Stockroom, Inc. v. Dydacomp Dev. Corp.

• Decision Date: 24 April 2013
• Docket Number: Civ. No. 11–6220(WHW).
• Citation: 941 F.Supp.2d 537
• Court: U.S. District Court — District of New Jersey
• Parties: STOCKROOM, INC., Plaintiff, v. DYDACOMP DEVELOPMENT CORP., and Plug & Pay Technologies, Inc., Defendants.

941 F.Supp.2d 537

STOCKROOM, INC., Plaintiff,

v.DYDACOMP DEVELOPMENT CORP., and Plug & Pay Technologies, Inc., Defendants.

Civ. No. 11–6220(WHW).

United States District Court,

D. New Jersey.

April 24, 2013.

Vincent Savino Verdiramo, Verdiramo & Verdiramo, Jersey City, NJ, for Plaintiff.

David Allen Ward, Kluger Healey, LLC, Red Bank, NJ, David J. Shannon, Marshall, Dennehey, Warner, Coleman & Goggin, Cherry Hill, NJ, for Defendants.

OPINION

WALLS, Senior District Judge.

This case concerns a credit card processing system that allegedly failed to process certain transactions. Defendant Dydacomp Development Corporation (“Dydacomp”) moves to dismiss Plaintiff Stockroom, Inc.'s (“Stockroom”) second amended complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. The Court decides the motion without oral argument under Federal Rule of Civil Procedure 78(b). Dydacomp's motion is granted in part and denied in part.

FACTUAL AND PROCEDURAL BACKGROUND

The facts of this case have been fully set forth in the Court's previous opinion dismissing Stockroom's claims without prejudice. ECF No. 30. In brief, Plaintiff Stockroom is a retailer of adult-themed products and clothing. Second Am. Compl. ¶ 7. Defendant Dydacomp is a software company that sells an order processing system for online merchants called Multichannel Order Manager (“MOM”). Id. ¶¶ 1, 8. In 1999, Stockroom began to use the MOM system to process retail transactions at its physical and online stores. Id. ¶ 9. Defendant Plug & Pay Technologies, Inc. (“Plug & Pay”) processes credit card transactions for online merchants in conjunction with the MOM system. Stockroom started using Plug & Pay in 2004. Id. ¶¶ 1, 10–12. In 2010, upon closing one of its stores, Stockroom discovered problematic credit card transactions where money was not deposited in its bank account and customer refunds were issued in error. Id. ¶¶ 1, 18–21, 39. Stockroom alleges that Defendants Dydacomp and Plug & Pay are responsible for the problem and about 3% of credit card transactions were affected. Id. ¶¶ 1, 21.

Stockroom's first amended complaint alleged seven claims: (1) breach of contract against Dydacomp; (2) breach of contract against Plug & Pay; (3) breach of covenant of good faith and fair dealing against both Defendants; (4) violation of the New Jersey Consumer Fraud Act (“NJCFA”) against both Defendants; (5) breach of express warranty against both Defendants; (6) breach of implied warranty of merchantability against both Defendants; (7) breach of warranty of fitness for a particular purposes against both Defendants. First Am. Compl. ¶¶ 29–75. The Court dismissed all the claims without prejudice. The claims based on breach of contract and breach of warranty were held to be time-barred under N.J. Stat. Ann. § 12A:2–725. Opinion at 8 (ECF No. 30). The Court instructed Stockroom that more detailed allegations of fraudulent concealment would be necessary for equitable tolling to apply. Id. at 9. Stockroom also failed to plead its NJCFA claim with sufficient particularity. Id. at 11–13. Stockroom was permitted to re-file to address these deficiencies and to add another claim of common law fraud. Id. at 12–13.¹

Stockroom filed a second amended complaint on October 1, 2012. ECF No. 32. Dydacomp moves to dismiss again, arguing that Stockroom still fails to plead sufficient facts for fraudulent concealment and fraud.

STANDARD OF REVIEW

When deciding a 12(b)(6) motion to dismiss, the Court accepts as true all facts alleged in the complaint and construes the complaint in the light most favorable to the plaintiff. Fleisher v. Standard Ins. Co., 679 F.3d 116, 120 (3d Cir.2012) (citations omitted). Legal conclusions asserted in the complaint are disregarded. Fowler v. UPMC Shadyside, 578 F.3d 203, 210–11 (3d Cir.2009). The Court should determine whether the facts alleged are sufficient to show that the plaintiff has “ ‘a plausible claim for relief.’ ” Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). “This ‘plausibility’ determination will be a ‘context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’ ” Id. (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937). After the Supreme Court's decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), “ ‘threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.’ ” Id. at 210, 129 S.Ct. 1937 (quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937).

DISCUSSION

I. Equitable tolling

The Court dismissed most of Stockroom's claims (counts I, II, III, V, VI, VII) because they are time-barred under N.J. Stat. Ann. § 12A:2–725. Opinion at 8. For equitable tolling to apply, Stockroom was instructed to plead with specificity how Dydacomp actively concealed its alleged wrongdoing. Id. at 8–9.

In the second amended complaint, Stockroom provides more details about Dydacomp's alleged fraudulent concealment. Stockroom's theory is that the faulty credit card transactions were caused by Dydacomp's MOM system issuing improper authorization codes. Stockroom reasonably relied upon those authorization codes as a sign that the transactions were legitimately processed. Second Am. Compl. ¶¶ 15, 22–27, 31. Stockroom claims Dydacomp must have been aware of the problem because one of its employees “intentionally created the software code that caused the MOM software” to generate the faulty authorization codes. Id. ¶ 32. Dydacomp allegedly misrepresented and concealed the flaws in the MOM system in several respects: (1) the hypothetical programmer who created the faulty software program and then concealed the error, id. ¶¶ 31–33; (2) each faulty authorization code generated by the MOM system constitutes “a misrepresentation regarding the status of the transaction,” id. ¶ 3 1; and (3) Dydacomp's sales and promotional materials misrepresented that the software could reliably process credit card transactions, id. ¶¶ 8–9. See Stockroom's Opp'n Br. at 13 (ECF No. 44).

These are creative arguments, but their very creativity only underscores the absence of facts showing that Dydacomp overtly tricked or misled Stockroom. That some hypothetical programmer at Dydacomp knew about the problem and concealed it is sheer conjecture. Each faulty authorization code generated by the MOM system cannot constitute a misrepresentation for equitable tolling purposes; the doctrine requires an act of concealment or trickery beyond the original act of wrongdoing. To complain that a program did not work properly does not mean that each error generated by that program is a misrepresentation. See 287 Corporate Ctr. Assocs. v. Twp. of Bridgewater, 101 F.3d 320, 325 (3d Cir.1996) (continually taxing a property as commercial property does not constitute misleading action for equitable tolling purposes). Lastly, Dydacomp's promotional and sales materials may not have revealed the MOM system error, but they also do not amount to “trickery or inducement” for Stockroom to miss the filing deadline. An overview of the cases where equitable tolling is applied shows that more specific acts of trickery are typically required. See Price v. N.J. Mfrs. Ins. Co., 182 N.J. 519, 525–27, 867 A.2d 1181 (2005) (applying equitable tolling where insurance company actively lulled the plaintiff into thinking that he had properly filed his claim by requesting and receiving documents over a three-year period, denying claim only after filing deadline had elapsed); Fabcon East, LLC v. Stegla Group, Inc., No. 10–4601, 2011 WL 2293454, at *5 (D.N.J. June 8, 2011) (contract limitations period equitably tolled where defendants repeatedly assured plaintiff that debt would be paid); Foodtown v. Sigma Marketing Sys., Inc., 518 F.Supp. 485, 494 (D.N.J.1980) (finding possible fraudulent concealment where defendant forwarded documents to plaintiff with misleading information).

Plaintiff relies heavily upon In re Ford Motor Co. E–350 Van Products Liability Litig., 2008 WL 4126264 (D.N.J. Sep. 02, 2008), in which the court applied equitable tolling for plaintiffs who allege generally that Ford deceived consumers by representing that the vehicles were safe. Id. at *18.Ford Motor is an outlier case that bucks the trend, and the court even concedes that plaintiffs “could have [pled] with greater precision.” Id. It is not binding precedent for this Court. Threadgill v. Armstrong World Indus., Inc., 928 F.2d 1366, 1371 (3d Cir.1991) (“The doctrine of stare decisis does not compel one district court judge to follow the decision of another.”) (quotations omitted). The Court places more weight upon recent New Jersey cases emphasizing that equitable tolling applies only in “narrowly-defined circumstances.” R.A. C. v. P.J.S. Jr., 192 N.J. 81, 100, 927 A.2d 97 (2007) (citing Price, 182 N.J. at 525–27, 867 A.2d 1181).See also Trinity Church v. Lawson–Bell, 394 N.J.Super. 159, 171, 925 A.2d 720 (N.J.Super.Ct.App.Div.2007) (“The requirements of equitable estoppel are quite exacting”).

Stockroom makes a compelling case that it could not have discovered these faulty credit card transactions earlier than it did, Second Am. Compl. ¶¶ 34–39, but that is beside the point. The discovery doctrine does not apply to breach of contract claims governed by the Uniform Commercial Code. Foodtown, 518 F.Supp. at 488. The discovery rule and the equitable tolling doctrine are distinct. Freeman v. State, 347 N.J.Super. 11, 31, 788 A.2d 867 (N.J.Super.Ct.App.Div.2002). The discovery rule postpones the accrual of a cause of action. Equitable tolling acknowledges the accrual of the cause of action but tolls the statute of limitation because the defendant's inequitable conduct “induced or tricked” the plaintiff to miss the filing deadline. Id. (quotations omitted). In the latter...