Argabright v. Rheem Mfg. Co.

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 FOR THE DISTRICT OF NEW JERSEY

June 28, 2016

HONORABLE JEROME B. SIMANDLE

OPINION

APPEARANCES:

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

SIMANDLE, Chief Judge:

I. INTRODUCTION

In this putative multistate class action, Plaintiff alleges that Defendant Rheem Manufacturing Company ("Rheem" or "Rheem Manufacturing") manufactured defective residential heating, ventilating, and air conditioning ("HVAC") systems under the Rheem and Ruud brand names. Plaintiffs in the proposed class consist of all individuals who purchased or obtained Defendant's HVAC systems, and the following claims are asserted in the Complaint: breach of express and implied warranties and violation the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, et seq.; claims for fraudulent concealment, negligent misrepresentation, and strict product liability; statutory claims under the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-1 et seq., the Arizona Consumer Fraud Act, A.R.S. § 44-1521 et seq., and New York General Business Law § 349; and claims for unjust enrichment and declaratory relief.

Defendant Rheem Manufacturing has moved to dismiss all counts under Federal Rule of Civil Procedure 12(b)(6). [Docket Item 8.]

For the reasons set forth below, the Court finds that the allegations support a plausible claim for breach of implied warranty and violation of the Magnuson-Moss Warranty Act, and Defendant's motion will be denied with respect to those Counts. The Court will grant Defendant's motion with respect to the remaining claims.

II. BACKGROUND¹

This putative class action arises from the alleged failure of certain copper evaporator coils contained in HVAC units that Defendant Rheem designed, manufactured, advertised, and sold to homeowners, builders, and contractors in the United States. The HVAC units are sold under the brand names Rheem and Ruud, and come with either a five- or ten-year limited parts warranty (the "Warranty"), which provides:

RHEEM SALES COMPANY, INC. (Manufacturer of Rheem, Ruud and WeatherKing products) warrants the Covered Equipment to be free from defects in materials and workmanship, and will repair or replace, at its option, ANY PART of Covered Equipment installed in residential . . . applications which fails in normal use and service within the Applicable Warranty Periods . . . .

(Limited Warranty - Parts, Ex. A to Def. Br. [Docket Item 8-2].) Under "EXCLUSIONS," the Warranty states:

In addition to the specific exclusions set forth in theother sections of this Limited Warranty document, THIS Limited Warranty WILL NOT APPLY TO:

. . .

(d) 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 . . . .

(Id.) The Warranty further states, under a section titled "LABOR COSTS," that it "does NOT cover any labor costs or expenses for service, NOR for removing or reinstalling parts." (Id. (emphasis in original); see also Compl. ¶¶ 50, 91.)²

Plaintiffs allege that the evaporator coils contained in the Rheem and Ruud HVAC units, which are made from copper based alloys, improperly and prematurely corrode and leak refrigerant under normal use. (Compl. ¶ 6.) The deterioration that occurs is referred to as formicary corrosion, or sometimes pinhole corrosion. (Id. ¶ 39.) The loss of refrigerant reduces or eliminates the ability of the HVAC units to provide cold air and reduces their ability to function. (Id. ¶¶ 7, 42.) Plaintiff alleges that the faulty evaporator coils are a defect inDefendant's product, and violates the express warranty and implied warranty of merchantability.

Plaintiffs additionally allege that Defendant knew or should have known of this defect based on numerous complaints they received from consumers and service technicians about failing or leaking copper coils. In their Complaint, Plaintiff includes excerpts from two dozen online consumer reviews noting problems with the evaporator coils and leakage of refrigerant. (See Compl. ¶ 26.) Moreover, Plaintiffs note that in 2013, Defendant introduced new coils made from aluminum two and a half times thicker than its counterpart in copper, and in a 2013 product video about the switch, Defendant had explained that "obviously the biggest difference that aluminum affords us is the elimination of formicary corrosion." (Id. ¶¶ 58-60.) According to Plaintiffs, the switch to thicker aluminum is also an indication that Defendant was aware of the corrosion problems with existing Rheem HVACs. (Id. ¶ 61.)

Plaintiffs assert that Defendant, despite knowing that their HVACs contained this defect, continued to represent their product's quality and fitness, and continued to warrant that the units were "free from defects in materials and workmanship." (Id. ¶¶ 54-55.) Additionally, pointing to the two dozen consumer reviews of Defendant's HVAC systems, Plaintiffs assert thatDefendant refused to honor its warranty obligations because it consistently refused to pay for replacement refrigerant or labor costs associated with the repair, and failed to replace HVAC units that had failed completely. (Id. ¶¶ 62, 98, & 102.)

Plaintiffs seek to bring this suit on behalf of all persons in the United States who purchased or acquired Rheem HVACs. In addition, they name three Plaintiffs, Lawrence Argabright, Victoria Fecht, and Librado Montano, to represent, alternatively or in addition to the nationwide class, subsets of the class of purchasers who reside in New Jersey, New York, and Arizona, respectively. (Id. ¶ 25-27.)

Lawrence Argabright, a resident of Shamong, New Jersey, purchased his Rheem HVAC system on September 9, 2011, from Crown Boiler Company and had it installed by David Wardell Heating and Cooling. (Id. ¶¶ 64, 66.) Plaintiff first noticed that his HVAC system was not cooling his home in July 2014, and subsequently called technicians three times over the course of July and August to inspect his unit. On the last visit, the technician noted that the leaks in refrigerant were due to a faulty evaporator coil, which the technician replaced. (Id. ¶¶ 67-69.) Plaintiff alleges that although Defendant provided Plaintiff with a new coil under its warranty, Plaintiff paid a total of $844.45 for replacement refrigerant and labor from the threeservice visits, which Defendant did not cover. (Id. ¶ 70.)

Victoria Fecht, a resident of Carle Place, New York, purchased and installed her Rheem HVAC unit through Daverio Mechanical, a Rheem Top Contractor, who represented that Rheem was superior to comparable products from other manufacturers.³ (Id. ¶¶ 72-74.) Plaintiff's HVAC system was installed in 2010. In June of 2014, Plaintiff noticed that the unit was not adequately cooling her home, and an inspection by a technician revealed that the system had a refrigerant leak. (Id. ¶ 77.) During a second service visit in August 2014, the inspecting technician noted that the unit's evaporator coils had multiple leaks, and a new coil was installed. (Id. ¶ 78.) Plaintiff paid for replacement refrigerant, service costs, and the new evaporator coil which together totaled $2,148.38. She alleges that to date, Defendant has not provided any compensation or reimbursement. (Id. ¶ 79.)

Plaintiff Librado Montano, a resident of Sahuarita, Arizona, purchased and installed a Rheem HVAC system in his home in or around October 2011, after a Rheem Top Contractor, Oasis Air Conditioning & Heating, represented to him that Defendant'sunits were superior to its competitors. (Id. ¶¶ 80-84.) Plaintiff noticed that the HVAC unit was not cooling his home in or around March 2015 and called the same contractor who had installed his unit to diagnose and fix the problem. The technician found a leak in the evaporator coil in March of 2015, and replaced the coil one month later in April. (Id. ¶¶ 85-87.) Plaintiff asserts that the coil was covered under Defendant's warranty, but that Defendant has not compensated him for the $1,312 he paid in total for replacement refrigerant and service costs. (Id. ¶ 88-89). There are no allegations that any of the three Plaintiffs' HVAC units suffered problems after the replacement coils were installed.

Plaintiffs' Complaint asserts claims for breach of express warranty (Count I); breach of implied warranty of merchantability (Count II); violation of the Magnuson-Moss Warranty Act ("MMWA") (Count V); fraudulent concealment (Count III); negligent misrepresentation (Count IV); strict product liability (Count VI); violations of the New Jersey Consumer Fraud Act ("NJCFA"), New York General Business Law ("N.Y. GBL") § 349, and the Arizona Consumer Fraud Act ("ACFA") (Counts VII, VIII, & IX); unjust enrichment (Count X); and declaratory relief (Count XI). Because Plaintiffs do not oppose the dismissal of their claim for strict liability (see Pl. Br. [Docket Item 26] at 14 n.3), Count VI willbe dismissed with prejudice.

Defendant seeks to dismiss the remaining ten counts (Def. Br. [Docket Item 8] and Def. Reply [Docket Item 29]), and the Court will address each claim in turn.

III. STANDARD OF REVIEW⁴

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. 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...