Carl Kelley Const. LLC v. Danco Technologies

• Decision Date: 07 August 2009
• Docket Number: No. CIV. 08-0379 JB/RLP.,CIV. 08-0379 JB/RLP.
• Citation: Carl Kelley Const. LLC v. Danco Technologies, 656 F.Supp.2d 1323 (D. N.M. 2009)
• Parties: CARL KELLEY CONSTRUCTION LLC, Plaintiff, v. DANCO TECHNOLOGIES, f/n/a WTNM Technologies, Ltd., and Jennifer Long, individually and as agent for WTNM, Defendants.
• Court: U.S. District Court — District of New Mexico

656 F.Supp.2d 1323

CARL KELLEY CONSTRUCTION LLC, Plaintiff, v.DANCO TECHNOLOGIES, f/n/a WTNM Technologies, Ltd., and Jennifer Long, individually and as agent for WTNM, Defendants.

No. CIV. 08-0379 JB/RLP.

United States District Court, D. New Mexico.

August 7, 2009.

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J. Robert Beauvais, J. Robert Beauvais, P.A., Ruidoso, NM, for the Plaintiff.

Ilyse D. Hahs-Brooks, Ilyse D. Hahs, Attorney at Law, LLC, G. Holdt Garver, G. Holdt Garver Chartered, Albuquerque, NM, for DefendantWTNM Technologies, Ltd.

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on DefendantWTNM Technologies, Ltd.'s Renewed Motion to to [sic] Dismiss or, Alternatively, for a Determination of Choice of Law of for [sic] Claims, filed January 28, 2009(Doc. 29).The Court held a hearing on June 26, 2009.The primary issues are: (i) whether the Court should dismiss unserved Defendant Danco Technologies from the case or require service of process; (ii) which state's law governs the claims in this case; (iii) whether the contract between PlaintiffCarl Kelley Construction, LLC and DefendantWTNM Technologies, Ltd. is an unenforceable adhesion contract; and (iv) whether the Court should dismiss any of Carl Kelley's claims.Some of the issues were resolved at the hearing when Carl Kelley conceded some points.Based upon these concessions, the Court will dismiss Danco from the case without prejudice to Carl Kelley attempting to bring Danco in later, and will dismiss the express-warranty claims.In addition, the Court finds that Texas law governs the contract claims, while New Mexico law governs the remaining claims.Applying Texas law, the Court concludes that the contract is not unenforceable.Finally, the Court will allow the tort claims and the claim under the New Mexico Unfair Trade Practices Act ("UPA") to proceed.

FACTUAL BACKGROUND

In 2007, the Village of Cloudcroft, New Mexico, contacted Carl Kelley about remodeling a settling basin that was part of the village's sewage treatment plant.SeeAmended Complaint¶ 7, at 2, filedJanuary 14, 2009(Doc. 27).Carl Kelley agreed to construct new chambers in the basin, and to seal the interior surfaces with an epoxy or similar impermeable lining.Seeid.¶ 8, at 3.After researching the issue, Carl Kelley recommended Belzona, sold exclusively in the region by WTNM, as the sealing material.Seeid.¶ 9, at 3.In July 2007, Carl Kelley purchased Belzona from WTNM.Seeid.¶ 10, at 3.Carl Kelley alleges that it made it clear that Cloudcroft wanted a twenty-year warranty and that Roger Danesi, WTNM's general partner, assured an engineer for Cloudcroft that it would provide such a warranty if the product was applied correctly.Seeid.¶¶ 13-14, at 3-4.

WTNM sent Carl Kelley a contract for the sale by a facsimile transmission instructing "please sign & return."Doc. 32-3.Mr. Carl Kelley, the eponymous managing member of Carl Kelley Construction, asserts that he thought the contract was offered "on a take it or leave it basis and there was no opportunity to negotiates any of the `conditions.'"Exhibit 6 to Response, Affidavit of Carl Kelley¶ 7, at 1(executed March 26, 2009)(Doc. 41-4)("Kelley Aff.").WTNM admits that the contract here was a "form/contract," but also asserts "that some of the information on the form is not pre-printed, but filled out at or around [the time] an order is placed."Exhibit 7 to Response, Request for AdmissionNo. 5 (Doc. 41-5).The contract consists of an invoice, which contains shipping information and the sales price, with an attached "Terms and Conditions of Sale" that lists a series of fourteen clauses on a single page.Contractat 1-2(Doc. 5-2).Two clauses from the contract are relevant here:

5) WARRANTIES

All product descriptions are based on the results of laboratory tests, and the Products are warranted by WTNM to be free from defects in material and workmanship and to conform to the description on the face hereof.

Buyer shall notify WTNM of any breach of the above warranty within a reasonable time of discovery.The liability of WTNM and the exclusive remedy of Buyer for breach of the above warranty shall be limited to the replacement of the Products or a refund of the purchase price, at WTNM's option.All OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING (WITHOUT LIMITATION) ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS A[sic] PARTICULAR PURPOSE OR ANY WARRANTY AGAINST REDHIBITORY DEFECTS, ARE EXPRESSLY EXCLUDED.BUYER ACKNOWLEDGES AND ACCEPTS SUCH EXCLUSION OF WARRANTIES.In no event shall WTNM be liable for consequential, special and/or incidental damages.Buyer shall not represent to any third party that the warranty of WTNM is greater than as set forth herein.

* * *

12) APPLICABLE LAW AND ARBITRATION

This contract shall be construed, interpreted and applied in accordance with the laws of the State of Texas.

Contract¶¶ 5, 12, at 2(bold and capitalization in original).

According to Carl Kelley, WTNM sent DefendantJennifer Long to supervise application of the Belzona.SeeAmended Complaint¶ 15, at 4.Carl Kelley alleges that it followed Long's directions, but that doing so resulted in the Belzona failing to create an impermeable seal.Seeid.¶¶ 16-19, at 4.After contacting WTNM, WTNM did not admit liability, but proposed remediation measures, which Carl Kelley maintains have proven unsuccessful.Seeid.¶¶ 20-24, at 5.

PROCEDURAL BACKGROUND

On April 20, 2008, Carl Kelley filed its original Complaint.SeeDoc. 1.WTNM moved to dismiss the Complaint, seeDoc. 5, but at the hearing on December 29, 2008, WTNM agreed to withdraw its motion and the Court granted Carl Kelley leave to amend its original Complaint, seeClerk's Minutesat 2, filedDecember, 29 2009(Doc. 26).Carl Kelley has now filed its Amended Complaint, which pleads claims for breach of express and implied warranties, breach of contract for the warranty, declaratory relief, fraudulent and negligent misrepresentation, and violations of the UPA, and which adds Danco as a Defendant, on the belief that Danco is "the legal successor to WTNM Technologies['] obligations and liabilities."Amended Complaint¶ 3, at 2.

WTNM has renewed its motion to dismiss, and asks that the Court dismiss or grant summary judgment on the claims against it and, alternatively, asks for a determination of the law governing Carl Kelley's claims.To begin its motion, WTNM asserts that neither Danco, nor any other person or entity, has assumed the obligations or liabilities of WTNM and that its counsel represents only WTNM.SeeMotionat 1-2.Next, WTNM contends that Carl Kelley's warranty claims fail because the claims rely on New Mexico law when Texas law supplies the governing law and because Carl Kelley lacks standing to bring the claims.Seeid. at 4-6.WTNM then argues that the Court should dismiss Carl Kelley's claim for declaratory judgment because, under Texas law, the contract is not one of adhesion.Seeid. at 6-8.WTNM requests that, if the Court does not dismiss the contract and warranty claims, the Court should find that Texas law governs those claims because the choice-of-law provision in the contract.Seeid. at 8-10.

After discussing the contract issues, WTNM next argues that Carl Kelley's claim for fraudulent misrepresentation is a disguised contract claim and fails to meet the rigorous standards required to plead fraud.Seeid. at 10-12.WTNM contends that Carl Kelley's alternative claim for negligent misrepresentation fails to state a claim because Carl Kelley did not reasonably rely on any statements to its detriment.Seeid. at 12.WTNM requests that, if the Court does not dismiss these tort claims, it declare that New Mexico law governs those claims under the principle of lex loci delicti.SeeMotionat 12-13.Finally, WTNM argues that Carl Kelley's claim for violation of the New Mexico UPA fails because Texas law applies to the claim and because the claim is inadequately pled regardless which law applies.SeeMotionat 13-14.WTNM asserts that the UPA claim is groundless and that it is therefore entitled to recover its attorney's fees for having to defend against the claim.SeeMotionat 14-15.

In response, Carl Kelley maintains that New Mexico law governs the contract.While acknowledging the choice-of-law provision, Carl Kelley contends that the contract is an adhesion contract and that, because it was signed in New Mexico, New Mexico law should apply.SeePlaintiff's Amended Memorandum Brief in Response to Defendant WTNM Technologies, Lt[d]'s Renewed Motion to Dismiss; Alternatively, for a Determination of Choice of Law for Claimsat 4-6, filedMarch 28, 2009(Doc. 41)("Response").Carl Kelley also asserts that there are factual issues whether Danco is a successor to WTNM, and so the Court should not dismiss Danco or require separate service of Danco.Seeid. at 7.Regarding the substantive claims, Carl Kelley first argues that the circumstances surrounding the contract indicate that it is a contract of adhesion.Seeid. at 8-11.Carl Kelley next argues that it can assert the twenty-year warranty and that, to ensure the warranty was not voided, it followed the directions of Long, whom Carl Kelley contends is WTNM's agent, in applying the Belzona.Seeid. at 12-17.

On the misrepresentation claims, Carl Kelley disputes WTNM's characterization of the claims as rehashed contract claims.According to Carl Kelley, the Complaint alleges a prima-facie case of both fraudulent and negligent misrepresentation.SeeResponseat 18.Lastly, Carl Kelley contends that its unfair practices claim is valid under either New Mexico or Texas law.Seeid. at 19-20.

In reply, WTNM maintains that the contract blocks Carl Kelley's warranty claims.SeeDefendantWTNM Technologies, Ltd.'s Reply to Plaintiff's Amended Response to WTNM's Renewed ...