United States District Court, D. New Jersey
For Plaintiffs: Stephen J. Buividas, Esquire, Cherry Hill, New Jersey.
For Innovated Solutions, LLC, Defendant: Stephen S. Lippman, Esquire, River Vale, New Jersey.
For 3D Systems Corporation, Defendant: Kenneth Kaufmann Lehn, Esquire, Winne, Banta, Hetherington, Basralian & Kahn, P.C., Hackensack, New Jersey.
NOEL L. HILLMAN, United States District Judge.
This matter comes before the Court upon motion [Doc. No. 24] of Defendant 3D Systems Corporation (hereafter, " 3D Systems" ), and by separate motion [Doc. No. 25] of Defendant Innovated Solutions, LLC for dismissal of the amended complaint
under Federal Rule of Civil Procedure 12(b)(6). The Court has considered the submissions of the parties and decides this matter pursuant to Federal Rule of Civil Procedure 78.
For the reasons that follow, Defendant 3D Systems' motion to dismiss is granted. Defendant Innovated Solutions' motion is granted in part and denied in part.
The Court exercises subject matter jurisdiction over this matter pursuant to 28 U.S.C. § 1332, as the complaint seeks damages in excess of $75,000 and the controversy is between citizens of different states.
On August 2, 2013, Plaintiffs, Rapid Models & Prototypes, Inc. (hereafter, " RMP" ), Joseph Pizzo and Angela Pizzo, filed a civil action in the Superior Court of New Jersey, Law Division, Camden County. Defendant 3D Systems removed the action to this Court based upon diversity of citizenship. (Not. of Removal ¶ 2 [Doc. No. 1].) Defendants 3D Solutions and Innovated Solutions thereafter filed motions to dismiss the complaint. In response, Plaintiffs filed an amended complaint [Doc. No. 22], thereby mooting the motions to dismiss. Defendants contend that Plaintiffs' amendments did not cure the deficiencies identified in their first motion to dismiss, and consequently they filed the motions to dismiss presently before the Court.
According to the allegations in the amended complaint, 3D Systems manufactures a three-dimensional printer, called the Projet SD 3000 3D Printer with Projet Accelerator Software and Projet Finisher (hereafter, the " machine" ), which is purportedly capable of " taking formless raw materials and molding them into specific mass-produced items which could then be sold as finished products or utilized in the creation of other products or materials." (Am. Compl. ¶ ¶ 8, 9.) In or about May of 2011, Plaintiff RMP entered into an equipment lease for the machine with U.S. Bancorp Manifest Funding Services (hereafter, " Bancorp" ). (Id. ¶ 8.) The lease provided that the machine and related materials were to be supplied by Defendant Innovated Solutions. (Id.)
Pursuant to the lease, Plaintiff RMP was obligated to make sixty monthly payments of $1350.44, plus taxes, and at the end of the lease term was entitled to purchase the machine for a nominal sum. (Id.) Plaintiffs contend that the lease agreement was " merely a financing vehicle" and was " in reality, a sales contract pursuant to which defendant Innovat[ed] agreed to transfer the machine from defendant Innovat[ed] to plaintiff RMP[.]" (Id.) Innovated Solutions is allegedly an " officially authorized reselling agent" for 3D Systems. (Id. ¶ 9.)
Plaintiffs allege that Innovated Solutions was aware that RMP intended to use the machine to perform specific tasks that were critical to RMP's business, and that a properly functioning machine was an essential component of the operation of RMP's business. (Id. ¶ 10.) Plaintiffs also allege that 3D Systems knew or should have known when manufacturing the machine that it would be put to a specific use in the manner intended by RMP. (Id.) Further, Plaintiffs allege that the machine
was sold subject to certain warranties by the defendants, including an express warranty by 3D Systems. (Id. ¶ 11.)
Plaintiffs aver that RMP discovered " [a]lmost immediately" after acquiring the machine that it was defective in that it did not perform the functions it was designed to perform and for which it had allegedly been acquired. (Id. ¶ 14.) Plaintiffs specifically state that the machine and its parts were " substandard," and the defects included malfunctioning electronic chips, rejected cartridges, a defective solenoid lock mechanism, and unreliable circuitry. (Id.) These alleged malfunctions and inadequacies caused product defects and customer complaints, which purportedly resulted in delay, lost production time, costly replacement, a repeated inability to meet delivery schedules and, ultimately, a loss of RMP's customers. (Id.) Although Plaintiffs allegedly notified Innovated Solutions of the ineffectiveness of the machine and requested immediate repairs and adjustments, neither Innovated Solutions nor 3D Systems could rectify the defects so that the machine could be put to effective use. (Id. ¶ 15.) Plaintiffs assert that as a result of RMP's inability to utilize the machine, RMP has lost present and existing customers, as well as future business prospects. (Id. ¶ 16.)
Plaintiffs thus instituted the present civil action in which they assert a number of claims against each of the defendants. Plaintiffs assert a claim for breach of contract against Innovated Solutions only (Count I). Further, Plaintiffs assert against both defendants claims for breach of the implied warranty of merchantability (Counts II and V), breach of the implied warranty of fitness (Counts III and VI), breach of the implied warranty of fitness for a particular purpose (Counts IV and VII), breach of express warranty (Count VIII), fraud (Count IX), negligent misrepresentation (Count X), and violation of the New Jersey Consumer Fraud Act (Count XI).
Defendants seek dismissal of the complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants also seek dismissal of the claims for fraud, negligent misrepresentation and violation of the New Jersey Consumer Fraud Act for failure to meet the heightened specificity requirement under Federal Rule of Civil Procedure 9(b).
III. STANDARD FOR MOTIONS TO DISMISS
In considering whether Plaintiffs' amended complaint fails to state a claim, the Court must accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the plaintiff. Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005); see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008) (" [I]n deciding a motion under Fed.R.Civ.P. 12(b)(6), [a district court is] . . . required to accept as true all factual allegations in the complaint and draw all inferences from the facts alleged in the light most favorable to" the plaintiff). A pleading is sufficient if it contains " a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2).
A district court, in weighing a motion to dismiss, asks " 'not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims[.]'" Bell A. Corp. v. Twombly, 550 U.S. 544, 563 n.8, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)); see also Ashcroft v. Iqbal, 556 U.S. 662, 684, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (" Our decision in Twombly expounded the pleading standard for 'all civil actions[.]'" ) (citation omitted).
Under the Twombly/Iqbal standard, a district court first " must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions." Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (citing Iqbal, 556 U.S. at 678, 129 S.Ct. 1937). Second, a district court " must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief.'" Fowler, 578 F.3d at 211 (citing Iqbal, 556 U.S. at 679, 129 S.Ct. 1937). " [A] complaint must do more than allege the plaintiff's entitlement to relief." Fowler, 578 F.3d at 211; see also Phillips, 515 F.3d at 234 (" The 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." ) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). " The defendant bears the burden of showing that no claim has been presented." Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005).
Finally, a court in reviewing a Rule 12(b)(6) motion must consider the facts alleged in the pleadings, the documents attached thereto as exhibits, and matters of public record. Guidotti v. Legal Helpers Debt Resolution, 716 F.3d 764, 772 (3d Cir. 2013). A court may also consider " 'undisputedly authentic documents if the complainant's claims are based upon these documents[.]'" Id. (quoting Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010)). If any other matters outside the pleadings are presented to the court, and the court does not exclude those matters, a Rule 12(b)(6) motion will be treated as a summary judgment motion pursuant to Rule 56. Fed.R.Civ.P. 12(d).
As noted above, Defendants contend that Plaintiffs' claims for fraud, negligent misrepresentation and a violation of the New Jersey Consumer Fraud Act must be pleaded with heightened particularity. For claims of fraud, Federal Rule of Civil Procedure 9(b) imposes a heightened pleading requirement, over and above that of Rule 8(a). Specifically, it requires that " in alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). " Malice, intent, knowledge, and other conditions of a person's mind," however, " may be alleged generally." Id. This heightened pleading standard requires a plaintiff to " 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 citation omitted).
" The purpose of Rule 9(b) is to provide notice of the 'precise misconduct' with which defendants are charged and to prevent false or unsubstantiated charges." Rolo v. City Investing Co. Liquidating Trust, 155 F.3d 644, 658 (3d Cir. 1998). Thus, to satisfy this heightened standard, " the plaintiff must plead or allege the date, time, and place of the alleged fraud or otherwise inject precision or some measure of substantiation into a fraud allegation." Frederico, 507 F.3d at 200. " Plaintiffs also must allege who made a misrepresentation to whom and the general content of the misrepresentation." Lum v. Bank of Am., 361 F.3d 217, 224 (3d Cir. 2004) (internal citation omitted), abrogated on other grounds by Twombly, 550 U.S. at 561-63, 127 S.Ct. 1955.
A. Choice of Law Principles
Since the claims in this case are based on state law, at the outset the Court must
determine which law to apply to each claim. None of the parties addressed the choice of law issue in their briefs, and all parties cited only New Jersey law in connection with the pending motions to dismiss. The Court, by Order dated November 20, 2014, required the parties to submit supplemental briefing on the choice of law issue. In the Order, the Court noted that South Carolina, Pennsylvania and New Jersey have an interest in this matter since the parties are citizens of these states. (See Order [Doc. No. 32] 1-2.)
In diversity cases, federal courts apply the forum state's choice of law rules to determine which state's substantive laws are controlling. Maniscalco v. Brother Int'l (USA) Corp., 709 F.3d 202, 206 (3d Cir. 2013)(citing Klaxon Co. v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). In conducting the choice of law analysis, New Jersey employs the " most significant relationship" test of the Restatement (Second) of Conflict of Laws. P.V. v. Camp Jaycee, 197 N.J. 132, 155, 962 A.2d 453 (2008) (" In balancing the relevant elements of the most significant relationship test, we seek to apply the law of the state that has the strongest connection to the case." ). This analysis, which must be performed on an issue-by-issue basis, consists of two steps. First, the Court must determine whether an actual conflict exists between New Jersey law and the law of a competing state. Snyder v. Farnam Cos., Inc., 792 F.Supp.2d 712, 717 (D.N.J. 2011). If no conflict exists, then the Court applies the law of the forum state. Id. Second, if an actual conflict exists, the Court must determine which state has the most significant relationship to the claim. Id. In making this determination, the Court must weigh the factors set forth in the Restatement that correspond to the plaintiff's cause of action. Id.
In response to the Court's Order, Defendants argue that New Jersey law applies because the parties implicitly agreed that Plaintiffs' claims are subject to New Jersey law. (Def. 3D Systems Corporation's Supp. Br. Regarding Choice of Law (hereafter, " Def. 3D System's Supp. Br." ) 1.) Plaintiffs, in response, argue that they never conceded that New Jersey law applies to their claims, having cited New Jersey law only because they initially filed their complaint in New Jersey Superior Court and because New Jersey law was the only law cited by Defendants in connection with the motion to dismiss. (Pls.' Supp. Br. Regarding Choice of Law (hereafter, " Pls.' Supp. Br." ) 1.) 3D Systems filed a reply brief, with leave of Court, in which it argues that because Plaintiffs initially filed the case in New Jersey state court, New Jersey law must be applied to this case. (Def. 3D Systems Corp.'s Reply Br. Regarding Choice of Law 1.) The Court rejects this argument. See, e.g., O'Boyle v. Braverman, 337 F.App'x 162 (3d Cir. 2009) (after case was removed from New Jersey state court, district court properly conducted choice of law analysis and concluded that Tennessee law applied to case), cert. denied, 558 U.S. 1112, 130 S.Ct. 1058, 175 L.Ed.2d 884 (2010); Ciecka v. Rosen, 908 F.Supp.2d 545, 553, 556 (D.N.J. 2012) (although case was removed from New Jersey state court, district court conducted choice of law analysis and concluded that Pennsylvania had most significant relationship with case).
Defendants also argued that under the " most significant relationship test," New Jersey law would govern all of the claims in this case. (Def. 3D System's Supp. Br. 6-12.) In its analysis, Defendant 3D Systems
did not address whether there is an actual conflict of laws with respect to each claim. (Id. at 5-6.) Instead, Defendant 3D Systems considered only the second prong and concluded that New Jersey has the most significant relationship to each claim given analysis of the factors set forth in the Restatement (Second) of Conflict of Laws. (Id. at 12.)
Plaintiffs argue that it is premature for the Court to resolve the choice of law issue at this early stage of litigation. The Court notes that " 'it can be inappropriate or impossible for a court to conduct [a choice of law] analysis at the motion to dismiss stage when little or no discovery has taken place.'" Snyder, 792 F.Supp.2d at 718 (quoting In re Samsung DLP Television Class Action Litig., Civ. No. 07-2141, 2009 WL 3584352, at *3 (D.N.J. Oct. 27, 2009)). However, as noted in Snyder, " '[s]ome choice of law issues may not require a full factual record and may be amenable to resolution on a motion to dismiss.'" Id. (quoting Harper v. LG Elecs. USA, Inc.,595 F.Supp.2d 486, 491 (D.N.J. 2009)). The Court should make a threshold inquiry into whether a choice of law analysis is appropriate at the motion to dismiss stage, by determining whether the choice of law issues require a full factual record or not. Id. The factual record may be sufficient for ...