Level at 401 LP v. First Co.

LEVEL AT 401 LP, Plaintiff, v. FIRST CO., EMERSON CLIMATE TECHNOLOGIES, INC.,and COPELAND CORPORATION, LLC, Defendants.

Case No. 5:20-cv-00085-M

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION

July 20, 2020

OPINION AND ORDER

This matter comes before the court on the May 19, 2020 motions to dismiss the amended complaint filed by (1) Defendant First Co. ("First Company") [DE-29] and (2) Defendants Emerson Climate Technologies, Inc. ("Emerson") and Copeland Corporation, LLC ("Copeland," and collectively with Emerson, "Emerson/Copeland") [DE-31]. For the reasons that follow, Defendants' motions are GRANTED.

I. Background

In its amended complaint, Plaintiff Level at 401 LP alleges the following facts: Emerson/Copeland¹ manufactured and sold compressors for heating, ventilating, and air-conditioning units ("HVAC units").[DE-23 ¶¶ 8, 14] Sometime in 2014, First Company, an HVAC-unit manufacturer: (1) installed Emerson/Copeland compressors into certain of its HVAC units; and (2) sold approximately 300 HVAC units containing the Emerson/Copeland compressors to the owner of a newly-constructed apartment complex in Raleigh, North Carolina. [DE-23 ¶¶ 8, 14] As part of the sale, First Company provided a limited warranty that set forth as follows:

First Co. products are warranted to be free from defects in material and workmanship under normal use and maintenance for a period of one year from the date of original installation or 18 months from the date of manufacture. Compressors are warranted for 5 years. A new or rebuilt part to replace any defective part that fails within the warranty period will be provided if the defective part is returned to the factory. [DE-23-1]

"Shortly after [First Company] manufactur[ed] the HVAC units" [DE-34 at 1], Emerson/Copeland informed First Company via an August 2014 bulletin of an issue that some were having with the Emerson/Copeland compressors, namely that the compressors were causing thermostatic-expansion valves to fail in some HVAC units in which the compressors were installed. [DE-23 ¶ 11-12; DE-7-1] Neither Emerson/Copeland nor First Company took any steps to inform the public of the issue with the Emerson/Copeland compressors or the First Company HVAC units in which the compressors were installed. [DE-23 at ¶¶ 12-14]

In February 2017, Plaintiff purchased the Raleigh apartment complex from an unspecified seller. [DE-23 ¶ 10] As part of the transaction, Plaintiff hired a consultant to inspect the First Company HVAC units, and the consultant indicated that he had observed no mechanical issues with them. [DE-23 ¶ 10]

Sometime in the fall of 2019, more than 70 of the HVAC units began to fail. [DE-23 ¶ 16] Plaintiff hired a mechanical engineer to determine the cause of these failures, and the engineer concluded that thecause was the "defective Emerson/Copeland compressor unit[.]" [DE-23 ¶ 17] On December 10, 2019, Plaintiff notified Defendants via certified mail of "these damages" and its "intention to repair and/or replace the defective HVAC units[,]" and requested that Defendants contact Plaintiff's representatives. [DE-23 ¶ 20] None of Defendants responded to Plaintiff's request. [DE-23 ¶ 20]

On February 4, 2020, Plaintiff filed a complaint in Wake County, North Carolina Superior Court alleging that Defendants had unlawfully concealed the compressors' defective condition from Plaintiff, and brought causes of action in breach of warranty, negligence, fraud/fraudulent concealment, and violation of North Carolina's Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1 (the "UDTPA"). [DE-1-4] Defendants removed the case to this court on March 6, 2020. [DE-1]

Plaintiff filed its amended complaint in this court with Defendants' consent on April 24, 2020. [DE-23] In the amended complaint, Plaintiff brings the following causes of action: (1) breach of express warranty, against First Company; (2) violation of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2310(d) (the "MMWA"), against First Company; (3) negligence, against First Company; (4) negligence, against Emerson/Copeland; (5) fraud/fraudulent concealment, against all Defendants; and (5) violation of the UDTPA, against all Defendants. [DE-23] Plaintiff seeks to recover damages for having to "repair[] and replace[] the defective HVAC units[,]" including HVAC units that are not alleged to have yet failed.² [DE-23 ¶¶ 19, 27, 37] On May 19, 2020, Defendants moved to dismiss the amended complaint pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) ("Rule 9(b)" and "Rule 12(b)(6)"). [DE-29 (First Company); DE-31 (Emerson/Copeland)] Defendants' motions have been fully briefed and are ripe for adjudication.

II. Legal standards

Under Rule 12(b)(6), a defendant may move the court to dismiss a pleading for "failure to state a claim upon which relief can be granted[.]" Fed. R. Civ. P. 12(b)(6).

When considering a Rule 12(b)(6) motion to dismiss, the court must accept as true all of the factual allegations contained within the complaint and must draw all reasonable inferences in the plaintiff's favor. Hall v. DIRECTV, LLC, 846 F.3d 757, 765 (4th Cir. 2017). However, any legal conclusions proffered by the plaintiff need not be accepted. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.").

To survive a Rule 12(b)(6) motion, the plaintiff's factual allegations, accepted as true, must "state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). "Plausibility requires that the factual allegations 'be enough to raise a right to relief above the speculative level[.]'" Robertson v. Sea Pines Real Estate Cos., 679 F.3d 278, 288 (4th Cir. 2012) (quoting Twombly, 550 U.S. at 555). "Although it is true that the complaint must contain sufficient facts to state a claim that is plausible on its face, it nevertheless need only give the defendant fair notice of what the claim is and the grounds on which it rests." Hall, 846 F.3d at 765 (internal quotation marks and citation omitted).

Under the heightened pleading standard of Rule 9(b), a party bringing a cause of action alleging fraud must also "state with particularity the circumstances constituting fraud[.]" Fed. R. Civ. P. 9(b). The set of facts that must be pled with particularity varies based upon the nature of the fraud being alleged. See infra Section III(a)(iv) (discussing Rule 9(b)'s pleading requirements for fraudulent-omission claims). While a plaintiff is required to plead the allegedly-fraudulent conduct with particularity, "a court shouldhesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant has been made aware of the particular circumstances for which [it] will have to prepare a defense at trial, and (2) that plaintiff has substantial prediscovery evidence of those facts." Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999).

III. Analysis

As mentioned above, Plaintiff's amended complaint contains the following causes of action: (1) breach of express warranty, against First Company; (2) violation of the MMWA, against First Company; (3) negligence, against First Company; (4) negligence, against Emerson/Copeland; (5) fraud/fraudulent concealment, against all Defendants; and (5) violation of the UDTPA, against all Defendants. [DE-23] Defendants argue that each of Plaintiff's causes of action fails under Rules 9(b) and/or 12(b)(6). The court will address the various causes of action brought against First Company and Emerson/Copeland in turn.

a. First Company

i. Breach of express warranty

"A warranty, express or implied, is contractual in nature." Wyatt v. N.C. Equip. Co., 253 N.C. 355, 358, 117 S.E.2d 21, 24 (1960). As with any other breach-of-contract action, a cause of action for breach of an express warranty requires plausible allegations that (1) defendant made an express warranty that is enforceable by the plaintiff and (2) defendant breached the terms of the express warranty. See Cummings v. Carroll, No. COA19-283, 841 S.E.2d 555, 572 (N.C. Ct. App. Mar. 3, 2020) ("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." (quotation marks and citation omitted)). "As a contract being interpreted, the terms of an express warranty are . . . construed in accordance with their plain meaning[.]" Hills Mach. Co., LLC v. Pea Creek Mine, LLC, No. COA18-890, 828 S.E.2d 709, 715 (N.C. Ct. App. May 21, 2019) (internal quotation marks and citation omitted).

As mentioned above, First Company is alleged to have provided a limited warranty in connection with the sale of the HVAC units (the "Warranty"), set forth in part as follows:

First Co. products are warranted to be free from defects in material and workmanship under normal use and maintenance for a period of one year from the date of original installation or 18 months from the date of manufacture. Compressors are warranted for 5 years. A new or rebuilt part to replace any defective part that fails within the warranty period will be provided if the defective part is returned to the factory. [DE-23-1]

In its motion to dismiss, First Company argues that Plaintiff has failed to adequately allege that First Company breached the Warranty because the amended complaint contains no allegation that any part was "returned to [First Company's] factory." [DE-30 at 17] The amended complaint does not contain an allegation that any part was returned to any factory, and Plaintiff appears to concede that fact within its response brief. [DE-34 at 7] Plaintiff argues, however, that the most reasonable interpretation of the Warranty is that First Company "must return the defective part after a replacement has been installed" [DE-34 at 7], essentially arguing that the return of the defective part is not a condition...