American & Efird LLC v. Pittsfield Plastics Engineering, Inc.

Filing 35

Amended ORDER re 29 Order on Motion to Dismiss, Order on Motion to Dismiss/Failure to State a Claim, Order on Memorandum and Recommendations. Signed by District Judge Max O. Cogburn, Jr on 11/8/2012. (blf)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:12cv194
AMERICAN & EFIRD LLC,

)
)
Plaintiff,
)
)
)
Vs.
)
)
PITTSFIELD PLASTICS ENGINEERING, )
INC.,
)
)
Defendant/Third
)
Party Plaintiff,
)
)
Vs.
)
)
METRO PLASTICS, INC.; SOLOMON
)
CAPITAL, LLC; and CSS INDUSTRIES,
)
INC.,
)
)
Third Party
)
Defendants.
)
)
______________________________
)

AMENDED
ORDER

THIS MATTER is before the court on review of a Memorandum and
Recommendation issued in this matter. In the Memorandum and Recommendation, the
magistrate judge advised the parties of the right to file objections within 14 days, all in
accordance with 28, United States Code, Section 636(b)(1)(c). Objections have been filed
within the time allowed by defendant/third party plaintiff Pittsfield Plastics Engineering, Inc.
Finding no error in the Memorandum and Recommendation, the court will overrule those
objections and affirm the recommendation of the magistrate judge.
I.
The Federal Magistrates Act of 1979, as amended, provides that “a district court shall
make a de novo determination of those portions of the report or specific proposed findings
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or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1); Camby v. Davis,
718 F.2d 198, 200 (4th Cir.1983). However, “when objections to strictly legal issues are
raised and no factual issues are challenged, de novo review of the record may be dispensed
with.” Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir.1982). Similarly, de novo review is not
required by the statute “when a party makes general or conclusory objections that do not
direct the court to a specific error in the magistrate judge’s proposed findings and
recommendations.” Id. Moreover, the statute does not on its face require any review at all
of issues that are not the subject of an objection. Thomas v. Arn, 474 U.S. 140, 149 (1985);
Camby v. Davis, 718 F.2d at 200. Nonetheless, a district judge is responsible for the final
determination and outcome of the case, and accordingly the court has conducted a careful
review of the magistrate judge’s recommendation.
II.
In this case, Honorable David S. Cayer, United States Magistrate Judge, determined
that regardless of whether Pennsylvania or North Carolina law were applied, the defendant’s
opportunity to inspect the product and actual knowledge of the defect stands in bar to any
claim for breach of implied warranties and that under state’s law, defendant’s allegations do
not support claims for strict liability or negligence. See M&R, p. 5 (citing Moore v.
Coachmen Indus., 129 N.C. App. 389, 402 (NC App. 1998) (no remedy in tort for defective
product where damage is economic); Azzarello v. Black Cros. Co., 480 Pa. 547, 553 (Pa.
1978) (strict liability will not apply unless product is “unreasonably dangerous”); N. C. Gen.
Stat. § 99B-1.1 (no strict liability in product liability actions)). Further, the magistrate judge
found that defendant brought its indemnification claim under N.C. Gen. Stat. § 25-2-312,
which relates to a breach of warranty of title, and because defendant did not allege that CSS
was not the owner of the pellets it sold, the breach of warranty of title fails. Based on such
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conclusions, the magistrate judge recommended that CSS’s Motion to Dismiss Amended
Third Party Complaint be granted and that the Amended Third Party Complaint be dismissed
with prejudice as to CSS under Rule 12(b)(6), Federal Rules of Civil Procedure.
III.
Defendant objects to such recommendation, arguing that the magistrate judge failed
to apply the law pled by it in its Third Party Complaint and Memorandum in Opposition to
CSS’s Motion to Dismiss. Defendant contends that when Massachusetts law is applied, it
states claims against CSS under which relief may be granted.
IV.
Defendant appears to argue that the magistrate judge was obligated to review the Rule
12(b)(6) motion under Massachusetts law as that was the law cited by defendant in its
Amended Third Party Complaint and responsive brief. While this court construes the factual
allegations of a complaint in a light most favorable to the party resisting a Rule 12(b)(6)
motion, such deference does not extend to a party’s choice of laws. As a federal court sitting
in diversity jurisdiction, this court must apply the law of the state in which it sits, including
the choice of law rules of the forum state. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487,
496 (1941).
The underlying facts of this dispute are not in question for purposes of the pending
motion. CSS in Berwick, Pennsylvania sold plastic scrap to Solomon Capital in Berwick,
Pennsylvania, which in turn sold plastic scrap to Metro Plastics of New Jersey. Metro
Plastics then sold the plastic scrap to defendant (located in Massachusetts), which then sold
the scrap to American & Efird in North Carolina. The scrap, in pellet form, allegedly failed
during American Efird’s manufacturing processes in North Carolina. It appears undisputed
that the last act in this transaction was American & Efird’s purchase and use of raw material
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in North Carolina, while the last act by

CSS was its

sale of scrap to Solomon in

Pennsylvania.
In objecting to the recommendation, defendant argues that Massachusetts law should
have been applied because they are located in Massachusetts, which is a result that it
contends would be directed by applying Tanglewood Land Co. v. Wood, 40 N.C. App. 133
(1979). In Tanglewood, the Court of Appeals applied the doctrine of Lex loci celebrationis
(a.k.a. Lex loci contractus) in finding that under the contract, Virginia law applied to a sale
of Virginia land. Id., at 136-37. The decision in Tanglewood, however, does not apply.
North Carolina’s Uniform Commercial Code (UCC) adopts an “appropriate relation”
analysis rather than Lex loci contractus. See N.C.Gen.Stat. § 25-1-105.

As the North

Carolina Supreme Court made clear subsequent to Tanglewood,
[t]he provisions of G.S. § 25-1-105 were intended to change the rigid conflict
of laws rules. The old rules must give way to the requirements of the Code. In
determining which jurisdiction's law is applicable to actions based on breach
of warranty, we no longer look only to where the contract was made or where
it was intended to be performed. Rather, we look to whether the transaction
bears an appropriate relation to the State.
We hold that although the mouth guard may have been purchased in
Massachusetts and manufactured in Canada, its use in the hockey game in
North Carolina wherein the plaintiff suffered his injuries is a "transaction
bearing an appropriate relation to this State" within the meaning of G.S. §
25-1-105 so that the law of this State governs the trial of his claims for breach
of warranties. The plaintiff did not suffer the damages from any breach of
warranty for which he seeks recovery until the hockey game in North Carolina.
We do not deem it an undue burden on the defendants Cooper that liability for
alleged damage caused by their product is governed by a place other than that
where it was manufactured or purchased. Defendants Cooper are corporations
conducting business on a multi-national scale and clearly should foresee the
use of their products in any state within this nation. Plaintiff suffered his injury
in this State and brought his action in its courts; the substantive as well as the
procedural laws of this State govern his claim.
Bernick v. Jurden, 306 N.C. 435, 442-443 (1982). Like the allegedly defective mouth guard
in Bernick that was manufactured in Canada and sold in Massachusetts, the ultimate damage

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occurred in North Carolina when American & Efird attempted to use the allegedly defective
plastic pellets. As a "transaction bearing an appropriate relation to this State" within the
meaning of G.S. § 25-1-105, the law of North Carolina governs the claims asserted by
defendant against CSS.

In any event, under the corresponding Massachusetts statute, §

2-316, “ Exclusion or Modification of Warranties,” the result recommended by the magistrate
judge would be the same: “(3) Notwithstanding subsection (2) (a) unless the circumstances
indicate otherwise, all implied warranties are excluded . . . (b) when the buyer before
entering into the contract has examined the goods or the sample or model as fully as he
desired or has refused to examine the goods there is no implied warranty with regard to
defects which an examination ought in the circumstances to have revealed to him ....” Under
the law of any state which has adopted the UCC, there simply is no warranty where there was
an opportunity to inspect. In its Answer, defendant affirmatively alleges that it was aware
that CSS’s product was recycled and that damage to plaintiff’s thread products would likely
occur as the kingspools would leach color. Document #7 at 4. As an affirmative defense,
defendant pled that it and plaintiff were aware that the kingspools they sold plaintiff were
“made of recycled polypropylene” and that they warned plaintiff of the risks associated with
using the recycled product. Id. Specifically, defendant alleges that “[d]espite [defendant’s]
recommendations and warnings to the contrary, Plaintiff elected to purchase kingspools from
[Defendant] which were made of recycled polypropylene material.” Id. Thus, under the
UCC, defendant cannot maintain a claim against CSS.
V.
After such careful review, the court determines that the recommendation of the
magistrate judge is fully consistent with and supported by current law. Further, the factual
background and recitation of issues is supported by the applicable pleadings. Based on such
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determinations, the court will fully affirm the Memorandum and Recommendation and grant
relief in accordance therewith.

ORDER
IT IS, THEREFORE, ORDERED that the Objections of defendant (#26) are
OVERRULED, the Memorandum and Recommendation (#25) is AFFIRMED, and Third
Party Defendant CSS Industries, Inc.’s Motion to Dismiss Amended Third Party Complaint
( #21) is GRANTED, and the Amended Third Party Complaint (#18) is DISMISSED as to
Third Party Defendant CSS Industries.

Signed: November 8, 2012

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