Maniscalco v. Brother International (USA) Corporation


New Jersey Law Journal


Maniscalco v. Brother International (USA) Corporation, No. 11-3032; Third Circuit; opinion by Barry, U.S.C.J.; filed March 8, 2013. Before Judges Smith, Chagares and Barry. On appeal from the District of New Jersey. [Sat below: Judge Wolfson.] DDS No. 09-8-xxxx [15 pp.]

Walter Huryk appeals from the order of the district court granting summary judgment in favor of Brother International Corp. (BIC) and dismissing his putative class action claim under the New Jersey Consumer Fraud Act (NJCFA). The district court dismissed that claim — a claim for concealing or failing to disclose two design defects present in BIC's line of Multi-Function Center (MFC) machines — on the ground that South Carolina law, not New Jersey law, is the applicable law.

BIC is a Delaware corporation with a principal place of business and headquarters in New Jersey. It is the primary distributor of MFC machines that are manufactured by Brother Industries Ltd. (BIL), BIC's parent entity located in Japan.

Huryk, a South Carolina resident, purchased a Brother 3220C in South Carolina on Dec. 11, 2003. In early 2007, Huryk's machine displayed the ME41 defect, and by April 2007, stopped working altogether. In October 2007, Huryk joined in a putative class action alleging that the MFC he purchased contained the ME41 defect and the ink-purging defect, and that BIC's omissions and concealments concerning the defects constituted a violation of the NJCFA. Huryk alleges that his machine ceased functioning as a result of BIC's failure to disclose defects, causing losses because Huryk had to purchase more ink than he otherwise would have, paid more for his MFC machine than it was worth, and had to purchase a replacement machine.

BIC moved for summary judgment, arguing that New Jersey law did not apply to Huryk's claim and, in the alternative, that even if New Jersey law did apply, Huryk could not establish (1) an ascertainable loss, (2) a causal connection between the alleged conduct and his harm, or (3) that BIC engaged in any wrongful conduct, as required by the CFA. The district court granted BIC's motion and dismissed the action, finding that under New Jersey choice-of-law rules, the factors set forth in the Restatement (Second) of Conflicts of Law weighed in favor of applying the law of Huryk's home state of South Carolina, and that South Carolina had the most significant relationship with the litigation. Huryk now appeals.

Held: South Carolina law applies to bar this putative consumer fraud class-action suit.

A federal court sitting in diversity applies the choice-of-law rules of the forum state — here, New Jersey — to determine the controlling law. New Jersey has adopted the "most significant relationship" test set forth in the Restatement (Second) of Conflict of Laws.

The first part of the choice-of-law inquiry is to determine whether or not an actual conflict exists between the laws of the potential forums. There is no dispute that there is a conflict between New Jersey and South Carolina consumer fraud law, a conflict that, in fact, would be dispositive of Huryk's putative class action. South Carolina, unlike New Jersey, would not permit the statutory consumer fraud claims to proceed as a class action.

Under the second part of the inquiry, the court must determine which jurisdiction has the "most significant relationship" to the claim. Under subsection (1) of § 148 of the Restatement, when the plaintiff's action in reliance took place in the state where the false representations were made and received, there is a presumption that the law of that state applies. Under subsection (2), when the plaintiff's action in reliance takes place in a different state than where the false representations were made and received, courts weigh several factors: (a) the place, or places, where the plaintiff acted in reliance on the defendant's representations, (b) the place where the plaintiff received the representations, (c) the place where the defendant made the representations, (d) the domicil, residence, nationality, place of incorporation and place of business of the parties, (e) the place where a tangible thing that is the subject of the transaction between the parties was situated at the time and (f) the place where the plaintiff is to render performance under a contract that he has been induced to enter by the false representations of the defendant.

Here, Huryk alleges fraudulent omissions that directly emanated from decisions made in BIC's headquarters in New Jersey, not at the point of sale in South Carolina. Huryk received and relied on BIC's representations in his home state of South Carolina, and there was no evidence demonstrating that BIC made any omissions or misrepresentations in South Carolina.

Applying subsection (2) of the Restatement, three of the six contacts weigh strongly in favor of applying South Carolina law: (a) the place where Huryk acted in reliance on BIC's representations, (b) the place where Huryk received the representations, and (e) the place where a tangible thing that is the subject of the transaction between the parties was situated at the time. Factor (f) is not applicable because there is no contract. Although Huryk is a domiciliary of South Carolina and BIC's place of business is in New Jersey, factor (d) weighs slightly in favor of applying South Carolina law. The only remaining questions are whether the place where BIC's alleged omissions took place, factor (c), weighs in favor of applying New Jersey law, and, if so, whether this contact is of such significance that it outweighs the contacts in favor of applying South Carolina law. The panel finds that it does not.

Accepting Huryk's premise that there were actionable omissions by BIC at its headquarters in New Jersey, the circuit panel concludes that this single contact — factor (c) — does not warrant applying New Jersey law. Nothing else about the relationship between the parties, other than the fortuitous location of BIC's headquarters, took place in the state of New Jersey. Huryk's home state, in which he received and relied on BIC's alleged fraud, has the "most significant relationship" to his consumer fraud claim. Huryk's reliance, his receipt of the representation, the location of the MFC, and the sale, all took place in South Carolina.

BIC's motion for summary judgment was properly granted. The order of the district court is affirmed.

For appellant — Douglas J. McNamara and Lisa M. Mezzetti (Cohen Milstein). For appellee — Michael R. McDonald, Melissa C. Dehonney, Lan Hoang and Christopher Walsh (Gibbons).

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