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Daisy Montich, On Behalf of Herself and All Others Similarly Situated v. Miele Usa

March 27, 2012

DAISY MONTICH, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS
v.
MIELE USA, INC., DEFENDANT



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

FOR PUBLICATION

OPINION

Presently before the Court is Defendant Miele USA, Inc.'s ("Miele" or "Defendant") motion to dismiss Plaintiff Daisy Montich's ("Montich" or "Plaintiff") Complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). Plaintiff filed her four-count Complaint on behalf of herself and a putative class alleging that Defendant (1) violated the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-1 et seq. ("NJCFA") (Count I); (2) violated similar Consumer Protection Acts of other states (including California) (Count II); (3) breached an implied warranty of merchantability (Count III); and (4) was unjustly enriched (Count IV). Plaintiff's claims stem from her purchase and use of a front-loading washing machine manufactured by Miele. Specifically, Plaintiff alleges that mold or mildew began to develop after about a year of normal use of the washing machine at her home in Torrence, California.

Defendant argues that Plaintiff raises no viable claims. For the reasons set forth below, Defendant's motion to dimiss is GRANTED-IN-PART and DENIED-IN-PART: Count I of the Complaint is DISMISSED WITH PREJUDICE, Count II is DISMISSED WITHOUT PREJUDICE, and Defendant's Motion is DENIED with respect to COUNTS III and IV.

I. BACKGROUND

In addressing Defendant's Motion to Dismiss, this Court must accept Plaintiff's allegations contained in the Complaint as true. See Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d 446, 457 (3d Cir. 2003); Dayhoff, Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir. 1996). Thus, the facts recited below are taken from the Complaint and do not represent this Court's factual findings.

In July 2007, Montich, a citizen of California, purchased a Miele front-loading washing machine from a Ferguson Enterprises, Inc. retail store in California. Compl. ¶¶ 6, 17. Miele is headquartered in Princeton, New Jersey. Id. ¶ 7. Plaintiff paid $1,799 and took delivery of the Miele washing machine on September 25, 2007, at her residence in Torrence, California. Id. ¶¶ 6, 17. In the summer of 2008, after normal home use, she noticed an odor of mildew or mold from both the machine and the laundered clothes. Id. ¶¶ 6, 18. Montich contacted Miele about the smell. Id. ¶ 20. In response, Miele sent her a "Descaler" to run during an empty cycle to remedy the odor. Id. Despite using the Descaler, her machine continued to smell of mildew or mold. Id.

Plaintiff's claims are brought on behalf of herself and two defined classes. Class A is defined as "All persons and entities who own a Miele Washing Machine." Compl. ¶ 21. Class B is a subset of Class A and is defined as "All persons and entities in New Jersey, Arizona, California, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New York, Ohio, Texas, Wisconsin, and Washington who own a Miele Washington Machine." Id. Plaintiff's NJCFA and breach of an implied warranty claims are brought on behalf of Class A, while her other consumer fraud act and unjust enrichment claims are brought on behalf of Class B.

In the instant matter, Defendant moves to dismiss the claims on the bases that (1) Plaintiff cannot avail herself of the NJCFA because California law applies to Plaintiff's consumer fraud claims;*fn1 (2) Plaintiff does not have standing to bring a claim under California's Unfair Competition Law ("UCL") and False Advertising Law ("FAL") because she faild to plead actual reliance; (3) Plaintiff fails to state a claim for a breach of implied warranty under California law because she did not buy the machine directly from Defendant and therefore lacks privity;*fn2 and (4) Plaintiff fails to state a claim for unjust enrichment under New Jersey law because Defendant was not directly enriched by Plaintiff's purchase. Lastly, Defendant argues that Plaintiff has failed to meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b) for her claims based on fraud.

As an initial matter, Plaintiff cites to several federal court opinions involving other motions to dismiss in similar cases alleging moldy front-loading washing machines and argues that Defendant's motion in general "treads well-trodden ground" and ignores "spot on authority." Pl. Opp'n 1-3. The Court has considered these decisions and does not find them to be analogous to the facts and legal issues before it today. Other than Harper v. LG Elecs. United States, Inc., 595 F. Supp. 2d 486, 490 (D.N.J. 2009), which is discussed at length, infra, none of the cases cited by Plaintiff involve a potential conflict of law between New Jersey and California. And, in all other cases beside Harper, the courts dismissed some of the same causes of action that Plaintiff now brings. See Butler v. Sears, Roebuck & Co., No. 06-7023, 2009 U.S. Dist. LEXIS 102413, at *14, *18 (N.D. Ill. Nov. 4, 2009); In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig., 684 F. Supp. 2d 942, 956, 960 (N.D. Ohio 2009); Tait v. BSH Home Appliances Corp., No. 10-711, 2011 U.S. Dist. LEXIS 103584, at *12 (C.D. Cal. Aug. 31, 2011).

II. STANDARD OF REVIEW

The Federal Rules of Civil Procedure provide that a complaint "shall contain (1) a short and plain statement of the grounds upon which the court's jurisdiction depends. . . (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks." Fed. R. Civ. P. 8(a). The purpose of a complaint is "to inform the opposing party and the court of the nature of the claims and defenses being asserted by the pleader and, in the case of an affirmative pleading, the relief being demanded." CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1182 (3d ed. 2004). Furthermore, Plaintiff's fraud-based claims must be pled with particularity per Federal Rule of Civil Procedure 9(b). To meet this heightened pleading standard, a plaintiff "must state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the precise misconduct with which it is charged." Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (internal citations and quotations omitted).

When reviewing a motion to dismiss, 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) (internal citations and quotations omitted). In Bell Atlantic Corporation v. Twombly, 550 U.S. 544 (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 (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 561 (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 555. 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, 550 U.S. at 556).

In affirming that Twombly standards apply to all motions to dismiss, the Supreme Court recently explained the following 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, 556 U.S. 662, 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." Ashcroft, 129 S. Ct. at 1950. The plausibility standard requires that "the plaintiff plead[ ] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged" and demands "more than a sheer possibility that a defendant has acted unlawfully." Id. at 1949 (quoting Twombly, 550 U.S. at 556). 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. In evaluating a motion to dismiss, a court may consider only the complaint, exhibits attached to the complaint, matters of public record, and undisputedly authentic documents if the complainant's claims are based upon these documents. Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993).

III. DISCUSSION

A. Choice of Law Principles

Plaintiff's claims are all based on state law. Therefore, the Court must decide which state law to apply to her claims -- New Jersey or California. A federal court sitting in diversity jurisdiction must apply the forum state's choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941); Gen. Star Nat'l Ins. Co. v. Liberty Mutual Ins. Co., 960 F.2d 377, 379 (3d Cir. 1992). The New Jersey Supreme Court has recently adopted the "most significant relationship" test of the Restatement (Second) of Conflict of Laws. P.V. v. Camp Jaycee, 197 N.J. 132, 142-43 (2008). This test consists of two prongs and is applied for each separate cause of action.

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. Camp Jaycee, 197 N.J. at 143-44 (citing Lebegern v. Forman, 471 F.3d 424, 430 (3d Cir. 2006)). If there is no actual conflict, the analysis ends and the court applies the law of the forum state. See In re Ford Motor Co., 110 F.3d 954, 965 (3d Cir.1997); Rowe v. Hoffman-La Roche, Inc., 189 N.J. 615, 621 (2007). But if a conflict does exist, the court must then determine which jurisdiction has the "most significant relationship" to the claim. Camp Jaycee, 197 N.J. at 136.

Defendant argues that California law applies to Plaintiff's consumer fraud and breach of implied warranty claims. Plaintiff, however, relying on Harper v. LG Elecs. United States, Inc. for support, contends that a choice of law determination is not yet ripe for decision because, according to Plaintiff, it requires a fact intensive inquiry that is premature at the motion to dismiss stage. In Harper, the court ruled that the factual record before it was not sufficiently developed to rule on the choice-of-law arguments raised by LG Electronic's motion to dismiss. The Harper court was clear, however, that it was not laying down a blanket rule. See Harper, 595 F. Supp. 2d at 491 ("Some choice of law issues may not require a full factual record and may be amenable to resolution on a motion to dismiss."). Rather, the decision about whether a choiceof-law issue is ripe or premature should be made on a case-by-case basis depending on the facts presented. Indeed, courts, including the Third Circuit, have decided choice-of-law issues on a motion to dismiss when the necessary facts are pled in the complaint. Cooper v. Samsung Elecs. Am., Inc., 374 F. App'x 250, 255 (3d Cir. 2010) (rejecting Plaintiff's argument that it was premature to make a choice-of-law determination at the motion to dismiss stage); Warma Witter Kreisler, Inc. v. Samsung Electronics America, Inc., No. 08-5380, 2010 U.S. Dist. LEXIS 34584, at *10-11 (D.N.J. Apr. 8, 2010); Knox v. Samsung Electronics America, Inc., No. 08-4308, 2009 U.S. Dist. LEXIS 53685, at *11-12 (D.N.J. June 25, 2009).

District courts in this Circuit have interpreted Harper to require a threshold inquiry into whether a choice-of law-issue needs a fuller factual record. See Snyder v. Farnam Cos., 792 F. Supp. 2d 712, 718 (D.N.J. 2011) ("In order to decide whether choice of law analysis is appropriate at the motion to dismiss stage in this particular case, the Court will follow the guidance provided in Harper, and determine whether the choice of law issues 'require a full factual record' or not."); Arlandson v. Hartz Mt. Corp., 792 F. Supp. 2d 691, 702 (D.N.J. 2011) (stating same and applying the law of the Plaintiffs' home state to claims for breach of implied warranty, violation of the NJCFA, and unjust enrichment). Because the "most significant relationship" test must be applied issue-by-issue, this Court will undertake a separate analysis for each of Plaintiff's claims. Should the choice-of-law analysis for that issue require a fuller factual record, the Court will defer its decision until such record is available. Otherwise, the decision may be made now.

B. Consumer Protection Claims

1. NJCFA

To determine whether a fuller factual record is required, the Court must first know what facts are necessary for each specific determination. The first prong -- whether a conflict exists between the laws of the two jurisdictions -- demands a purely legal analysis and requires no factual record. Defendant argues that there is a conflict between the consumer protection laws of New Jersey and California because New Jersey does not require a plaintiff to plead and prove reliance whereas California does. Plaintiff does not dispute this. Instead, Plaintiff argues that any choice-of-law determination is premature and even if California law does apply, Plaintiff has sufficiently established reliance.

To state a prima facie case under the NJCFA, a plaintiff must demonstrate three elements: "(1) unlawful conduct by the defendant; (2) an ascertainable loss by the plaintiff; and (3) a causal connection between the defendant's unlawful conduct and the plaintiff's ascertainable loss." Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 557 (2009). A party need not plead reliance under the NJCFA. "Our CFA does not require proof that a consumer has actually relied on a prohibited act in order to recover." Int'l Union of Operating Eng'rs Local No. 68 Welfare Fund v. Merck & Co., Inc., 192 N.J. 372, 391 (2007).

California's equivalent of the NJCFA is referred to as the unfair competition law ("UCL") and false advertising law ("FAL"). "Unfair competition" is defined under the UCL as any "unlawful, unfair or fraudulent business act or practice." Cal. Bus. & Prof. Code § 17200; see also Lippitt v. Raymond James Fin. Servs., 340 F.3d 1033, 1043 (9th Cir. 2003) ("To bring a UCL claim, a plaintiff must show either an (1) 'unlawful, unfair, or fraudulent business act or practice,' or (2) 'unfair, deceptive, untrue or misleading advertising.'"). The UCL's "coverage is sweeping, embracing anything that can properly be called a business practice and that at the same time is forbidden by law." Cel-Tech Commc'ns, Inc. v. LA. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999) (internal quotations and citation omitted). The FAL prohibits "any statement . . .which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading" made in connection with the sale of goods or services. Cal. Bus. & Prof. Code § 17500.

The broad scope of these sections was limited when California voters approved Proposition 64, which added standing requirements to both the UCL and FAL. Now a plaintiff must show she is someone "who has suffered injury in fact and has lost money or property as a result of such unfair competition." Cal. Bus. & Prof. Code §§ 17204, 17535. That language has been interpreted as adding the elements of actual reliance and injury in fact to UCL and FAL claims. Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 321-22 (Cal. 2011) (affirming the actual reliance and injury in fact requirements under both the UCL and the FAL); In re Tobacco II Cases, 46 Cal. 4th 298, 328 (Cal. 2009) ("Accordingly, we conclude that a plaintiff must plead and prove actual reliance to satisfy the standing requirement of section 17204...."). Because the NJCFA does not require a showing of reliance whereas California's consumer protection laws do, the Court finds there is a conflict of law between the two jurisdictions.

Turning to the second prong of the analysis, I must determine which state has the "most significant relationship" to Plaintiff's unfair competition claims. To do so, I must weigh the factors set forth in the Restatement section that corresponds to Plaintiff's cause of action. See, e.g., Nafar v. Hollywood Tanning Sys., 339 F. App'x 216, 220 (3d Cir. 2009) (citing Agostino v. Quest Diagnostic, Inc., 256 F.R.D. 437, 463 (D.N.J. 2009)); Camp Jaycee, 197 N.J. at 143-44. Because the Plaintiff's unfair competition claims sound in fraud and misrepresentation, the Court applies the conflict of laws analysis of Section 148, which applies to fraud based claims. Restatement (Second) of Conflict of Laws § 148 (1971); see also, e.g., Agostino, 256 F.R.D. at 462; see also Nafar, 339 F. App'x at 221.

Section 148 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 ...


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