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Arcand v. Brother International Corp.

November 30, 2009

DIANA ARCAND AND THOMAS SHOOSMITH, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
BROTHER INTERNATIONAL CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Wolfson, United States District Judge

FOR PUBLICATION

OPINION

Presently before the Court are two motions filed by Defendant Brother International Corporation ("BIC"): (1) a motion to dismiss all claims pursuant to Fed. R. Civ. P. 12(b)(6), and (2) a motion to strike nationwide class allegations pursuant to Fed. R. Civ. P. 12(f). In their First Amended Complaint ("Complaint"), Plaintiffs Diana Arcand ("Arcand") and Thomas Shoosmith ("Shoosmith"), individually, and on behalf of a putative class of consumers (collectively "Plaintiffs"), who purchased Brother-brand laser printers and toner cartridges, assert claims against BIC for: (1) fraudulent concealment; (2) violations of the New Jersey Consumer Fraud Act ("NJCFA"); (3) trespass to chattels; and (4) conversion. Plaintiffs claim that they were injured by BIC each time they had to prematurely buy new toner cartridges for their laser printers when the printers falsely indicated the toner cartridge needed to be replaced notwithstanding the fact that usable toner remained in the cartridge. For the reasons that follow, the Court finds that Plaintiffs' NJCFA claim must be dismissed because Plaintiffs fail to allege that they suffered an ascertainable loss due to BIC's unlawful conduct. The Court also dismisses Plaintiffs' fraudulent concealment claim. These claims are dismissed without prejudice, with a right to re-plead. Additionally, the Court dismisses with prejudice Plaintiffs' trespass to chattels and conversion claims.

I. Statement of Facts and Procedural History

The following version of events assumes Plaintiffs' allegations in the Complaint to be true because BIC moves pursuant to Fed. Civ. R. P. 12(b)(6) and (f). Defendant BIC, a Delaware corporation headquartered in Bridgewater, New Jersey, is a subsidiary of Brother Industries LTD ("BIL") and the authorized distributer and provider of customer support for Brother-brand laser printers and toner cartridges sold within the United States. Compl. ¶ 6. Arcand, a Virginia resident, purchased a Brother HL-2040 laser printer and replacement Brother toner cartridges in Virginia. Id. ¶ 4. Shoosmith, a New Jersey resident, purchased a Brother HL-2070 laser printer and replacement Brother toner cartridges in New Jersey. Id. ¶ 5. Both printers, as indicated in the user manual, denote a maximum page yield: "replacement toner cartridges print up to 2,500 A4 or Letter-size single-sided pages at 5% coverage." Supplemental Certification of Michael R. McDonald, ("Supp. McDonald Certif."), Ex. E, User Manual p.5-2.*fn1

Brother-brand printers notify the user when the toner reaches a certain level. Compl. ¶ 17. In this case, both Arcand's and Shoosmith's laser printers display a yellow LED light and a "Toner Life End" message when the toner reaches this level. Id. ¶¶ 17-18. According to the service manuals for the models owned by Arcand and Shoosmith,*fn2 the toner cartridge is considered to be at life end when approximately forty-four grams of toner are remaining in the cartridge. Id. ¶ 36. A new cartridge contains approximately 100 grams of toner. Id. Notwithstanding the fact that some toner remains in the cartridge, the user manual explains that this light and message indicate that the printer has run out of toner. Id. ¶ 17. The user manual also "strongly recommend[s]" that users not refill toner cartridges or purchase any toner cartridges other than "Genuine Brother Brand." Id. ¶ 15. The LED light and message indicating the end of toner life not only act as a warning but preclude the user from printing until the "empty" toner cartridge is replaced. Id. ¶¶ 26, 32. According to Arcand and Shoosmith, they were unaware when they purchased the printer of this "forced shut-down mechanism," which causes the LED light to illuminate and to display an empty message when there is what Plaintiffs consider to be "a large amount of usable toner" remaining, thereby preventing them from using all the toner in the cartridges. Id. ¶¶ 2, 28, 34.

B. Procedural History

Plaintiffs initiated this putative class action on October 17, 2007. A motion to dismiss, or in the alternative, to stay the proceeding pending resolution of a similar action in California, was filed by BIC on January 4, 2008, and was subsequently denied by this Court on August 27, 2008. BIC again filed a motion to stay the proceedings, this time due to another action in California that was pending class certification, on September 19, 2008. On January 30, 2009, this Court again denied BIC's motion to stay the proceedings. On February 9, 2009, BIC filed a motion to dismiss Plaintiffs' Complaint and strike nationwide class allegations. This Court later terminated the motion, however, because Plaintiffs filed their first amended complaint on February 27, 2009. In response, BIC filed a motion to dismiss Plaintiffs' amended complaint and strike nationwide class allegations on March 16, 2009. After a recent decision in this District, in a case factually analogous to the one at bar, Knox v. Samsung Electronics America, Inc., No. 08-cv-4308 (D.N.J. July 2009), the Court provided both parties the opportunity to submit a sur-reply brief in support of their respective positions.

II. Discussion

A. Standard of Review

When reviewing a motion to dismiss on the pleadings, courts "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citation and quotations omitted). In Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court clarified the 12(b)(6) standard. Specifically, the Court "retired" the language contained in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. at 1968 (quoting Conley, 355 U.S. at 45-46). Instead, the factual allegations set forth in a complaint "must be enough to raise a right to relief above the speculative level." Id. at 1965. As the Third Circuit has stated, "[t]he Supreme Court's Twombly formulation of the pleading standard can be summed up thus: 'stating. a claim requires a complaint with enough factual matter (taken as true) to suggest' the required element. This 'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." Phillips, 515 F.3d at 234 (quoting Twombly, 127 S.Ct. at 1965).

In affirming that Twombly standards apply to all motions to dismiss, the Supreme Court recently explained the principles. "First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009); Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). "Second, only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 1950. Therefore, "a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. Ultimately, "a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts." Fowler, 578 F.3d at 211.

Before reaching the merits of Plaintiffs' claims, there is a threshold procedural question as to what, if any, documents and exhibits may be considered on this Motion pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiffs supply this Court with several exhibits, including (1) a response by BIC to an Order to Show Cause in the matter of Kandel v. Brother International Corporation, No. 08-1040 ("Kandel"), a case currently pending in the Central District of California (Kaplan Decl. ¶ 2; Ex. A); (2) a letter from BIC's counsel to the plaintiff's counsel in Kandel titled Responding to Consumer Legal Remedies Act Demand Letter (Kaplan Decl. ¶ 3; Ex. B); (3) selected pages from the service manual for Brother-brand printers model numbers HL-2030/2040/2070N (Kaplan Decl. ¶ 4; Ex. C); (4) a survey of user manuals, compiled by Plaintiffs' counsel, listing printer model numbers, control panel messages and explanations purportedly found in the user guides (Kaplan Decl. ¶ 5; Ex. D); (5) selected excerpts from the user manual for Arcand's printer (model HL-2040) and Shoosmith's printer (model HL-2070) (Kaplan Decl. ¶ 6; Ex. E); and (5) an article from an online web magazine detailing one user's frustration with the shutdown mechanism equipped on Brother-branded printers (Kaplan Decl. ¶ 7; Ex. F);.

BIC objects to Plaintiffs' introduction of the foregoing materials in this Motion to Dismiss, yet likewise attaches several documents as exhibits to its Motion, including: (1) an Opinion by the Central District of California in the Kandel matter (McDonald Decl. ¶ 3; Ex. B); (2) class action complaints in Lipper v. Brother International Corporation, No. CV08-06126 ("Lipper"), a case currently pending in the Central District of California, and the Kandel matter (McDonald Decl. ¶¶ 4-5; Ex. C, Ex. D); (3) selected excerpts from the user manual for Arcand's printer (model HL-2040) and Shoosmith's printer (model HL-2070) (McDonald Supplemental Decl. ¶ 3; Ex. E); and (4) deposition testimony taken in the case of Maniscalco v. Brother International Corporation, No. 06-04907 ("Maniscalco"), a case pending before this Court (McDonald Decl. ¶4; Ex. F). While Plaintiffs do not likewise dispute the inclusion of Defendant's exhibits in consideration of this Motion to Dismiss, the Court will nevertheless consider which of the proposed exhibits may be properly considered.

Generally, when ruling on a motion to dismiss, a court may not consider matters outside the pleadings. However, a court may consider documents that are "integral to or explicitly relied upon in the complaint" without converting a motion to dismiss into a motion for summary judgment. In re Rockefeller Ctr. Props., Inc. Sec. Litig., 184 F.3d 280, 287 (3d Cir.1999) (emphasis and citations omitted). Indeed, "a court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document. Otherwise, a plaintiff with a legally deficient claim could survive a motion to dismiss simply by failing to attach a dispositive document on which it relied." Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (citations omitted). Consideration of these referenced documents will not require the conversion of a motion to dismiss to one for summary judgment under Fed. R. Civ. P. 12(b)(6). "When a complaint relies on a document... the plaintiff obviously is on notice of the contents of the document, and the need for a chance to refute evidence is greatly diminished." Id. at 1196-97. Even if a "[c]omplaint does not explicitly refer to or cite [a document]... the critical [issue] is whether the claims in the complaint are 'based' on an extrinsic document and not merely whether the extrinsic document was explicitly cited." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (emphasis in original) (citations omitted).

Additionally, public documents and prior judicial proceedings may be considered in deciding a motion to dismiss. See Southern Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group, Ltd., 181 F.3d 410, 426 (3d Cir. 1999); Angstadt v. Midd-West Sch. Dist., 377 F.3d 338, 342 (3d Cir. 2004). see also Herring v. United States, No. 03-5500, 2004 WL 2040272, at *7 (E.D.Pa. Sept.10, 2004), aff'd, 424 F.3d 384 (3d Cir. 2005). Indeed, on a motion to dismiss: a court may properly look at public records, including judicial proceedings, in addition to the allegations in the complaint.... Specifically, on a motion to dismiss, we may take judicial notice of another court's opinion-not for the truth of the facts recited therein, but for the existence of the opinion, which is not subject to reasonable dispute over its authenticity.

Southern Cross Overseas Agencies, 181 F.3d at 426-27 (citations omitted).

Under the foregoing legal standard, it is clear that this Court may consider the attached excerpts from the BIC user manual (McDonald Supplemental Decl. ¶ 3; Ex. E; Kaplan Decl. ¶ 6; Ex. E) and the BIC service manual (Kaplan Decl. ¶ 4; Ex. C). Indeed, not only do Plaintiffs expressly reference both the user and service manuals in the Complaint by directly quoting selected language in support of their claims, the language and information quoted from both manuals concern the "Toner Life End" Message and precise weight measurements of the toner cartridges after the toner has reached its life end, which in conjunction with the printer shutdown mechanism, are at the crux of Plaintiffs' claims. See Compl. ¶¶ 15, 35, 36. Thus, the Court finds that it may consider the user and service manuals as undisputed documents*fn3 referenced in the Complaint or central to Plaintiffs' claims, without converting this motion to one for summary judgment.

Although the Court may also consider the Kandel Opinion (McDonald Decl. ¶3; Ex. B), and the Kandel and Lipper class action complaints (McDonald Decl. ¶¶ 4-5; Ex. C, Ex. D), their use is strictly limited to the existence of the opinion and the pleadings in those matters. As previously noted, "[w]hile a prior judicial opinion constitutes a public record of which a court may take judicial notice, it may do so on a motion to dismiss only to establish the existence of the opinion, not for the truth of the facts asserted in the opinion." See Lum v. Bank of America, 361 F.3d 217, 222 n. 3 (3d Cir. 2004). The same holds true for pleadings. See Southern Cross Overseas Agencies, 181 F.3d at 426-27.

The remaining submissions are neither referenced in the Complaint nor essential to Plaintiffs' claims, and will not be considered in this Motion. Although Plaintiffs cite the brief filed by BIC in response to the Order to Show Cause in the Kandel matter (Kaplan Decl. ¶ 2; Ex. A) and the letter from BIC's counsel in the Kandel matter (Kaplan Decl. ¶ 3; Ex. B) as being BIC's admissions as to its corporate operations in New Jersey, facts probative in the choice of law analysis, the Court finds that they are neither referenced in the Complaint, nor essential to Plaintiffs' allegations such that their consideration is proper in the context of the instant Motion to Dismiss. While the Court agrees that the facts contained in the proffered documents may indeed be essential to the Court's choice of law analysis, they are not integral to the Complaint such that their admission is appropriate at this stage in the litigation. Indeed, the choice of law analysis is very fact intensive and should not be undertaken where a full factual record is required. See Harper v. L.G. Electronics, 595 F.Supp.2d 486, 490-91 (D.N.J. 2009)(declining to make choice-oflaw determination on motion to dismiss where factual record was insufficient). The Plaintiffs' submission of the online magazine article (Kaplan Decl. ¶ 7; Ex. F), the survey of user manuals compiled by Plaintiffs' counsel (Kaplan Decl. ¶ 5; Ex. D) and the deposition testimony taken in Maniscalco case (McDonald Decl. ¶4; Ex. F) suffer from the same infirmity. While the information contained therein may indeed be essential to the choice of law analysis, those exhibits are not integral to Plaintiffs' claims such that their admission is proper on a Motion to Dismiss. The narrow exception to the general rule that a motion to dismiss must be decided based solely on the allegations of a well-pleaded complaint ceases to have any limits if any tangentially related documents may be considered.

B. New Jersey Consumer Fraud Act (NJCFA) Claims

1. Choice of Law

It is axiomatic that a district court must apply the choice of law rules of the forum in which the court sits. See Klaxon v. Stentor Elec. Mfg., Inc., 313 U.S. 487, 496 (1941); Thabault v. Chait, 541 F.3d 512, 535 (3d Cir. 2008). Hence, the Court will apply New Jersey's recently adopted choice of law analysis, the most significant relationship test. P.V. v. Camp Jaycee, 197 N.J. 132, 142-43 (2008); Nafar v. Hollywood Tanning Sys., No. 08-3994, 2009 WL 2386666, at *4 (3d Cir. Aug. 5, 2009); see also Ghaffari v. Hern, No. 06-931 (FLW), 2009 WL 2147092, at *3 (D.N.J. Jul. 15, 2009).

The most significant relationship test is a case-by-case, qualitative analysis consisting of two prongs. See P.V. v. Camp Jaycee, 197 N.J. 132, 143 (2008). The first prong of the analysis requires a court to examine the substance of the potentially applicable laws in order to determine if an actual conflict exists. Id. at 143-44 (citing Lebegern v. Forman, 471 F.3d 424, 430 (3d Cir. 2006)). Where there is no actual conflict, the analysis ends and the court applies the law of the forum state. Schwartz v. Hilton Hotels Corp., 639 F. Supp. 2d 467, 471 (D.N.J. 2009). If a conflict does exist, the court must turn to the second prong, which requires the court to weigh the factors enumerated in the Restatement sections corresponding to a plaintiff's cause of action. See Camp Jaycee, 197 N.J at 143-45.

A conflict arises when there exists a "distinction" between the substance of the potentially applicable laws. Camp Jaycee, 197 N.J. at 143. Here, the parties agree that there is a conflict of laws with regard to Arcand's consumer fraud claim given that she is a Virginia resident.*fn4 The parties do not dispute that the outcome of the consumer fraud claims would differ in Virginia versus New Jersey. Under the Virginia Consumer Protection Act ("VCPA"), Arcand could neither assert class action claims, see Am. Online v. Super. Ct., 90 Cal. App. 4th 1, 17 (2001) (citing King v. Va. Birth-Related Neurological Injury Comp. Program, 22 Va. Cir. 156 (1990), nor could she obtain injunctive relief, Physicians Comm. for Responsible Med. v. General Mills, Inc., 283 Fed. App'x 139, 141-44 (4th Cir. 2008), and BIC would be subject to a minimum statutory penalty of $500. Va. Code Ann. § 59.1-204. Conversely, the NJCFA encourages private class actions, Fink v. Ricoh, 365 N.J. Super 520, 570 (Law Div. 2003), permits private injunctive relief, Weinberg v. Sprint Corp., 173 N.J. 233, 253 (2002), and has no minimum statutory penalty, N.J.S.A. § 56:8-2.11. Therefore, if Virginia, as opposed to New Jersey, law were applied in this case, a class action headed by Arcand would be barred, Arcand would be precluded from seeking injunctive relief, and the statutory penalty imposed on BIC would differ. Since both parties assert differences in the laws that assuredly affect the outcome of this case, the Court finds that an actual conflict does exist.

Once an actual conflict is established, the most significant relationship test requires the Court to weigh the factors enumerated in the Restatement section corresponding to the Plaintiffs' cause of action. See, Camp Jaycee, 197 N.J. at 143-44. The factors of the applicable Restatement section must then be examined in light of the contacts and principles set forth in Restatement Section 6. Camp Jaycee, 197 N.J. at 144-45. The starting point of the Court's Restatement analysis in this case is Section 148, which governs the choice of law analysis for consumer fraud claims. See Agostino v. Quest Diagnostics Inc., 256 F.R.D. 437, 462 (D.N.J. 2009); In re Mercedes-Benz Tele Aid Contract Litig., 257 F.R.D. 46, 64 (D.N.J. 2009). Section 148 of the Restatement (Second) provides:

(1) When the plaintiff has suffered pecuniary harm on account of his reliance on the defendant's false representations and when the plaintiff's action in reliance took place in the state where the false representations were made and received, the local law of this state determines the rights and liabilities of the parties unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the occurrence and the parties, in which event the local law of the other state will be applied.

(2) When the plaintiff's action in reliance took place in whole or in part in a state other than that where the false representations were made, the forum will consider such of the following contacts, among others, as may be present in the particular case in determining the state which, with respect to the particular issue, has the most significant relationship to the occurrence and the parties:

(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 ...


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