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Maniscalco v. Brother International Corporation (USA)

793 F. Supp.2d 696 (D. N.J. 2011)

CONSUMER FRAUD ACT — To determine whether the State of New Jersey’s Consumer Fraud Act applies to a particular transaction, a court must weigh the various contacts between the fraud claims and the relevant state to determine which state has the greatest ties to the claims because it is not dispositive that a merchant’s headquarters is located in New Jersey.

A distributor of printers warranted that a certain model would be free from defects in materials and workmanship for one year, while any consumable and accessory items would be warranted for only ninety days. The machine displayed specific information about the number of pages that a user could expect to print from a cartridge. In at least two distinct places, the manual explained that the process of cleaning the print head consumed ink.

The distributor received reports of an error indicating a voltage issue within the print heads of affected machines. The distributor notified the manufacturer. A recall was considered after the distributer and manufacturer extensively worked through the problem in search of a solution, but the manufacturer never issued a recall. A fix was eventually found, but was applied only to new machines; existing machines could only be remedied with a replacement part. Additionally, around the same time, an overseas distributor of the manufacturer’s product investigated a fault where the same model machine was purging too much ink. In response, the manufacturer released a software update to alleviate the issue, but did not attempt to notify existing owners of the issue or its solution.

A consumer residing in a state outside the District of New Jersey initiated a putative class action suit alleging, in relevant part, that the printer he purchased was plagued by the issues described above. The Court had previously granted the distributor’s motion to dismiss the complaint’s claims for declaratory judgment and unjust enrichment, but denied the motion to dismiss with respect to the claim for relief under the New Jersey Consumer Fraud Act (NJCFA). Thereafter, the distributor filed a motion for summary judgment, arguing that the NJCFA did not apply to the claim and that even if the NJCFA applied, the consumer had not demonstrated an ascertainable loss; a causal connection between the alleged wrongful conduct and alleged harm; or that the distributor had engaged in any wrongful conduct. After the motion was briefed, the consumer moved to strike portions of the distributor’s reply. Specifically, the consumer alleged that the distributor waived the right to move for summary judgment with regard to the ink-purging claims because the distributor included those arguments for the first time in its reply brief.

The Court first performed a choice of law analysis to determine if the NJCFA was applicable. To do so, the Court weighed the various contacts between the class’s fraud claims and the relevant states to determine which state had the greatest ties to the claims. The consumers conceded that three of the six factors that a federal court considers weighed against applying New Jersey law: the place of reliance, the place where the consumer received the representation, and the place where the tangible thing subject to the transaction was located. As to the domicile, residence, and place of business factors, the Court found that no one state was favored because the consumers resided in various states and the distributor was incorporated in a different state altogether. Thus, the Court’s analysis turned largely to the place where defendants made the misrepresentations.

The Court noted that a merchant’s headquarters being located in New Jersey is not dispositive as to the place where an alleged misrepresentation was made. The Court observed that the consumer had not pointed to a single decision by the distributor or manufacturer to conceal the defects such that New Jersey, and not the consumers’ home states, would have the most significant relationship to the fraud claims. Neither the user manual nor the units themselves were made in New Jersey. Thus, any representations made by the distributor were not made in New Jersey.

Further, the Court found that the distributor’s continued sale of the printers, despite knowledge of an issue under investigation, was not an actionable omission or decision to conceal any defect by the distributor in New Jersey. The mere fact that the distributor continued to sell printers did not, itself, constitute a decision to omit or conceal a material fact. Because each consumer resided outside of New Jersey, purchased and used the machines in their home states, and relied upon the allegedly deceptive conduct in their home states, the Court found that other states had more significant relationships with the litigation. Thus, New Jersey law did not apply and the motion for summary judgment was granted.

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