Before the Court is Defendant Swift Transportation Co., Inc.’s (“Swift”) Motion to Dismiss filed on July 17, 2009. 1 (D.E. # 28.) Plaintiff Michael Pascarella (“Plaintiff’) filed a response in opposition on November 4, 2009, and Swift filed a reply on November 25, 2009. For the reasons stated below, Swift’s motion to dismiss is GRANTED IN PART and DENIED IN PART.
I. BACKGROUND 2
Plaintiff, a resident of Burlington County, New Jersey, brings this case as a putative class action against Swift, a Nevada corporation with its principal place of business located in Phoenix, Arizona. (Pl.’s First Am. Compl. ¶¶ 1, 8, 13.) Plaintiffs complaint also names as defendants Sharon A. Harrington (“Commissioner Harrington”), the Chief Administrator of the New Jersey Motor Vehicle Commission, and David Mitchell (“Commissioner Mitchell”), the Commissioner of the Tennessee Department of Safety. (Id. ¶¶ 15-16.)
Between May 1, 2005 and January 31, 2008, Swift operated the Swift Driving Academy (“Swift Academy”) in Millington, Tennessee — which provided training to persons wishing to obtain Class A Commercial Drivers Licenses (“CDL”) — and also acted as a third-party contractor for the State of Tennessee, administering official CDL tests to CDL applicants. (Id. ¶¶ 14, 34.) Swift charged its students tuition in the amount of $3,900 per student, which included a bus ticket to Millington, lodging in a motel owned by Swift, and associated fees. (Id. ¶¶ 35, 37.) Swift represented to students that they could obtain a Tennessee CDL by completing Swift’s driver education course and then successfully passing the CDL test Swift administered for the State of Tennessee. (Id. ¶ 36.) Some of Swift’s students later obtained New Jersey CDLs on the basis of the Tennessee CDLs they received through Swift. (See id. ¶¶ 45-49.)
In February 2008, federal agents raided Swift’s offices in Memphis and Millington. (Id. ¶ 51.) The State of Tennessee, through Commissioner Mitchell, then notified licensing authorities in other states that Swift’s testing procedures from May 2005 to January 2008 were flawed as a result of Swift’s failure to following rules and regulations governing CDL testing. (Id. ¶ 54.) Plaintiff alleges that the State of Tennessee approved the ostensible irregularities in CDL testing, and that the decision to nullify Swift’s test results arises solely from a political disagreement between the Tennessee Department of Safety’s current and former commissioners. (Id. ¶ 59-60.)
Following receipt of the notification sent by the State of Tennessee, the State of New Jersey issued notices to CDL-holders who had been trained and licensed through Swift that their New Jersey CDLs would be revoked in thirty days because of unspecified improprieties by Swift.
(Id.
¶ 70.) New Jersey’s notices required drivers to take a new CDL test and to pay testing fees in order to keep their licenses.
(Id.
¶ 71.) Plaintiff alleges that Commissioners Harrington and Mitchell failed to provide him and other similarly situated
Plaintiff filed suit in the United States District Court for the District of New Jersey on April 23, 2009, and amended his complaint on June 16, 2009. Plaintiff sued Commissioners Harrington and Mitchell for injunctive and declaratory relief under 42 U.S.C. § 1983. {Id. ¶¶ 125-159.) Plaintiffs causes of action against Swift include claims for violation of the New Jersey Consumer Fraud Act and deprivation of federally protected rights under § 1983 as well as for declaratory and injunctive relief, unjust enrichment, and negligence. {Id. ¶¶ 160-195.) On July 14, 2009, the federal district court in New Jersey dismissed Plaintiffs claim against Commissioner Harrington, finding that “Plaintiff received sufficient notice of the intended deprivation and was not deprived of a hearing because he did not request a hearing, as provided for under New Jersey law.” (Opinion of July 14, 2009 at 28.) On July 21, 2009, Plaintiff filed a stipulation of dismissal under Rule 41(a) of the Federal Rules of Civil Procedure dismissing his claim as to Commissioner Mitchell without prejudice. Plaintiffs claims as to Swift remain pending and are the subject of the instant motion.
II. LEGAL STANDARD
A. Legal Standard for Motion under Fed.R.Civ.P. 12(b)(1)
A motion to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure asserts that the court lacks subject matter jurisdiction. A motion to dismiss for lack of subject matter jurisdiction may challenge the sufficiency of the complaint itself — in which case it constitutes a facial attack — or it may challenge the factual existence of subject matter jurisdiction — in which case the motion constitutes a factual attack.
United States v. Ritchie,
B. Legal Standard for Motion under Fed.R.Civ.P. 12(b)(6)
A motion to dismiss a complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure only tests whether a cognizable claim has been pled.
Scheid v. Fanny Farmer Candy Shops, Inc.,
Likewise, the complaint must contain factual allegations sufficient “to raise a right to relief above the speculative level[.]”
Twombly,
III. ANALYSIS
A. New Jersey Consumer Fraud Act Claim
Swift first argues that under a proper choice-of-law analysis, Tennessee — rather than New Jersey — law should be applied to Plaintiffs claims because Tennessee is the state possessing the most significant relationship to the parties and events. Thus, reasons Swift, Plaintiffs claim under the New Jersey Consumer Fraud Act (“NJCFA”) should be dismissed. Additionally, Swift argues that Plaintiffs complaint fails to state a claim for relief under the Tennessee Consumer Protection Act— the Tennessee statute comparable to the NJCFA. Furthermore, Swift contends that, even if the Court applied New Jersey law to this case, the NJCFA does not extend to the type of actions alleged in Plaintiffs complaint.
Plaintiff responds that Swift has misconstrued the allegations of his complaint. Whereas Swift focuses on Plaintiffs allegations that it contracted with students and conducted improper testing all within the State of Tennessee, Plaintiff urges the Court to construe his NJCFA claim as addressing the wrongful actions Swift allegedly took in the State of New Jersey— specifically, advertising for and recruiting students to enroll in the Swift Academy. According to Plaintiff, Swift advertised to potential students in New Jersey, inducing them to enroll in the Swift Academy by representing that Swift could validly conduct testing that would lead to the issuance of a CDL from state licensing officials when Swift knew or should have known that its testing procedures were not legally sufficient to lead to a valid CDL. Thus, it is Swift’s allegedly false and misleading marketing that Plaintiff argues is subject to application of New Jersey law and thereby actionable under the NJCFA. 3
1. Choice-of-Law Analysis
This action originated in the U.S. District Court for the District of New Jersey and was later transferred to this Court pursuant to 28 U.S.C. § 1404. Ordinarily, a federal court exercising diversity juris
Relying upon the
Restatement (Second) of Conflict of Laws,
New Jersey applies a flexible “governmental interest” analysis to determine what state has a greater interest in applying its law to an issue and thus ought to have its laws applied to a particular case.
Erny v. Estate of Merola,
Because Plaintiffs response clarifies that he seeks recovery under the NJCFA only as to false and misleading marketing by Swift in the State of New Jersey, the Court need only consider what state’s law properly applies to this aspect of Plaintiffs suit.
4
Assuming without deciding that there exists a conflict between Tennessee and New Jersey law, relevant considerations clearly counsel application of New Jersey law to Plaintiffs allegations of deceptive marketing. The alleged conduct in question is misleading advertising directed to Plaintiff and other residents of New Jersey. Furthermore, Plaintiffs suit alleges that he and other residents of New Jersey were induced by that advertising to travel to Tennessee to receive certain services. Thus, New Jersey is the situs of the material events leading to creation of the relationship between Plaintiff and Swift. New Jersey’s interest in regulating and curtailing misleading advertisements directed towards its residents is substantial, while Tennessee’s interest in advertising that occurs in New Jersey is far more attenuated. Applying another state’s law would risk undermining the level of protection that the New Jersey legislature intended for its consumers when enacting the NJCFA and would expose its businesses to unfair competition from out-of-
2. Other Aspects of Plaintiff’s NJCFA Claim
a. Tennessee Consumer Protection Act
After arguing in its motion for application of Tennessee law, Swift then contends that its actions did not violate Tennessee’s Consumer Protection Act. As the Court has already determined that New Jersey law applies to this aspect of Plaintiffs complaint, this argument is moot.
b. Pleading with Specificity under Fed.R.Civ.P. 9(b)
Next, Swift asserts that Plaintiff has not pleaded fraud with the specificity required by Rule 9(b) of the Federal Rules of Civil Procedure, which states that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” While Rule 9(b) is said to impose a particularity requirement on averments of fraud or mistake, this must be understood in conjunction with the liberal pleading standard established by Rule 8(a)(2).
See Michaels Bldg. Co. v. Ameritrust Co., N.A.,
Plaintiff argues that a defendant may violate the NJCFA in ways other than actual fraud, and thus Rule 9(b) is inapplicable to his NJCFA claims. The Court agrees that the NJCFA covers many forms of “unconscionable commercial practice,”
see
N.J.S.A. 56:8-2, and instances of sharp dealing besides conduct that is “fraudulent” in the technical sense.
See, e.g., Wozniak v. Pennella,
Even if Plaintiffs NJCFA claim were subject to Rule 9(b), however, the Court would still find that, given the apparently limited information currently available to Plaintiff, he has sufficiently apprised Swift of his allegations since Swift is “not left guessing about the gener
c. Effect of Contract between Plaintiff and Swift
Finally as to Plaintiffs NJCFA claim, Swift contends that the contract between Plaintiff and Swift precludes Plaintiffs claim. Specifically, Swift asserts that its contract with Plaintiff only granted Plaintiff the right to receive training — not CDL testing — and the contract expressly disclaims any guarantee that the student will be able to pass Tennessee’s CDL exam or secure a license. Neither argument is availing for Swift.
Based on the allegations of Plaintiffs complaint as clarified by Plaintiffs response, the arrangement between Plaintiff and Swift for CDL testing existed separate and apart from the relationship established by the written contract between the parties. The absence of any mention of CDL testing in the contract is thus of no moment. Furthermore, Swift cannot rely upon the contractual disclaimer since Plaintiffs suit is premised on Swift’s misconduct in administering testing, not on any failure to properly train Plaintiff.
B. Claim under 42 U.S.C. § 1983
Swift next argues that Plaintiffs claim under 42 U.S.C. § 1983 fails as a matter of law because (1) Plaintiff does not allege that Swift approved or participated in the deprivation of Plaintiffs constitutional rights; and (2) Plaintiff does not allege that Swift has a policy that directly resulted in the alleged deprivation of Plaintiffs constitutional rights.
Considering Swift’s second point first, the Court disagrees that Plaintiffs failure to identify in his complaint the particular policy or custom responsible for the deprivation of his rights necessarily mandates dismissal under Rule 12. Although Swift correctly notes that a private corporation can only be held liable under § 1983 when it has a policy or custom that caused the alleged civil rights violation,
see Street v. Corrections Corp. of Am.,
The Court nevertheless agrees with Swift that Plaintiff has not sufficiently alleged a cause of action against Swift under § 1983. The gravamen of Plaintiffs allegations against state authorities consists of assertions that Commissioners Harrington and Mitchell deprived CDL-holders of due process in revoking their CDLs without providing a pre-deprivation hearing and affording other protections
Plaintiff may have been harmed by Commissioner Mitchell’s revocation of his CDL, and Plaintiff may have also been harmed by Swift’s testing procedures. On the face of Plaintiffs complaint, however, these are distinct wrongs, and the Court finds no basis for holding Swift liable under § 1983. Accordingly, Plaintiffs § 1983 claim is dismissed.
C. Unjust Enrichment
Plaintiff also asserts a cause of action for unjust enrichment. “The elements of an unjust enrichment claim are: 1) ‘[a] benefit conferred upon the defendant by the plaintiff; 2) ‘appreciation by the defendant of such benefit’; and 3) ‘acceptance of such benefit under such circumstances that it would be inequitable [ ] to retain the benefit without payment of the value thereof.’ ”
Freeman Indus., LLC v. Eastman Chem., Co., Inc.,
Plaintiffs response clarifies that he is proceeding under the theory that there existed an arrangement by which Plaintiff paid Swift for CDL testing and that testing was ultimately found to be improper. Plaintiff concedes that his complaint mistakenly states that this testing was part of the written contract between the parties. Plaintiff instead contends that there was a separate agreement on testing and requests leave to amend his complaint, if necessary, to make this allegation clear. Given the clarification provided in Plaintiffs response, the Court finds that Plaintiff may properly proceed on his claim for unjust enrichment using the theory that Swift’s actions in testing Plaintiff resulted in Plaintiff conferring a benefit on Swift under circumstances such that Swift’s retention of that benefit would be inequitable. Swift’s request to dismiss Plaintiffs cause of action for unjust enrichment is therefore denied, and Plaintiff shall have fifteen days from the date of this order to file an amended complaint clarifying his allegations.
D. Declaratory Relief
Swift similarly argues that Plaintiffs’ claims for declaratory relief should be dismissed because Plaintiff did not allege how Swift failed to comply with its contractual obligation to provide training through the Swift Academy. Pointing to the contract
As discussed above, Plaintiffs response makes clear that his complaint mistakenly alleged that testing was part of the written contract between the parties. Based on the clarification provided by Plaintiffs response, the Court finds that there exists a legitimate dispute between the parties as to the nature and extent of the duties for testing under a separate arrangement or agreement. Accordingly, Swift’s argument for dismissal of Plaintiffs claim for declaratory relief is rejected, and Plaintiff shall have fifteen days from the date of this order to file an amended complaint clarifying his allegations.
E. Negligence Claim
1. Existence of a Duty to Plaintiff
Swift also argues that Plaintiffs position that he should recover for Swift’s flawed testing procedures under a theory of negligence must be dismissed because Swift owed Plaintiff no duty with respect to testing. According to Swift, its duties to Plaintiff were limited to those described in the contract for training at the Swift Academy. As noted above, however, Plaintiff asserts that a separate arrangement existed as to testing. It is therefore of no consequence that testing is not mentioned in the parties’ written contract.
Swift also argues that in its capacity as a third-party tester for the State of Tennessee, it owed no duty to Plaintiff, or anyone else being tested, because its duties were solely owed to the State of Tennessee. Quoting two sentences from Tennessee state regulations that require third-party testers to comply with all of the same rules and regulations governing a state examiner, Swift contends that it owed a duty only to the State of Tennessee. While the quoted regulations make clear that the State of Tennessee required Swift to adhere to certain practices, these regulations do not preclude the possibility that Swift also owed a duty to examinees, and Swift cites no authority for the proposition that it owed its examinees no duty. To the contrary, an agent who commits a tort in the course of working for a principal is generally liable to the party injured.
See, e.g., Givens v. Mullikin ex rel. Estate of McElwaney,
2. The Economic Loss Doctrine
Swift further contends that Plaintiffs negligence claim must be dismissed under the economic loss doctrine, “a judicially created principle that reflects an attempt to maintain separation between contract law and tort law by barring recovery in tort for purely economic loss,”
Lincoln Gen. Ins. Co. v. Detroit Diesel Corp.,
For support, Swift relies on three cases — one published, two unpublished— from the Tennessee Court of Appeals.
6
In the sole published Tennessee case Swift cites directly addressing the issue,
United Textile Workers v. Lear Siegler Seating Corp.,
the court held that the economic loss doctrine precluded a suit by workers seeking lost wages against a factory owner whose propane tank leaked and caused the workers to lose a day of pay when their places of employment were closed.
The Tennessee Court of Appeals has since implicitly restricted the economic loss doctrine to claims involving products liability or the sale of goods, at least where the plaintiff can establish a sufficiently direct relationship between the defendant’s negligent act and the plaintiffs economic loss.
Trinity Indus., Inc. v. McKinnon Bridge Co., Inc.,
The economic loss rule is a judicially created principle that requires parties to live by their contracts rather than to pursue tort actions for purely economic losses arising out of the contract. The rule comes into play when the purchaser of a product sustains economic loss without personal injury or damage to property other than the product itself. Inthat circumstance, the purchaser must seek a remedy in contract, not in tort. Thus, when a purchaser’s expectations in a sale are frustrated because a product does not work properly, the purchaser’s remedies are limited to those prescribed by the law of contract.
McLean v. Bourget’s Bike Works, Inc.,
No. M2003-01944-COA-R3-CV,
In confronting whether the economic loss doctrine should apply to transactions involving services, the Wisconsin Supreme Court noted that the “genesis of the economic loss doctrine lies in products liability cases.”
Ins. Co. of North Am. v. Cease Elec. Inc.,
Considering all appropriate indicia, the Court concludes that the Tennessee Supreme Court would decline to extend the economic loss doctrine to cases involving the provision of services if squarely faced with this question. Accordingly, Swift’s request to dismiss Plaintiffs negligence claim is denied.
F. Exhaustion of Administrative Remedies
Finally, Swift argues that Plaintiffs complaint should be dismissed in its entirety under Rule 12(b)(1) of the Federal Rules of Civil Procedure because Plaintiff has not exhausted available administrative remedies.
The requirement of exhaustion of administrative remedies is largely— though not exclusively — a creature of statute and is imposed where appropriate to fully develop issues in a contest over an agency’s actions.
See Sims v. Apfel,
According to Swift, the revocation of Plaintiffs CDL is still subject to challenge in administrative proceedings before the responsible licensing agency in New Jersey. Seeking the reinstatement of Plaintiffs license from New Jersey officials would, Swift argues, be more efficient than the instant litigation. Of course, Plaintiff seeks money damages from Swift, something state administrative proceedings cannot provide. Thus, the Court rejects Swift’s arguments regarding exhaustion.
IV. CONCLUSION
For the reasons stated above, the Court GRANTS IN PART and DENIES IN PART Swift’s motion to dismiss. Plaintiffs claim under 42 U.S.C. § 1983 is DISMISSED. Swift’s motion is otherwise DENIED. As directed above, Plaintiff shall file an amended complaint within fifteen days from the date of this order correcting the admittedly erroneous averments of his First Amended Complaint.
Notes
. This action originated in the United States District Court for the District of New Jersey, but was transferred to the Western District of Tennessee on August 25, 2009 and then consolidated with three other related cases.
. The following factual recitation is taken from Plaintiff's First Amended Complaint and is assumed to be true for purposes of this motion only.
. The implication of this argument as well as Plaintiff's reliance upon Tennessee authorities in supporting the other claims in his complaint indicates Plaintiff's agreement with Swift that Tennessee law is appropriately applied to all of his other state-law claims.
. "New Jersey's choice of law rules incorporate doctrine of depecage whereby 'the laws of different states may apply in the same case to different issues in the case.' "
In re Consolidated Parlodel Litig.,
. The Tennessee Supreme Court has further said that ''[t]he economic loss doctrine is im
. The two unpublished cases Swift cites are
Rural Developments, LLC v. Tucker,
No. M2008-00172-COA-R3-CV,