TREMCO CANADA DIVISION, RPM CANADA v. DARTRONICS, INC.

Filing 20

OPINION fld. Signed by Judge Stanley R. Chesler on 6/4/13. (sr, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

TREMCO CANADA DIVISION, RPM
CANADA,
Plaintiff,
v.
DARTRONICS, INC.,
Defendant.

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Civil Action No. 13-1641 (SRC)

OPINION

CHESLER, District Judge
This matter comes before the Court upon the motion filed by Defendant Dartronics, Inc.
(“Defendant” or “Dartronics”) to dismiss the Second Count of the First Amended Complaint
pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff Tremco Canada Division, RPM
Canada (“Plaintiff” or “Tremco”) has opposed the motion. The Court has considered the papers
filed by the parties, and for the reasons that follow, grants Defendant’s motion. The New Jersey
Consumer Fraud Act claim pled in the Second Count of the First Amended Complaint will be
dismissed.

I.

BACKGROUND
This case arises from Defendant’s alleged failure to deliver to Plaintiff an inkjet printing

system that complied with the parties’ agreement. Tremco is a Canadian company engaged in
the business of manufacturing sealant and weatherproofing products for commercial, residential
and industrial use. According to the First Amended Complaint, Tremco and Dartronics entered
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into a contract, pursuant to a purchase order dated May 5, 2011, for Dartronics to supply Tremco
with a turnkey system for high-speed automated printing of high-resolution data and color
images onto Tremco’s caulking tubes. (Adopting the language of the First Amended Complaint,
the Court will hereinafter refer to the subject of the purchase order as the “System.”) At that
time, Tremco remitted $174,250 to Dartronics, representing a 50% downpayment for the
purchase. Plaintiff alleges that, following delays in production, the System was ultimately
shipped to Tremco in or about January 2012 and tested by the parties. Plaintiff further alleges
that the System “grossly failed the testing” and that, despite numerous opportunities given by
Tremco to Dartronics to remedy the problems, the defects and deficiencies persisted. (First Am.
Compl., ¶¶ 10-13.) Tremco alleges that it has rejected the System for failure to meet promised
performance levels, has demanded the return of its downpayment and has been forced to spend
money and resources to hand label its caulk tubes.
The First Amended Complaint seeks relief under two causes of action: breach of contract
(First Count) and violation of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1, et seq.
(“Consumer Fraud Act”) (Second Count). This motion challenges the sufficiency of the
Consumer Fraud Act claim under Rule 12(b)(6).

II.

DISCUSSION
A. Standard of Review
A complaint will survive a motion under Rule 12(b)(6) only if it states “sufficient factual

allegations, accepted as true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)).

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“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.” Id. (citing
Twombly, 550 U.S. at 556.) Following Iqbal and Twombly, the Third Circuit has held that, to
prevent dismissal of a claim, the complaint must show, through the facts alleged, that the
plaintiff is entitled to relief. Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).
While the Court must accept all factual allegations as true and construe the complaint in the light
most favorable to the plaintiff, it need not accept a “legal conclusion couched as a factual
allegation.” Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007); Fowler, 578 F.3d at 21011; see also Iqbal, 556 U.S. at 679 (“While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.”). “Threadbare recitals of the elements
of a cause of action, supported by mere conclusory statements, will not suffice.” Iqbal, 556 U.S.
at 678.
B. Consumer Fraud Act Claim
A claim under the Consumer Fraud Act entails three prima facie elements: “(1) unlawful
conduct by defendant; (2) an ascertainable loss by plaintiff; and (3) a causal relationship between
the unlawful conduct and the ascertainable loss.” Bosland v. Warnock Ddoge, Inc., 197 N.J. 543,
557 (2009). As a claim sounding in fraud, the private cause of action created by the Consumer
Fraud Act must meet the heightened pleading requirement of Federal Rule of Civil Procedure
9(b). F.D.I. C. v. Bathgate, 27 F.3d 850, 876 (3d Cir.1994). Rule 9(b) states: “In alleging fraud
or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”
As interpreted and applied by the Third Circuit, Rule 9(b) requires “plaintiffs to plead ‘the who,
what, when, where, and how: the first paragraph of any newspaper story.’” In re Advanta Corp.

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Sec. Litig., 180 F.3d 525, 534 (3d Cir.1999) (quoting DiLeo v. Ernst & Young, 901 F.2d 624,
627 (7th Cir.1990)); see also Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir.2007)
(holding that Rule 9(b) requires a party alleging fraud 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.’”).
Defendant argues that Plaintiff’s Consumer Fraud Act claim is deficient for three reasons:
(1) the transaction at issue is not subject to the Consumer Fraud Act because, as alleged, the
System is a specially designed product for Tremco and therefore not “merchandise” under the
statute; (2) the First Amended Complaint fails to allege that Dartronics engaged in any activity in
violation of the statute; and (3) the claim fails to meet pleading standard of Rule 9(b). The Court
finds that each of these arguments warrants dismissal of the Consumer Fraud Act claim.
As to the scope of transactions to which the Consumer Fraud Act applies, the Court
begins with the language of the statute itself. The Consumer Fraud Act prohibits “any
unconscionable commercial practice, deception, fraud, false pretense false promise,
misrepresentation, or the knowing concealment, suppression, or omission, or any material fact
with intent that others rely upon such concealment, suppression or omission, in connection with
the sale or advertisement of any merchandise . . . .” N.J.S.A. 56:8-2 (emphasis added). The
statute defines “merchandise” as “any object, wares, goods, commodities, services of anything
offered, directly or indirectly to the public for sale.” N.J.S.A. 56:8-1(c). The Third Circuit,
acknowledging the broad but not limitless scope of the statute, noted that “New Jersey courts
have repeatedly made clear [that] the CFA seeks to protect consumers who purchase ‘goods or
services generally sold to the public at large.’” Cetel v. Kirwan Fin. Group, Inc., 460 F.3d 494,

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514 (3d Cir. 2006) (quoting Marascio v. Camapnella, 298 N.J. Super. 491 (App. Div. 1997)).
Thus, for example, based on the principle that the Consumer Fraud Act covers sales to
consumers in the “popular sense” and, as such, did not encompass every marketplace transaction,
the Third Circuit held in Cetel that the district court correctly found the Consumer Fraud Act to
be inapplicable, reasoning that benefits plans at issue were a complex product aimed at a very
specific class of investor and not marketed or sold to the general public. Id. at 514-15.
Likewise, in Princeton Healthcare System v. Netsmart New York, Inc., the Appellate Division of
New Jersey’s Superior Court reversed the lower court’s denial of the defendant’s motion to
dismiss the Consumer Fraud Act claim, finding that the contract between the parties “for the
installation and implementation of a complex software system” did not constitute the “sale of
merchandise” within the meaning of the statute. Princeton Healthcare System v. Netsmart New
York, Inc., 422 N.J. Super. 467, 473-74 (App. Div. 2011). The court reasoned that in contrast to
a “simple purchase of computer software to the public at large,” the transaction at issue provided
for the “design of a custom-made program to satisfy Princeton House's unique needs and
Netsmart's active participation in implementation of this program. Id. at 474.
The First Amended Complaint provides no indication that the System was a standardized
product generally available to the public. To the contrary, the allegations support the reasonable
inference that the System was specially designed and created for Tremco, to meet its needs in
connection with printing and labeling the caulking tube products it manufactured. The First
Amended Complaint alleges that Dartronics issued a proposal specific to Tremco’s business
operations, that the System proposed was manufactured individually for Tremco and that, after
completion of the System, it was subjected to various “Factory Acceptance Tests” to ensure that

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it performed to Tremco’s specifications and satisfaction. These facts, assumed to be true, belie
Tremco’s assertions, made in its brief in opposition to the motion, that the product at issue is
simple albeit customized printing equipment, generally available to the public at large. The
allegations, in short, do not plausibly establish that the transaction at issue was for the “sale of
merchandise” and, as such, do not establish that sale of the System falls within the purview of
the Consumer Fraud Act. Cetel, 460 F.3d at 514-15; Princeton Healthcare Sys., 422 N.J. Super.
at 473-74. The failure to plead an essential element of a claim for relief under the Consumer
Fraud Act, that is, conduct in violation of the act, defeats the claim under the standard of Rule
12(b)(6).
Equally fatal to the Consumer Fraud Act claim is the lack of any factual allegation in the
First Amended Complaint concerning the conduct, statements and/or omissions on which
Plaintiff grounds its claim. In a conclusory manner, Tremco alleges that “Dartronics made false
promises to Tremco, both orally and in writing, that it could supply to Tremco a System that
would meet promised performance criteria.” (First Am. Compl., ¶ 26.) At best, this allegation
merely restates the basis of the breach of contract claim pled in the First Count, that is, that the
Dartronics failed to perform and deliver a product as required by the parties’ agreement. Merely
asserting that Dartronics made “false promises” without giving any factual detail in support of
that statement is not enough to state a viable Consumer Fraud Act claim. Statements which
parrot the element of a claim without asserting facts to support that element do not satisfy the
minimal pleading standard of Rule 8(a), much less the particularity requirements of Rule 9(b).
Thus, even if the First Amended Complaint alleged facts sufficient to establish that the parties’
transaction involving the System constituted the sale of merchandise, as defined by the

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Consumer Fraud Act, it nevertheless fails to state a cognizable Consumer Fraud Act claim for
failure to allege, with particularity, facts that, assumed to be true, would demonstrate that
Dartronics engaged in conduct in violation of the statute.

III.

CONCLUSION
For the reasons discussed, the Court grants the motion to dismiss the Consumer Fraud

Act claim. An appropriate order will be filed.
s/ Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge

Dated: June 4, 2013

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