Bristol Village, Inc. v. Louisiana-Pacific Corporation et al
Filing
37
DECISION AND ORDER CONSTRUING Plaintiff's untimely 24 Amended Complaint (Docket No. 24) as a request for leave to file the same, and GRANTING that request; DISMISSING as moot Defendant's 17 Amended Motion to Dismiss the Complaint; DISM ISSING Defendant ABT Building Products Corporation from this action; GRANTING in part and DENYING in part Defendant's 25 Motion to Dismiss the Amended Complaint. Signed by William M. Skretny, Chief Judge U.S.D.C. on 12/31/2012. (CLERK TO FOLLOW UP.) (MEAL)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
BRISTOL VILLAGE, INC., individually and on
behalf of a class of others similarly situated,
Plaintiff,
v.
DECISION AND ORDER
12-CV-263S
LOUISIANA-PACIFIC CORPORATION, and
ABT BUILDING PRODUCTS CORPORATION,
Defendants.
I. INTRODUCTION
Plaintiff Bristol Village, Inc. commenced this putative class action alleging, among
other things, that Defendant Louisiana-Pacific Corporation1 breached express and implied
warranties with respect to its TrimBoard product. Presently before this Court is Defendant’s
Motion to Dismiss all causes of action except Plaintiff’s breach of express warranty claim.
The Court has reviewed the submissions and finds oral argument unnecessary. For the
reasons that follow, Defendant’s motion is granted in part and denied in part.
II. BACKGROUND
Plaintiff is an assisted living facility located in Clarence Center, New York. (Am.
Compl. ¶ 9.) TrimBoard, a composite-wood trim product, was installed in Plaintiff’s facility
1
Plaintiff concedes that this Defendant is a wholly owned subsidiary of and indistinct from
Defendant Louisiana-Pacific Corporation, (See Pl’s Mem of Law in Opp’n at 2), therefore this decision will
refer to the Defendant in the singular.
1
in November 2003. (Id. ¶¶ 9, 26, 64-65.) TrimBoard is used:
as fascia, a trim band running horizontally and situated vertically under the
roof edge or forming the outer surface of a cornice; soffit, applied near the
roof line of a structure; corner board, which functions as trim on the corners
of a building; bandboard, which functions as a trim divider between floor
levels on the exterior of a wall; and window trim and door trim/casing.
Trim[B]oard is also marketed for use in other typical exterior applications.
(Id. ¶ 26.) Plaintiff alleges that Defendant marketed TrimBoard “as a low-cost wood trim
alternative that is actually superior to real wood trim.” (Id. ¶¶ 28-29.)
Defendant warranted TrimBoard “exclusive of finish, against delamination, checking,
splitting, cracking and chipping of the basic substrate for a period of ten years from the
date of installation under normal conditions of use and exposure,” and upon any failure
within that time period, Defendant would “compensate the owner for repair and
replacement of the affected trim no more than twice the original purchase price.” (Am.
Compl. Ex. A.) TrimBoard also came with a five-year warranty on its primer “against
peeling, blistering, or cracking” from the date of installation. (Id.) The warranty included the
following notice: “THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.” (Id. (emphasis in original))
Plaintiff commenced the instant action in this Court in 2012 against Defendant and
ABT Building Products Corporation, alleging that the TrimBoard on Plaintiff’s facility “is now
rotting, swelling, cracking, and peeling.” (Am. Compl. ¶ 67.)
In particular, the fascia trim on Plaintiff’s structure has exhibited significant
swelling at butted joints. The ends of boards in these types of installations
are site-cut, but are not ‘exposed’ such that they require sealing and priming
2
– a fact that should be stated in installation instructions, but was not stated
in Defendant’s installation instructions. All fascia installed on Plaintiff’s
structure with butted joints has exhibited swelling. Fascia installed on
Plaintiff’s structure at butted-joints is also delaminating.
(Id. ¶ 68.). Further, the TrimBoard installed around Plaintiff’s windows and as other trim
has also exhibited damage. (Id. ¶¶ 69-70.) Plaintiff alleges that, as a result of the defective
TrimBoard, the structure of Plaintiff’s facility sustained significant water damage and parts
thereof are rotting. (Id. ¶ 73.) Accordingly, Plaintiff asserted causes of action in its initial
Complaint for: (1) breach of express warranty; (2) breach of implied warranty of
merchantability; (3) negligence; (4) unjust enrichment; (5) violation of New York’s
Deceptive Trade Practices Law, General Business Law § 349 (a); (6) punitive damages;
and (7) declaratory and injunctive relief. (Compl. ¶¶ 84-140, Docket No. 1.)
In lieu of answering, Defendant moved to dismiss the Complaint in April 2012.
(Docket Nos. 12, 17 (motion and amended motion).) Plaintiff filed an Amended Complaint
on May 24, 2012. (Docket No. 24.) The Amended Complaint eliminates ABT Building
Products Corporation as a defendant, in recognition of the fact that this entity is a wholly
owned subsidiary of and indistinct from Defendant Louisiana-Pacific Corporation. (See Pl’s
Mem of Law in Opp’n at 2.) No separate cause of action for punitive damages appears in
the Amended Complaint, although Plaintiff still seeks such relief as a part of its requested
damages. Defendant therafter moved to dismiss all causes of action in the Amended
Complaint except for the breach of express warranty claim.2 (Docket No. 25.)
2
In support of its m otion, Defendant subm its the Attorney Affidavit of Brian P. Crosby, Esq., with
Exs. A-C, and a supporting Mem orandum of Law (Docket No. 25). Plaintiff responded with an opposing
Mem orandum of Law (Docket No. 29), and Defendant filed a reply m em orandum in further support of its
m otion (Docket No. 31).
3
III. DISCUSSION
In considering a motion to dismiss for failure to state a claim pursuant to Rule 12
(b)(6), a court must accept all factual allegations in the complaint as true and make all
reasonable inferences in a plaintiffs’ favor. ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493
F.3d 87, 98 (2d Cir. 2007). In order to survive such a motion, a complaint must “contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868
(2009), quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d
929 (2007); ATSI Commc’ns, Inc., 493 F.3d at 98. This assumption of truth applies only
to factual allegations and is inapplicable to legal conclusions. Iqbal, 556 U.S. at 678. “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.”
Iqbal, 556 U.S. at 678.
Further, where a plaintiff timely amends his complaint as a matter of course while
a motion to dismiss is pending, see Fed. R. Civ. P. 15 (a)(1)(B), a court may either deny
the motion as moot or consider it in light of the amended pleading. Roller Bearing Co. of
America, Inc. v. American Software, Inc., 570 F. Supp. 2d 376, 384 (D.Conn. 2008). Here,
however, Plaintiff’s Amended Complaint was filed more than 21 days after Defendant’s
Amended Motion to Dismiss was filed. Fed. R. Civ. P. 15 (a)(1)(B)(a party may file an
amended pleading as of right within 21 days after service of either a responsive pleading
or service of a motion under Rule 12 (b), (e), or (f)); see generally United States ex rel.
Mathews v. HealthSouth Corp., 332 F.3d 293, 296 (5th Cir. 2003)(“failure to obtain leave
results in an amended [pleading] having no legal effect”); Gaumont v. Warner Bros.
4
Pictures, 2 F.R.D. 45, 46 (S.D.N.Y. 1941)(same); but see Little v. Nat’l Broad. Co., Inc.,
210 F.Supp.2d 330, 372 (S.D.N.Y. 2002)(some courts have considered untimely amended
pleadings if leave would have been granted and in the absence of prejudice to any party).
Nonetheless, Defendant has also moved to dismiss this Amended Complaint and the
parties have fully briefed the issues raised therein. This Court will therefore construe
Plaintiff’s filing as a request for leave to file an Amended Complaint, and grant that request.
Defendant’s Amended Motion to Dismiss the Complaint is dismissed as moot. (Docket No.
17.) Accordingly, the Court will address the merits of Defendant’s Motion to Dismiss the
Amended Complaint. (See Docket No. 25.)
A.
Breach of Implied Warranty
Defendant contends that the second cause of action must be dismissed because:
(1) Plaintiff lacked privity with Defendant, a necessary element of a breach of implied
warranty claim; (2) any implied warranty was expressly disclaimed by Plaintiff; and (3) this
claim is barred by the statute of limitations.
Initially, Defendant is correct that, under New York law,3 “[a] claim based upon a
breach of an implied warranty requires a showing of privity between the manufacturer and
the plaintiff when there is no claim for personal injuries.” Adirondack Combustion Tech.,
Inc. v. Unicontrol, Inc., 17 A.D.3d 825, 827, 793 N.Y.S.2d 576, 579 (N.Y.A.D. 3d Dep’t.
2005) (citing Jaffee Assoc. v. Bilsco Auto Serv., 58 N.Y.2d 993, 995, 448 N.E.2d 792
(1983)); see Arthur Glick Leasing,Inc. v. William J. Petzold, Inc., 51 A.D.3d 1114, 1117,
858 N.Y.S.2d 405 (N.Y.A.D. 3d Dep’t 2008), lv denied 11 N.Y.3d 708 (2008) (remote
3
The parties do not dispute that New York law applies in this action where jurisdiction is based on
the Class Action Fairness Act (28 U.S.C. § 1332(d)(2)).
5
purchaser barred as a matter of law from claiming economic damages due to alleged
breach of implied warranties); Cereo v. Takigawa Kogyo Co., Ltd., 252 A.D.2d 963, 964,
676 N.Y.S.2d 364, 365-66 (N.Y.A.D. 4th Dep’t 1998) (privity not required in a personal
injury action for breach of express or implied warranty ) (citing U.C.C. § 2-318). Thus, to
the extent that Plaintiff contends that it is a third-party beneficiary to an implied warranty,
privity is required because Plaintiff’s Amended Complaint contains no allegation of
personal injuries. See U.C.C. § 2-318 (seller’s implied warranty extends to any natural
person reasonably expected to use, consume or be affected by goods who is personally
injured by the breach).
Plaintiff argues that it need not allege direct privity with Defendant because it was
a third-party beneficiary to “the sales contract between the installers of the Trimboard and
Defendant.” (Pl’s Mem of Law in Opp’n at 8.) A non-party may pursue contractual remedies
“only if it is an intended, and not a mere incidental, beneficiary . . . and even then, even if
not mentioned as a party to the contract, the parties' intent to benefit the third party must
be apparent from the face of the contract.” East Coast Athletic Club, Inc. v. Chicago Title
Ins. Co., 39 A.D.3d 461, 463, 833 N.Y.S.2d 585, 588 (N.Y.A.D. 2d Dep’t 2007) (internal
quotation marks omitted). Further:
Generally it has been held that the ordinary construction contract—i.e., one
which does not expressly state that the intention of the contracting parties is
to benefit a third party—does not give third parties who contract with the
promisee the right to enforce the latter's contract with another. Such third
parties are generally considered mere incidental beneficiaries.
Port Chester Elec. Const. Co. v. Atlas, 40 N.Y.2d 652, 655, 357 N.E.2d 983, 986 (1976);
Bd. of Mgrs. of the Riverview at College Point Condominium III v. Schorr Brothers Dev.
Corp., 182 A.D.2d 664, 665, 582 N.Y.S.2d 258 (N.Y.A.D. 2d Dep’t 1992). Here, the
6
Amended Complaint contains only a general reference to a non-specified sales contract;
indeed, it is unclear whether Plaintiff owned the subject structure at the time TrimBoard
was installed in 2003 or acquired it at a later time. (See Am. Compl. ¶ 65 (alleging that the
“TrimBoard on Plaintiff’s structure was installed in November 2003” with no allegation as
to when Plaintiff acquired or had the structure built).) Instead, the factual assertions in the
Amended Complaint imply, at best, the existence of an ordinary construction contract to
which Plaintiff was an incidental beneficiary. There is therefore insufficient factual matter
to state a claim that Plaintiff was a third-party beneficiary to a sales contract between
Defendant and the unnamed contractor who installed TrimBoard.
Similarly, although “an undisclosed principal may sue on a contract made in its
agent's name,” there is nothing alleged in the Amended Complaint from which to conclude
that, at the time the TrimBoard was purchased, Plaintiff had any control over or even any
affiliation with the general contractor purchaser. Aymes v. Gateway Demolition Inc., 30
A.D.3d 196, 196-97, 817 N.Y.S.2d 233, 234 (N.Y.A.D. 1st Dep’t 2006); see generally
Pensee Assoc. v. Quon Indus., 241 A.D.2d 354, 359, 660 N.Y.S.2d 563, 566-67 (N.Y.A.D.
1st Dep’t 1997) (agency relationship requires manifestation of one party’s willingness to
allow another to “act for it subject to the principal’s control and within the limits of the
authority thus conferred”); cf. Utica Observer Dispatch, Inc. v. Booth, 106 A.D.2d 863, 483
N.Y.S.2d 540 (N.Y.A.D. 4th Dep’t 1984) (privity found where evidence in the record
established contractor purchased product on behalf of owner). Accordingly, contrary to
Plaintiff’s assertion (Pl’s Mem in Opp’n at 10 n. 2), the Amended Complaint does not
sufficiently allege that the TrimBoard was purchased by a contractor acting as its agent.
Moreover, Defendant is also correct that, even if Plaintiff had stated a claim for
7
breach of implied warranty, it would be barred by the statute of limitations. The statute of
limitations for such a cause of action against a manufacturer or distributor is four years and
“accrues on the date the party charged tenders delivery of the product” N. Y. Cent. Mut.
Fire Ins. Co. v. Glider Oil Co., Inc., 90 A.D.3d 1638, 1640, 936 N.Y.S.2d 815, 819
(N.Y.A.D. 4th Dep’t 2011) (internal quotation marks omitted); see U.C.C. § 2-725 (1), (2);
Orlando v. Novurania of America, Inc., 162 F.Supp.2d 220, 223 (S.D.N.Y. 2001) (where
action involves the sale of goods, four year statute of limitations found in Uniform
Commercial Code applies instead of six year statute of limitations found in N.Y. C.P.L.R.
§ 213); Heller v. U.S. Suzuki Motor Corp., 64 N.Y.2d 407, 411, 477 N.E.2d 434 (1985) (a
cause of action against a manufacturer or distributor accrues on the date defendant
tenders delivery of the product, not on the date that some third party sells it to plaintiff).
In the instant case, the TrimBoard was necessarily tendered by Defendant in or prior to
November 2003, when Plaintiff asserts it was installed. (Am. Compl. ¶ 65.) Plaintiff did not
commence this action until 2012, therefore the breach of implied warranty claim is
untimely.
Plaintiff’s argument that Defendant is equitably estopped from pleading a statute of
limitations defense because of its alleged material misrepresentation regarding
TrimBoard’s inherent defects is without merit. (Pl’s Mem of Law in Opp’n at 16-18.) This
same misrepresentation underlies Plaintiff’s breach of express warranty and deceptive
trade practice claims. (Am. Compl. ¶¶ 86-91, 126-133.) “ ‘[E]quitable estoppel does not
apply where the misrepresentation or act of concealment underlying the estoppel claim is
the same act which forms the basis of [the] plaintiff's underlying substantive cause[s] of
action’ ” Robare v. Fortune Brands, Inc., 39 A.D.3d 1045, 1046, 833 N.Y.S.2d 753
8
(N.Y.A.D. 3d Dep’t 2007), lv denied 9 N.Y.3d 810 (2007) (quoting Kaufman v. Cohen, 307
A.D.2d 113, 122, 760 N.Y.S.2d 157, 167 (N.Y.A.D. 1st Dep’t 2003); see Kosowsky v.
Willard Mtn., Inc., 90 A.D.3d 1127, 1130-31, 934 N.Y.S.2d 545, 549 (3d Dep’t 2011)
(same).
In light of the above conclusions, this Court need not consider at this time whether
Defendant’s exclusion of implied warranties is unconscionable.
B.
Negligence
Defendant argues that Plaintiff’s third cause of action, for negligence, is barred by
New York’s economic loss doctrine, and therefore must also be dismissed. (Def’s Mem of
Law at 18-20.)
The economic loss doctrine provides that tort recovery in strict products
liability and negligence against a manufacturer is not available to a
downstream purchaser where the claimed losses flow from damage to the
property that is the subject of the contract, and personal injury is not alleged
or at issue. The rule is applicable to economic losses to the product itself as
well as consequential damages resulting from the defect.
Weiss v. Polymer Plastics Corp., 21 A.D.3d 1095, 1096, 802 N.Y.S.2d 174, 175 (N.Y.A.D.
2d Dep’t 2005) (internal citations omitted); see Bocre Leasing Corp. v. General Motors
Corp. (Allison Gas Turbine Div.), 84 N.Y.2d 685, 694, 645 N.E.2d 1195, 1194 (1995). “In
such cases the damaged party has lost part of its bargain and the parties are relegated to
the contractual remedies they negotiated, including warranties governing the rights and
obligations between manufacturers and suppliers of goods.” Syracuse Cablesystems, Inc.
v. Niagara Mohawk Power Co., 173 A.D.2d 138, 142, 578 N.Y.S.2d 770, 772 (N.Y.A.D. 4th
Dep’t 1991). In contrast, tort liability is “generally present” where personal injury and “other
property damage” is at issue. Bocre Leasing Corp., 84 N.Y.2d at 692.
9
A court determining whether the economic loss doctrine applies “should consider
the nature of the defect, the injury, the manner in which the injury occurred, and the
damages sought.” Hodgson, Russ, Andrews, Woods & Goodyear, LLP v. Isolatek Intern.
Corp., 300 A.D.2d 1051, 1052, 752 N.Y.S.2d 767, 769 (N.Y.A.D. 4th Dep’t 2002). Notably,
recovery for damage caused to a unit or system by a defective component has been
consistently barred by the economic loss rule, even where that defective component was
manufactured by a third party. See, e.g., Trump Intern. Hotel & Tower v. Carrier Corp., 524
F.Supp.2d 302, 309, 312 (S.D.N.Y. 2007) (recovery for damage to absorption chiller barred
by economic loss rule because chiller and allegedly defective safety switch were one
integrated unit); Bocre Leasing Corp., 84 N.Y.2d at 687, 693 (property damage caused by
defective jet engine to the helicopter itself and resulting lost profits constituted classic
contractual economic damages); Atlas Air, Inc. v. General Elec. Co., 16 A.D.3d 444, 445,
791 N.Y.S.2d 620, 621 (N.Y.A.D. 2d Dep’t 2005) (no recovery in tort for damage to entire
plane as a result of defendant’s defectively designed engine), lv denied 6 N.Y.3d 701
(2005). “Critical to a determination of whether a tort claim is barred by the economic loss
doctrine is whether damages are sought for the failure of the product to perform its
intended purpose, in which case recovery is barred by the economic loss doctrine, or for
direct and consequential damages caused by a defective and unsafe product.” Praxair, Inc.
v. General Insulation Co., 611 F. Supp. 2d 318, 326 (W.D.N.Y. 2009) (citing Hodgson,
Russ, Andrews, 300 A.D.2d at 1052-53).
Here, Plaintiff alleges that, in addition to the deterioration of the TrimBoard itself, the
defective nature of the product “attracts moisture to the structure and its interior. This
causes the structure, including the structure’s interior[,] to deteriorate.” (Am. Compl. ¶ 37.)
10
Further, “Trim[B]oard’s water absorption has also resulted in the growth of mold, mildew,
and fungi, as well as infestations by termites and other insects.” (Am. Compl. ¶ 36.) At
issue is whether the alleged damage to “the structure’s interior” is a consequential loss
flowing from the defective TrimBoard, recovery for which is barred by the economic loss
rule, or whether this constitutes damage to “other property,” for which recovery is
permissible.
New York courts have already held that, in cases involving the failure of exterior
building products to perform properly, the economic loss rule bars recovery for both the
direct loss of the product itself as well as the consequential damages to the underlying
structure. Weiss, 21 A.D.3d at 1096 (water damage to plywood substrate consequential
damage of failure of exterior synthetic stucco insulation system to protect home); Hemming
v. Certainteed Corp., 97 A.D.2d 976, 976, 468 N.Y.S.2d 789, 790 (N.Y.A.D. 4th Dep’t
1983) (damages for direct loss of defective shingles, sheathing and nails, as well as
consequential damage to home itself, barred by economic loss rule), appeal dismissed 61
NY2d 758 (1984). Here, although Plaintiff makes the conclusory assertion that “[i]t would
be a leap indeed to maintain that the interior of the house and a trim material are one
system,” (Pl’s Mem of Law in Opp’n), there is no supporting argument explaining how the
moisture damage to the interior is not a direct result of TrimBoard’s failure to appropriately
perform as part of the building’s protective exterior. Cf. Praxair, Inc., 611 F. Supp. 2d at
321, 327 (tort recovery permissible where plaintiff alleged insulation performed its intended
function of maintaining temperature, but nonetheless caused extensive damage to piping
system when chloride in the insulation combined with moisture and formed acid); Hodgson,
Russ, 300 A.D.2d at 1052-53 (tort recovery permissible where mold caused by fireproofing
11
insulation was the result of water, rather than fire, the hazard against which the product
was intended to protect). In the absence of any allegation that would distinguish Plaintiff’s
present claim from those in Weiss and Hemming, it is concluded that the damage claimed
relates to the expectations of the parties regarding the performance of TrimBoard, thus
relegating these plaintiffs to contractual remedies such as warranty. Hemming, 97 A.D.2d
at 976; C.f Syracuse Cablesystems, Inc., 173 A.D.2d at 142 (claims did not relate to
expectation of the parties where product performed as intended).
C.
Unjust Enrichment
Defendant contends that Plaintiff’s unjust enrichment claim must be dismissed
because: 1) the existence of a valid and enforceable contract, the express warranty,
precludes recovery in quasi-contract; and 2) the relationship between the parties is too
attenuated to support an unjust enrichment claim. (Def’s Mem of Law at 11-13.)
A claim for unjust enrichment requires a showing that the defendant was enriched
at the plaintiff’s expense, and it would be against equity and good conscience to permit the
defendant “to retain what is ought to be recovered.” Mandarin Trading Ltd. v. Wildenstein,
16 N.Y.3d 173, 182, 944 N.E.2d 1104 (2011) (internal quotation marks omitted); see
Paraount Film Distrib. Corp. v. State of N.Y., 30 N.Y.2d 415, 421, 285 N.E.2d 695 (1972).
Recovery under this quasi-contractual theory is precluded by the existence of a valid and
enforceable written contract governing the particular subject matter. Payday Advance Plus,
Inc. v. Fidnwhat.com, Inc., 478 F.Supp.2d 496, 504 (S.D.N.Y. 2007); Clark-Fitzpatrick, Inc.
v. Long Island R. Co., 70 N.Y.2d 382, 388, 516 N.E.2d 190 (1987).
Initially, Plaintiff is correct that unjust enrichment may be pleaded in the alternative
where there is a bona fide dispute whether a relevant contract exists or covers the dispute
12
at issue. See Goldman v. Simon Prop. Group, Inc., 58 A.D.3d 208, 220, 869 N.Y.S.2d
125, 135 (N.Y.A.D. 2d Dep’t 2008); (Pl’s Mem of Law in Opp’n at 19-20). Defendant,
however, has never disputed that an express warranty exists providing Plaintiff, as an
owner of TrimBoard, with a contractual remedy. (See Def’s Mem of Law at 1 (seeking
dismissal of all causes of action except the breach of express warranty claim); Def’s Reply
Mem of Law at 7, Docket No. 31.); Am. Compl. Ex. A (promising to compensate “the
owner” upon product’s failure within warranty period).) An unjust enrichment claim is
unavailable “where it simply duplicates, or replaces, a conventional contract or tort claim,”
and here there is no bona fide dispute about the existence of the express warranty, only
the validity of the limitation on the amount of recovery stated therein. Corsello v. Verizon
New York, Inc., 18 N.Y.3d 777, 790, 967 N.E.2d 1177 (2012) (“unjust enrichment is not a
catchall cause of action to be used when others fail”).
Moreover, under New York law, although privity is not required, an unjust enrichment
claim cannot be sustained if the relationship between the parties is too attenuated.
Mandarin Trading Ltd., 16 N.Y.3d at 182; Sperry v. Crompton Corp., 8 N.Y.3d 204,
215-16, 863 N.E.2d 1012 (2007). Plaintiff concedes that it was not a direct purchaser of
TrimBoard from Defendant. (Pl’s Mem of Law in Opp’n at 8 (arguing that it was a third-party
beneficiary to the “sales contract between the installers of the Trim[B]oard and
Defendant”).) A relationship is too attenuated where a plaintiff is an indirect purchaser of
an item as part of a larger product, and here Plaintiff acquired TrimBoard either as part of
its purchase of its structure or its contracting for construction services thereon. Sperry, 8
N.Y.3d at 216 (“connection between the purchaser of tires and the producers of chemicals
used in the rubber-making process is simply too attenuated to support” unjust enrichment
13
claim); State of N.Y. v. Daicel Chem. Indus., Ltd., 42 A.D.3d 301, 303, 840 N.Y.S.2d 8
(N.Y.A.D. 1st Dep’t 2007) (attenuated connection between manufacturer of food
preservatives and end users of commercially sold food products containing these
preservatives). The unjust enrichment claim is therefore dismissed.
D.
Deceptive Trade Practices, New York General Business Law § 349
Plaintiff alleges that Defendant violated New York General Business Law § 349 (a),
which makes unlawful “deceptive acts or practices in the conduct of any business, trade
or commerce,” by misrepresenting the quality of TrimBoard. (Am. Compl. ¶¶ 123-136.) “To
state a claim under § 349, a plaintiff must allege: (1) the act or practice was
consumer-oriented; (2) the act or practice was misleading in a material respect; and (3) the
plaintiff was injured as a result.” Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009);
Stutman v. Chemical Bank, 95 N.Y.2d 24, 29, 731 N.E.2d 608 (2000). Notably, of these
elements, Defendant challenges only whether Plaintiff sufficiently alleged that Defendant’s
conduct was consumer-oriented.
Contrary to Defendant’s argument, Plaintiff is not precluded from pursing a § 349
claim by the fact that it is a corporate entity. Oswego Laborers' Local 214 Pension Fund
v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 25, 647 N.E.2d 741, 744 (1995) (either
individuals or business entities may bring a claim pursuant to this section); Statler v. Dell,
Inc., 775 F. Supp. 2d 474, 484 (E.D.N.Y. 2011) (Section 349 does not preclude businesses
from acting as plaintiffs). Nor is the fact that Plaintiff does not allege that it purchased
TrimBoard directly from Defendant dispositive. “It is not necessary that the plaintiff be a
consumer or stand in the shoes of a consumer in order to bring a section 349 claim.” Int’l
Design Concepts, LLC v. Saks Inc., 486 F. Supp. 2d 229, 238 (S.D.N.Y. 2007) (citing
14
Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 264 (2d Cir. 1995)); City of N.Y.
v. Smokes-Spirits.Com , Inc., 12 N.Y.3d 616, 624 n. 3, 911 N.E.2d 834 (2009) (noting prior
holding that class of persons accorded standing under this section is not necessarily limited
to consumers). Although the attenuated relationship between Plaintiff and Defendant may
affect Plaintiff’s ability to establish that it was directly injured as a result of Defendant’s
alleged deceptive practices, Defendant’s arguments in the present motion focus on
consumer orientation. See Blue Cross and Blue Shield of N.J., Inc. v. Philip Morris USA
Inc., 3 N.Y.3d 200, 207, 818 N.E.2d 1140 (2004) (recovery precluded under § 349 for
indirect or derivative damages, i.e. where the loss arises solely as the result of injuries
sustained by another party); Gale v. Int’l Business Machines Corp., 9 A.D.3d 446, 447, 781
N.Y.S.2d 45, 47 (N.Y.A.D. 2d Dep’t 2004) (where plaintiff did not see any misleading
statements regarding defective product prior to purchase thereof, no connection between
deceptive act and plaintiff’s injury).
“The consumer oriented prong of the Section 349 claim requires a plaintiff to show
that the practices complained of have a ‘broad impact on consumers at large; private
contract disputes unique to the parties . . . would not fall within the ambit of the statute.”
Statler, 775 F. Supp. 2d at 483-84 (internal quotation marks omitted; citing New York Univ.
v. Continental Ins. Co., 87 N.Y.2d 308, 320, 662 N.E.2d 763 (1995)); see Oswego
Laborers' Local 214 Pension Fund, 85 N.Y.2d at 26-27. In light of the fact that this
requirement is construed liberally so that the statute can be broadly applied, New York v.
Feldman, 210 F. Supp. 2d 294, 301 (S.D.N.Y. 2002), Plaintiff has sufficiently alleged that
Defendant’s conduct was consumer oriented. Plaintiff states in its Amended Complaint
that Defendant advertised TrimBoard as being more durable and easier to use than real
15
wood and competing products, despite knowing that the product was unable to resist
moisture as intended, and distributed marketing materials that misled consumers into
believing that TrimBoard could be used in “typical exterior application in which lumber
would typically be used.” (Am. Compl. ¶¶ 28-32, 58-63, 126-131.) Notably, Plaintiff is not
required to identify specific individual consumers who were harmed by Defendant’s actions
in order to establish a violation of this section. North State Autobahn, Inc. v. Progressive
Ins. Group Co., -- A.D.3d --, 953 N.Y.S.2d 96, 102-03 (N.Y.A.D. 2d Dep’t 2012). Instead,
Plaintiff’s allegations are consumer-oriented “in the sense that they potentially affect
similarly situated consumers” and “were not unique to these two parties, nor were they
private in nature or a single shot transaction.” Oswego Laborers' Local 214 Pension Fund,
85 N.Y.2d at 26-27 (internal quotation marks omitted); see Statler, 775 F. Supp. 2d at 484
(allegations of widespread sales of defective product with a uniform pattern of deceptive
conduct sufficient to survive motion to dismiss).
Further, contrary to Defendant’s assertion, Plaintiff’s allegations do not establish that
TrimBoard was marketed only to developers and contractors rather than individual
homeowners. (Am. Compl. ¶ 3 (alleging that Defendant sold TrimBoard to owners as well
as contractors), ¶ 32 (representations made to induce contractors, builders, and
consumers to purchase TrimBoard), ¶ 33 (TrimBoard sold to homeowners).) Whether the
evidence will ultimately support these allegations is a question for another day. Cf.
Fibermark, Inc. v. Brownville Specialty Paper Prods., 419 F. Supp. 2d 225, 240 (N.D.N.Y.
2005) (judgment as a matter of law granted dismissing § 349 claim where there was
insufficient evidence that defendant sold to ‘consumers at large,’ meaning directly to the
end-users of the product).
16
E.
Plaintiff’s Separate Cause of Action for Declaratory and Injunctive Relief
Defendant correctly asserts, and Plaintiff does not dispute, that the sixth cause of
action for declaratory and injunctive relief is duplicative of Plaintiff’s other substantive
claims and that this nominal cause of action must be dismissed. Flaherty v. Filardi, 388 F.
Supp. 2d 274, 291 (S.D.N.Y. 2005). “Declaratory judgments and injunctions are remedies,
not causes of action.” Chiste v. Hotels.com L.P., 756 F. Supp. 2d 382, 406-07 (S.D.N.Y.
2010).
Defendant’s assertion that Plaintiff may not seek declaratory relief in this Rule 23
class action in light of the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes is,
however, without merit. 131 S. Ct. 2541, 2557, 180 L.Ed.2d 374 (2011). In Dukes, the
Court held that claims for backpay were improperly certified under Rule 23 (b)(2):
Rule 23(b)(2) allows class treatment when “the party opposing the class has
acted or refused to act on grounds that apply generally to the class, so that
final injunctive relief or corresponding declaratory relief is appropriate
respecting the class as a whole.” One possible reading of this provision is
that it applies only to requests for such injunctive or declaratory relief and
does not authorize the class certification of monetary claims at all. We need
not reach that broader question in this case, because we think that, at a
minimum, claims for individualized relief (like the backpay at issue here) do
not satisfy the Rule. The key to the (b)(2) class is “the indivisible nature of
the injunctive or declaratory remedy warranted—the notion that the conduct
is such that it can be enjoined or declared unlawful only as to all of the class
members or as to none of them.” In other words, Rule 23(b)(2) applies only
when a single injunction or declaratory judgment would provide relief to each
member of the class. It does not authorize class certification when each
individual class member would be entitled to a different injunction or
declaratory judgment against the defendant. Similarly, it does not
authorize class certification when each class member would be entitled
to an individualized award of monetary damages.
Dukes, 131 S. Ct. at 2557 (final emphasis added, internal citation omitted). Accordingly,
the Court held that claims for monetary relief cannot be certified under this provision where
17
the monetary relief is not merely incidental to the injunctive or declaratory relief. Id.
It has since been recognized that Dukes abrogates the approach to Rule 23(b)(2)
class certification previously used in this Circuit; i.e. that certification of a combination Rule
23 (b)(2) class is permitted so long as the individualized monetary relief does not
predominate over the requested injunctive relief. Stinson v. City of New York , 282 F.R.D.
360, 380 (S.D.N.Y. 2012); Jermyn v. Best Buy Stores, L.P., 276 F.R.D. 167, 173 (S.D.N.Y.
2011); U.S. v. City of N.Y., 276 F.R.D. 22, 31-33 (E.D.N.Y. 2011); see Robinson v. MetroNorth Commuter R.R. Co., 267 F.3d 147, 164 (2d Cir. 2001). The class in Dukes,
however, was certified only pursuant to Rule 23 (b)(2). Dukes, 131 S. Ct. at 2548-49; see
Jermyn, 276 F.R.D. at 173. In light of this, courts in this Circuit have since held that Dukes
does not preclude certifying a class under Rule 23 (b)(2) and separately certifying a class
under Rule 23 (b)(3) for non-trivial monetary damages. Jermyn, 276 F.R.D. at 173-74;
Stinson, 282 F.R.D. at 381; see Nationwide Life Ins. Co. v. Haddock, 460 Fed. Appx. 26,
29 (2d Cir. 2012) (remanding for consideration of class certification under Rule 23 (b)(3)
as well as (b)(2) where non-incidental, individualized monetary damages were sought
along with injunctive relief). In other words, Plaintiff may seek injunctive and declaratory
relief in addition to monetary damages so long as this Court “engages in the analysis
necessary under Rule 23(b)(2) and Rule 23(b)(3)” to certify both classes. Stinson, 282
F.R.D. at 381.
Here, Plaintiff’s Amended Complaint contains allegations in support of the minimal
requirements necessary to certify a class pursuant to Rule 23(b)(2), such as numerosity,
commonality, typicality, and adequacy of representation, (see Rule 23(a)), as well as
allegations in support of the “heightened requirements” of Rule 23 (b)(3), including
18
predominance and superiority. Blyden v. Mancusi, 186 F.3d 252, 269 (2d Cir. 1999). The
Court finds consideration of whether Plaintiff has, in fact, established that certification of
either class is warranted to be premature.4 (Def’s Mem of Law at 18-20.) “[A] decision
about certification need not be made at the outset; a court should delay a certification
ruling until information necessary to reach an informed decision is available.” Ruggles v.
Wellpoint, Inc., 253 F.R.D. 61, 66-67 (N.D.N.Y. 2008); see Winfield v. Citibank, N.A., 842
F. Supp. 2d 560, 573 (S.D.N.Y. 2012) (determinations regarding Rule 23 requirements are
often more properly deferred to the class certification stage). Indeed, “ ‘in making a
certification decision, a judge must look somewhere between the pleading[s] and the fruits
of discovery.... [E]nough must be laid bare to let the judge survey the factual scene on a
kind of sketchy relief map, leaving for later view the myriad of details that cover the terrain.’
” Philip Morris Inc. v. Nat’l Asbestos Workers Med. Fund, 214 F.3d 132, 135 (2d Cir. 2000)
(quoting Sirota v. Solitron Devices, Inc., 673 F.2d 566, 571-72 (2d Cir. 1982)).
F.
Punitive Damages
Defendant further contends that Plaintiff failed to plead sufficient facts to support an
inference that Defendant acted with the level of malice necessary to warrant the imposition
of punitive damages. (Def’s Mem of Law at 17-18.) Initially, in light of the above
conclusions, the remaining claims are for breach of express warranty and violation of
General Business Law § 349. See generally Kantrowitz v. Allstate Indem. Co., 48 A.D.3d
4
Notably, several courts have already rejected Defendant’s argum ent that the com m onality
requirem ent is defeated by the need to inquire into whether each putative plaintiff installed Trim Board
correctly. See Brunson v. Louisiana-Pacific Corp., 266 F.R.D. 112, 119 (D.S.C. 2010) (com m onality
requirem ent m et where, although som e individual issues exist, com m on issue of whether Trim Board is
defective “is dispositive and overshadows any other issues”); Thom as v. Louisiana-Pacific Corp., 246
F.R.D. 505, 516 (D.S.C. 2007)(noting that the plaintiff’s theory was that Trim Board is defective and
unsuitable even where installed correctly).
19
753, 754, 853 N.Y.S.2d 151 (N.Y.A.D. 2d Dep’t 2008) (a demand for punitive damages
does not constitute a separate cause of action). Section 349 expressly allows for the
recovery of limited punitive damages in connection with a successful claim.5 See N.Y.
General Business Law § 349 (h) (granting a court discretion to triple amount of damages
up to one-thousand dollars); Karlin v. IVF America, Inc., 93 N.Y.2d 282, 291, 712 N.E.2d
662 (1999) (remedies available pursuant to section 349 include compensatory damages,
limited punitive damages, and attorneys’ fees).
Further, punitive damages for the breach of contractual obligations, such as express
warranties, are generally unavailable unless necessary to vindicate a public right. TVT
Records v. Island Def Jam Music Group, 412 F.3d 82, 94 (2d Cir. 2005), cert denied, 548
U.S. 904 (2006); Carvel Corp. v. Noonan, 350 F.3d 6, 24 (2d Cir. 2003); see Mayline
Enters., Inc. v. Milea Truck Sales Corp., 641 F. Supp. 2d 304, 311, 313 (S.D.N.Y. 2009)
(the standard for applying punitive damages in a breach of warranty claim is the same
applied in a breach of contract claim). Punitive damages are recoverable in contract claims
where the breach involved particularly egregious fraud aimed at the public generally. TVT
Records, 412 F.3d at 94 (citing Rocanova v. Equitable Life Assurance Society of the U.S.,
83 N.Y.2d 603, 621, 634 N.E.2d 940 (1994)). To establish the right to such damages in
connection with the contractual claim, Plaintiff is required to show, among other things, that
Defendant’s conduct is actionable as an independent tort. New York Univ. v. Continental
Ins. Co., 87 N.Y.2d 308, 316, 662 N.E.2d 763 (1995). Plaintiff failed to state a claim of
5
Although N.Y. C.P.L.R. 901 (b) prohibits class action relief for a statutorily-im posed penalties or
m inim um dam ages, the Suprem e Court held in Shady Grove Orthopedic Assocs. v. Allstate Ins. Co. that
the certification requirem ents of Rule 23 preem pted this state law ‘procedural’ lim itation in federal actions.
130 S. Ct. 1431, 1438-40, 176 L.Ed.2d 311 (2010).
20
egregious tortious conduct; therefore any claim for punitive damages not authorized by
Section 349 must be dismissed. See Greenspan v. Allstate ins. Co., 937 F.Supp. 288, 295
(S.D.N.Y. 1996) (demand for punitive damages struck where plaintiffs had no remaining
tort claim); Flores-King v. Encompass Ins. Co., 29 A.D.3d 627, 818 N.Y.S.2d 221 (N.Y.A.D.
2d Dep’t 2006) (to state a claim for punitive damages for breach of an insurance contract,
complaint needed to first allege a claim of egregious tortious conduct directed at the
insured).
IV. CONCLUSION
For the reasons stated above, Defendant’s Motion to Dismiss the Amended
Complaint is granted in part and denied in part. Plaintiff’s second, third, and fourth causes
of action are dismissed for the failure to state a claim. Plaintiff’s nominal sixth cause of
action is dismissed because declaratory judgments and injunctions are remedies, not
causes of action. Finally, any claim for punitive damages not authorized by Section 349
is dismissed.
V. ORDERS
IT HEREBY IS ORDERED that Plaintiff’s untimely Amended Complaint (Docket No.
24) is construed as a request for leave to file the same, and that request is GRANTED;
FURTHER, that Defendant’s Amended Motion to Dismiss the Complaint (Docket No.
17) is DISMISSED as moot;
FURTHER, in light of the parties’ agreement, nominal Defendant ABT Building
21
Products Corporation is dismissed from the action;
FURTHER, that Defendant’s Motion to Dismiss the Amended Complaint (Docket No.
25) is GRANTED in part and DENIED in part in conformance with the above decision.
SO ORDERED.
Dated: December 31, 2012
Buffalo, New York
/s/William M. Skretny
WILLIAM M. SKRETNY
Chief Judge
United States District Judge
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