18 F. Supp. 3d 583
D.N.J.2014Background
- Inserts East agreed to buy a remanufactured Harris N400B press from GI for $2.7 million and GI represented the press as a N400B model.
- The press allegedly never worked reliably; when run, speeds above 24,000 iph caused vibration and misregistration, making it commercially unusable.
- Inspection reportedly revealed damaged bearings and missing upgrades GI had promised, with GI attempting cure efforts that were futile.
- Inserts East contends GI sold a remanufactured N400 (not the N400B) and that several component parts had serial numbers removed prior to delivery.
- The contract contains a 12-month warranty and a broad damages limitation excluding consequential damages; the warranty did not expressly guarantee the N400B model.
- Seven counts are pleaded: breach of express warranty, rejection/revocation of acceptance, breach of contract, unjust enrichment, CFA claim, common-law fraud, and an unconscionability challenge to the damage-limitation clause; Counts 4–7 target GI (and Kiley for Counts 5–6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Count 4 (unjust enrichment) duplicative of Count 2 (rejection/acceptance)? | Unjust enrichment may be pled alternate theories without double recovery. | Unjust enrichment duplicates the rejection/acceptance remedy. | Count 4 denied dismissed count not grounds for dismissal; alternative theories permitted. |
| Do CFA and common-law fraud claims against Kiley survive individually? | Kiley made a pre-contract misrepresentation that the press was N400B. | Kiley should be shielded from CFA/liability; pleading insufficient specificity. | Both CFA and common-law fraud claims against Kiley survive. |
| Does the economic loss doctrine bar CFA and common-law fraud claims? | CFA and fraud claims are extrinsic to contract and not barred. | Economic loss doctrine may bar such claims if integral to contract. | CFA claim not barred; common-law fraud survives under fraud-in-the-inducement exception. |
| Are the CFA and common-law fraud claims adequately pled under Rule 8 and 9(b)? | Complaint provides specific misrepresentation allegations and context. | Pleading is vague about who made which misrepresentations and intent. | Claims adequately pled; sufficient specificity and intent inferred. |
| Is the damages-limitation clause unenforceable as unconscionable? | Alleged fraud could show unfair bargaining and discovery should determine unconscionability. | Consequence damages exclusion valid absent unconscionable conduct. | Unconscionability issue remains; denial of motion to dismiss Count 7. |
Key Cases Cited
- Saltiel v. GSI Consultants, 170 N.J. 297 (N.J. 2002) (personal liability for officers in intentional fraud; economic loss exception noted)
- Lithuanian Commerce Corp. v. Sara Lee Hosiery, 219 F. Supp. 2d 600 (D.N.J. 2002) (economic loss doctrine; fraud-in-the-inducement exception; extrinsic vs intrinsic fraud)
- Florian Greenhouse v. Cardinal IG Corp., 11 F. Supp. 2d 521 (D.N.J. 1998) (CFA claim not subsumed by contract; legislative intent to allow treble damages)
- Bracco Diagnostics, Inc. v. Bergen Brunswig Drug Co., 226 F. Supp. 2d 557 (D.N.J. 2002) (fraud in the inducement and extraneous contract considerations; pre-contract misrepresentations)
- Alloway v. General Marine Industries, 149 N.J. 620 (N.J. 1997) (fraud/inducement and contractual rights; economic loss doctrine considerations)
- Carter v. Exxon Co. USA, 177 F.3d 197 (3d Cir. 1999) (unconscionability and bargain power considerations in contract terms)
- Duffy v. Charles Schwab & Co., Inc., 123 F. Supp. 2d 802 (D.N.J. 2000) (pleading standards; contracts and quasi-contracts distinct theories)