Argabright v. Rheem Mfg. Co., Civil No. 15-5243 (JBS/AMD).

258 F.Supp.3d 470

Lawrence ARGABRIGHT, Victoria Fecht, and Librado Montano, on behalf of themselves and all others similarly situated, Plaintiffs,

v.RHEEM MANUFACTURING COMPANY, Defendant.

Civil No. 15-5243 (JBS/AMD).

United States District Court, D. New Jersey.

Signed June 23, 2017

Melanie H. Muhlstock, Esq., PARKER WAICHMAN LLP, 6 Harbor Park Dr., Port Washington, NY 11050, Counsel for Plaintiffs.

Aaron Van Nostrand, Esq., David Jay, Esq., GREENBERG TRAURIG LLP, 500 Campus Drive, Suite 400, P.O. Box 677, Florham Park, NJ 07932, Counsel for Defendant.

OPINION

SIMANDLE, Chief Judge:

I. INTRODUCTION

This matter comes before the Court on Defendant Rheem Manufacturing Company's ("Rheem" or "Rheem Manufacturing") Motion to Dismiss the Amended Complaint. [Docket Item 49.] In this putative multistate class action, Plaintiffs Lawrence Argabright ("Argabright"), Victoria Fecht ("Fecht"), and Librado Montano ("Montano") allege that Defendant manufactured defective residential heating, ventilating, and air conditioning ("HVAC") systems under the Rheem and Ruud brand names. Plaintiffs assert the following claims in their Amended Complaint: breach of express warranty (Count I); breach of implied warranty of merchantability (Count II); fraudulent concealment (Count III); negligent misrepresentation (Count IV); violation of the Magnuson–Moss Warranty Act ("MMWA") (Count V); violation of the New Jersey Consumer Fraud Act ("NJCFA") (Count VI); violation of New York General Business Law § 349 ("NYGBL") (Count VII); violation of the Arizona Consumer Fraud Act ("ACFA") (Count VIII); unjust enrichment (Count IX); and a claim for declaratory relief (Count X). [Docket Item 43 at 22–43.]

Defendant has moved to dismiss all claims in the Amended Complaint, with the exception of the claim for breach of implied warranty of merchantability as to Plaintiff Lawrence Argabright ("Argabright"). [Docket Item 49.] Plaintiffs have submitted a Response in opposition [Docket Item 55] and Defendant has submitted a Reply [Docket Item 56].

The general facts of this case were recited in the Court's previous Opinion and will not be repeated here. See Argabright v. Rheem Manufacturing Company, 201 F.Supp.3d 578, 587–90 (D.N.J. 2016). The Court will address factual allegations not made in the original complaint but that were added to the Amended Complaint, however, in the Discussion section, infra.

The Court will address the arguments as to each claim in turn. For the reasons set forth below, the Court denies in part and grants in part Defendant's Motion.

II. STANDARD OF REVIEW¹

When considering a motion to dismiss a complaint for failure to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6), a court must accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the nonmoving party.² A motion to dismiss may be granted only if a court concludes that the plaintiff has failed to set forth fair notice of what the claim is and the grounds upon which it rests that make such a claim plausible on its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

Although the court must accept as true all well-pleaded factual allegations, it may disregard any legal conclusions in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Fowler v. UPMC Shadyside, 578 F.3d 203, 210–11 (3d Cir. 2009). Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.

In addition, the complaint must contain enough well-pleaded facts to show that the claim is facially plausible. This "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id."If the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not shown—that the pleader is entitled to relief." Id. at 679, 129 S.Ct. 1937 (internal quotation marks and citation omitted).

Rule 9(b) of the Fed. R. Civ. P. requires particularized pleading for the conduct underlying Plaintiffs' fraud claims. Under Rule 9(b), the "circumstances" of the alleged fraud must be pleaded with enough specificity to "place defendants on notice of the precise misconduct with which they are charged." Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984). Although the rule states that "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally," and does not require the plaintiff to plead every material detail of the fraud, the plaintiff must use "alternative means of injecting precision and some measure of substantiation into their allegations of fraud." In re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002) (internal quotations and citations omitted).

III. DISCUSSION³

A. Breach of Express Warranty (Count I)

Plaintiffs complain that Defendant breached its Warranty "because the HVAC had a known latent defect and was substantially certain to fail within the warranty period, Mr. Argabright did not receive compensation for the costs of refrigerant to identify the failure, and he has not been reimbursed for the costs of refrigerant that was not used in connection with the normal use of his Rheem HVAC." [Docket Item 55 at 18.]

Plaintiffs also argue that Defendant's Warranty fails of its essential purpose because the remedy they chose was insufficient under the contract "because Defendant unreasonably delayed recovery under the warranty notwithstanding that it knew, but failed to disclose, that the evaporator coils were substantial[ly] certain to cause failure of the entire unit, depriving Mr. Argabright the substantial benefit of his purchase." [Id. at 19–20.] Finally, Plaintiffs argue that the "fact alleged here state a claim that the exclusion of refrigerant and labor costs" from the Warranty was unconscionable because Defendant knew or should have known that their HVAC units contained this defect when they sold them, that Plaintiffs and Class Members could not have discovered the defect "before failure and certainly not until after the time of purchase," and that "Defendant unreasonably delayed providing remedies under the warranty until after owners had expended money on inspection costs that might reasonably have been avoided but for Defendant's concealment or omissions [.]" [Id. at 20–21.]

For reasons discussed infra, even construed liberally, the allegations in Plaintiffs' Complaint are insufficient to plausibly make out Plaintiffs' claims for breach of warranty as to Argabright. However, the Court will deny Defendant's Motion as to Fecht. Furthermore, because Arizona law disapproves of disposing with claims of unconscionability at the motion-to-dismiss stage, the Court will also deny Defendant's Motion as to Montano.

1. Defendant Did Not Breach the Terms of Its Warranty as to Argabright and Montano, but Plaintiffs State a Claim for Breach of Warranty as to Fecht

The Court previously ruled that Plaintiff did not plausibly state a claim for breach of express warranty, because, by its terms, the Limited Warranty [Docket Item 8–2] stated under "EXCLUSIONS," that the Limited Warranty did not apply to "parts installed with Covered Equipment or used in connection with normal maintenance, such as cleaning or replacing air filters, refrigerant, thermostats, tubing, or concrete pads"; the Limited Warranty also stated in a section titled "LABOR COSTS" that the warranty "does NOT cover any labor costs of expenses for service, NOR for removing or reinstalling parts." The Court ruled that Plaintiffs did not plausibly allege that Defendant breached the terms of the warranty because Defendant in fact replaced the defective coils; the items Defendant did not replace, in contrast, were those that were excluded by the terms of the warranty. [Docket Item 44 at 3–4 & 12–17.]

Under New Jersey law, "to state a claim for breach of express warranty, Plaintiffs must properly allege: (1) that Defendant made an affirmation, promise or description about the product; (2) that this affirmation, promise or description became part of the basis of the bargain for the product; and (3) that the product ultimately did not conform to the affirmation, promise or description." Francis E. Parker Memorial Home, Inc. v. Georgia–Pacific LLC, 945 F.Supp.2d 543, 568 (D.N.J. 2013).

Plaintiff now alleges that although "the limited warranty has an express exclusion relating to refrigerant, that exclusion only excludes coverage for parts installed with the Rheem HVAC or used in connection with the normal maintenance, such as cleaning or replacing refrigerant ... [and] [t]he refrigerant Mr. Argabright purchased to discover and repair the evaporator coil defect was not ... used in connection with the Rheem HVAC's normal maintenance.... [That refrigerant] should never have had to be replaced because refrigerant does not escape the closed system absent a leak." [Docket Item 55 at 18.]

This argument is unavailing. First, as Defendant correctly notes, Plaintiffs have not alleged any additional factual circumstances regarding the terms of the warranty or any alleged breach thereof by Defendant that address the Court's original decision. [Docket Item 49–1 at 22.] All Plaintiffs allege is a different reading of the terms of the Limited Warranty; however, such an argument is not convincing.

The Limited Warranty provides that it "WILL NOT APPLY TO ... parts installed with Covered Equipment or used in connection with normal maintenance, such as cleaning or replacing air filters, refrigerant, thermostats, tubing, or concrete pads." [Docket Item 8–2.] The natural, unconstrained reading of this exclusion is that the Limited Warranty does not apply to, inter alia, parts used in connection with normal maintenance. These non-covered parts include but are not limited...