PET GIFTS USA, LLC v. IMAGINE THIS COMPANY, LLC et al
Filing
38
OPINION filed. Signed by Judge Freda L. Wolfson on 10/2/2015. (mmh)
*NOT FOR PUBLICATION*
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
PET GIFTS USA, LLC,
:
:
Plaintiff, :
:
v.
:
:
IMAGINE THIS COMPANY, LLC AND :
TWELVE, INC.
:
:
Defendants. :
:
:
Civ. Action No. 14-3884 (FLW)(DEA)
OPINION
WOLFSON, United States District Judge
Plaintiff Pet Gifts USA, LLC (“Plaintiff” or “Pet Gifts”) brought this lawsuit alleging that
Defendants Imagine This Company, LLC (“ITC”) and Twelve, Inc. (“Twelve”) (collectively, the
“Defendants”) unlawfully used proprietary magnet designs belonging to Plaintiff. Defendants
move to dismiss all claims in the Complaint, arguing, in part, that Virginia law applies to
Plaintiff’s claims, and under Virginia law they are time-barred. However, Plaintiff argues that
New Jersey law applies, and under this state’s law its claims are not time-barred. In a previous
Opinion, the Court determined that additional facts were necessary to conduct a choice-of-law
analysis. Accordingly, the Court terminated Defendants’ motion to dismiss and ordered the
parties to first conduct limited discovery on the choice-of-law question. The parties have
completed discovery and submitted supplemental briefs on this issue. Thus, the choice-of-law
question is now ripe for review by the Court.
For the reasons set forth below, Defendants’ motion is granted in part and denied in part as
follows: the Court dismisses Plaintiff’s breach of contract claim as barred by the statute of
1
limitations under both New Jersey and Virginia law, and finds because New Jersey law applies to
the remainder of Plaintiff’s claims, those causes of action survive.
I.
Background
As a general matter, a court ruling on a motion to dismiss may not consider matters
extraneous to the pleadings. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d
Cir. 1997). However, as discussed in further detail below, a court is entitled to look beyond the
pleadings when resolving a choice-of-law question. See e.g. Toll v. Tannenbaum, 596 Fed. Appx.
108, 111 (3d Cir. 2014); Nautilus Ins. Co. v. Reuter, 537 F.3d 733, 742 (7th Cir. 2008); Vaz
Borralho v. Keydril Co., 696 F.2d 379, 386 (5th Cir. 1983).
Plaintiff Pet Gifts is a New Jersey limited liability company owned and operated by Wayne
and Elicia Kessler in New Jersey, which also does business as “Animal Accents” and “Arks-NBarks.”1 Kessler Cert. ¶ 1. Pet Gifts sells novelty pet merchandise throughout the United States.
Pl.’s Answer to Interrog. No. 3. Defendant ITC is a Virginia limited liability company with its
principal place of business in Virginia, which is owned exclusively by Michael and Beverly Moss.
Moss Cert. ¶ 2. ITC designs, manufactures, and sells various consumer goods, such as pet-themed
1
There appears to be some confusion as to the relationship between Pet Gifts USA, LLC and
Animal Accents. According to Defendants, their dealings were with an entity called Animal
Accents, not Pet Gifts. Defs.’ Mem. in Supp. of Applying Va. Law p. 3 n. 1. Defendants are unsure
as to the relationship between Animal Accents and Pet Gifts, because in the Complaint, Plaintiff
stated that Animal Accents was a trade name of Pet Gifts USA, LLC, but in its answers to
Defendants first set of interrogatories, Plaintiff states Animal Accents is a New Jersey limited
liability company and a predecessor entity to Pet Gifts USA, LLC. Defs.’ Mem. p. 3 n. 1. Despite
this confusion as to the relationships between these entities, the true nature of their relationship
will not affect the choice-of-law question. Therefore, for the purposes of this Opinion, the Court
will treat these entities as one entity, Pet Gifts USA, LLC.
2
magnets, to various resellers throughout the United States, including Virginia and New Jersey.
Defendant Twelve is the corporate parent of ITC and a Virginia corporation with its principal place
of business in Virginia. Id. at ¶ 3.
On February 17, 2007, Ms. Kessler, working as a sales representative for Pet Gifts, first
met Ms. Moss at the Henrico Humane Society Pet Expo in Richmond, Virginia. Kessler Cert. ¶ 3;
Moss Cert. ¶ 13. At that meeting, Ms. Moss informed Ms. Kessler that ITC provided magnet
printing services and gave her a sample brochure. Kessler Cert. ¶ 3. Approximately one to two
months later,2 Ms. Kessler, in New Jersey, telephoned Ms. Moss at ITC, in Virginia, to request
printing services of various pet-themed magnets for Pet Gifts. Id. at ¶ 4; Moss Cert. ¶ 14.
Thereafter, the parties negotiated, via telephone, email, and fax, the print work for a “custom-run”
of magnets to be delivered to Pet Gifts in New Jersey. Kessler Cert. ¶¶ 1-7, 12; Moss Cert. ¶¶ 1415. Throughout the course of these negotiations, Ms. Kessler was located in New Jersey and Ms.
Moss was located in Virginia. Kessler Cert. ¶¶ 1-7; Moss Cert. ¶¶ 14-15.
The negotiations for the first order of magnets concluded when Ms. Kessler, in New Jersey,
signed and returned a proof sheet detailing the terms of the transaction via fax to ITC, in Virginia.
Kessler Cert. ¶¶ 8-10; Moss Cert. ¶ 15. According to Plaintiff, when Ms. Kessler first received the
proof sheet for signature from ITC, she found some of the text pertaining to the terms of the
transaction illegible. Kessler Cert. ¶¶ 8-9. Ms. Kessler then telephoned Ms. Moss to ascertain the
language of the text, and Ms. Moss gave her an explanation. Id. at ¶ 9. Plaintiff alleges that during
this telephone conversation, Ms. Moss misrepresented the terms of the proof sheet to Ms. Kessler.
2
Ms. Moss certifies that she contacted Ms. Kessler “some weeks later,” while Ms. Kessler
certifies that she was contacted “approximately two months later.” Kessler Cert. ¶ 4; Moss Cert.
¶ 14. This discrepancy has no bearing on the choice-of-law question.
3
Compl. p. 6, 8 ¶¶ 18, 28-29; Moss Cert. ¶ 17. Specifically, Plaintiff avers that Ms. Moss outlined
certain pricing and order sizing terms contained in the proof sheet, but did not mention other terms,
including language regarding a license to customers’ proprietary designs. Compl. p. 6, 8 ¶¶ 18, 2829.3 Ms. Kessler claims that she relied upon Ms. Moss’ representations as to the terms of the proof
sheet in signing and finalizing the agreement. Kessler Cert. ¶ 10.
For several months thereafter, ITC produced multiple custom orders of magnets and
personalized magnet packaging for Pet Gifts according to Plaintiff’s specifications. Kessler Cert.
¶¶ 11-21; Moss Cert. ¶¶ 19-20. Except for one or two in-person meetings in Virginia,4 the parties’
communications were made via telephone or email from Virginia to New Jersey, or vice versa.
Kessler Cert. ¶¶ 11-14; Moss Cert. ¶¶ 17, 20. All magnets ordered by Pet Gifts were manufactured
by ITC in Virginia. Moss Cert. ¶ 17. Generally, orders were shipped from Virginia to Pet Gifts’
3
In larger text the proof sheet provides information regarding the designs of the magnets to be
manufactured, quantity, and price. Defs.’ Mot. To Dismiss Compl., Ex. A. In smaller text, at the
bottom of the page, the proof sheet reads:
Terms: Upon receipt unless other arrangements approved. This quotation and the prices
contained therein are subject to change without notice. 10% Overunder shipment must be
considered a complete contract. Invoice is adjusted accordingly. IT will retain all artwork,
art, tools and tooling produced by us for the customer’s use, free of storage charges.
However, all such items and any copies or reproductions thereof are designed for our use
and will not be releases or transferred. Customer is responsible for all collection fees,
collection costs and attorney fees. 1.5% monthly charge will apply to all unpaid balances.
A convenience fee of 4% will be added to all credit card payments. All printed items are
not returnable. All products are sold with the understanding that the purchaser will
determine the suitability of such products for its purposes. Shipping and Handling charges
are additional.
Id.
4
The parties disagree as to the exact number of in-person business meetings that occurred in
Virginia. Ms. Kessler certifies that there was only one meeting in Virginia between Pet Gifts and
ITC. Kessler Cert. ¶ 18. On the other hand, Ms. Moss Certifies that she met with Ms. Kessler in
Virginia at least twice during this period. Moss Cert. ¶ 19.
4
offices in New Jersey, or its agent in New Jersey. Kessler Cert. ¶ 12. However, according to
Defendants, on at least one occasion, Pet Gifts requested to pick up its magnet order directly from
ITC in Virginia, and on one other occasion, Plaintiff requested delivery of an order to a location
in Virginia. Moss Cert. ¶ 21.
On May 18, 2008, while attending a pet industry trade show, Pet Gifts first observed a
competing company selling magnets of the same designs as those ITC had previously
manufactured for Pet Gifts, but imprinted with ITC’s contact information, rather than Pet Gifts’
information. Kessler Cert. ¶ 19. These magnets were marketed for substantially lower prices. Id.
at ¶ 19. Additionally, Pet Gifts has observed these same magnets sold by its competitors at retail
trade shows in Edison and Atlantic City in New Jersey. Id. at ¶ 22. ITC certifies that it sells its
magnets to resellers and other customers “over all or nearly all” of the United States, including
both New Jersey and Virginia. Moss Cert. ¶ 7.
On May 7, 2014, nearly six years later, Pet Gifts filed its Complaint in state court against
Defendants, alleging (1) consumer fraud, pursuant to N.J.S.A. 56:8-1, et seq. (the “NJCFA” claim);
(2) conversion of property; (3) breach of contract; (4) breach of the duty of loyalty; (5) conversion
of artwork; and (6) trade dress infringement, pursuant to N.J.S.A. 56:4-1 and New Jersey common
law. On June 17, 2014, Defendants removed the case to this Court. Thereafter, in lieu of an answer,
Defendants filed a motion to dismiss, arguing in part that Virginia law applies to Plaintiff’s claims
and that under Virginia law, Plaintiff’s claims, are time-barred. Plaintiff opposed the motion to
dismiss, contending that its claims are brought within New Jersey’s applicable statute of
limitations. On February 10, 2015, the Court determined that additional facts were necessary to
conduct a choice-of-law analysis. Accordingly, the Court terminated Defendants’ motion to
5
dismiss and ordered the parties to first conduct limited discovery on the choice-of-law question.
The parties engaged in limited discovery, and each submitted supplemental briefs on this issue.
II.
Discussion
a. Standard of Review
Although it is well established that choice-of-law analysis is a purely legal question, NL
Indus., Inc. v. Commercial Union Ins. Co., 65 F.3d 314, 319 (3d Cir. 1995), the second prong of
New Jersey’s most significant relationship test is fact intensive and requires consideration of the
facts specific to each case. Warriner v. Stanton, 475 F.3d 497, 500 (3d Cir. 2007). The Court is
tasked with this duty. In resolving a choice-of-law question, the court may look beyond the
pleadings. See e.g. Toll, 596 Fed. Appx. at 111; Nautilus, 537 F.3d at 742; Vaz, 696 F.2d 379 at
386.5
However, once I have determined which state’s law to apply to Plaintiff’s claims, I will
analyze whether its claims are barred by the relevant statute of limitations, assuming the accrual
date alleged in the Complaint is true. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 589 (2007).
An affirmative statute of limitations defense may be raised in a motion to dismiss under Rule
12(b)(6), if “the time alleged in the statement of a claim shows that the cause of action has not
been brought within the statute of limitations.” Hanna v. U. S. Veterans' Admin. Hosp., 514 F.2d
1092, 1094 (3d Cir. 1975).
b. Choice of Law: Actual Conflict of Law
5
I note that while the parties dispute certain facts here, i.e. the length of time between their
first and second contact, as well as the total number of in-person meetings that took place in
Virginia, the choice-of-law analysis in this case does not turn on those disputed facts. The Court,
therefore, need not make any findings of fact to resolve the choice of law question at hand.
6
As the Court explained in its previous Opinion, a federal court sitting in diversity
jurisdiction must apply the forum state's choice-of-law rules. Klaxon Co. v. Stentor Elec. Mfg. Co.,
313 U.S. 487, 496-97 (1941); Gen. Star Nat'l Ins. Co. v. Liberty Mutual Ins. Co., 960 F.2d 377,
379 (3d Cir. 1992). New Jersey has adopted the “most significant relationship” test of the
Restatement (Second) of Conflict of Laws (the “Restatement”). P.V. ex rel. T.V. v. Camp Jaycee,
197 N.J. 132, 142-43 (2008). New Jersey's most significant relationship test consists of two prongs.
The first prong of the analysis requires the court to examine the substance of the potentially
applicable laws in order to determine if an actual conflict exists between the states’ laws. Id. at
143-44 (citing Lebegern v. Forman, 471 F.3d 424, 430 (3d Cir. 2006)). Where there is no actual
conflict, no further analysis is necessary and the court applies the law of the forum state. See In re
Ford Motor Co., 110 F.3d 954, 965 (3d Cir. 1997); Rowe v. Hoffman-La Roche, Inc., 189 N.J. 615,
621 (2007). However, if a conflict exists, the court must analyze the second prong and determine
which jurisdiction has the most significant relationship to the particular claim at issue. Camp
Jaycee, 197 N.J. at 136.
Here, the Court previously analyzed the laws at issue and determined that an actual conflict
exists between Virginia and New Jersey law as to the majority of Plaintiff’s claims, and therefore
I must address the second prong of the choice-of-law analysis. Indeed, as I have stated previously,
there is no dispute, that under Virginia law, all of Plaintiff’s claims would either be subject to a
two-year, four-year, or five-year statute of limitations. Defendants claim, and Plaintiff does not
dispute, that Plaintiff’s causes of action accrued, at the latest, on May 18, 2008, when Plaintiff first
observed its competitors selling magnets with substantially similar designs to those manufactured
for Plaintiff by ITC. Given that Plaintiff filed suit on May 7, 2014 -- nearly six years after the date
of this discovery -- all of Plaintiff’s claims would be time-barred under Virginia law. On the other
7
hand, under New Jersey law, a six-year statute of limitations applies to Plaintiff’s claims of
consumer fraud, conversion of property, conversion of artwork, breach of duty of loyalty, and trade
dress infringement.6 Therefore, assuming Plaintiff’s causes of action accrued on May 18, 2008,
these claims were brought within the applicable statute of limitations under New Jersey law.
Consequently, a conflict exists between Virginia and New Jersey law as to these claims.
However, I find a conflict does not exist between the laws of these states as they pertain to
Plaintiff’s breach of contract claim. In New Jersey, claims of breach of a contract for the sale of
goods are governed by a four-year statute of limitations. See Ford Motor Credit Co. v. Arce, 348
N.J. Super. 198, 200 (App. Div. 2002) (citing N.J.S.A. 2-725(1)). Thus if the parties’ contract is
for a sale of goods, Plaintiff’s breach of contract claim would be time-barred under New Jersey
law, as well as Virginia law. On the other hand, if it is not a contract for the sale of goods, a sixyear limitations period would apply, and New Jersey and Virginia laws would conflict. See Cnty.
of Hudson v. Janiszewski, 520 F. Supp. 2d 631, 644 (D.N.J. 2007), as amended (Nov. 5, 2007),
aff'd, 351 F. Fed. Appx. 662 (3d Cir. 2009). Neither party raises the issue whether the contract in
question is for the sale of goods, and consequently, for the purposes of my prior Opinion, I
presumed that a six-year statute of limitations applied. However, upon closer inspection, the Court
6
NJCFA claims are subject to a six-year statute of limitations. DiIorio v. Structural Stone &
Brick Co., 368 N.J. Super. 134, 142 (App. Div. 2004); N.J.S.A. § 2A: 14–1. Conversions claims
regarding property are also governed by a six-year statute of limitations in New Jersey. See e.g.,
Dynasty Bldg. Corp. v. Ackerman, 376 N.J. Super. 280, 287 (App. Div. 2005); N.J.S.A. 2A:14-1.
Claims alleging a breach of the duty of loyalty, under New Jersey law, are a type of fiduciary claim
that is also subject to a six-year statute of limitations. See Jeffrey Rapaport M.D., P.A. v. Robin S.
Weingast & Associates, Inc., 859 F. Supp. 2d 706, 715 (D.N.J. 2012) (citing N.J.S.A. 2A:14-1).
Finally, statutory unfair competition claims are also governed by a six-year statute of limitations.
See e.g., Fox v. Millman, 210 N.J. 401, 410 (2012); N.J.S.A. 2A:14-1.
8
finds that for the reasons set forth below, the four-year statute of limitations applies to Plaintiff’s
contract claim, as the parties’ contract is for the sale of goods.
The contracts at issue are the proof sheets signed and submitted by Plaintiff to place magnet
orders with Defendants. Compl. p. 11 ¶ 2. Plaintiff asserts that Defendants breached the contract
by printing magnets with Plaintiff’s proprietary designs for Defendants’ own use, which exceeded
the scope of the license granted to Defendants by the terms of the agreement. Compl. p. 11 ¶ 4.
Because the parties’ contract is a mixed contract involving the license of intellectual property as
well as the sale of goods (magnets), I must determine whether it constitutes a contract for the sale
of goods for the purposes of N.J.S.A. 2-725. This determination, turns on whether the sale of goods
is the primary purpose of, or merely incidental to, the contract. Tele-Radio Systems Ltd. v.
DeForest Electronics, Inc., 92 F.R.D. 371, 373-74 (D.N.J.1981); see also Docteroff v. Barra Corp.
of America, Inc., 282 N.J. Super. 230, 240 (App. Div. 1995). In that regard, the court must
“examine the whole transaction between the parties and look to the essence or main objective of
the parties’ agreement.” Tele-Radio 92 F.R.D.at 373-74 (internal quotations omitted).
Here, the Court finds that the main purpose of the contract was plainly for a sale of goods,
i.e. magnets, and the licensing term was incidental to the agreement; indeed, it was included only
as one of the terms assigning the rights and responsibilities of the parties in connection with the
sale of magnets. And while the intent of the parties is clear from the face of the agreement, I can
further conclude that the license was collateral based on Plaintiff’s allegation that it signed the
proof sheets entirely ignorant of the existence of such a term. Therefore, because I find the
agreement was for the sale of goods, under New Jersey law, Plaintiff’s breach of contract claim is
barred by the four-year statute of limitations.
9
Since under either Virginia or New Jersey law Plaintiff’s breach of contract claim would
be barred, I need not engage in further choice of law analysis as to this claim and the law of the
forum state, New Jersey, applies. However, for Plaintiff’s remaining claims, a conflict of law does
exist, and I must go on to analyze the second step of the choice-of-law analysis to these claims.
c. Choice of Law: Most Significant Relationship
Under the second step of the choice-of-law analysis, the court determines which state has
the most significant relationship to the claim by weighing the factors set forth in the Restatement
section that corresponds to Plaintiff’s cause of action. See, e.g., Nafar v. Hollywood Tanning Sys.,
339 F. Fed. Appx. 216, 220 (3d Cir. 2009) (citing Agostino v. Quest Diagnostics Inc., 256 F.R.D.
437, 463 (D.N.J. 2009)); Camp Jaycee, 197 N.J. at 143-44. Plaintiff’s claims fall into two separate
categories addressed by the Restatement: (1) fraud and misrepresentation and (2) tort.
Accordingly, each claim must be analyzed separately.
Plaintiff’s claim of consumer fraud is governed by Section 148 of the Restatement
(“Section 148”), which pertains to fraud and misrepresentation. Maniscalco v. Brother Int’l (USA)
Corp., 709 F.3d 202, 207 (3d Cir. 2013); see also Restatement (Second) of Conflict of Laws § 148.
Plaintiff’s claims regarding conversion of property, conversion of artwork, breach of duty of
loyalty, and trade dress infringement are governed by Section 145 of the Restatement (“Section
145”), which concerns tort. See, e.g., Clark, 2009 U.S. Dist. LEXIS 84093, at *50-51 (D.N.J. Sep.
14, 2009) (applying Section 145 to a breach of fiduciary duty claim); Bondi v. Citigroup, Inc., 423
N.J. Super. 377, 431 (App. Div. 2011) (classifying conversion as a tort); Benihana of Tokoyo, Inc.
v. Benihana, Inc., 828 F. Supp. 2d 720, 725 (D. Del. 2011) (applying Section 145 to a conversion
claim under the most significant relationship choice-of-law analysis); Winback, 42 F.3d at 1433
(classifying trademark infringement as a “species of tort”); see also Restatement § 145(2).
10
i. NJCFA Claim
As stated above, choice-of-law analysis for NJCFA claims is governed by Section 148 of
the Restatement. “Section 148 has two subsections: Section 148(1) applies when the defendant
made the fraudulent representations in the same state in which the consumer relied on the
representations, whereas Section 148(2) governs when the misrepresentations and the reliance
occurred in different states.” Rapid Models & Prototypes, Inc. v. Innovated Solutions, 71 F. Supp.
3d 492, 503 (D.N.J. 2014) (citing Restatement § 148); see also Maniscalco, 709 F.3d at 207. Both
Defendants and Plaintiff argue, unconvincingly, that Section 148(1) should apply in the instant
case, claiming misrepresentations were made, received, and relied on entirely in either Virginia or
New Jersey, respectively.
Defendants claim Plaintiff admitted in its answers to Defendants’ interrogatories that
Defendants’ misrepresentations were both sought and received in Virginia, when Plaintiff visited
Defendants’ Virginia office in 2007. Defs.’ Mem. p. 10 (citing Pl’s Answer to Interrog. Nos. 1&
4). Defendants further contend that although Plaintiff does not affirmatively state that it relied on
the assurances in Virginia, “it is reasonable to infer that it was in Virginia at the time of that
communication, when Plaintiff apparently decided to continue its relationship with ITC.” Id. at 10.
However, this argument misconstrues Plaintiff’s Complaint and its answers to Defendants’
interrogatories, which both refer to Ms. Moss’ alleged misrepresentations made to Ms. Kessler
during their telephone conversation regarding the language of the proof sheet. Pl’s Answer to
Interrog. No. 1; Compl. p. 5-6 ¶¶ 17-19. Indeed, the alleged misrepresentations were made by Ms.
Moss in Virginia while Ms. Kessler received and relied on these representations in New Jersey.
Defendants’ references to later interactions that occurred only in Virginia are not probative,
because it is the substance of this phone call that forms the basis for Plaintiff’s consumer fraud
11
claim. Similarly unpersuasive, Plaintiff’s argument in favor of applying Section 148(1) simply
ignores the fact that Ms. Moss was in Virginia during the conversation in question. Because the
alleged misrepresentation was made in a different state from which it was received and relied upon,
Section 148(2) of the Restatement must apply. I will turn to that discussion.
Under Section 148(2), the court weighs the following factors to determine which state has
the most significant relationship to the claims:
(a) the place, or places, where the plaintiff acted in reliance upon the defendant's
representations,
(b) the place where the plaintiff received the representations,
(c) the place where the defendant made the representations,
(d) the domicil, residence, nationality, place of incorporation and place of business
of the parties,
(e) the place where a tangible thing which is the subject of the transaction between
the parties was situated at the time, and
(f) the place where the plaintiff is to render performance under a contract which he
has been induced to enter by the false representations of the defendant.
Restatement § 148(2). The relative importance to each of these factors in a given case “should be
determined in light of the choice-of-law principles stated in § 6 [of the Restatement]” (“Section
6”). Restatement § 148 cmt. e. “Reduced to their essence, the section 6 principles are: (1) the
interests of interstate comity; (2) the interests of the parties; (3) the interests underlying the field
of tort law; (4) the interests of judicial administration; and (5) the competing interests of the states.”
Camp Jaycee, 197 N.J. at 147 (internal quotations omitted).
When I apply these factors to the telephone conversation between Ms. Kessler and Ms.
Moss, during which the alleged fraud purportedly occurred, I find that factors (a), (b) and (d) weigh
in favor of applying New Jersey law, factor (c) weighs in favor of applying Virginia law, and
factors (e) and (f) do not weigh strongly in favor of either. Factors (a) and (b) weigh in favor of
applying New Jersey law, because Ms. Kessler was in New Jersey when she received the alleged
12
misrepresentations from Ms. Moss and immediately acted in reliance on this information by
signing the proof sheet and faxing the signed copy to ITC. Factor (d) weighs slightly in favor of
applying New Jersey law, because although Plaintiff operates in New Jersey and Defendants
operate in Virginia, the “domicil, residence and place of business of the plaintiff are more
important than are similar contacts on the part of the defendant” in consumer fraud cases because
“financial loss will usually be of greatest concern to the state with which the person suffering the
loss has the closest relationship.” Maniscalco, 709 F.3d at 208 (quoting Restatement § 148 cmt. i).
Since Ms. Moss was in Virginia when she made these alleged misrepresentations, factor
(c) weighs in favor of applying Virginia law. As to factor (e), the “tangible thing” at issue in this
transaction was the order of magnets that were to be produced in Virginia and then shipped to New
Jersey. However, at the time of the conversation between Ms. Kessler and Ms. Moss, the magnets
had not yet been produced, and therefore, did not exist in a particular location. Consequently, this
factor is neutral as to which law to apply. Finally, factor (f) is neutral as Plaintiff’s performance
under the contract did not have a locus in a particular state. Plaintiff sent payments from New
Jersey to Virginia, an action which did not occur in a single state. See Restatement § 148 cmt. i
(explaining that this factor carries weight only if “at least the great bulk of plaintiff's performance
is to take place in a single state”). Thus, only factor (c) weighs in favor of applying Virginia law,
while (a), (b), and (d) weigh in favor of applying New Jersey law, and (e) and (f) are neutral.
I additionally note that the fact that Defendants are headquartered in Virginia and their
alleged unlawful conduct emanated from Virginia does not supersede the numerous contacts with
Plaintiff’s home state of New Jersey. As the Third Circuit has advised, when Section 148 is applied
to cases where defendant is incorporated in one state and plaintiff is domiciled in a different state,
the mere fact that unlawful conduct emanated from the state where the defendant resides “will not
13
supersede the numerous contacts with the consumer's home state for purposes of determining
which state has the most significant relationship under Restatement § 148(2).” Montich v. Miele
USA, Inc., 849 F. Supp. 2d 439, 449 (D.N.J. 2012) (internal quotation marks omitted) (affirmed
by the Third Circuit in Maniscalco, 709 F.3d at 209). In this case, New Jersey’s contacts to the
place where Plaintiff acted in reliance upon the defendant's representations, the place where
Plaintiff received the representations, and the place where Plaintiff does business outweigh
Virginia’s contacts to the place where Defendants operate and the place where unlawful conduct
emanated from. Accordingly, taken as a whole, the Section 148 factors weigh in favor of applying
New Jersey law to plaintiff’s NJCFA claim.
Section 6 of the Restatement also supports the position that New Jersey has a greater
interest in the litigation of Plaintiff’s consumer fraud claim. First “the interests of interstate comity
favor applying the law of the individual claimant's own state,” because applying any other state’s
laws would frustrate the domiciliary state's legislative policies. Maniscalco, 709 F.3d at 209 (citing
Fink v. Ricoh Corp., 365 N.J. Super. 520, 585 (Law Div. 2003)) The second factor, interests of the
parties, deals with what law the parties reasonably expected would apply in light of their
transaction. Montich, 849 F. Supp. 2d at 450 (citing Fu v. Fu, 160 N.J. 108, 123 (1999) (reasoning
that when considering the interests of the parties a court should “look to what law the parties
reasonably expected would apply in light of their transaction”). The record does not contain
sufficient facts to determine what law the parties reasonably expected would apply to their
agreement.7 But, this factor is less important to the analysis of a tort or fraud claim, because
7
Defendants have argued that the Court should presume Plaintiff expected Virginia law to
apply to their business relationship, because before filing suit in New Jersey, Plaintiff initially
retained a Virginia lawyer who sent cease and desist letters to Defendants citing Virginia law.
Defs.’ Mem. p. 12. I do not find this evidence persuasive as it does not speak to the Plaintiff’s
14
“persons who cause injury on non-privileged occasions, particularly when the injury is
unintentionally caused, usually act without giving thought to the law that may be applied to
determine the legal consequences of this conduct” and further “such persons have few, if any,
justified expectations in the area of choice of law to protect.” Restatement § 145 cmt. b. The third
factor, the interests underlying the field of tort law, favors neither state. “Consumer fraud law
serves the dual purposes of compensating injured parties,” which favors New Jersey law, “and
deterring corporate misconduct,” which favors Virginia law in this case. Maniscalco, 709 F.3d at
210. Similarly, the fourth factor, the interests of judicial administration, does not weigh in favor
of either state. Moreover, “New Jersey courts have found that the interests of judicial
administration must yield to the interests of the other factors.” Id. at 210 (citing Fu, 160 N.J. at
124). Finally and most importantly, the interest of New Jersey in having its law apply to its own
consumers outweighs the interests of Virginia in protecting out-of-state consumers from consumer
fraud. See Id. at 210 (“[T]he interest of South Carolina in having its law apply to its own consumers
outweighs the interests of New Jersey in protecting out-of-state consumers from consumer
fraud.”). Therefore, in light of the principals of Section 6 and Section 148(2), the Court finds that
New Jersey has the most significant relationship to Plaintiff’s NJCFA claim.8
expectations vis-à-vis its business relationship with Defendants before it discovered any potential
cause of action.
8
Notwithstanding the application of New Jersey law to Plaintiff’s NJCFA claim, the Court has
not yet found that Plaintiff has met the pleading requirements of New Jersey law with respect to
its NJCFA claim. Whether Plaintiff can be considered as a “consumer” under the NJCFA, rather
than a wholesale buyer of goods for resale, for example, has not been determined by this Court,
and indeed, I voice my skepticism as to whether it is a consumer under the facts of this case. See
e.g. Papergraphics Int'l, Inc. v. Correa, 389 N.J. Super. 8, 13 (App. Div. 2006) (“[A] wholesale
buyer of goods intended for resale is not a ‘consumer,’ and the sale is a non-consumer transaction
outside the ambit of CFA protection.”); see also Lithuanian Commerce Corp. v. Sara Lee Hosiery,
15
ii. Tort Claims
Plaintiff asserts four claims sounding in tort: conversion (two counts), breach of fiduciary
duty, and common law trade dress infringement. Plaintiff claims that Defendants caused Plaintiff’s
economic loss when it converted Plaintiff’s proprietary magnet designs, sold them as its own and
attempted to persuade customers to deal directly with Defendants instead of Plaintiff. Compl. p. 10
¶¶ 3-6, p. 12 ¶¶ 1-5. Plaintiff further avers Defendants owed Plaintiff a “duty of loyalty” as their
customer and that Defendants breached this loyalty by converting Pet Gifts designs and selling
them as their own. Id. at p. 12 ¶¶ 1-5. Finally, Plaintiff alleges that Defendants’ production of
identical magnets with identical packaging “deceives consumers as to the origin of the products.”
Id. at p. 15 ¶¶ 4-8.
These claims are governed by Section 145 of the Restatement. See, e.g., Clark, 2009 U.S.
Dist. LEXIS 84093 at *50-51; Bondi, 423 N.J. Super. at 431; Benihana, 828 F. Supp. 2d at 725;
Winback, 42 F.3d at 1433; see also Restatement § 145(2). Under Section 145, the “[c]ontacts to
be taken into account” in assessing the most significant relationship to such claims include:
“(a) the place where the injury occurred,
(b) the place where the conduct causing the injury occurred,
(c) the domicil, residence, nationality, place of incorporation and place of business
of the parties, and
(d) the place where the relationship, if any, between the parties is centered.”
Restatement § 145(2). As with Section 148 of the Restatement, the factors set forth in Section
145(2) are also reviewed in light of the principals stated in Section 6. Restatement § 145(1).
Restatement § 145(1).
179 F.R.D. 450, 469 (D.N.J. 1998). Because the issue is dispositive to this claim, the Court directs
Defendants to address it in their forthcoming motion to dismiss.
16
When Plaintiff’s tort claims are analyzed under Section 145(2), factor (a) weighs in favor
of applying New Jersey law, while factor (b) weighs in favor of applying Virginia law, and factors
(c) and (d) are neutral as to which state’s law to apply. As to the first factor, Defendants argue that
because ITC’s magnet sales are much higher in Virginia than in New Jersey, the primary place of
Plaintiff’s injury is Virginia. Defs.’ Mem. p. 13-14. Plaintiff counters that the locus of its injury is
New Jersey, where Plaintiff primarily conducts its business. Pl.’s Mem. in Supp. of Applying N.J.
Law. p. 14. While both ITC and Pet Gifts market their magnets throughout the United States, “[t]he
effect of the loss, which is pecuniary in its nature, will normally be felt most severely at the
[P]laintiff's headquarters or principal place of business,” New Jersey. Restatement § 145 cmt. f.
Thus, factor (a) weighs in favor applying New Jersey law.
Factor (b), the place where the conduct causing injury occurred, is less clear. Indeed,
although Defendants sold and shipped their products throughout the United States, the products
were manufactured in, and shipped from, Virginia. There is not a consensus on whether conduct
involving the distribution of goods to multiple states is located, under the meaning of Section 145,
at the place of manufacturing, or at the place where goods are shipped. See Fink, 365 N.J. Super.
at 587 (defendant camera manufacturer’s alleged conduct causing injury was found to be located
where third party retailers distributed the cameras and advertising brochures); but see Irby v.
Novartis Pharms. Corp., 2011 N.J. Super. LEXIS 3188, at *14 (Law Div. Nov. 18, 2011)
(defendant pharmaceutical manufacturer’s alleged conduct causing injury was found to be located
at defendant’s place of manufacturing, not place where drug was distributed). In the instant case,
I find that the conduct causing injury occurred primarily in Virginia, wherein Defendants
manufactured, packaged, and shipped their goods.
17
Furthermore, in evaluating claims where injury occurred in multiple states, factor (a) can
be given less weight than factor (b) if the location of injury is merely fortuitous and “defendant
had little or no reason to foresee that [its] act would result in injury in a particular state.”
Restatement § 145 cmt. e. Here, Defendants were aware, by virtue of their business relationship
with Plaintiff, that their alleged tortious acts against Plaintiff would result primarily in injury to
Plaintiff in New Jersey. Thus this balancing rule does not apply, and factor (a) should be given
weight equal to factor (b).
Factor (c), the place of business of the parties, is neutral because Plaintiff and Defendants
operate primarily in New Jersey and Virginia, respectively. Finally, factor (d), the place where the
relationship is centered, is also neutral, because the parties’ relationship is not centered on any one
particular state. While Ms. Kessler initially met Ms. Moss in Virginia, negotiations between the
parties generally occurred remotely, with Ms. Kessler in New Jersey and Ms. Moss in Virginia.
Additionally, the products manufactured in Virginia were predominantly shipped to New Jersey.
Althgouh one or two business meetings seem to have occurred between the parties in Virginia and
Plaintiff accepted delivery of magnets in Virginia on at least two occasions, this does not, as
Defendants argue, center the relationship in Virginia. See Defs.’ Mem. p. 14-15. Rather, these
incidents are exceptions to the parties’ regular pattern of conducting business between Virginia
and New Jersey.
Because the factors under Section 145 weigh equally in favor of applying New Jersey and
Virginia law, I must rely on the Section 6 factors to determine which state has the greatest interest
in Plaintiff’s tort claim. See Restatement § 145(1). The Section 6 analysis above with respect to
Plaintiff’s consumer fraud claims is similarly applicable to Plaintiff’s tort claims. See Clark, 2009
U.S. Dist. LEXIS 84093 at *51 (applying the same Section 6 analysis to fraud claim under Section
18
148 and breach of fiduciary duty claim under Section 145). First, to avoid frustrating the legislative
policy of the claimant’s own state, the interests of interstate comity favor applying the law of the
domiciliary state. Maniscalco, 709 F.3d at 209 (citing Fink, 365 N.J. Super. at 585) Second, as
above, the interests of the parties, are less important in the analysis of a tort or fraud claim.
Restatement § 145 cmt. b. Third, as with consumer fraud, the interests underlying the field of tort
law favor equally both compensating injured parties and deterring corporate misconduct. See
Maniscalco, 709 F.3d at 210. Fourth, again, “the interests of judicial administration must yield to
the interests of the other factors.” Id. (citing Fu, 160 N.J at 124). Finally, when addressing the
competing interests of the states, the court must consider “whether application of a competing
state's law under the circumstances of the case will advance the policies that the law was intended
to promote.” Fu, 160 N.J at 125. New Jersey and Virginia’s policies regarding the relevant tort
laws are similar to their policies regarding consumer fraud law in that these laws were also
designed to protect their residents from injury. It follows that, as with consumer fraud, New Jersey
would be more interested in protecting its own residents from tortious injury than Virginia would
be interested in protecting out-of-state residents from tortious injury. Thus, under Section 6, New
Jersey has a greater interest in the litigation of Plaintiff’s tort claims than Virginia.
Based on my analysis under both Section 145(2) and Section 6, the Court applies New
Jersey law to Plaintiff’s claims of conversion, breach of fiduciary duty, and common law trade
dress infringement. Therefore, since Plaintiff brought suit within six years its tort claims are not
time-barred.9
9
While the Court applies New Jersey’s statute of limitations, the Court does not comment upon
whether Plaintiff has met the pleading requirements of New Jersey law with respect to its tort
claims, or as discussed above, its NJCFA claim.
19
III.
Conclusion
The Court dismisses count three, Plaintiff’s breach of contract claim. Further, the Court
determines that New Jersey law applies to the remainder of Plaintiff’s claims. Defendants are
directed to re-file their motion to dismiss taking into account the application of New Jersey law to
the remainder of Plaintiff’s claims.
Date: October 2, 2015
/s/ Freda L. Wolfson
U.S. District Judge
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