Crossroads Trucking Corp. v. TruNorth Warranty Plans of N. Am.

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CROSSROADS TRUCKING CORP., Plaintiff, v. TRUNORTH WARRANTY PLANS OF NORTH AMERICA, LLC and 19TH CAPITAL GROUP, LLC, Defendants.

No. 3:21-cv-00318-RJC-DSC

United States District Court, W.D. North Carolina, Charlotte Division

August 31, 2022

ORDER

Robert J. Conrad, Jr. United States District Judge

THIS MATTER comes before the Court on Defendant 19th Capital Group, LLC's Motion to Dismiss for Failure to State a Claim and Failure to Comply With The Enhanced Pleading Requirements (Doc. No. 15), the Magistrate Judge's Memorandum and Recommendation (the “M&R) (Doc. No. 29), and Plaintiff's Objection to the M&R (Doc. No. 31).

I. BACKGROUND

A. Factual Background

Accepting the allegations in the Complaint as true, Plaintiff Crossroads Trucking Corp. (“Crossroads”), an equipment transportation company, primarily transports equipment for a carnival company. Crossroads leases trucks to accomplish its transportation goals, and did so from Defendant, 19th Capital Group, LLC (“19th Capital”), a tractor-trailer leasing company. As part of the transaction, Defendant TruNorth Warranty Plans of North America, LLC (“TruNorth”) provided a warranty to Plaintiff. Plaintiff alleges that TruNorth and 19th Capital have a close relationship and partnership in which they fraudulently induce customers to lease defective trucks through a combination of misrepresentations about the quality of the trucks and the robust coverage of the warranties.

After 19th Capital solicited Plaintiff via email, phone calls, and marketing communications, Plaintiff leased a freightliner truck (the “First Freightliner”) from 19th Capital, and TruNorth provided the associated warranty (the “First Warranty”). 19th Capital represented to Plaintiff that the warranty was robust and would cover any and all engine failure. Plaintiff received the First Warranty about a month after leasing the First Freightliner. Subsequently, the First Freightliner engine failed. Pursuant to the First Warranty, TruNorth replaced it with a new Freightliner (the “Second Freightliner”) as well as an almost identical lease and warranty. Again, Plaintiff received a copy of such warranty (the “Second Warranty”) about a month after leasing the Second Freightliner.

Roughly three months after Plaintiff received a copy of the Second Warranty, the Second Freightliner suffered engine failure. Plaintiff followed the Second Warranty's requirements by obtaining a repair estimate and filing a claim with TruNorth. TruNorth denied coverage because the check engine light had illuminated within 100 hours before the engine failed. Despite Plaintiff's attempts to show that the engine light was unrelated to the engine failure, TruNorth denied the claim a second time.

B. Procedural Background

Plaintiff filed this action bringing the following claims: (1) violation of the Unfair and Deceptive Trade Practices Act (“UDTPA”); (2) Negligence; (3) Fraud; (4) Breach of Contract; and (5) Negligent Misrepresentation. Subsequently, the Magistrate Judge granted TruNorth's request to enforce the dispute resolution provision contained in its warranty agreement with Plaintiff, and the matter is stayed pending arbitration as to Plaintiff's claims against TruNorth. Separately, 19th Capital filed its Motion to Dismiss, seeking dismissal of all claims against it under Federal Rules of Civil Procedure 9(b) and 12(b)(6).

II. LEGAL STANDARD

A district court may assign dispositive pretrial matters, including motions to dismiss, to a magistrate judge for “proposed findings of fact and recommendations.” 28 U.S.C. § 636(b)(1)(A) & (B). The Federal Magistrate Act provides that a district court “shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” Id. § 636(b)(1)(C); Fed.R.Civ.P. 72(b)(3). However, “when objections to strictly legal issues are raised and no factual issues are challenged, de novo review of the record may be dispensed with.” Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982). De novo review is also not required “when a party makes general and conclusory objections that do not direct the court to a specific error in the magistrate's proposed findings and recommendations.” Id. Similarly, when no objection is filed, “a district court need not conduct a de novo review, but instead must ‘only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.'” Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310, 315 (4th Cir. 2005) (quoting Fed.R.Civ.P. 72, advisory committee note).

The standard of review for a motion to dismiss under Rule 12(b)(6) for failure to state a claim is well known. Fed.R.Civ.P. 12(b)(6). “A motion to dismiss under Rule 12(b)(6) ‘challenges the legal sufficiency of a complaint,' including whether it meets the pleading standard of Rule 8(a)(2).” Fannie Mae v. Quicksilver LLC, 155 F.Supp.3d 535, 542 (M.D. N.C. 2015) (quoting Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009)). A complaint attacked by a Rule 12(b)(6) motion to dismiss will survive if it contains enough facts “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial plausibility means allegations that allow the court to draw the reasonable inference that defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678.

Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Specific facts are not necessary; the statement need only “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. Additionally, when ruling on a motion to dismiss, a court must accept as true all factual allegations contained in the complaint. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). Nonetheless, a court is not bound to accept as true legal conclusions couched as factual allegations. Papasan v. Allain, 478 U.S. 265, 286 (1986). “Courts cannot weigh the facts or assess the evidence at this stage, but a complaint entirely devoid of any facts supporting a given claim cannot proceed.” Potomac Conference Corp. of Seventh-Day Adventists v. Takoma Acad. Alumni Ass'n, Inc., 2 F.Supp.3d 758, 767-68 (D. Md. 2014). Furthermore, the court “should view the complaint in a light most favorable to the plaintiff.” Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993).

III. DISCUSSION

The Magistrate Judge recommended granting 19th Capital's Motion to Dismiss all claims against 19th Capital. In response, Plaintiff raised six objections.

A. Breach of Contract Claim

First, the M&R recommended dismissing Plaintiff's breach of contract claim because Defendant 19th Capital is not a party to the Second Warranty. Plaintiff objects, arguing 19th Capital is a party to the Second Warranty because its signature and logo are on the warranty agreement, and 19th Capital and TruNorth are close partners. The Court agrees with the Magistrate Judge that 19th Capital is neither a party to the Second Warranty nor is it responsible to Plaintiff for any of the obligations under the warranty.

Under North Carolina law, a warranty is “contractual in nature.” Allen v. Roberts Const. Co., 138 N.C.App. 557, 570-71 (2000). “The word ‘warranty' by definition implies a contractual relation between the party making a warranty and the beneficiary to the warranty.” Murray v. Bensen Aircraft Corp., 259 N.C. 638, 641 (1963). “The elements of a claim for breach of contract are (1) existence of a valid contract and (2) breach of the terms of that contract.” Supplee v. Miller-Motte Bus. Coll., Inc., 768 S.E.2d 582, 590 (N.C. Ct. App. 2015). Such an action requires “‘the existence of a contract between plaintiff and defendant, the specific provisions breached, [t]he facts constituting the breach, and the amount of damages resulting to plaintiff from such breach.'” Sides v. Athene Annuity & Life Co., No. 3:19-cv-703-GCM, 2020 WL 2114380, at *3 (W.D. N.C. May 4, 2020). For a contract to be formed, there must be an offer and an acceptance in which two parties mutually assent “to the same thing in the same sense.” Yeager v. Dobbins, 252 N.C. 824, 828 (1961). In other words, “a valid contract exists only where there has been a meeting of the minds as to all essential terms of the agreement.” Northington v. Michelotti, 121 N.C.App. 180, 184 (1995). “[A] non-party to a contract ‘cannot be held liable for any breach that may have occurred.'” Howe v. Links Club Condo. Ass'n, Inc., 263 N.C.App. 130, 139 (2018) (citing Canady v. Mann, 107 N.C.App. 8 252, 259 (1992)); Nationwide Mut. Ins. Co. v. Chantos, 293 N.C. 431, 438 (1977) (“It is a fundamental principle of contract law that parties to a contract . . . may not bind a third person who is not a party to the contract in absence of his consent to be bound”).

Here the Second Warranty references 19th Capital only as the “retailer” and “lien holder,” and 19th Capital's representative signed the Second Warranty as an “authorized retailer” of the TruNorth warranty. (Doc. No. 17-4). TruNorth, not 19th Capital, owes all obligations under the Second Warranty. TruNorth appears thirty times on the Second Warranty, detailing its obligations and authority under the agreement. For example, the section titled “Claim Procedure and Breakdown Responsibilities,” requires “[i]f breakdown occurs, please call TruNorth™ Claims immediately” and sets forth both TruNorth's and Plaintiff's obligations for claims made under the warranty. In...