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Dutton Road Associates Lp v. Sunray Solar

April 12, 2011

DUTTON ROAD ASSOCIATES LP, PLAINTIFF,
v.
SUNRAY SOLAR, INC., DEFENDANT.



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

***NOT FOR PUBLICATION***

OPINION

Presently before the Court is Defendant's Motion to Dismiss Counts III, V, and VI of Plaintiff's Complaint for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the Court grants Defendant's motion with respect to Plaintiff's negligence claim (Count V), but denies the motion with respect to Counts III and VI of Plaintiff's Complaint.

I. FACTS AND PROCEDURAL HISTORY

Plaintiff Dutton Road Associates, LP ("Dutton"), a Pennsylvania limited partnership, alleges that Defendant Sunray Solar, Inc. ("Sunray"), a New Jersey corporation, breached the parties' agreement by failing to install a solar panel system on the roof of Plaintiff's property in Philadelphia. Compl., ¶ 1-2, 4. Dutton, specifically, alleges that Dutton entered into a contract with Sunray for installation of the solar panel system on or about August 4, 2009. Id. at ¶ 5. The total amount due under the contract was $475,672.00. Id. at ¶ 6. Pursuant to the agreement, Plaintiff alleges, Sunray was responsible for obtaining all government approvals, permits, incentives, grants, and rebates in connection with the solar panel installation. Id. at ¶ 8. After the initial agreement was finalized, the parties entered into an amended contract (hereinafter referred to as "Amended Agreement"). Id. at ¶ 10. According to Plaintiff, the Amended Agreement added that Sunray "guarantees, warrants, and represents" that Dutton is eligible for governmental rebate programs amounting to 30% of the cost of the solar panel system. Id. at ¶ 11. Dutton made two payments to Sunray, each in the amount of $142,701.60, on or about March 23, 2010 and April 6, 2010.

Dutton alleges that it subsequently discovered that Sunray was not authorized to conduct business in the City of Philadelphia ("City") or the Commonwealth of Pennsylvania; it was not aware of this fact at the time it executed the initial contract. Id. at ¶ 12. Because Sunray was not licensed to do business, Dutton alleges, Sunray was not able to begin work on the project. Id. at ¶ 16. Dutton avers that it sought an update on the status of the project on repeated occasions, id. at ¶ 17, to no avail. Id. at ¶¶ 18-19. According to Dutton, Sunray directed it to obtain copies of the permits and other governmental approvals from the City but, upon contacting the City, no applications or approvals were found. Id. at ¶ 22. Finally, Dutton alleges, "the solar panel system has not been installed on the roof of the [p]roperty in a workmanlike manner or at all." Id. at ¶ 23.

Dutton brings several causes of action against Sunray: a breach of contract claim (Count I), breach of implied covenant of good faith and fair dealing (Count II), unjust enrichment/quantum meruit (Count III), fraudulent concealment/intentional non-disclosure (Count IV), negligence (Count V), and rescission (Count VI). Dutton originally filed its complaint asserting these claims in the Court of Common Pleas, Philadelphia County, on August 23, 2010. Shortly thereafter, on September 21, 2010, Sunray removed the case to the Eastern District of Pennsylvania on the basis of diversity jurisdiction. Sunray subsequent filed a motion to transfer the suit to this district and, by stipulation of the parties and order of that court, the suit was transferred to this Court on October 21, 2010. After the case was transferred, Sunray filed the instant motion to dismiss upon which the Court now rules.

II. DISCUSSION

In deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6), I must view all allegations in the complaint in the light most favorable to the plaintiff. See Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008). To satisfy the Rule 12(b)(6) standard, the complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "To avoid dismissal, [the] complaint must set forth facts that raise a plausible inference that the defendant inflicted a legally cognizable harm upon the plaintiff." See Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009). Conclusory allegations of liability will not suffice. Id. at 1950.

The parties' agreement provides that New Jersey law applies, see Handwerker Cert., Exh. B at 2, and thus the Court will analyze the state law claims under the rubric of New Jersey law. Indeed, in deciding a motion to dismiss, a court may consider the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of plaintiff's claim. Lum v. Bank of Am., 361 F.3d 217, 222 n. 3 (3d Cir. 2004). I now turn to Defendant's arguments as to several of Plaintiff's claims.

A. Availability of Rescission Remedy

Defendant Sunray argues that Plaintiff may not seek rescission of the parties' contract for two reasons. First, Sunray argues that Dutton is not entitled to the equitable remedy of rescission because it has alleged a claim of legal, as opposed to equitable, fraud. Second, Sunray argues that Dutton may not rescind the parties' agreement because "it has only recently insisted on performance." Pl. Open. Br. at ii. The Court rejects both of Sunray's arguments.

In support of its argument that the pleading of legal fraud precludes Dutton from seeking rescission, Sunray cites primarily to Enright v. Lubow, 202 N.J.Super. 58 (App. Div. 1985) and Jewish Ctr. of Sussex County v. Whale, 86 N.J. 619 (1981). As these cases and more recent case law in New Jersey make clear, the key distinction between legal and equitable fraud is that legal fraud requires proof of intent while equitable fraud does not. Jewish Ctr., 86 N.J. at 624-25; Liebling v. Garden State Indem., 337 N.J.Super. 447, 453 (2001). Further, a plaintiff that asserts equitable fraud is not entitled to recover monetary damages; he or she may recover only in equity. See Nolan by Nolan v. Lee Ho, 120 N.J. 465, 472 (1990) ("Because defendants are not seeking damages, they need establish only equitable fraud, not legal fraud."). Defendant appears to argue that, in light of this distinction, the assertion of legal fraud precludes a plaintiff from seeking the equitable relief of rescission.

While Enright and Jewish Ctr. stand for the proposition that only equitable relief may be obtained in an action for equitable fraud, they do not stand for the inverse proposition that, in an action for legal fraud, only monetary damages may be obtained.*fn1 More to the point, as explained by the New Jersey Supreme Court in Jewish Ctr., "whatever would be fraudulent at law will be so in equity." 86 N.J. at 625. In other words, by pleading allegations of legal fraud, Plaintiff has necessarily pled equitable fraud. Furthermore, although this Court's research has not revealed binding New Jersey case law expressly addressing whether allegations of legal fraud may entitle a plaintiff to rescission, the Court finds that Defendant has not met its burden of pointing to case law, in support of its motion to dismiss, that New Jersey law bars a plaintiff asserting legal fraud from seeking the remedy of rescission.*fn2 Thus Defendant's motion cannot succeed. The Court find this result particularly appropriate in light of the procedural posture of the instant suit; it may be that Plaintiff may ...

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