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Zon LED LLC v. Power Partners Inc.

United States District Court, W.D. Oklahoma

October 17, 2017

ZON LED, LLC, Plaintiff,
v.
POWER PARTNERS, INC.; et al., Defendants.

          ORDER

          TIMOTHY D. DEGIUSTI, UNITED STATES DISTRICT JUDGE.

         Before the Court is Defendant Inventronics USA, Inc.'s (“Inventronics USA”) Motion to Dismiss Amended Complaint [Doc. No. 46], filed pursuant to Fed.R.Civ.P. 12(b)(6) and Fed.R.Civ.P. 9(b). Plaintiff Zon LED, LLC has filed a response [Doc. No. 54] in opposition to the Motion, and Inventronics USA has filed a reply brief [Doc. No. 61]. The Motion is fully briefed and at issue.

         Factual and Procedural Background

         Plaintiff sells lighting products to commercial customers. It brings suit to recover damages allegedly caused by the failure of power supply products or “LED drivers” sold by Power Partners, Inc. (“Power Partners”) and incorporated into Plaintiff's LED lighting products.[1] See Am. Compl. [Doc. No. 37], ¶ 6. The drivers were manufactured by a Chinese company, Inventronics, Inc.[2] Plaintiff has sued Inventronics USA, an Oklahoma corporation with a distribution center in Oklahoma, as the alleged “United States presence” of Inventronics, Inc. See Am. Compl. [Doc. No. 37], ¶ 3. Plaintiff asserts a fraud claim under Massachusetts law (see id. ¶ 38), and breach of warranty claims under Oklahoma's Uniform Commercial Code (“UCC”), Okla. Stat. tit. 12A, §§ 2-313 to 2-315. See id. at 17-19, ¶¶ 42, 47, 52. Federal subject matter jurisdiction is based on diversity of citizenship under 28 U.S.C. § 1332.[3]

         Standard of Decision

         “To survive a motion to dismiss [under Rule 12(b)(6)], a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “[W]here the well pleaded facts do not permit the court to infer more than the possibility of misconduct, the complaint has alleged - but it has not ‘show[n]' - ‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)). Thus, in assessing plausibility, a court should first disregard conclusory allegations and “next consider the factual allegations in [the] complaint to determine if they plausibly suggest an entitlement to relief.” Id. at 681.

         A claim of fraud is governed by the heightened pleading requirements of Rule 9(b), which provides:

In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.

         Fed. R. Civ. P. 9(b). “At a minimum, Rule 9(b) requires that a plaintiff set forth the ‘who, what, when, where and how' of the alleged fraud, and must set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof.” United States ex rel. Sikkenga v. Regence Bluecross Blueshield, 472 F.3d 702, 726-27 (10th Cir. 2006) (internal quotations omitted); see Toone v. Wells Fargo Bank, N.A., 716 F.3d 516, 522 (10th Cir. 2010); Tal v. Hogan, 453 F.3d 1244, 1263 (10th Cir. 2006). To determine if factual allegations satisfy Rule 9(b), the Court reviews only the text of a complaint; matters outside the pleading may not be considered unless permitted by Rule 12(b)(6). See Toone, 716 F.3d at 521; Sikkenga, 472 F.3d at 726; Tal, 453 F.3d at 1264 & n.24. The Court accepts “as true all well-pleaded facts, as distinguished from conclusory allegations, and view[s] those facts in the light most favorable to the non-moving party.” Sikkenga, 472 F.3d at 726.

         Discussion

         A. Fraud Claim

         Plaintiff's fraud claim has two parts: 1) fraudulent inducement of Plaintiff to use substandard LED drivers in its lighting products through “bait and switch tactics;” and 2) fraudulent “performance” conduct that concealed defects in the LED drivers and caused Plaintiff to continue using them after numerous failures had occurred. See Am. Compl. [Doc. No. 37] at 14 & ¶¶ 32-34, 35-37. In pleading this fraud claim, Plaintiff does not specify what acts were committed by whom but, instead, attributes representations and conduct to “Defendants” collectively and refers to Inventronics USA and Inventronics, Inc. collectively as “Inventronics.” See id. ¶ 3 & ¶¶ 32-35, 37. Inventronics USA contends this failure to identify any statement or action “attributed specifically to Inventronics USA” is fatal to Plaintiff's fraud claim against it. See Mot. Dismiss [Doc. No. 46] at 6 (emphasis omitted). Inventronics USA also asserts that Plaintiff has not sufficiently identified any false representations made by Inventronics USA or any of its agents or employees, and has failed to plead certain elements of fraud, including a material misrepresentation of fact (rather than opinion) and reasonable reliance by Plaintiff.

         Plaintiff, of course, disagrees with Inventronics USA's assessment of the Amended Complaint and argues that “sufficient particularity” may be found by “taking into account the allegations of the Complaint, its exhibits, and the documents or other information referenced in the Complaint.” See Pl.'s Resp. Br. [Doc. No. 54] at 1.[4] Plaintiff goes further, and provides as Exhibit 1 to its brief “advertising placed in a trade publication” that is offered to support Plaintiff's allegation that Inventronics USA should be regarded as the “United States presence” of Inventronics, Inc. and show that affiliated entities of Inventronics, Inc. “fail to distinguish themselves” to the public. See id. at 1-2 & Ex. 1 [Doc. No. 54-1]. Plaintiff provides no legal authority that would permit the Court to consider Plaintiff's exhibit of trade magazines in ruling on Inventronics USA's Motion. The Court finds these materials to be inappropriate for consideration under Rule 12(b)(6), and disregards them. Further, Plaintiff provides no legal authority, and the Court is aware of none, for allowing a conclusory allegation that Inventronics USA is the “United States presence” of Inventronics, Inc. to serve as a sufficient factual basis to disregard the separate legal entities and treat the two corporations as one. Thus, the Court proceeds to determine whether the Amended Complaint provides sufficient particularity in its factual allegations and attached or referenced materials to state a fraud claim against Inventronics USA.

         To establish a common law claim of fraud requires proof of the following elements: “1) a false material misrepresentation, 2) made as a positive assertion which is either known to be false or is made recklessly without knowledge of the truth, 3) with the intention that it be acted upon, and 4) which is relied on by the other party to his (or her) own detriment.” Bowman v. Presley, 212 P.3d 1210, 1217-18 (Okla. 2009) (footnotes omitted).[5] In this case, Plaintiff argues that the Amended Complaint alleges the following “fraudulent ‘statements' by Inventronics USA: (1) providing perfect specimens to Plaintiff for testing to induce Plaintiff to purchase from Defendants, then delivering production units that were nothing like the specimens; (2) promising Plaintiff particular performance characteristics for the drivers . . .; and (3) lying to cover up the massive product failures that ...


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