).
Defendants first argue that the Energy Star logo contains no specific
representation regarding a machine’s relative energy use or efficiency. I
disagree. As previously discussed, see IV.A.2, supra, Plaintiffs have sufficiently
pleaded that the Energy Star logo represents that a machine is compliant with
35
the program requirements with regard to energy use and efficiency. See Rossi,
2013 WL 5781673, at *4 (concluding “Defendants adhesion of the Energy Star
certification to its products falls within the statutory definition of an express
warranty pursuant to California Law, and that Plaintiffs have alleged an
express warranty with appropriate specificity” where Plaintiffs alleged that the
product met the Energy Star program requirements).
Defendants also submit that the FAC fails to allege that Defendants knew
the washers were non-compliant at the time of sale, and that any knowledge
attributable to Whirlpool should not be attributed to the retailer-Defendants.
“California federal courts have held that under the CLRA, plaintiffs must
sufficiently allege that a defendant was aware of a defect at the time of sale to
survive a motion to dismiss.” Rossi, 2013 WL 5781673, at * 10. While Plaintiffs’
argument was a winning one in Rossi, in that case the Plaintiffs specifically
pleaded that the manufacturer either tested the machines before marketing
them (and therefore knew they did not comply), or that it failed to test the
machines (and therefore knew its representations to have not basis). Rossi,
2013 WL 5781673, at * 10.
Plaintiffs argue that the FAC allegations fall within Rossi. Thus Baker
purchased her machine on December 1, 2010, seventy-two days after DOE
notified Whirlpool that the appliance failed testing on September 20, 2010. FAC
¶‘jJ 37, 40. The same cannot be said for Maxwell, who purchased his machine
on November 27, 2009, before Springboard Engineering ever completed DOE
efficiency testing of the Maytag machine. FAC ¶ 39. Therefore, Maxwell’s CLRA
claim must be dismissed.
Plaintiffs argue that “from the allegations of the Complaint it can be
inferred” that Defendants tested washers and knew they were non-compliant,
or else that they failed to perform adequate testing. Docket No. 47 at 20. I will
25
not “infer” what is not properly pleaded.
25
Compare Rossi, where Plaintiffs specifically pleaded:
As such, Whirlpool either (a) tested the Mislabeled Refrigerators before
marketing them and, at all times relevant hereto, knew that the models
were non-compliant with the requirements of the ENERGY STAR®
program or, in the alternative (b) affixed ENERGY STAR® labels to the
Mislabeled Refrigerators without testing them, and thus knew the
representation concerning their energy efficiency was baseless. This
information is solely within Whirlpools possession.
36
Finally, I will address Defendants’ contention that any knowledge
possessed by Whirlpool cannot be attributed to the retailer-Defendants. Here,
Plaintiffs allege in a generalized fashion that “defendants were aware of the
defect because they were aware that DOE-initiated testing had shown” that the
machines were not Energy Star compliant. FAC ¶ 100. At the pleading stage,
“knowledge, intent, or ‘other conditions of a person’s mind” may be pleaded
generally. Rossi, 2013 WL 5781673, at * 9 (quoting Kowalsky v. Hewlett—
Packard Co., No. 10—CV—02176—LHK, 2011 WL 3501715, at *3 (N.D. Cal.
Aug. 10, 2011) (quoting Fed. R. Civ. P. 9(b)). The FAC provides no supporting
facts, and this issue may well be difficult to prove, but I will not dismiss the
claims against the retailers on this basis.
The CLRA claim of Maxwell is dismissed. The motion to dismiss the
CLRA claim of Baker for failure to state a claim is denied.
b. Unfair Competition Law
The Unfair Competition Law (“UCL”) prohibits acts or practices that are:
(1) unlawful; (2) fraudulent; or (3) unfair. Cal. Bus. & Prof. Code § 17200. Each
prong of the UCL constitutes a separate and distinct theory of liability. Keams
v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). The UCL proscribes
“unfair competition,” which includes “any unlawful, unfair or fraudulent
business act or practice and unfair, deceptive, untrue or misleading
advertising.” § 17200. The California Supreme Court has held that the UCL’s
“coverage is sweeping, embracing anything that can properly be called a
business practice and that at the same time is forbidden by law.” Cel—Tech
Communications, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180, 83 Cal.
Rptr. 2d 548, 973 P.2d 527 (1999) (internal quotations and citation omitted). At
the same time, however, the available relief is limited: “A UCL action is
equitable in nature; damages cannot be recovered.” Korea Supply Co. v.
Lockheed Martin Corp., 63 P.3d 937, 943 (Cal. 2003).
Plaintiffs allege that Defendants violated each of the three UCL prongs.
Defendants argue that Plaintiffs fail to allege facts supporting any of the three
prongs and, accordingly, move to dismiss the claim in its entirety.
The fraudulent practice prong of the UCL “has been understood to be
distinct from common law fraud.” In re Tobacco H Cases, 46 Cal. 4th 298, 312,
Rossi, 2013 WL 5781673, at
*
10.
37
207 P.3d 20, 29 (Cal. 2009). “A [common law] fraudulent deception must
be
actually false, known to be false by the perpetrator and reasonably relied upon
by a victim who incurs damages. None of these elements are required to
state a
claim for injunctive relief’ under the UCL.” Id. (quoting Day v. AT & T Corp., 74
Cal. Rptr. 2d 55, 60 (Cal. 1998)); see In re Sony Grand Wega KDF-E A1O/A
20
Series Rear Projection HDTV Television Litig., 758 F. Supp. 2d 1077, 1092
(S.D.
Cal. 2010) (“Unlike common law fraud, a party can show a violation of the
UCL’s ‘fraudulent practices” prong without allegations of actual deception.”).
The term fraudulent, as used in the statute, then, requires only a likelihood:
“a
showing [that] members of the public ‘are likely to be deceived.” Id. (quotin
g
Puentes v. Wells Fargo Home Mortg., Inc., 72 Cal. Rptr. 3d 903, 909 (Cal. Dist.
Ct. App. 2008)). Claims under this prong still require a plaintiff to plead that
the alleged misrepresentation was directly related to the injurious conduct and
that the plaintiff actually relied on the alleged misrepresentation. Id.
As discussed above, the FAC alleges that the Energy Star logo carries
with it a representation that the washing machine meets certain energy
efficiency standards, a representation that was not true. There is a suffici
ent
allegation that Whirlpool made that representation and the retailers selling the
machines adopted it as their own. See Section IV.A.2, supra. Baker and
Maxwell allege that they saw and relied on the logo, and that they would
not
have made these purchases had they known the machines were not Energy
Star complaint. Id. ¶‘j 30, 37.
Accordingly, the allegations of fraudulent conduct “likely to deceive” the
public are adequate. The motion to dismiss the UCL claim for failure to state
a
cause of action will therefore be denied.
c. False Advertising Law
Plaintiffs also allege that Defendants’ misrepresentations about the
washing machines’ Energy Star compliance violate California’s False
Advertising Law (“FAL”). The FAL provides that it is:
unlawful for any person
to make or disseminate or cause to be
made or disseminated before the public in this state
in any
advertising device
or in any other manner or means whatever,
including over the Internet, any statement, concerning
personal property or services, professional or otherwise, or
performance or disposition thereof, which is untrue or misleading
.
.
.
.
.
.
.
.
.
.
38
.
and which is known, or which by the exercise of reasonable care
should be known, to be untrue or misleading.
Cal. Bus. & Prof. Code
§
17500.
Defendants contend that the FAC fails to identify with particularity
“specific advertisements, when and where they were shown, [and] how they
were untrue or misleading.” Docket No. 37 at 17—18 (quoting In re Sony Grand
Wega KDF-E Al O/A20 Series Rear Projection HDTV Television Litig., 758 F.
Supp. 2d 1077, 1093 (S.D. Cal. 2010)). And again they argue that the Energy
Star logo does not constitute a specific representation.
Brian Maxwell allegedly purchased his washing machine at a Fry’s
Electronics retail store in Roseville, California on November 27, 2009. FAC ¶
30. Plaintiff Shelly Baker purchased her machine at a Sears retail store in
Ontario, California, on December 1, 2010. Id. ¶ 37. Each alleges that the
machine bore the Energy Star logo in two places, that he or she saw the logo,
that he or she understood it to be a representation by the manufacturer and
retailer that the washer met Energy Start standards of energy efficiency, and
that the washer was not, in fact, Energy Star compliant. Id. ¶ 1.
The Rossi Court found similar pleadings to be sufficient to state a claim
under the FAL. Rossi, 2013 WL 5781673, at * 13 (“The Court finds the above
allegations state the date, place, and medium in which Plaintiffs were exposed
to Defendants Energy Star advertisements.”). I agree. The motion to dismiss
the FAL claims for failure to state a cause of action is denied.
3. Michigan Consumer Protection Act
26
The Michigan Consumer Protection Act (“MPCA”) proscribes thirty-seven
discrete acts. Mich. Comp. Laws § 455.903. To state a claim under the MPCA, a
complaint must identify which proscribed act or acts the defendant has
allegedly committed. The FAC alleges that, through “misleading and deceptive
statements and false promises,” Defendants violated the MPCA by
misrepresenting the energy efficiency of the washing machines “after learning
of the defects with the intent that Plaintiffs relied on such representations in
their decision regarding” the purchase of the machines. FAC ¶f 121, 123.
26
McLenna, a Michigan plaintiff, may assert this claim against Whirlpool and
Home Depot.
39
Defendants submit that the claim fails because the Complaint contains
no factual allegations that Plaintiff McLenna’s washer is primarily used for
“personal, family, or household services,” as required by Mich. Comp. Laws §
455.902(g). The FAC does, however, allege that the washer is a “consumer
product” as defined under 15 U.S.C. § 2302(1). Moreover, the natural inference
raised by this ordinary retail purchase of a single unit by a private individual is
that McLenna bought the washer for home use.
Defendants argue with more force that the FAC fails to specify any
particular MCPA section that Defendants allegedly violated. Plaintiffs concede
this, but contend that the FAC alleges violations of CLRA § 1770(a)(5) and §
1770(a)(7), “which are identical to Mich. Comp. Laws § 445.903(c) and §
445.903(e).” They also attempt to supplement their allegations in their briefs.
The FAC fails to state a claim under the MCPA with the required
specificity. See Muneio v. Fed. Nat. Mortgage Ass’n, 09-12973, 2010 WL
5146328, at *4 (E.D. Mich. Dec. 13, 2010) (finding that an MCPA claim could
not survive a motion to dismiss because the plaintiffs did not “allege how it
violated the MCPA, nor do they identify which MCPA sections it purportedly
violated,” and, therefore, failed to state a claim for a violation of the MCPA);
*
11 (FD.D. Mich.
Meyer u. Citimortgage, Inc., 11-13432, 2012 WL 511995, at
Feb. 16, 2012) (reasoning that plaintiffs failed to state a claim under the MCPA
where they offered “nothing more than a recitation of lists of prohibited
activities under the MCPA, without identifying which sections were purportedly
violated, without pleading any factually basis for the purported violations, and
without identifying which defendant purportedly violated the acts”); see also
Innovation Ventures, LLC v. N.V.E., Inc., 747 F. Supp. 2d 853, 867 (E.D. Mich.
2010), affd in part, rev’d in part and remanded, 694 F.3d 723 (6th Cir. 2012)
(granting summary judgment as to an MPCA allegation where defendant had
not identified “which of the MCPA’s provisions its counterclaim is asserted
under”).
The Court will not draw on statement in briefs or make unwarranted
inferences to remedy deficient pleadings. Supplementation of the existing
allegations must be done, if anywhere, in an amended pleading. The motion to
dismiss the MCPA claims is granted on this basis.
4. Florida’s Deceptive and Unfair Trade Practices Act
40
I find that Reid has adequately stated a claim under Florida’s Deceptive
and Unfair Trade Practice Act (“FDUTPA”) Fla. Stat. § 501.204(1). Such a
FDUTPA claim has three elements: (1) a deceptive or unfair practice; (2)
causation; (3) actual damages. Defendants maintain that Plaintiffs have failed
to plead these elements. Rollins, Inc. v. Butland, 951 So.2d 860, 869 (Fla. 2d
Dist. Ct. App. 2006).
a. Reid’s standing to pursue a FDUPTA claim
Defendants argue that Plaintiff Reid lacks standing because he fails to
allege that he bought the machine in Florida. The FAC alleges that Reid
“resides in Tampa, Florida,” and purchased the machine “from a nearby Air
Force base.” FAC ¶j 38, 10. I take judicial notice that Tampa is 200 miles from
the Georgia border and that there is an air force base four miles from Reid’s
home. Reading the Complaint in the light most favorable to the non-moving
party, I will deny the motion to dismiss on this basis.
b. Deceptive or unfair act
Defendants also contend that the FAC fails to allege that Defendants
employed a deceptive or unfair act. Under the FDUTPA, a deceptive act is one
that is “likely to mislead a consumer acting reasonably,” Ziotnick v. Premier
Sales Grp., 480 F. 3d 1281, 1284 (11th Cir. 2007), and an unfair practice is
one that “offends established public policy” or is otherwise “immoral, unethical,
oppressive, unscrupulous, or substantially injurious to consumers.” PNR, Inc.
u. Beacon Prop. Mgmt., Inc., 842 So. 2d 773, 777 (Fla. 2003) (citation and
internal quotations omitted).
A deceptive act occurs when “there is a representation, omission, or
practice that is likely to mislead the consumer acting reasonably in the
circumstances, to the consumers detriment.” Gavron v. Weather Shield Mfg.,
Inc., 819 F. Supp. 2d 1297, 1302 (S.D. Fla. 2011) (quoting PNR, Inc., 842 So.
2d at 777). Accordingly, the statute “focuses on whether an act is deceptive,
not whether a defendant knew that the allegedly violative conduct was
occurring.” Id.
For the reasons amply set forth above, the mislabeling of the washers
would be likely to mislead a reasonable consumer about the energy efficiency of
41
the washers. See Zlotnick v. Premier Sales Grp., 480 F. 3d 1281, 1284 (11th Cir.
27
2007). The FAC adequately alleges a deceptive act.
c. Actual damages
Defendants argue that Plaintiffs fail to allege actual damages. As
discussed above in the context of other claims, the FAC adequately alleges that
plaintiffs paid a price premium for an Energy Star certified washer, and paid
higher energy bills because the machine did not in fact comply with efficiency
standards. That is enough.
The motion to dismiss the FDUTPA claims is denied.
28
5. Ohio Consumer Sales Practices Act
Plaintiff Parsons brings a claim under the Ohio Consumer Sales
Practices Act (“OCSPA”), which prohibits suppliers from committing “an unfair
or deceptive act or practice in connection with a consumer transaction.” Ohio
Rev. Code Ann. § 1345.02. That statute requires a showing of a material
representation, deceptive act, or omission that affected a plaintiff’s decision to
purchase an item. Temple v. Fleetwood Enters., Inc., 133 F. App’x 254, 265 (6th
Cir. 2005).29 Parsons asserts both a class claim and an individual claim under
the OCSPA.
The viability of the class claim is better addressed at the class
certification stage. The parties will then be asked to address, inter alia, the
Plaintiffs also allege that Defendants violated “the EPCA, NECPA, NAECA, and
FAC ¶ 25, 108. Defendants argue that
regulations promulgated thereunder
because these statutes do not impose an obligation on
Plaintiffs do not state a claim
Defendants regarding the use of the Energy Star logo. I do not reach this issue, as I
find that Plaintiffs have sufficiently alleged a deceptive act under the FDUPTA.
27
.
.
.
.“
Parsons, on Ohio purchaser, may properly bring this claim against Whirlpool
and ARCA. As noted above, however, it does not appear that ARCA has been properly
served. In any event, ARCA has not moved to dismiss the claims brought against it.
28
Defendants also move to dismiss an Ohio Deceptive Trade Practices Act claim
because it does not apply to consumer transactions. Plaintiff has conceded the point
and withdrawn this claim. Docket No. 47 at 26 n.9. Accordingly, the Ohio Deceptive
Trade Practices Act is dismissed.
29
42
effect of OCSPA’s limitations on class actions in federal court under Shady
Grove Orthopedic Assocs. v. Allstate Ins. Co., 559 U.S. 393 (2010). See
McKinney v. Bayer Coip., 744 F. Supp. 2d 733, 743 (N.D. Ohio 2010)
(discussing Shady Grove issue with respect to OCSPA). I here discuss only
°
3
whether the FAG adequately pleads an individual violation of OCSPA.
Defendants, here as elsewhere, contend that the Energy Star logo makes
no specific representation to energy efficiency and that the FAG does not
identify specific, relevant marketing statements. They cite Savett v. Whirlpool
Corp., which held that the Energy Star logo was not specific enough to
constitute an express warranty under Ohio law: “[T]he logo itself contains no
assertion of fact or promise. Unlike traditional express warranties where
unambiguous promises or factual assertions are made, which are clearly
understood on their own footing, any meaning conveyed by the logo requires
independent knowledge.” Savett, 12 CV 310, 2012 WL 3780451, at *9• And in
any event, “plaintiff [did} not allege that he saw or understood any purported
meaning of the logo.” Id. n.8. I repeat, however, that this reasoning explicitly
applied only to an express warranty claim.
Savett itself appears to have at least tacitly acknowledged the limits of
that rationale when it turned to an individual plaintiff’s rescission claim under
the OCSPA. Savett dismissed that OCSPA claim, not because the Energy Star
logo is not a representation, but on the following basis: “[P]laintiff fails to allege
that he saw the ENERGY STAR logo or any advertisement at any point. Nor
does he allege that he had any understanding of the meaning of the ENERGY
STAR logo. Absent such allegations, the Court finds that plaintiff fails to state
an individual claim for rescission under the OCSPA.” Id. at *6
Savett is not persuasive here, because the allegations “absent” in that
case are present here. The FAG alleges that each Plaintiff, including Parsons,
saw the Energy Star label around the time of purchase. FAC ¶j 29—38. Each
that the machine
understood the logo “as a representation and warranty
met the standards of energy efficiency established by the Energy Star program,
and that the machine would help him maximize his energy savings while
helping to protect the environment.” Id. Each is alleged to have relied on those
representations when purchasing the machines. Id. Unlike the Savett plaintiff,
.
.
.
Defendants acknowledge that there is a split of authority as to whether Rule
9(b) or ordinary Rule 8 pleading standards apply to these claims. My decision does not
turn on the distinction, as it would be the same under either standard.
30
43
Cohen allegedly “saw” and “understood” the “purported meaning” of the logo.
Scwett, 12 CV 310, 2012 WL 3780451, at *9, n.8.
Plaintiff Cohen’s allegations sufficiently make a “showing of a material
representation
that impacted” his “decision to purchase the item at issue.”
See Temple, 133 Fed. App’x at 265. I therefore find that Plaintiffs have
sufficiently pleaded a material misrepresentation under OCSPA and deny the
motion to dismiss Parson’s claim under OCSPA.
.
.
.
6. Indiana Deceptive Consumer Sales Act
’
3
Plaintiff Beyer asserts a claim under the Indiana Deceptive Consumer
Sales Act (“IDCSA”), which prohibits “incurable” and “uncured” deceptive
32
acts. An “incurable” act is one committed with intent to defraud or mislead,
whereas an “uncured” deceptive act is one the supplier failed to “cure” after
receiving notice. Pemj v. Gulf Stream Coach, Inc., 814 N.E.2d 634, 647 (md. Ct.
App. 2004). There is no catchall fraud category under the IDSCA; a plaintiff’s
allegations must fit into one of the enumerated acts proscribed under the
statute. Lawson v. Hale, 902 N.E.2d 267, 274 (md. App. 2009).
The FAC alleges that Defendants violated the statute by nondisclosure
and active concealment of the washers’ failure to meet Energy Star standards.
Accordingly, it alleges, “Defendants engaged in unlawful trade practices,”
including representations that the machines have qualities that they do not
have. FAC at 39.
a. Failure to Plead with Particularity.
First, Defendants submit that Plaintiffs have failed
misconduct with the requisite particularity under Fed. R.
Relatedly, they contend that the statute requires an oral or
representation, and that the FAC alleges only non-disclosures,
actionable. See Lawson, 902 N.E.2d at 274.
to plead any
Civ. P. 9(b).
written act or
which are not
Beyer, an Indiana purchaser, may properly bring this claim against Whirlpool
and Sears.
Various sections of the IDCSA were recently amended by the Indiana
Legislature. These amendments are effective as of July 1, 2014. Therefore, the
previous version of the statute is applicable here.
32
44
Plaintiffs respond that the allegations of the FAC fall within the following
portions of Indiana Code subsection 24—5—0.5—3:
(a) The following acts or representations as to the subject matter of
a consumer transaction, made either orally or in writing by a
supplier, are deceptive acts:
(1) That such subject of a consumer transaction has
sponsorship, approval, performance, characteristics,
accessories, uses, or benefits it does not have which the
supplier knows or should reasonably know it does not
have.
(2) That such subject of a consumer transaction is of a
particular standard, quality, grade, style, or model, if it is
not and if the supplier knows or should reasonably know
that it is not.
(7) That the supplier has a sponsorship, approval, or
affiliation in such consumer transaction the supplier does
not have, and which the supplier knows or should
reasonably know that the supplier does not have.
b) Any representations on or within a product or its packaging or
in advertising or promotional materials which would constitute a
deceptive act shall be the deceptive act both of the supplier who
places such representation thereon or therein, or who authored
such materials, and such other suppliers who shall state orally or
in writing that such representation is true if such other supplier
shall know or have reason to know that such representation was
false.
md. Code Ann.
§ 24-5-0.5-3.
Beyer contends that he relied on alleged affirmative misrepresentations
as to the energy efficiency and Energy Star compliance of the machines; non
disclosures of certain information are not essential to his claims. In short, he
does not allege an omission, but instead alleges an affirmative
45
misrepresentation. As discussed above, see Section IV.E. 1 .a, I find that such
allegations are sufficient and I will not dismiss on this ground.
b. An “incurable” or “uncured” deceptive act
Defendants argue that Plaintiffs have failed to plead an “incurable” or
“uncured” deceptive act as required under the statute.
As to an “incurable” act, the FAC bases its claim of “intent to deceive” on
the following allegations: “Defendants were first notified on September 20, 2010
that the Mislabeled Washing Machines failed to meet Energy Star standards.”
Docket No. 47 at 27 (citing FAC ¶ 40). Despite this notification, “Defendants
did not recall the Mislabeled Washing Machines.” And Defendants thereafter
“knowingly sold the Washing Machine to Plaintiff Baker with intent to defraud
after receiving notice of the noncompliance.” Id. Baker, however, is not Beyer;
Baker is the California plaintiff who did indeed buy the washer after September
20, 2010. Beyer, in Indiana, bought his washer at a Sears retail store on March
18, 2010, long before the September 20, 2010 notification. Id. ¶ 36. Any intent
to deceive with respect to Beyer’s purchase cannot rest on the September 20,
2010 notification, which occurred afterward. The FAC does not otherwise
specifically allege that the relevant Defendants knew or should have known of
the defect at the time of Beyer’s purchase. It fails to allege the required intent
to deceive, and therefore fails to allege a deceptive incurable act as defined
under the Indiana statute.
As to the “uncured” deceptive act claim, the FAC alleges that Defendants
failed to correct the defect after receiving notification in September 2010, but
instead “reached an informal agreement with the EPA.” Plaintiffs were not given
notice of this agreement or of the noncompliance. Docket No. 47 at 27 (citing
FAC ¶ 45).
Here, Beyer’s failure to allege that he provided notice to Defendants is
fatal to his claim. An “uncured deceptive act” under the statute is specifically
defined as a deceptive act
(A) with respect to which a consumer who has been damaged by
such act has given notice to the supplier under section 5(a) of this
chapter; and
(B) either:
46
(i) no offer to cure has been made to such consumer within
thirty (30) days after such notice; or
(ii) the act has not been cured as to such consumer within a
reasonable time after the consumer’s acceptance of the offer
to cure.
md. Code Ann.
§ 24-5-0.5-2. Furthermore, Section 5(a) states that:
No action may be brought under this chapter
unless (1) the
deceptive act is incurable or (2) the consumer bringing the action
shall have given notice in writing to the supplier within the sooner
of (i) six (6) months after the initial discovery of the deceptive act,
(ii) one (1) year following such consumer transaction, or (iii) any
time limitation, not less than thirty (30) days, of any period of
warranty applicable to the transaction, which notice shall state
fully the nature of the alleged deceptive act and the actual damage
suffered therefrom, and unless such deceptive act shall have
become an uncured deceptive act.
.
md. Code Ann.
.
.
§ 24-5-0.5-5.
The FAC does not allege that Plaintiff Beyer complied with the
statutorily-mandated notice provision. See Jasper v. Abbott Labs., Inc., 834 F.
Supp. 2d 766, 773 (N.D. IlL 2011) (finding that, to state an uncured deceptive
act claim, “notice must come from the consumer bringing the action” and that
constructive notice is insufficient to state a claim). The uncured deceptive act
claim is defective and must be dismissed.
The motion to dismiss the IDCSA claims for failure to state a legal cause
of action is granted.
7. Texas Deceptive Trade Practices Act
33
The Texas Deceptive Trade Practices Act (“TDTPA”), Tex. Bus. & Corn.
Code § 17.41—17.63, has three essential elements: (1) the plaintiff is a
consumer; (2) the defendant violated a specific provision of the TDTPA; and (3)
the defendant’s violation caused damages to the plaintiff. The statute
specifically allows a plaintiff to pursue a claim under the TDTPA for a breach of
Cohen, a Texas purchaser, may properly bring this claim against Whirlpool and
Home Depot.
47
an express or implied warranty, as well as for an “unconscionable act.” See
Brittan Communications Int7 Corp. v. Sw. Bell Tel. Co., 313 F.3d 899, 907 (5th
Cir. 2002).
The FAC alleges that “Defendants engaged in false, misleading, and
deceptive practices,” in violation of TDTPA. FAC ¶ 174. Cohen, individually and
on behalf of the putative Texas subclass, alleges that Defendants made
misrepresentations as to the Energy Star compliance of the washing machine
purchased. He also alleges that Defendants breached express and implied
warranties to Cohen and the subclass, and are therefore liable under Sections
17.50(a)(2) and 17.50(b) of the TDTPA. Finally, he alleges that Defendants
violated the TDTPA because their actions constitute “an unconscionable action
or course of action” under § 17.50(a)(3) of the TDTPA. FAC ¶ 179.
a. Statute of limitations
Defendants argue that these claims are barred by the applicable statute
of limitations. A TDTPA claim must be brought within two years from the date
of the false, misleading, or deceptive act “or within two years after the
consumer discovered or in the exercise of reasonable diligence should have
discovered the occurrence of the false, misleading, or deceptive act or practice.”
Tex. Bus. & Corn. Code Ann. § 17.565. Cohen purchased the machine from
Home Depot on November 28, 2009. FAC ¶ 31. This action was filed more than
two years later, on January 5, 2012. The parties therefore agree that the claim
is time-barred unless the “discovery rule” exception applies.
The discovery rule acts to defer “accrual of certain causes of action until
the plaintiff knew or exercising reasonable diligence should have known of the
wrongful act causing injury.” Salinas v. Gary Pools, Inc., 31 S.W.3d 333, 336
(Tex. Comm’n App. 200). Under Texas practice, a party seeking to avail itself of
the discovery rule must plead the rule, either in its original complaint or
amended complaint. See Taha v. William Marsh Rice Univ., No. 1 1-CV-2060,
2011 WL 6057846, at *6 (S.D. Tex. Dec. 6, 2011) (quoting Woods v. William M.
Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988)) (“Under Texas law, a ‘party
plead the rule, either in its
seeking to avail itself of the discovery rule must
original petition or in an amended or supplemental petition in response to
defendant’s assertion of the defense as a matter of avoidance.”). In Taha, the
plaintiff failed to plead the rule and “merely mentioned the discovery rule at the
end of his response” to a motion to dismiss. Id. The court found that the
.
48
.
.
plaintiff had “therefore waived his ability to use the rule to avoid the statute of
limitations.” Id.
The Fifth Circuit has made it clear, however, that in federal court the
discovery rule need not be specifically pleaded. As long as the facts that are
pleaded put the defendant on sufficient notice that the plaintiff may assert the
discovery rule, it is not waived. Brandau v. Howmedica Osteonics Corp., 439
Fed. App’x 317, 320 (5th Cir. 2011) (citing TIG Ins. Co. u. Aon Re, Inc., 521 F.3d
351, 357 (5th Cir. 2008)).
Plaintiffs respond first that the discovery rule— not a common law
doctrine but an explicit element of the Texas statute—always applies to TDTPA
claims. See Salinas v. Gary Pools, Inc., 31 S.W.3d 333, 336 (Tex. App. 2000)
(citing Tex. Bus. & Corn. Code Ann. § 17.565) (noting that the discovery rule
“always applies to DTPA claims, which, according to the statute, accrue on the
date on which the false, misleading or deceptive act or practice occurred, or
when the consumer discovered or in the exercise of reasonable diligence should
have discovered the occurrence of the false, misleading or deceptive act or
practice.”).
That is true as far as it goes, but I think a complaint must still put the
defendant on notice that the accrual of the cause of action is potentially
delayed under the circumstances of the particular case. Plaintiff Cohen replies
that the FAC does just that. It alleges that Whirlpool learned of the DOE’s
determination of noncompliance on September 20, 2010, but provided
the Mislabeled Washing Machines’
consumers with “no notice of
noncompliance with the Energy Star standard.” FAC ¶‘j{ 40, 45. The allegation
is that Defendants gave no actual notice, and the facts pleaded do not suggest
that Plaintiffs, through the exercise of reasonable diligence, should have
discovered on their own that the washers were not Energy Star-compliant.
.
.
.
I therefore agree with Plaintiffs that the discovery rule should apply to
this TDTPA claim, and that the TDTPA claims cannot be dismissed on statute
of limitations grounds based on the face of the FAC.
b. Adequacy of the Breach of Warranty and Unconscionable
Action Allegations
Under the TDPTA, Tex. Bus. & Corn. Code Ann. § 17.50(a)(2), a plaintiff
may pursue a claim under the TDTPA for breach of an express or implied
49
warranty. Defendants argue that the TDTPA claim must be dismissed because
the underlying breach of express and implied warranty claims must be
dismissed. I have already found that the FAC adequately plead express and
implied warranty claims, see Sections IV.A & B, supra, so the premise of this
34
argument fails.
c. Failure to provide pre-litigation notice
At least 60 days before filing a suit for damages under the TDTPA, a
consumer provide a putative defendant with written notice advising the
defendant of the nature of the suit and the amount of any damages and
35
expenses. See Tex. Bus & Corn. Code Ann. § 17.505(a). Because Cohen failed
to fulfill this prerequisite, Home Depot contends, his TDPTA claim must be
dismissed.
The Fifth Circuit has held that a plaintiff “has the burden to plead and
prove compliance with this notice requirement . . . .“ Keith v. Stoelting, Inc., 915
F.2d 996, 998 (5th Cir. 1990) (citing How Insurance Company v. Patriot
Financial Services of Texas, Inc., 786 S.W.2d 533, 537 (Tex. App. 1990))
(holding that plaintiff’s failure to allege compliance with the notice requirement
A TDPTA claim may also be sustained by a showing on an “unconscionable
action,” which is defined as “an act or practice which, to a consumer’s detriment,
takes advantage of the lack of knowledge, ability, experience, or capacity of the
consumer to a grossly unfair degree.” Tex. Bus. & Corn. Code Ann. § 17.45(5). Having
determined that the breach of express and breach of implied warranty claims are
sufficient to sustain this claim, I do not reach the issues as to an unconscionable act.
34
Specifically, this provision provides that:
(a) As a prerequisite to filing a suit seeking damages under Subdivision
(1) of Subsection (b) of Section 17.50 of this subchapter against any
person, a consumer shall give written notice to the person at least 60
days before filing the suit advising the person in reasonable detail of the
consumer’s specific complaint and the amount of economic damages,
damages for mental anguish, and expenses, including attorneys’ fees, if
any, reasonably incurred by the consumer in asserting the claim against
the defendant. During the 60-day period a written request to inspect, in
a reasonable manner and at a reasonable time and place, the goods that
are the subject of the consumer’s action or claim may be presented to the
consumer.
Tex. Bus. & Corn. Code Ann.
§ 17.505.
50
is grounds for a determination that plaintiff failed to state action under the
DTPA). Cohen does not really deny that he failed to serve notice. He contends
instead that a plaintiff may provide written notice of suit within a grace period
of sixty days after the filing of a complaint if “written notice is rendered
impracticable by reason of the necessity of filing suit in order to prevent the
36
expiration of the statute of limitations.” Tex. Bus. & Com. Code § 17.505(b).
He further maintains that, because he filed suit on behalf of a class, he could
not wait 60 days, lest the class members’ claims be barred by the statute of
limitations in the interim.
The parties dispute whether Cohen’s claims were already barred by the
statute of limitations when he filed the complaint (rendering the 60-day grace
period moot). Cohen purchased his washer on November 28, 2009. He filed his
complaint against Home Depot on February 16, 2012, more than two years
later. But he maintains that the statute of limitations did not being to run until
May 7, 2012, the date the washing machines were formally disqualified.
The dispute is not consequential. Cohen does not assert that pre-suit
notice was ever tendered, whether sixty days before or sixty days after the
Plaintiffs filed suit.
The question of a remedy remains. The Supreme Court of Texas confirms
that, under the TDTPA, pre-suit notification is a prerequisite to a DTPA action
for damages. Hines, 843 S.W.2d at 468. But that is not the end of the story.
“The notice requirement of the DTPA is clearly mandatory, but that feature
alone does not determine the consequences for failure to comply with it.” Id.
Serious consequences, it turns out, may be easily averted. As Cohen
points out, the TDTPA states that failure to provide pre-suit notice is grounds
for abatement, not for automatic dismissal. See id. § 17.505(d). In Hines,
supra, the Supreme Court of Texas held that “[w]hen a plaintiff fails to comply
with the requirement, abatement of the action for the statutory notice period is
36
In full, the provision provides:
(b) If the giving of 60 days’ written notice is rendered impracticable by
reason of the necessity of filing suit in order to prevent the expiration of the
statute of limitations or if the consumer’s claim is asserted by way of
counterclaim, the notice provided for in Subsection (a) of this section is not
required, but the tender provided for by Subsection (d), Section 17.506 of this
subchapter may be made within 60 days after service of the suit or
counterclaim.
51
more consistent with the purpose of notice,” which is to encourage settlement
and discourage litigation. 843 S.W.2d at 469. So the appropriate sanction is
not dismissal but a 60-day delay.
I find, moreover, that Defendants have waived their objection to the lack
of notice by failing to make a “timely request for abatement.” Soto v. Vanderbilt
Mortgage, CIV.A. C-10-66, 2010 WL 2598374, at *2 (S.D. Tex. June 24, 2010).
If a plaintiff files an action for damages under the DTPA without
first giving the required notice and a defendant timely requests an
abatement, the trial court must abate the proceedings if it
determines that notice was not provided as required. [Tex. Bus. &
Com. Code] § 17.505(c), (d) (Vernon 2002). To be timely, the
request for an abatement must be filed not later than the 30th day
after the date the person files an original answer. Id. § 17.505(c). A
defendant who fails to make a timely request for abatement waives
his objection to the lack of notice. Hines v. Hash, 843 S.W.2d 464,
469 (Tex. 1992).
Y2K Enterprises, Inc. v. Cathere, 01-06-00476-CV, 2007 WL 1844427, at *2
(Tex. App. June 28, 2007). See also Hines, 843 S.W.2d 464 at 469 (“To be
timely, the request for abatement must be made while the purpose of notice—
settlement and avoidance of litigation expense—remains viable. Thus,
defendant must request an abatement with the filing of an answer or very soon
thereafter, If the trial court determines that plaintiff has failed to give notice as
required by the statute, the action must be abated.”).
Accordingly, for all of these reasons, I will deny the motion to dismiss the
TDTPA claim on the basis of failure to provide pre-suit notification.
CONCLUSION
For the reasons stated above, Defendants’ Motions to Dismiss are
GRANTED IN PART and DENIED IN PART. Because the Court cannot
conclude at this stage that amendment would be futile, such dismissals are
without prejudice, and Plaintiffs are GRANTED leave to amend their First
Amended Consolidated Complaint. Plaintiffs shall have 40 days from the filing
of this Opinion and accompanying Order to file an amended pleading, which
should be deemed the Second Amended Complaint. Defendants will have 30
52
days thereafter to respond via answer or dispositive motion. An appropriate
order follows.
KEVIN MCNULTY
United States District Ju ge
Dated: June 16, 2014
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