Woods v. Maytag Co.
2011 U.S. Dist. LEXIS 98276, 2011 WL 3855886, 807 F. Supp. 2d 112 (2011)
Rule of Law:
To state a claim for fraudulent misrepresentation or concealment under New York law in federal court, a plaintiff must satisfy the heightened pleading standards of Federal Rule of Civil Procedure 9(b) by alleging specific details or facts giving rise to a strong inference of fraudulent intent or superior, concealed knowledge of a defect by a manufacturer; general consumer protection claims under New York General Business Law § 349 require a showing of deceptive acts directed at consumers with broad impact.
Facts:
- On July 21, 2005, Gary Woods purchased a Maytag 30-inch gas range oven (Model MGR5875QDS) from Plesser's, M.S.H., a department store.
- Prior to purchasing the oven, Woods, concerned about safety, asked the Plesser's sales representative if the oven was subject to hazardous flare-ups and explosions reported in similar appliances.
- The Plesser's sales representative assured Woods that the Maytag oven was safe and not prone to hazardous flare-ups and explosions.
- Woods purchased the oven, satisfied that it was safe for use.
- On or about February 29, 2008, when Woods attempted to use the oven, it malfunctioned, causing an explosion and fire, which resulted in Woods suffering serious burns.
- Woods alleged the explosion was caused by a defect in the oven's electric igniter mechanism.
- An authorized Maytag repairman dispatched by Cool Power LLC (which works for Whirlpool, Maytag's authorized service arm) told Woods he had addressed numerous similar consumer complaints with respect to the oven, specifically flare-ups, explosions, and fire.
- The repairman's work report stated, 'found unknown intermittent gas ignition[.] Causing gas buildup. Customer face Badly Burned.' and 'Whirlpool ... stated to not proceed filing safety issue & personal injury. Whirlpool will call cust [sic] with what to do.', and the repairman advised Woods that his superiors told him not to generate a report indicating the incident was caused by the gas igniter.
Procedural Posture:
- On February 10, 2010, Gary Woods filed a putative class action in the United States District Court for the Eastern District of New York against Plesser’s, Maytag Corp., and Maytag Sales, alleging claims including breach of warranty, fraud, and violations of General Business Law § 349.
- On March 10, 2010, the Maytag Defendants filed a motion to dismiss the initial complaint in its entirety under Fed.R.Civ.P. 12(b)(6).
- In an order dated November 2, 2010, the District Court granted the motion, dismissing Woods' breach of warranty claims as time-barred and his fraud and GBL § 349 claims for failure to plead facts plausibly alleging knowledge of the defect and specific misrepresentations or omissions, but granted Woods leave to re-plead these claims.
- On November 22, 2010, Woods filed an amended complaint, asserting causes of action against all defendants for fraudulent inducement (through misrepresentations and concealment) and violations of GBL § 349, abandoning the warranty claims previously asserted against Plesser's.
- On December 9, 2010, all defendants moved to dismiss the amended complaint pursuant to Rule 12(b)(6), arguing that Woods failed to plead his fraud claim with particularity under Rule 9(b) and his GBL § 349 claim plausibly under Rule 8(a).
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Issue:
Does a plaintiff's amended complaint adequately plead claims for fraudulent inducement (based on misrepresentation and concealment) and violations of New York General Business Law § 349 against a manufacturer (Maytag) and a retailer (Plesser's) under the heightened pleading standards of Federal Rule of Civil Procedure 9(b) and the plausibility standard of Rule 8(a)?
Opinions:
Majority - Spatt, District Judge
Yes, in part. The court denies the motion to dismiss the fraudulent concealment claim and GBL § 349 claim against the Maytag Defendants, and the fraudulent misrepresentation claim against Plesser’s. However, it grants the motion to dismiss the fraudulent misrepresentation claim against the Maytag Defendants and the fraudulent concealment and GBL § 349 claims against Plesser’s. Regarding the fraudulent misrepresentation claim, the court dismissed it against the Maytag Defendants with prejudice because Woods failed to plead any facts supporting an agency relationship between Plesser's and Maytag. Therefore, the Plesser's salesperson's statements could not be attributed to Maytag, and other vague allegations of misrepresentations through 'internet' and 'advertisement literature' were insufficient under Rule 9(b). Conversely, the claim for fraudulent misrepresentation against Plesser's was not dismissed. The allegations satisfied Rule 9(b)'s particularity requirements by identifying the specific statement, speaker, time, place, and why it was fraudulent. The court inferred scienter from the sales representative making a positive assertion of fact in response to a direct question with a 'pretense of knowledge,' indicating recklessness to induce the purchase. For the fraudulent concealment claim, the court denied dismissal against the Maytag Defendants. While general industry knowledge, public reports, and recalls alone were insufficient to establish exclusive knowledge for a duty to disclose, the repairman's statements and the contents of the work report, made by an authorized Maytag agent, constituted 'strong circumstantial evidence' that Maytag had specific knowledge of a defect in the oven's igniting mechanism and acted with fraudulent intent to conceal the problem. Post-accident statements can raise an inference of pre-accident knowledge, especially when facts are peculiarly within the defendant's knowledge. However, the fraudulent concealment claim against Plesser's was dismissed with prejudice, as Woods failed to allege facts that Plesser's had actual knowledge of the defect or access to information not available to the plaintiff, thus lacking 'superior knowledge' for a duty to disclose, and no agency relationship with the repairman was established. Finally, concerning the GBL § 349 claim, the court dismissed it against Plesser's because the alleged misrepresentation by the sales representative was directed only at Woods and lacked the broad consumer impact required for a GBL § 349 claim. However, the GBL § 349 claim against the Maytag Defendants was not dismissed. The court found that the plausible allegation of Maytag's knowledge of the defect and failure to disclose it (as established for fraudulent concealment) satisfied the 'deceptive act or practice' element, which can be based on omissions where a business exclusively possesses material information, thereby meeting the Rule 8(a) plausibility standard.
Analysis:
This case offers critical guidance on pleading standards for fraud and consumer protection claims in federal court under New York law. It underscores the stringent particularity required for fraudulent misrepresentation under Rule 9(b), especially concerning the attribution of statements and the inference of scienter through a 'pretense of knowledge.' The decision also clarifies a manufacturer's duty to disclose product defects, emphasizing that specific knowledge, potentially inferred from post-accident agent communications, can establish fraudulent concealment and satisfy the 'deceptive act' element of GBL § 349 claims. Future plaintiffs must be meticulous in detailing the 'who, what, when, where, and why' of alleged fraud and demonstrate that omissions stem from a defendant's superior, exclusive knowledge impacting a broad consumer base.
