St. Gregory Cathedral School et al v. LG Electronics, Inc. et al

Filing 121

MEMORANDUM AND OPINION, and ORDER GRANTING Defendants motion to dismiss as to Plaintiffs unjust enrichment claim. Defendants Motion to Dismiss Plaintiffs Second Amended Complaint is GRANTED and Plaintiffs claims are DISMISSED WITHOUT PREJUDICE. ORDERED that if Plaintiffs seek to amend their complaint in light of this order, they shall move to do so by April 4, 2014. Signed by Judge Michael H. Schneider on 3/5/2015. (gsg)

United States District Court
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
ST. GREGORY CATHEDRAL
SCHOOL, ET AL.
v.
LG ELECTRONICS, INC., ET AL.

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Case No. 6:12-cv-739

MEMORANDUM ORDER AND OPINION
Currently before the Court is Defendants LG Electronics, Inc. and LG USA, Inc.’s
Motion to Dismiss Plaintiffs’ Second Amended Complaint (Doc. No. 61). In this class action
lawsuit, Plaintiffs assert federal and state law causes of action. The federal causes of action all
arise under RICO. The state causes of action are all brought under New Jersey law. Defendants
urge this Court to find no RICO enterprise exists and that either New Jersey law does not apply
or does not support Plaintiffs’ claims. After considering the parties’ arguments, the applicable
law, and the facts as pleaded, the Court is of the opinion Defendants’ motion should be
GRANTED.
Background 1
Defendant LG Electronics, Inc. (LG Korea) designs and manufactures heating,
ventilation, and air conditioning units (HVACs) in Korea, and then enlists its wholly owned
subsidiary, Defendant LG Electronics U.S.A., Inc. (LG USA), to market and sell those HVACs

1

All statements are taken from the allegations made in Plaintiffs’ Second Amended Complaint (Plaintiffs’
complaint) (Doc. No. 35).

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through licensed distributors in the United States. LG USA uses a wholly owned subsidiary, LG
Alabama, Inc. (LG AL), to provide service and support to purchasers. 2
Plaintiffs allege that LG Korea initiated a conspiracy to conceal defects common to all
LG HVACs manufactured and sold between 2007 and 2011. LG Korea first learned of defects in
its HVACs in 2007 after an internal report indicated 179 out of 2,911,639 units failed due an
issue with the thermistor. LG Korea also discovered issues with fan motors, PC boards, coils,
compressors, and source code across various HVAC product lines. LG Korea did not disclose
these issues to LG USA and LG AL until 2009.
During the time period relevant to this suit, LG USA provided uniform marketing
materials to its licensed distributors utilizing specifications LG Korea supplied. The marketing
materials for LG HVACs contained representations about the quality of the units, such as their
energy usage, noise level, fan speed, and durability. Plaintiffs allege that these representations
were uniformly false. In late 2010, LG USA directed its licensed distributors to account for and
“quarantine” certain models still in the distributors’ warehouses. LG USA directed the
distributors to not disclose the defects to customers already in possession of defective models.
LG Korea also provided customer service, technical support, and troubleshooting
information to LG AL. These materials did not disclose issues with LG HVACs, which
prevented warranty claims.
The Named Plaintiffs are four entities located in Texas and North Carolina that purchased
LG HVACs. Plaintiff St. Gregory Cathedral School (St. Gregory) is a private school in Tyler,
Texas that purchased twelve units from a licensed distributor. Plaintiffs ADK Quarter Moon,
LLC (ADK), Lexmi Hospitality, LLC (Lexmi), and Shri Balaji, LLC (Shri Balaji) are North
2

LG Korea is incorporated and headquartered in Korea, LG USA is incorporated under the laws of Delaware, but
has its principal place of business in New Jersey, and LG AL is both incorporated and headquartered in
Alabama.

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Carolina entities that own hotels and motels in North Carolina and bought units from licensed
distributors. The Named Plaintiffs purchased units from four different product lines over a threeyear period. They claim that their LG HVACs, and all other LG HVACs manufactured between
2007 and 2011, failed to perform as LG represented.
Legal Standard
Motions to dismiss under Rule 12(b)(6) for failure to state a claim “are viewed with
disfavor and are rarely granted.” Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 570 (5th
Cir. 2005); Lormand v. US Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009). The Court utilizes a
“two-pronged approach” in considering a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009). First, the Court identifies and excludes legal conclusions that “are not entitled to the
assumption of truth.” Id. Second, the Court considers the remaining “well-pleaded factual
allegations.” Id. The Court must accept as true all facts alleged in a plaintiff’s complaint, and the
Court views the facts in the light most favorable to a plaintiff. In re Katrina Canal Breaches
Litig., 495 F.3d 191, 205 (5th Cir. 2007). A plaintiff’s complaint survives a defendant’s Rule
12(b)(6) motion to dismiss if it includes facts sufficient “to raise a right to relief above the
speculative level.” Id. (quotations and citations omitted).

In other words, the Court must

consider whether a plaintiff has pleaded “enough facts to state a claim to relief that is plausible
on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
Discussion
A. RICO
Plaintiffs allege five violations of the Racketeer Influenced and Corrupt Organizations
Act, 18 U.S.C. § 1961, et seq. Four are brought under § 1962(c) of title 18, which prohibits a
person from conducting the affairs of an enterprise through a pattern of racketeering activity. See

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Whelan v. Winchester Prod. Co., 319 F.3d 225, 229 (5th Cir. 2003). The fifth is brought under
§ 1962(d) of title 18, which prohibits a person from conspiring to violate any other section of
§ 1962. Plaintiffs also allege similar violations of New Jersey’s RICO statutes.
Defendants contend that Plaintiffs’ first four RICO claims fail because they have not
alleged a RICO enterprise. Because they maintain that the first four claims fail, Defendants argue
that Plaintiffs’ § 1962(d) claim must, too, because no underlying RICO claim exists that could
support a conspiracy to violate RICO. Defendants also argue that Plaintiffs’ New Jersey RICO
claims fail for the same reason as the Federal RICO claims.
i. § 1962(c)
A RICO “‘enterprise’ includes any individual, partnership, corporation, association, or
other legal entity, and any union or group of individuals associated in fact although not a legal
entity.” 18 U.S.C. § 1961(4). A RICO enterprise must be distinct from the defendant serving as
the RICO person. Atkinson v. Anadarko Bank and Trust Co., 808 F.2d 438, 439 (5th Cir. 1987).
Under § 1962(c), no RICO enterprise exists where a subsidiary merely acts on behalf of, or to the
benefit of, its parent. Lorenz v. CSX Corp., 1 F.3d 1406, 1412 (3d Cir. 1993); accord ISystems v.
Spark Network Ltd., No. 10-10905, 2012 WL 3101672, at *4–5 (5th Cir. Mar. 21, 2012). Further,
no RICO enterprise exists where a corporation’s agents commit predicate acts in the conduct of
the corporation’s business. Elliott v. Foufas, 867 F.2d 877, 881 (5th Cir.1989). These general
rules control unless the use of subsidiaries or agents somehow allowed a corporation to carryout
the predicate acts in a way it could not have if it were vertically integrated. See Bucklew v.
Hawkins, Ash, Baptie & Co., LLP., 329 F.3d 923, 934 (7th Cir. 2003); Fitzgerald v. Chrysler
Corp., 116 F.3d 225, 227–28 (7th Cir. 1997).

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Plaintiffs’ complaint fails to set forth well pleaded facts that could establish how LG’s
use of subsidiaries and licensed distributors allowed it to accomplish its purported fraud.
Plaintiffs come closest to alleging sufficiently distinct roles between LG Korea, LG USA, LG
AL, and their licensed distributors with one allegation: LG Korea had more information about
the defects of various components in LG HVACs than any other entity at various points in time
and kept the downstream entities in the dark (¶¶ 25–33). Plaintiffs conclude that the asymmetry
in knowledge between the LG entities allowed varying combinations of entities to use the less
informed entities to cover up defects in LG HVACs (¶¶ 38–39, 42–43, 47–50).
But everything Plaintiffs allege could have taken place if LG operated as one company
that manufactured, sold, and serviced its HVACs. What is more, Plaintiffs do not allege any facts
that show how the asymmetrical knowledge of corporate entities and agents allowed LG to carry
out its fraud. Instead, Plaintiffs supply only a conclusion that the asymmetry in knowledge did
(Doc. No. 35 at ¶¶ 37, 46–47).
As alleged, neither LG’s entities nor its agents were exploited in such a way to trigger
RICO liability. Indulging all reasonable inferences, LG entities and licensed distributors carried
out their role in making, testing, marketing, selling, and servicing LG HVACs. For two years, the
marketing, selling, and servicing arms of LG’s operation relied on false information supplied by
the manufacturing arm even after that manufacturing arm discovered defects existed in the
HVACs. Once the manufacturing arm admitted the defects, it brought everyone in, and then
LG—collectively—attempted to staunch the fallout. In view of those allegations, “[w]hat
possible difference, from the standpoint of preventing the type of abuse for which RICO was
designed, can it make that [a manufacturer] sells its products to the consumer through [licensed]
dealers . . . or sells abroad through subsidiaries?” See id. at 227. The answer is that it does not

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because RICO is not aimed at punishing corporate structure. RICO is aimed at preventing
organized crime from infiltrating legitimate businesses. See United States v. Turkette, 452 U.S.
576, 593 (1981).
Culling a distinct RICO enterprise out of a corporate structure like LG’s requires more
than what Plaintiffs have alleged:
Just how much more is uncertain. But it is enough to decide this
case that where a large, reputable manufacturer deals with its
dealers and other agents in the ordinary way, so that their role in
the manufacturer's illegal acts is entirely incidental, differing not at
all from what it would be if these agents were the employees of a
totally integrated enterprise, the manufacturer plus its dealers and
other agents (or any subset of the members of the corporate family)
do not constitute an enterprise within the meaning of the statute.
See Fitzgerald, 116 F.3d at 228 (emphasis added).
Therefore, the Court GRANTS Defendants’ Motion to Dismiss with respect to Plaintiffs’
§ 1962(c) claims.
ii. § 1962(d)
Having determined that Plaintiffs failed to allege an independent violation of § 1962,
Plaintiffs cannot maintain a claim under § 1962(d). See Paul v. Aviva Life & Annuity Co., 3:09cv-1490-B, 2011 WL 2713649, at *4 (N.D. Tex. July 12, 2011), aff'd, 487 F. App’x 924 (5th Cir.
2012) (dismissing § 1962(d) claim after dismissing all other RICO claims for lack of RICO
enterprise).
Accordingly, the Court GRANTS Defendants’ Motion to Dismiss as to Plaintiffs’
§ 1962(d) claim.
iii. New Jersey RICO
Although Defendants contend that Plaintiffs’ New Jersey RICO claims should be
dismissed if the federal RICO claims fall, New Jersey law does not support Defendants’ position.
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Two intermediate New Jersey appellate courts have explicitly held that New Jersey’s RICO
statute does not require a distinct person and enterprise. See State v. Ball, 632 A.3d 1222, 1239
(N.J. Super. Ct. App. Div. 1993); Maxim Sewerage Corp v. Monmouth Ridings, 640 A.2d 1216,
1221 (N.J. Super Ct. Ch. Div. 1993). As Defendants’ note, the New Jersey Supreme Court later
declined to endorse one of those intermediate appellate court’s “very broad definition of
enterprise,” while noting that it would generally “heed federal legislative history and case law in
construing [New Jersey’s] statute.” State v. Ball, 661 A.2d 251, 258, 271 (N.J. 1995). But the
vast majority of courts construing New Jersey’s RICO statute conclude it imposes no
distinctiveness requirement. See, e.g., In re Refco Inc. Sec. Litig., 826 F. Supp. 2d 478, 532–33 &
n.47 (S.D. N.Y. 2011) (collecting cases). Thus, the RICO person and the RICO enterprise may
be one and the same under New Jersey law.
But an enterprise satisfies only one element of a viable RICO claim. With regards to the
Defendants’ predicate acts, Plaintiffs allege only that the LG enterprises engaged in mail and
wire fraud by transmitting marketing materials containing false representations. Each alleged
predicate act relies solely on a violation of federal law (Doc. No. 35 at ¶¶ 76–77, 130, 138, 145,
152, 158).
To plead mail fraud, Federal Rule of Civil Procedure 9(b) requires a plaintiff to state the
time, place, and content of the fraudulent mail and wire communications with particularity. See
Tel-Phonic Servs., Inc. v. TBS Int’l, Inc., 975 F.2d 1134, 1138–39 (5th Cir. 1992). Plaintiffs
contend they have done so by identifying several marketing statements disseminated over several
years that were fraudulent when made (Doc. No. 77 at 5–7, 22 & n.6).

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Plaintiffs claim that “[d]espite knowing of [ ] product defects since at least 2007, LG
Korea . . . supplied LG USA with product specifications and uniform advertising literature” that
were fraudulent (Doc. No. 35 at ¶ 37). But Plaintiffs’ factual allegations undercut their argument.
The defects Plaintiffs allege LG Korea knew of are defects in certain product lines
discovered in a piecemeal fashion over four years (Doc. No. 35 at ¶¶ 25–33). And according to
the technical service bulletins Plaintiffs rely on to bolster their claims, defects existed only on a
limited numbers of models within LG’s various product lines (Doc. Nos. 35-14, 35-15, 35-16,
35-17, 35-18, 35-19). The same technical service bulletins indicate that LG discovered the
existence of defects after those models were initially marketed. (Doc. Nos. 35 at ¶¶ 25–33, 3514, 35-15, 35-16, 35-17, 35-18, 35-19). Plaintiffs also allege that LG modified defective parts in
later models, conducted field tests, discovered, and diagnosed issues post hac (Doc. No. 35 at
¶¶ 26, 28, 30–31). Thus, instead of pleading mail fraud with particularity, Plaintiffs’ factual
allegations state with particularity that LG investigated its products, discovered issues after-thefact, and developed solutions to those problems. Those allegations are insufficient to plead mail
fraud. See Anctil v. Ally Fin., Inc., 2014 WL 587364 at *11–12 (S.D. N.Y. Feb. 10, 2014)
(holding mail fraud not pleaded with particularity because no allegations tended to indicate
defendants made statements with intent to defaud); cf. Durso v. Samsung Electronics Am., Inc.,
2:12-CV-05352, 2013 WL 5947005, at *10 (D. N.J. Nov. 6, 2013) (finding no basis for
consumer fraud claims under Rule 9(b) when no factual allegation suggested defendant knew of
defect before marketing product).
Finally, while Plaintiffs allege a fraud by omission theory, this Court declines to view
technical bulletins as evidence of fraudulent concealment. Alban v. BMW of N. Am., CIV. 09-

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5398, 2011 WL 900114, at *12 (D. N.J. Mar. 15, 2011). To do so would “discourage
manufacturers from responding to their customers in the first place.” Id.
Therefore, the Court GRANTS Defendants’ Motion to Dismiss Plaintiffs’ New Jersey
RICO claims.
B. State Law Claims
Plaintiffs allege four non-RICO state law causes of action against LG: (1) a violation of
the New Jersey Consumer Fraud Act (NJCFA), (2) breach of express warranty, (3) breach of
implied warranty, and (4) unjust enrichment. Each cause of action invokes New Jersey law (Doc.
No. 35 at 55–56). Plaintiffs’ complaint details which allegations justify applying New Jersey’s
substantive law (Doc. No. 35 ¶¶ 119–123).
Defendants challenge the application of New Jersey law to Plaintiffs’ consumer fraud and
express warranty claims. Defendants do not demonstrate a conflict between Texas, North
Carolina, and New Jersey law regarding unjust enrichment and implied warranty. Instead,
Defendants challenge the substance of those claims. Plaintiffs argue that the Court should not
engage in a choice-of-law analysis at the motion to dismiss stage and defend the adequacy of
their state law claims as pleaded.
i. Choice of Law
Initially, the Court notes that it may properly conduct a choice-of-law analysis at the
pleading stage. See Yelton v. PHI, Inc., 669 F.3d 577, 584–85 (5th Cir. 2012); Cooper v.
Samsung Elec. Am., Inc., 374 F. App’x 250, 255 n.5 (3rd Cir. 2010).
A federal court sitting in diversity applies the choice of law rules of the state in which it
sits. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496–97 (1941). As this Court sits in
Texas, it is obligated to apply Texas choice of law rules. Burleson v. Liggett Grp., Inc., 111 F.

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Supp. 2d 825, 828 (E.D. Tex. 2000). Texas courts first determine whether the potentially
applicable laws conflict. Spence v. Glock, Ges.m.b.H., 227 F.3d 308, 311 (5th Cir. 2000). When
a conflict exists, Texas courts use the “most significant relationship test” of Restatement
(Second) of Conflict of Laws (the Restatement) to resolve the conflict. See id. The Restatement
sets out both general principals and claim-specific factors to consider. See Hughes Wood Prods.,
Inc. v. Wanger, 18 S.W.3d 202, 205 (Tex. 2000). Texas courts look to § 148 of the Restatement
for consumer fraud claims and to § 188 of the Restatement for contract-based claims. See
Scottsdale Ins. Co. v. Nat’l Emergency Servs., Inc., 175 S.W.3d 284, 293–96 (Tex. App.—
Houston [1st Dist.] 2004, pet. denied)
a. Consumer Fraud Claims
Plaintiffs take no position regarding whether New Jersey, North Carolina, and Texas’s
law conflict (Doc. No. 77 at 33–35). But Texas courts conclude that the consumer protection
statues of the various states conflict. See Tracker Marine, L.P. v. Ogle, 108 S.W.3d 349, 354–55
& n.44 (Tex. App.—Houston [14th Dist.] 2003, no pet.) (citing BMW of N. Am., Inc. v. Gore,
517 U.S. 559, 568–69 (1995); In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1017 (7th
Cir.2002)). Thus, the Court finds that the substantive laws proposed by the parties conflict.
Plaintiffs allege that LG Korea and LG USA made their false statements about LG
HVACs from their respective principal places of businesses, Korea and New Jersey (Doc. No. 35
at ¶¶ 1–4, 37, 51–52, 119, 168–73). Accordingly, the Court looks to the six factor test provided
in § 148(2), which applies when fraudulent statements are made, received, and relied in on
different forums:
(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,
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(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 (Second) of Conflicts § 148(2) (1971).
The Court finds that the Named Plaintiffs’ home states possess a stronger connection to
the consumer fraud claims than New Jersey. Plaintiffs allege that the Named Plaintiffs acted in
reliance on the misrepresentations, received the misrepresentations, do business, possess the
HVACs, and rendered performance under their contracts in Texas and North Carolina. (Doc. No.
35 ¶¶ 1–4, 51 n.14). LG USA does business in New Jersey and disseminated LG’s marketing
materials from New Jersey (Doc. No. 35 at ¶¶ 6, 119, 168–73). LG Korea does business in Korea
and transmitted the information incorporated into LG’s marketing materials from Korea. (Doc.
No. 35 at ¶¶ 6, 37, 51–52, 119, 168–73). Thus, as a matter of wrote application, the factors weigh
in favor of the Named Plaintiffs’ home states.
Applying the appropriate weight to each factor gives Texas and North Carolina an even
greater advantage. First, comment g. to § 148 of the Restatement indicates that the state where
the plaintiff relied on the defendant’s representations (Texas and North Carolina) is of greater
importance than where the defendant made them. See Tracker, 108 S.W.3d at 356. Then
comment j. indicates that when any two factors (other than the defendant’s residence and place
where the defendant made the representations) occur in one state, that state “will usually be the
state of applicable law.” See id. As pleaded by the Plaintiffs, four factors implicate Texas and
North Carolina (Doc. No. 35 ¶¶ 1–4, 51 n.14). Finally, comment h. undercuts New Jersey’s
significance by lessening the importance of the place where the defendant made the

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representation when more than one forum is implicated, which it is here (Doc. No. 35 at ¶¶ 5–6,
37, 51–52, 119, 168–73). See Restatement (Second) of Conflict of Laws § 148 cmt. h. Thus, the
Court finds that the Plaintiffs have failed to plead facts that if true give rise to a plausible
inference that New Jersey’s substantive law governs the consumer law claims.
Therefore, it GRANTS Defendant’s motion to dismiss as to the NJCFA claims.
b. Express Warranty
Plaintiffs take no position regarding whether New Jersey, North Carolina, and Texas’s
law conflict (Doc. No. 77 at 33–35). But Texas courts recognize that the Uniform Commercial
Code’s express warranty provisions—as adopted by the states—are not uniform. See Compaq
Comps. v. Lampray, 135 S.W.3d 657, 673–80 (Tex. 2004). Accordingly, the Court finds that the
substantive laws proposed by the parties conflict.
In resolving conflicts for express warranty claims, Texas courts look to § 188 of the
Restatement, which provides the following factors:
(a)
(b)
(c)
(d)
(e)

the place of contracting,
the place of negotiation of the contract,
the place of performance,
the location of the subject matter of the contract, and
the domicil, residence, nationality, place of incorporation and
place of business of the parties.

Restatement (Second) of Conflict of Laws § 188.
The Court finds that these factors overwhelmingly favor the application of Texas and
North Carolina law to Named Plaintiffs’ express warranty claims. Texas and North Carolina
serve as the place of contracting, negotiation, performance, and location of the HVACs (Doc.
No. 35 ¶¶ 1–4). New Jersey is only implicated by the fifth factor (the location of the parties), as
are Texas, North Carolina, and Korea (Doc. No. 35 ¶¶ 1–6). Thus, the Court finds that on the

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basis of the facts as pleaded by Plaintiffs, Texas and North Carolina’s substantive law governs
the Named Plaintiffs’ express warranty claims. See Compaq, 135 S.W.3d at 680–81.
Therefore, the Court GRANTS Defendants’ motion to dismiss as to these claims. 3
ii. Implied Warranty
Defendants argue that no implied warranty claim may lie because LG affirmatively
disclaimed implied warranties (Doc. Nos. 61 at 28–29, 61-1, 61-2, 62-3, 62-4). Plaintiffs respond
that the disclaimer is not controlling because LG acted unconscionably in crafting the limited
warranty while knowing about the defects in their HVAC lines.
New Jersey generally enforces the disclaimer of implied warranties, provided that
disclaimer is conspicuous and enforcing the disclaimer would not be unconscionable. See
Stiogum Holdings, Inc. v. Ropes, 800 A.2d 915, 921 (N.J. Super. Ct. Ch. Div. 2002); N.J.S.A.
§ 12A:2–316. Plaintiffs do not dispute that the disclaimer was conspicuous (Doc. No. 77 at 31–
32). Instead, Plaintiffs argue that enforcing the disclaimer is unconscionable (Doc. No. 77 at 32).
New Jersey courts look to two factors to determine whether a contractual provision is
unconscionable “(1) unfairness in the formation of the contract, or procedural unconscionability,
and (2) excessively disproportionate terms, or substantive unconscionability.” See Payne v.
Fujifilm U.S.A., Inc., Civil Action No. 07-385, 2007 WL 459128, at *4 (D. N.J. Dec. 28, 2007).
To begin with, the Court notes that Plaintiffs make no specific allegations regarding
either unconscionability factor. But Plaintiffs argue that LG concealed defects, implicating the
fairness of their contract’s formation. The facts Plaintiffs allege belie their argument.

3

The Court notes that the Limited Warranty as to LG’s Multi-V VRF System appears to contain a choice of law
clause provision (Doc. No. 61-2 at 3 (“The laws of the State of Georgia govern this Limited Warranty and all of
its terms and conditions, without giving effect to any principles of conflict of laws.”)). Neither party addressed
the impact this provision has on Plaintiffs’ claims.

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As noted above, Plaintiffs allege that LG learned about defects on certain product lines in
a piecemeal fashion over a period of four years (Doc. No. 35 at ¶¶ 25–33, 208). That knowledge
pertained to a limited numbers of models within LG’s various product lines (Doc. Nos. 35-14,
35-15, 35-16, 35-17, 35-18, 35-19). Of the models Plaintiffs allege were defective with anything
more than conclusory allegations, none appear to be the models the Named Plaintiffs purchased
(Doc. Nos. 35 at ¶¶ 1–4, 25–33, 35-14, 35-15, 35-16, 35-17, 35-18, 35-19). 4 Thus, Plaintiffs’
allegations do not provide a plausible inference that LG sold any models with knowledge of
existing defects.
Also as noted above, this Court declines to view technical bulletins as evidence of
fraudulent concealment. Alban, 2011 WL 900114, at *12.
Accordingly, the Court finds that Plaintiffs failed to adequately plead facts that if true
give rise to a plausible inference of unconscionability, and thus, there is no basis to set aside
LG’s disclaimer of implied warranties. Therefore, the Court GRANTS Defendants’ motion to
dismiss as to Plaintiffs’ breach of implied warranty claim.
iii. Unjust Enrichment
Defendants move to dismiss Plaintiffs’ unjust enrichment claims for lack of privity. New
Jersey “requires a ‘direct relationship’ between the parties or a mistake on the part of the party
conferring the benefit.” See Alin v. Am. Honda Motor Co., Civil Action No. 08-4825, 2010 WL
1372308, at *14–15 (D. N.J. Mar. 31, 2010).
Plaintiffs failed to plead facts that support their claim for unjust enrichment because they
do not allege privity with LG. According to Plaintiffs complaint, the Named Plaintiffs purchased
their LG HVACs from licensed distributors—not LG (Doc. No. 35 at ¶¶ 1–4). Purchases made
from someone other than the defendant do not give rise to a claim for unjust enrichment under
4

Plaintiffs listed some of model numbers specifically and others only by product line (Doc. No. 35 at ¶¶ 1–4).

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New Jersey law. See, e.g., Henderson v. Volvo Cars of N. Am., LLC, Civil Action No. 09-4146,
2010 WL 2925913, *10-11 (D. N.J. July 21, 2010).
Therefore, the Court GRANTS Defendants’ motion to dismiss as to Plaintiff’s unjust
enrichment claim.
Conclusion
.

For the reasons discussed more thoroughly above, Defendants’ Motion to Dismiss

Plaintiffs’ Second Amended Complaint is GRANTED and Plaintiffs’ claims are DISMISSED
WITHOUT PREJUDICE.
It is further ORDERED that if Plaintiffs seek to amend their complaint in light of this
order, they shall move to do so by April 4, 2014.
It is SO ORDERED.
SIGNED this 5th day of March, 2014.

____________________________________
MICHAEL H. SCHNEIDER
UNITED STATES DISTRICT JUDGE

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