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OC Tint Shop, Inc. v. Cpfilms, Inc.

United States District Court, D. Delaware

September 27, 2018

OC TINT SHOP, INC., Plaintiff,
v.
CPFILMS, INC., EASTMAN CHEMICAL COMPANY, EASTMAN PERFORMANCE FILMS, LLC, and DOES 1 through 100, inclusive, Defendants.

          John C. Phillips, Jr and David A. Bilson, PHILLIPS GOLDMAN MCLAUGHLIN & HALL, PA., Wilmington, DE. Attorneys for Plaintiff.

          Donald E. Reid, Thomas W. Briggs, Jr., and Anthony D. Raucci, MORRIS, NICHOLS, ARSHT & TUNNEL LLP, Wilmington, DE. Attorneys for Defendants.

          MEMORANDUM OPINION

          ANDREWS, U.S. DISTRICT JUDGE

         Defendants CPFilms, Eastman Chemical Company, and Eastman Performance Films filed a motion to dismiss Plaintiff OC Tint Shop's First Amended Complaint for failure to state a claim. (D.I. 36). The Court has considered the parties' briefing. For the following reasons, the Court GRANTS in part and DENIES in part Defendants' motion to dismiss for failure to state a claim.

         I.BACKGROUND

         As alleged by the Complaint, the facts are as follows. Plaintiff has been in the business of installing window tinting film for approximately twelve years. (D.I. 35 at 3). Plaintiff has "purchased SunTek window tinting film from Defendants at their Anaheim location" for a number of those years. Id. From early 2016 on, Plaintiff noticed that the quality of the film purchased from Defendants had diminished considerably. Id. Plaintiff has found that the film will often not peel off the liner before installation or is so sticky that it causes difficulty when installing the product. Id. Plaintiff has also noticed specks on the liner and experienced the liner not having enough had adhesive from proper installation. Id. at 3-4. Due to these defects, Plaintiff has incurred substantial losses due to providing warranty work for its customers to replace or repair the defective film. Id. at 4.

         Plaintiff alleges that the degradation of quality resulted from Defendants' decision to cut costs by removing an ingredient from the manufacturing of the film. Id. Plaintiff has alleged substantial incurred costs in the following amounts: "$275, 000.00 for defective window tinting film purchased from Defendants, dating back to 2016;" $720, 000.00 in "additional costs in paying its employees to re-install the new tinting film; $10, 000.00 for defective film purchased, but still in Plaintiffs possession; $46, 000.00 incurred in warranty work as a result of the defective window tinting film; and approximately $176, 000.00 in lost revenue." Id. at 5.

         Plaintiff brought this action against Defendants CPFilms and Eastman Chemical Company in the Superior Court of California, Orange County. Plaintiff seeks recovery for Breach of Contract, Breach of Warranties, Breach of Good Faith and Fair Dealing, Violation of CA Unfair Competition law, Intentional Interference with Prospective Economic Relations, Negligent Interference with Prospective Economic Relations, Intentional Interference with Contractual Relations, Intentional Misrepresentation, Negligent Misrepresentation, and Concealment. (D.I. 35). Plaintiff also seeks a Declaratory Judgment. Id.

         Defendants removed the case pursuant to 28 U.S.C. § 1332 (diversity jurisdiction). (D.I. 1). Defendants then filed a Motion to Dismiss Complaint Under Forum Non Conveniens, or in the Alternative to Transfer Action to District of Delaware based upon a choice-of-forum clause in the sales contract. (D.I. 10). The United States District Court for the Central District of California granted the Motion the Transfer. (D.I. 23). By stipulation, the Parties agreed that Plaintiff could amend its Complaint. (D.I. 34). After Plaintiff filed its First Amended Complaint (D.I. 35), Defendants filed their motion to dismiss. (D.I. 36).

         II. LEGAL STANDARD

         When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must accept the complaint's factual allegations as true. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). Rule 8(a) requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Id. at 555. The factual allegations do not have to be detailed, but they must provide more than labels, conclusions, or a "formulaic recitation" of the claim elements. Id. ("Factual allegations must be enough to raise a right to relief above the speculative level... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)."). Moreover, there must be sufficient factual matter to state a facially plausible claim to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The facial plausibility standard is satisfied when the complaint's factual content "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. ("Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." (internal quotation marks omitted)).

         Rule 9(b) of the Federal Rules of Civil Procedure requires a party alleging fraud or mistake to "state with particularity the circumstances constituting fraud or mistake." "A pleading is sufficient under Rule 9(b) if it states the time, place and specific content of the false representations as well as the identities of the parties to the misrepresentation." In re Sony, 758 F.Supp.2d 1077, 1087 (S.D. Cal. 2010) (internal quotations marks omitted); see also Gerbitz v. ING Bank, FSB, 967 F.Supp.2d 1072, 1078 (D. Del. 2013) (laying out "the who, what, where, when, how, and why" of plaintiff s fraud claims).

         III. DISCUSSION

         A. Choice of Law

         A federal court sitting in diversity must apply the law of the forum state. In Delaware, the "most significant relationship test" governs the choice of law analysis for both contract and tort claims. Deuley v. DynCorp Intern., Inc., 8 A.3d 1156, 1160 (Del. 2010); Travelers Indem. Co. v. Lake, 594 A.2d 38, 47 (Del. 1991). "The Delaware Supreme Court has determined that for contract claims, the Court must consider several factors in determining which forum's law to apply, including 'the place of contracting, the place of negotiation, the place of performance, the location of the subject matter of the contract, and the domicile, residence, nationality, place of incorporation and place of business of the parties.'" Enzo Sci., Inc. v. Adipogen Corp., 82 F.Supp.3d 568, 595 (D. Del. 2015) (quoting In re Am. LaFrance, LLC, 461 B.R. 267, 272 (Bankr. D. Del. 2011)). Under Delaware law, choice-of-law provisions are generally enforceable. Enzo Sci, Inc., 82 F.Supp. at 595 (citing Weiss v. Nw. Broad. Inc., 140 F.Supp.2d 336, 442 (D. Del. 2001)).

         For tort claims, courts must consider several factors including the place where the injury occurred, the place where the conduct causing the injury occurred, the domicile, residence, nationality, place of incorporation and place of business of the parties, and the place where the relationship, if any, between the parties is centered. Travelers Indem. Co., 594 A.2d at 47. Furthermore, "the effect of misrepresentation, duress, undue influence and mistake upon a contract is determined by the law selected by application of the rules of [Restatement (Second) of Conflict of Law] §§ 187-88. In turn, § 187 allows the law of the state chosen by the parties to govern contractual rights and duties unless the chosen state lacks a substantial relationship to the parties or transaction or applying the law of the chosen state will offend a fundamental policy of a state with a material greater interest." Abry Partners V, L.P. v. F & W Acquisition LLC, 891 A.2d 1032, 1047 (Del. Ch. 2006).

         Here, the contract between the parties states that Delaware law governs any dispute arising from the contract. The Court sees no reason to disturb that choice-of-law provision as applied to the contract claims. Additionally, Plaintiffs tort claims center on Defendants' misrepresentations and those misrepresentations' effect on the contractual relationship between the parties. Under Delaware law, the law of the state chosen by the parties to govern contractual rights and duties should therefore apply to Plaintiffs tort claims as well.

         B. Contract Claims (Counts I-IV)

         Plaintiffs Complaint alleges the following causes of action in contract: breach of contract (Count I), breach of the implied warranty of merchantability (Count II), breach of the express warranty of merchantability (Count III), and breach of implied warranty of fitness for a particular purpose (Count IV). Defendants assert that Plaintiffs contract claims are precluded by (1) the contract's express exclusion of express and implied warranty claims and (2) the contract's limitation of liability provision. (D.I. 37 at 3-4). Plaintiff argues that Defendants are retroactively barred from arguing that the Contract's disclaimer of warranties exempts Defendants from liability because Plaintiff had been purchasing Defendants' product before receiving the contract in early 2016. (D.I. 40 at 4-5). Plaintiff also argues that the limitation of liability provision (1) is unconscionable and (2) "fails of its essential purpose." Id. at 6-9.

         i. The Disclaimer of Warranties and the Limitation of Liability Provision are Permitted under Delaware Law

         1. Disclaimer of Warranties

          Delaware law permits contracting parties to exclude warranties of merchantability and fitness in commercial contracts. Del. Code Ann. tit. 6 § 2-316(2). The contract language "must mention merchantability and in case of a writing must be conspicuous" to exclude the warranty of merchantability. Id. To exclude the implied warranty of fitness, the contract language must be "a writing and conspicuous." Id. Here, the contract language mentions merchantability, is in writing, and is clearly conspicuous. Specifically, the warranty disclaimer is set off from the surrounding text of the contract in all capitals text. (D.I. 37, Ex. B at ¶ 2). This language is sufficient to preclude all such warranty claims.

         Plaintiffs argument that Defendants are retroactively barred from asserting the warranty disclaimer for all of Plaintiff s purchases is incorrect. While Plaintiff has been purchasing product from Defendant since before early 2016, Defendants provided Plaintiff with the new contract in January 2016. As Plaintiff alleges in its Complaint, the breach of contract began in early 2016, around the same time that the new contract was provided. (D.I. 35 at 4). Even taking these facts in the light most favorable to Plaintiff, Defendants are not barred from asserting the disclaimer of warranties as to any purchases after Plaintiff received the new contract terms in January 2016. Plaintiff chose to continue purchasing Defendants' products despite the new terms of sale, and thereby accepted the warranties disclaimer. Plaintiffs claims are therefore subject to the warranty disclaimer.

         ii. The Limitation of ...


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