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Alltrista Plastics, LLC v. Rockline Industries, Inc.

Superior Court of Delaware, New Castle

September 4, 2013

ALLTRISTA PLASTICS, LLC, d/b/a JARDEN PLASTIC SOLUTIONS, Plaintiff,
v.
ROCKLINE INDUSTRIES, INC., Defendant.

Submitted: May 10, 2013

Upon Consideration of Plaintiff's Motion to Dismiss Defendant's Counterclaims and Affirmative Defenses

Joseph J. Bellew, Esq., Cozen O'Connor, Wilmington, Delaware. Attorney for Plaintiff.

James J. Freebery, Esq., and Noriss Cosgrove Kurtz, Esq., McCarter & English, Wilmington, Delaware. Attorney for Defendant.

OPINION

James T. Vaughn, Jr. Judge

In this case, the plaintiff, Alltrista Plastics, LLC d/b/a Jarden Plastic Solutions ("Jarden") sued the defendant, Rockline Industries, Inc. ("Rockline"), for breach of a Supply Agreement. In its answer, Rockline denied that it breached the contract and asserted several affirmative defenses seeking, inter alia, rescission due to mutual mistake and fraud in the inducement. Rockline also asserted several counterclaims against Jarden for breach of contract; intentional misrepresentation; negligent misrepresentation; breach of the covenant of good faith and fair dealing; breach of the implied warranty of fitness for a particular purpose; promissory estoppel; and unjust enrichment. Jarden now moves to dismiss Rockline's affirmative defenses seeking rescission and all of Rock line's co unterclaims except for the breach of contract claim. This is the Court's opinion regarding Jarden's motion.

FACTS

The following facts are taken from the pleadings and the exhibits attached thereto. To the extent that the facts are in dispute, the Court relies on the factual allegations contained in Rockline's counterclaims because it is then on moving party.

Jarden is an Indiana limited liability company that manufactures, designs, and produces plastic containers that are used in packaging consumer products. Rockline is a Wisconsin corporation that manufactures, markets, and sells various household products, including wet wipes.

In January 2009, Jarden approached Rockline with a proposal to manufacture plastic canisters for use by Rockline in packaging its consumer wet wipes. According to Rockline, Jarden repeatedly represented to Rockline that it could manufacture plastic canisters that would meet Rockline's packaging requirements. On November 12, 2009, Rockline and Jarden executed a Letter of Understanding outlining the preliminary terms and conditions under which the two parties would agree to enter into a supply agreement for the production and sale of canisters to the private wet wipe market. In the Letter of Understanding, Jarden agreed to develop a tool that could manufacture plastic canisters and Rockline agreed to pay Jarden $400, 000, the first $200, 000 of which was due and paid by Rockline upon executing the Letter of Understanding. Rockline also agreed to purchase a minimum amount of canisters from Jarden each year for three years starting in 2010.

Following the execution of the Letter of Understanding, Rockline provided Jarden with a list of validation criteria that the canisters were required to pass in order to meet Rockline's requirements. Jarden then created a prototype tool that produced one canister at a time ("the single-cavity tool") to demonstrate to Rockline its ability to successfully manufacture a canister that would meet Rockline's needs.

On September 30, 2010, Jarden presented canister design options to Rockline and represented that the options presented would meet Rockline's requirements. Rockline selected a canister design and, according to Rockline, agreed to enter into a Supply Agreement based upon the representations of Jarden's representatives.

On November 2, 2010, Jarden and Rockline entered into the final Supply Agreement whereby Jarden agreed to build a tool at Rockline's expense that could produce cylindrical canisters to house Rockline's wet wipes. In exchange, Rockline agreed to pay Jarden an additional $300, 000 for the production of the tool, payable upon validation of the tool, and after which time Rockline would retain ownership of the tool. Rockline also agreed to purchase at least 13, 000, 000 canisters from Jarden each year for three years at an agreed-upon price.

On November 4, 2010, February 3, 2011, and March 11, 2012, Rockline placed purchase orders for canisters produced from the single-cavity tool for further trial testing, which Jarden manufactured and delivered to Rockline. Rockline subjected the canisters to its validation tests in order to determine if the canisters met their specified criteria. Based on its evaluation of the canisters, Rockline approved of the canisters produced from the single cavity tool and also authorized Jarden to manufacture a tool that could produce eight canisters at a time ("the eight-cavity tool"), which was the tool that would be used in the final manufacturing process. According to Rockline, Jarden told Rockline that the canisters produced from the single-cavity tool were representative of the canisters that ultimately would be produced from the final eight-cavity tool.

Jarden then manufactured plastic canisters produced from the eight-cavity tool and delivered them to Rockline, who subjected the canisters to its validation tests. According to Rockline, the canisters produced from the eight-cavity tool did not meet its requirements with regard to the canisters' ability to be stacked.

Over the next couple of years, Jarden unsuccessfully attempted to produce canisters that would meet Rockline's requirements, conducting more than ten trial production runs of canisters that were manufactured using iterations of the eight-cavity tool, none of which met Rockline's requirements. According to Rockline, the most recent trial canisters, delivered to Rockline in February 2012, experienced denting, buckling, and cracking while being stacked in Rockline's warehouse. Rockline notified Jarden of the canisters' failure on March 21, 2012 and invited Jarden to come to Rockline's facility to inspect the damaged canisters. A representative from Jarden did visit Rockline's facility on March 27 and observed the defective canisters. On multiple occasions after that visit, Rockline requested that Jarden provide Rockline with information to help determine the cause of the canisters' failures, and, according to Rockline, Jarden never responded. Because the trial canisters did not meet Rockline's requirements, Rockline never validated or approved the canisters manufactured from the eight-cavity tool.[1]

On September 17, 2012, Jarden sued Rockline alleging that it breached the Supply Agreement. Specifically, Jarden sought damages for the balance of the cost of the tool and modifications to the tool, which it totals at $542, 346; the total cost of the unfulfilled minimum purchase orders of 13, 000, 000 canisters a year for three years at $0.19 a canister; and a termination fee of $1, 500, 000 for terminating the agreement without cause in the first year of the Supply Agreement.

On November 30, 2012, Rockline answered the complaint and asserted counterclaims against Jarden for breach of contract, intentional misrepresentation, negligent misrepresentation, breach of the covenant of good faith and fair dealing, breach of the implied warranty of fitness for a particular purpose, promissory estoppel, and unjust enrichment. Rockline also asserted several affirmative defenses seeking, inter alia, rescission of the Supply Agreement due to mutual mistake and fraud in the inducement.

Jarden now moves to dismiss all of Rockline's counterclaims except for the breach of contract claim and the affirmative defenses seeking rescission.

STANDARD OF REVIEW

When deciding a Motion to Dismiss for failure to state a claim upon which relief can be granted, the complaint must give general notice of the claim asserted.[2]The complaint will not be dismissed unless it is clearly without merit as to either a matter of law or fact, or if "it appears with reasonable certainty that the plaintiff could not prove any set of facts that would entitle him to relief."[3] The Court will limit its review of the motion to dismiss to the well-pleaded allegations in the complaint, but will draw all reasonable factual inferences in favor of the non-moving party.[4]

DISCUSSION

A. Rockline's Counterclaims

Jarden moves to dismiss Rockline's counterclaims II through VII alleging intentional misrepresentation, negligent misrepresentation, breach of the covenant of good faith and fair dealing, breach of the implied warranty of fitness for a particular purpose, promissory estoppel, and unjust enrichment under Superior Court Civil Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Jarden also moves to dismiss Rockline's promissory estoppel and unjust enrichment counterclaims under Rule 12(b)(1) for lack of subject matter jurisdiction. I will address each of these claims seriatim.

(1) Intentional Misrepresentation

To plead a claim for fraud or intentional misrepresentation under Delaware law, a plaintiff must allege: (1) a false representation, usually one of fact, made by the defendant; (2) with knowledge or belief of its falsity or with reckless indifference to the truth; (3) with intent to induce action or inaction; (4) that plaintiff's response was taken in justifiable reliance on the representation; and (5) an injury resulting from such reliance.[5]

In Rockline's counterclaim against Jarden, Rockline alleges that Jarden approached Rockline in 2009 and repeatedly made claims that it had the ability to produce a canister that would satisfy all of Rockline's needs and specifications. Rockline further alleges that Jarden told it that the canisters produced from the single-cavity tool were representative of the canisters that would be produced from the final eight-cavity tool.

Rockline claims that these statements were false representations; that Jarden knew its representations were untrue at the time they were made, or, alternatively, the representations were made recklessly without caring whether they were true; that Jarden made the representations with the intent to induce Rockline to enter into the Supply Agreement; that Rockline relied on those representations to their detriment and Rockline's reliance was reasonable; and that Rockline was injured as a result of the reliance. Rockline also states that it "would not have signed the Supply Agreement if Jarden Plastic had not misrepresented its ability to manufacture canisters that met Rockline's requirements and ...


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