Ecosolargy, Inc. v. Code Green Solar Limited Liability Company et al

BRIEF in Opposition

D.N.J.January 2, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY ECOSOLARGY, INC., a California corporation Plaintiff vs. CODE GREEN SOLAR LIMITED LIABILITY COMPANY, a New Jersey limited liability company; CODE GREEN SOLAR PUERTO RICO, LLC, a Puerto Rico limited liability company, a/k/a CODE GREEN SOLAR PR, LLC; and DOES 1- 10 Defendants / Counterclaimants : : : : : : : : : : : : : : : : : Docket No: 1:16-cv-06018 (JHR)(KMW) CIVL ACTION BRIEF BY CODE GREEN SOLAR & CODE GREEN SOLAR PUERTO RICO IN OPPOSITION TO THE PLAINTIFF’S MOTION TO DISMISS (Rule 12(b)(6)) AND FOR A MORE DEFINITE STATEMENT (Rule 12(e)) JUSTIN R. WHITE TESTA HECK SCROCCA & TESTA, P.A. 424 W. LANDIS AVENUE VINELAND, NJ 08360 (856) 691-2300 Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 1 of 11 PageID: 95 i TABLE OF CONTENTS PAGE TABLE OF CONTENTS................................................................... i TABLE OF CITATIONS .................................................................. i BRIEF INTRODUCTION & FACTUAL BACKGROUND......................... 1 PROCEDURAL HISTORY............................................................... 2 LEGAL ARGUMENT....................................................................... 3 I: Summary of Argument .............................................. 3 II: Legal Standard for a Motion to Dismiss and for Pleadings .................................................................... 4 III: New Jersey’s Consumer Fraud Act is Applicable ..... 5 CONCLUSION.................................................................................. 8 TABLE OF CITATIONS CASES PAGE Chattin v. Cape May Green, Inc., 124 N.J. 520 (1991) ........................................................................... 6 Cox v. Sears Roebuck & Co., 138 N.J. 2 (1994) ............................................................................... 6-7 Czar, Inc. v. Heath, 198 N.J. 195 (2009) ........................................................................... 6 D’Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J. Super. 11 (App. Div. 1985) ................................................. 6 Gennari v. Weichert Co. Realtors, 148 N.J. 582 (1997) ........................................................................... 6 Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 2 of 11 PageID: 96 ii In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997)............................................................. 4 L.J. Zucca, Inc. v. Allen Bos. Wholesale Distributors, Inc. 434 N.J. Super. 60 (App. Div. 2014) ................................................. 6 Oran v. Stafford, 223 F.3d 275 (3d Cir. 2000)............................................................... 4 Panek v. Bogucz, 718 F. Supp. 1228 (D.N.J. 1989) ....................................................... 4 Phillips v. Cnty. of Allegheny, 515 F.3d 224 (3d Cir. 2008)............................................................... 4 Pomerantz Paper Corp. v. New Community Corp., 207 N.J. 344 (2011) ........................................................................... 7 Turbe v. Gov’t of Virgin Islands, 938 F.2d 427 (3d Cir. 1991)............................................................... 4 STATUTES N.J.S.A. § 56:8-1 et. seq. ................................................................... passim COURT RULES Fed. R. Civ. P. 8................................................................................. 5 Fed. R. Civ. P. 9................................................................................. 5 Fed. R. Civ. P. 10............................................................................... 5 Fed. R. Civ. P. 12............................................................................... 4 Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 3 of 11 PageID: 97 1 INTRODUCTION & FACTUAL BACKGROUND Defendant / Counterclaimant Code Green Solar, LLC is in the business of selling and installing solar energy systems in various states in the continental United States. Likewise, Defendant / Counterclaimant Code Green Solar Puerto Rico is in the business of selling and installing solar energy systems in the territory of Puerto Rico. Although they are distinct legal entities, Code Green Solar and Code Green Solar Puerto Rico are closely affiliated and share key managers, many of whom are based in Code Green Solar’s Cherry Hill headquarters. Plaintiff, EcoSolargy, is in the business of selling various goods associated with solar energy systems. Specifically, EcoSolargy sells solar “modules,” which are commonly referred to as solar “panels.” Solar panels / modules are the core of all solar energy systems. Code Green Solar and Code Green Solar Puerto Rico entered into a series of contracts for the purchase of solar panels from EcoSolargy. The parties contemplated that the panels meant for Code Green Solar would be shipped to New Jersey. The parties contemplated that the panels meant for Code Green Solar Puerto Rico would be shipped to Puerto Rico. Both Code Green entities contend that the panels were due to arrive at their respective destinations no later than 60 days (about 8 weeks) following their order. This amount of “lead time” was relied upon by both of the Code Green entities as they sought to fulfill contractual obligations owed to numerous third-parties. Both Code Green entities contend that EcoSolargy’s delivery of the solar panels was unacceptably late, and well beyond the 60 day period that had been agreed upon. Accordingly, the Code Green entities rejected the (late delivered) panels. Both Code Green entities also rescinded all future orders that might have been placed with EcoSolargy. Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 4 of 11 PageID: 98 2 It is the contention of both Code Green entities that EcoSolargy’s late delivery of the solar panels caused disruption to business and associated damages. Both Code Green entities had to scramble to obtain solar panels from alternate suppliers. By way of counterclaim, both Code Green entities allege damages as a result. Both Code Green entities also contend consequential damages, including but not limited to a loss of business goodwill.1 PROCEDURAL HISTORY Following Code Green Solar’s and Code Green Solar Puerto Rico’s rejection of that late delivered solar panels and rescission of all future orders for solar panels, EcoSolargy filed suit. (No. 1). EcoSolargy’s complaint pleads a breach of contract claim, alleging that Code Green Solar and/or Code Green Solar Puerto Rico have breached a series of contracts for the sale of goods (the solar panels). Code Green Solar and Code Green Solar Puerto Rico filed an answer (No. 7). In this pleading, Code Green Solar and Code Green Solar Puerto Rico also set forth a counterclaim arising from the exact same series of contracts that EcoSolargy claims have been breached. The counterclaim by Code Green Solar and Code Green Solar Puerto Rico further alleges that EcoSolargy fraudulently induced the Code Green entities to enter the contracts by representing the fact that the panels would be delivered within 60 days. The Code Green entities allege that EcoSolargy knew that this statement of fact was incorrect but nonetheless intended that the Code Green entities rely upon same. 1 Both Code Green entities contend that EcoSolargy’s late delivery of the solar panels caused delay in delivering completed solar systems to Code Green’s various residential customers in both the continental United States and in Puerto Rico. It is expected that pre-trial discovery will confirm that the solar industry has become incredibly competitive, especially in the residential sector; and that dissatisfied customers cause a “ripple effect” that adversely affects future business prospects. Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 5 of 11 PageID: 99 3 Accordingly, the Code Green entities -- in addition to their contract / UCC claims -- contend that EcoSolargy’s actions are subject to redress under a common law fraud theory and pursuant to the remedies set forth in New Jersey’s Consumer Fraud Act, N.J.S.A. § 56:8-1 et. seq. Rather than filing an answer to the Code Green entities’ counterclaim, EcoSolargy has filed the instant Motion to Dismiss / Motion for a More Definite Statement. (No. 15). LEGAL ARGUMENT I. SUMMARY OF ARGUMENT. Plaintiff EcoSolargy’s motion should be denied. The subject counterclaim adequately states contract, fraud and Consumer Fraud Act claims against EcoSolargy. It is disingenuous for EcoSolargy to take the position that it is somehow “in the dark” as to which contracts give rise to the Code Green entities’ claims. (See Plaintiff’s brief at p. 22). This is because they are the exact same contracts upon which EcoSolargy sues. Further, the common law fraud and Consumer Fraud Act claims in the counterclaim are adequately plead. They are straightforward allegations -- EcoSolargy stated to the Code Green entities that the solar panels would be delivered within a certain timeframe, knew that this was untrue, and intended for the Code Green entities to rely upon the (untrue) statement as to time of delivery. The Code Green entities did in fact rely upon EcoSolargy’s statement as to time of delivery, and were thus induced to contract with EcoSolargy. Later, because the solar panels were not delivered within the time frame as represented by EcoSolargy, the Code Green entities suffered damages. Also, discovery has barely begun. The parties have only just exchanged Rule 26 initial disclosures. No interrogatories or document demands have been propounded. No depositions have been taken. No experts have been retained. It is simply too early a juncture to conclude that the subject transactions are outside the purview of New Jersey’s Consumer Fraud Act. Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 6 of 11 PageID: 100 4 Finally, in the event that the Court is inclined to give any sort of relief to EcoSolargy pursuant to this motion, it is respectfully submitted that such relief should take the form of the Code Green entities being granted leave to restate their various theories of liability as separate causes of action. II. LEGAL STANDARD FOR A MOTION TO DISMISS AND FOR PLEADINGS. Considering the long-established federal policy of having civil litigation decided on the merits, district courts generally disfavor Rule 12(b)(6) motions. Panek v. Bogucz, 718 F. Supp. 1228, 1229 (D.N.J. 1989). A motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6) may be granted only if, accepting all well-pleaded allegations in the Complaint as true, and viewing them in the light most favorable to the non-movant. Oran v. Stafford, 226 F.3d 275, 279 (3d Cir. 2000). Under Rule 12(b)(6), the Court must accept the allegations in the non- movant’s pleading as true, and draw all reasonable inferences in favor of the non-movant. The issue is not whether a non-movant will ultimately prevail, but whether they are entitled to offer evidence to support the claims. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997). A motion to dismiss can only be granted if no relief could be granted under any set of facts that could be proved. Turbe v. Gov’t of Virgin Islands, 938 F.2d 427, 428 (3d Cir. 1991). Even then, a pleading subject to Rule 12(b)(6) dismissal should typically be without prejudice. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 245 (3d Cir. 2008) (holding that “if a complaint is subject to a Rule 12(b)(6) dismissal, a district court must permit a curative amendment unless such an amendment would be inequitable or futile”). As set forth above, both the complaint and the counterclaim arise from the same nexus of facts and same series of contractual agreements. By way of the counterclaim, the Code Green entities have simply added one additional variable -- that the late delivery of the solar panels was Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 7 of 11 PageID: 101 5 not on account of accident over oversight by EcoSolargy. The Code Green entities pleadings pass muster under Rules 8, 9 and 10 of the Federal Rules of Civil Procedure. Accordingly, EcoSolargy’s motion to dismiss the counterclaim by the Code Green entities should be denied. III. NEW JERSEY’S CONSUMER FRAUD ACT IS APPLICABLE. It is also respectfully submitted that the counterclaim adequately pleads a cause of action under the Consumer Fraud Act (the “Act”). Plaintiff’s brief raises a choice-of-law type of argument, and questions whether the Act is even applicable to some of the alleged transactions. (See Plaintiff’s brief at p. 20). Clearly, it is too early a juncture to sort through choice-of-law argument at this early stage of this litigation and such argument by the Plaintiff should be disregarded.2 Plaintiff contends that they have no idea as to which provision of the Consumer Fraud Act might apply in this situation. In hopefully an attempt at humor, Plaintiff sets forth a laundry list of Consumer Fraud Act provisions and regulations, and then rhetorically asks “which applies?” (See Plaintiff’s brief at p. 19). So that there is no misunderstanding, the Code Green entities contend that N.J.S.A. § 56:8-2 applies. That section of the Consumer Fraud Act -- really, the heart of the Act -- provides: The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice; provided, however, that nothing herein contained shall apply to the owner or publisher of newspapers, magazines, publications or printed matter wherein such advertisement 2 It’s worth pointing out that it is the Plaintiff that chose to bring this suit in the District of New Jersey. Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 8 of 11 PageID: 102 6 appears, or to the owner or operator of a radio or television station which disseminates such advertisement when the owner, publisher, or operator has no knowledge of the intent, design or purpose of the advertiser. (emphasis added). The remedies of the Act are available to any person who suffers an ascertainable loss of moneys or property from the unlawful conduct prohibited by that law. L.J. Zucca, Inc. v. Allen Bros. Wholesale Distributors Inc., 434 N.J. Super. 60, 74 (App. Div. 2014). The Act, as remedial legislation, is liberally construed to accomplish its dual objectives of deterrence and protection. It has been said that the Act’s history “has been marked by the constant expansion of consumer protection.” Czar, Inc. v. Heath, 198 N.J. 195, 201 (2009). An “unlawful practice” warranting liability under the Act falls into three general categories: (1) knowing omissions; (2) affirmative acts; and, (3) violations of specific regulations promulgated under the CFA. Gennari v. Weichert Co. Realtors, 148 N.J. 582, 605 (1997). A “knowing omission” is just what it sounds like -- a seller’s withholding of an important fact or circumstance. An “affirmative act” violating the Act is one that is an “unconscionable commercial practice” -- an activity that is basically unfair or unjust, which materially departs from standards of good faith, honesty in fact, and fair dealing. D’Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J. Super. 11, 29 (App. Div. 1985). When an alleged CFA violation consists of an “affirmative act,” intent is not an essential element. The aggrieved does not need to prove that the seller actually intended to commit an unlawful act. Chattin v. Cape May Green, Inc., 124 N.J. 520, 522 (1991). Liability under the Act pursuant to a “regulatory violation” of the CFA consists of a violation of specific regulations promulgated under the Act. A failure to completely follow such a regulation constitutes a per se violation of the Act. Cox v. Sears Roebuck & Co., 138 N.J. 2, Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 9 of 11 PageID: 103 7 17 (1994). Examples of such regulations would be the baby food, health club, kosher food, etc. provisions of the Act (as set forth in the Plaintiff’s brief at page 20). In this case, the Code Green entities submit that the conduct of EcoSolargy is probably best classified as a “knowing omission” violation of the Act. However, and as stated, discovery is yet to begin in earnest, and the Code Green entities theories are obviously subject to amendment and refinement. Further, the Plaintiff argues that the subject transactions (i.e. the contracts for the purchase of solar panels) are not transactions to which the Act applies. Plaintiff argues that the Act does not apply to dealings between merchants or to wholesale type of transactions. Plaintiff’s arguments in this regard are more along the lines of summary judgment type arguments, and not “ripe” for deciding at this time. Also, the New Jersey Supreme Court has recognized that even a wholesale transaction between corporations can be subject to the Act. See Pomerantz Paper Corp. v. New Community Corp., 207 N.J. 344, 359 (2011) (interpreting the Consumer Fraud Act in the context of a distributor’s wholesale of janitorial / paper products to a corporate entity providing housing to low-income people). For this additional reason, the Plaintiff’s motion should be denied. Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 10 of 11 PageID: 104 8 CONCLUSION In light of the above, it is respectfully submitted that EcoSolargy’s motion to dismiss should be denied in all regards. In the event that the Court finds that EcoSolargy is entitled to relief, it is respectfully submitted that the Code Green entities should be granted leave to amend their counterclaim. TESTAHECK SCROCCA&TESTA, P.A. Attorneys for Code Green Solar, LLC & Code Green Solar Puerto Rico, LLC Dated: January 2, 2017 BY: s/ Justin R. White___________ JUSTIN R. WHITE Case 1:16-cv-06018-JHR-KMW Document 18 Filed 01/02/17 Page 11 of 11 PageID: 105