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Turbulent Diffusion Technology Inc. v. Amec Foster Wheeler North America Corp.

United States District Court, D. New Jersey

May 4, 2017

TURBULENT DIFFUSION TECHNOLOGY INC., Plaintiff,
v.
AMEC FOSTER WHEELER NORTH AMERICA CORPORATION, Defendant.

          MEMORANDUM OPINION

          MARY L. COOPER United States District Judge.

         Plaintiff Turbulent Diffusion Technology Inc. (“TDT”) filed suit against Defendant Amec Foster Wheeler North America Corporation (“Amec Foster Wheeler”) alleging breach of contract, anticipatory repudiation, wrongful termination, and breach of the covenant of good faith and fair dealing. (See dkt. 1.)[1] On October 24, 2016, TDT filed an amended complaint maintaining the same counts. (See dkt. 22.) On November 3, 2016, Amec Foster Wheeler answered TDT's Amended Complaint and brought counterclaims alleging breach of contract, breach of the covenant of good faith and fair dealing, breach of express warranty, breach of implied warranty of fitness for a particular purpose, and fraud in the inducement. (See dkt. 24.) Counterclaim-Defendant TDT filed the pending Motion to Dismiss, seeking to dismiss only Amec Foster Wheeler's counterclaim for fraud in the inducement. (See dkt. 25.) The Court resolves this motion without oral argument. See L.Civ.R. 78.1(b). For the reasons stated herein, we will grant TDT's Motion to Dismiss.

         I. BACKGROUND

         A. General Background

         In August 2013, Amec Foster Wheeler entered into a contract with a third party, CH2-UGL JV (“CH2”), to supply and install utility boilers for CH2 at the Ichthys Combined Power Plaint in Darwin, Australia. (Dkt. 24 at 11.) Amec Foster Wheeler and TDT entered into a purchase order agreement (“Purchase Order”), wherein TDT agreed to design, manufacture, supply, and deliver three burner and valve train skid systems (“the Equipment”) for a contract price of $1, 649, 326.63 to Amec Foster Wheeler. (Id. at 11-14.) The Equipment designed and manufactured by TDT was to be supplied by Amec Foster Wheeler for installation at the Ichthys Combined Cycle Power Plant in Darwin, Australia pursuant to all codes applicable in the Northern Territories of Australia. (Id. at12.)[2]

         After approximately two years and some level of performance of its obligations pursuant to the Purchase Order, or lack thereof, TDT sent Amec Foster Wheeler a notice of breach and demand for adequate assurances, pursuant to N.J.S.A. 12A:2-609. (Dkt. 22 at 10; dkt. 22-3.) Amec Foster Wheeler responded with a Notice of Termination and Cancellation, terminating the Purchase Order for a variety of reasons. (See dkt. 22 at 10; dkt 22-4; dkt. 24 at 20-21.)

         TDT and Amec Foster Wheeler bring forth competing claims relating to the breach of the Purchase Order. (See dkt. 22 at 11-17; dkt. 24 at 26-30.) Because these claims are not germane to this Motion to Dismiss, we will not describe them in detail here. Instead, we focus on the factual allegations related to the fraud in the inducement claim asserted by Amec Foster Wheeler. However, we note that Amec Foster Wheeler's breach of contract, breach of express warranty, and breach of implied warranty claims are based, in part, on the alleged noncompliance of the Equipment with the terms and specifications of the Purchase Order, which include the Australian codes. See n. 2, supra.

         Prior to the execution of the Purchase Order, and in connection with its bid evaluation process, Amec Foster Wheeler met with TDT in June 2013. (Id. at 31.) Amec Foster Wheeler alleges that TDT, in an effort to induce Amec Foster Wheeler to issue and execute the Purchase Order, represented that “its work would comply with the Australian Code requirement” and that “it would meet this requirement through a subcontract with Optimil Machinery, Inc.” (“Optimil”). (Id. at 31.) Amec Foster Wheeler further alleges that TDT made the following additional representations at the June 2013 meeting: (1) “all equipment ordered through TDT will be fabricated at [Optimil], in Delta, British Columbia, Canada”; (2) “TDT had a ‘partnership' with Optimil”; (3) “TDT maintained 100% control of work in the shop of Optimil”; and (4) “[Optimil] had performed projects in Australia, was familiar with Australian codes and standards and was “confident” in its ability to comply with Australian codes that governed [the] work.” (Id. at 31.) Amec Foster Wheeler alleges that at the time of the June 2013 meeting, TDT knew that its representations regarding Optimil were false, and that they were made with the intention that Amec Foster Wheeler rely on them to issue the Purchase Order to TDT. (Id. at 32-33.) Amec Foster Wheeler alleges that it did rely on these misrepresentations and executed the Purchase Order to its detriment. (Id. at 33.)

         B. The Parties' Positions

         TDT offers three arguments in favor of dismissing Amec Foster Wheeler's claim for fraud in the inducement: (1) the claim is barred by the economic loss doctrine; (2) the claim is barred by the Purchase Order's integration clause; and (3) the claim should be dismissed because Amec Foster Wheeler did not allege facts that demonstrate that the alleged misrepresentations were material. (Dkt. 25-1 at 4-5.) The following is a summary of the parties' positions on these issues.

         1. The Economic Loss Doctrine

         “The economic loss doctrine ‘prohibits plaintiffs from recovering in tort economic losses to which their entitlement only flows from contract.'” Bracco Diagnostics, Inc. v. Bergen Brunswig Drug Co., 226 F.Supp.2d 557, 562 (D.N.J. 2002) (quoting Duquesne Light Co. v. Westinghouse Elec. Co., 6 F.3d 604, 618 (3d Cir.1995)). “In particular, ‘whether a tort claim can be asserted alongside a breach of contract claim depends on whether the tortious conduct is extrinsic to the contract between the parties.'” RNC Sys. v. Modern Tech. Group, Inc., 861 F.Supp.2d 436, 451 (D.N.J. 2012) (quoting Chen v. HD Dimension Corp., No. 10-863, 2010 WL 4721514, at *8 (D.N.J. Nov. 15, 2010)). “For instance, a plaintiff may be permitted to proceed with tort claims sounding in fraud in the inducement so long as the underlying allegations involve misrepresentations unrelated to the performance of the contract, but rather precede the actual commencement of the agreement.” Id. (citations omitted). However, “only those pre-contractual misrepresentations that are extraneous to the parties' contract may be brought alongside a breach of contract claim.” Montclair State University v. Oracle USA, Inc., No. 11-2867, 21012 WL 3647427, at *4 (D.N.J. Aug. 23, 2012) (citations omitted).

An alleged misrepresentation is extraneous to an agreement when it breaches a duty separate and distinct from the performance of the agreements terms. In other words, an act that is in breach of a specific contractual undertaking would not be extrinsic, but an act that breaches some other duty would be. Hence, an alleged misrepresentation that involves a nonfulfillment of a warranty or guarantee contained within the contract itself cannot be said to be extraneous to the contract.

Id. at *5 (quotations and citations omitted).

         TDT argues that the misrepresentations forming the basis of Amec Foster Wheeler's fraud in the inducement claim relate directly to the performance of the Purchase Order. Specifically, TDT argues that its statements that “its work would comply with the Australian Code requirement” and that “it would meet this requirement through a subcontract with Optimil” directly relate to the express terms of the Purchase Order, (i.e., the Australian code requirement). (Dkt. 25-1 at 10.) TDT asserts that its additional statements concerning its relationship with Optimil directly relate to the performance of the Australian code requirement.

         TDT also argues that the alleged misrepresentations relate to the use of a subcontractor, an issue that is directly ...


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