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Terex South Dakota, Inc. v. Carraro Drive Tech, S.P A.

United States District Court, D. Connecticut

March 8, 2018



          MICHAEL P. SHEA, U.S.D.J.

         This case arises out of a contract for the sale of goods between two commercial parties. The plaintiff, Terex South Dakota, Inc. (“Terex”), alleges that the defendant, Carraro Drive Tech, S.p.A. (“Carraro”), supplied it with faulty axles for the material handling equipment it sells and then refused to provide warranty coverage after the axles suffered catastrophic failures, leading to complaints by Terex's customers. Terex sets out seven counts against Carraro: (i) breach of contract; (ii) breach of the implied covenant of good faith and fair dealing; (iii) breach of express warranty; (iv) breach of implied warranty of fitness for a particular purpose; (v) breach of implied warranty of merchantability; (vi) express indemnity; and (vii) negligence. Carraro presents a different account, alleging that Terex knew or should have known that a mechanism over which it had control was to blame for the failure of Carraro's axles. As a result, Carraro brings the following counterclaims against Terex: (i) wrongful rejection (count one); (ii) breach of warranty by buyer (count two); (iii) fraudulent misrepresentation (count three); (iv) negligent misrepresentation (count four); (v) promissory estoppel (count five); (vi) unjust enrichment (count six); (vii) breach of the covenant of good faith and fair dealing (count seven); (viii) breach of contract (count eight); (ix) negligence (count nine); and (x) violation of the Connecticut Unfair Trade Practices Act (“CUTPA”) (count ten). The parties now advance dueling motions to dismiss. Carraro moves to dismiss Terex's complaint. (ECF No. 16). Terex moves to dismiss counts three, four, nine, and ten of Carraro's counterclaim complaint. For the following reasons, Carraro's motion to dismiss is denied and Terex's motion to dismiss is granted. Further, Carraro's second and eighth counts are dismissed for failure to state a cognizable claim.

         I. Factual Allegations

         a. Terex's Complaint

         Terex “designs and manufactures material handling equipment including . . . the GTH-844, a large wheeled telehandler. . . .” (ECF No. 1 at ¶ 6). Carraro “designs and manufactures axles of medium and large size. . . .” (Id. at ¶ 7). “In early 2010, [Terex] and Carraro signed a ‘Letter of Intent to Make an Award' for axles to be used on [Terex's GTH-844] telehandlers.” (Id. at ¶ 8). Terex then filled out a form provided by Carraro identifying the technical specifications for the GTH-844. (Id. at ¶ 9). Carraro was to use this information to “select[] the appropriate model of stock axle meeting the identified needs of [Terex], and [Terex] relied on Carraro's skill and judgment in that regard.” (Id.).

         When Terex purchased axles from Carraro, it would simultaneously issue a “Blanket Release” containing Terex's “Terms and Conditions which provide, among other things, the warranty applicable to Carraro's [a]xles, indemnification, choice of Connecticut law and an award of costs, including a reasonable attorney's fee, in any litigation arising out of the contract.” (Id. at ¶ 11). “Shortly after Carraro's [a]xles were installed in the GTH-844s, the [a]xles began to suffer catastrophic failures of both the front and rear axles.” (Id. at ¶ 13). These failures “caused [Terex] to expend in excess of $75, 000 responding to customers' issues with the [a]xles.” (Id. at ¶ 14). On October 1, 2015, “Carraro ceased providing warranty coverage for its [a]xles under warranty and advised its authorized service provider that [Terex] would be responsible for repairs from that date forward.” (Id. at ¶ 15). “As a direct result of Carraro's improperly designed and/or manufactured [a]xles, and Carraro's refusal to honor its warranty, [Terex] was injured and suffered damages.” (Id. at ¶ 16).

         b. Carraro's Counterclaim Complaint

         Carraro presents a different version of events in its counterclaim complaint. Its account dovetails with Terex's description of the beginning of the parties' relationship, as it notes that it began providing axles[1] to Terex in December of 2012. (ECF No. 17 at ¶ 8). “In the spring of 2013, Terex reported to [Carraro] that it was receiving reports that the [axles] were breaking in the GTH 844 Telehandler.” (Id. at ¶ 9). The parties met in the summer and fall of 2013 to discuss “the potential causes of the failure of the [axles].” (Id. at ¶¶ 10-11). “Throughout 2013, 2014, and 2015, Terex continuously represented to [Carraro] that [Carraro's axles] were at fault.” (Id. at ¶ 12). Carraro disputed this contention and repeatedly inquired whether the problems could have been caused by “improper engagement of the differential lock mechanism, a matter solely within Terex's knowledge and control.” (Id.). Terex repeatedly denied the existence of any issues with the differential lock mechanism. (Id.).

         “Relying on Terex's assurances that there were no issues with [the differential lock mechanism], [Carraro] began redesign work of its [axles] in an effort to address the alleged failures of the [axles].” (Id. at ¶ 13). Carraro also began to “make new production investments based on its redesign of the [axles], ” thereafter incurring “installation, production, and shipping costs in connection with the new design of” the [axles] for the GTH-844s. (Id. at ¶¶ 13-14). Carraro also “made warranty payments to Terex totaling $299, 446 based on Terex's representations that the [axles] had failed and [that] there were no issues with the differential lock mechanism.” (Id. at ¶ 15). “In January 2016, [Carraro] discovered that there was undue pressure that was causing the improper engagement of the differential locking mechanism in the GTH 844 Telehandlers, which in turn caused the failure of [Carraro's] [axles].” (Id. at ¶ 16). Terex “knew or should have known of this problem” and that it was the cause of the axle failures, and “continuously concealed” the true cause of the axle failures, all the while accepting new axles and warranty payments from Carraro. (Id. at ¶¶ 16-17).

         II. Legal Standard

         “A motion to dismiss a counterclaim is evaluated under the same standard as a motion to dismiss a complaint.” Revonate Mfg., LLC v. Acer Am. Corp., No. 12 Civ. 6017(KBF), 2013 WL 342922, at *2 (S.D.N.Y. 2013) (quoting Netrix Leasing, LLC v. K.S. Telecom, Inc., No. 00 Civ. 3375(KMW), 2001 WL 228362, at *8 (S.D.N.Y. 2011)). For both pleadings, under Fed.R.Civ.P. 12(b)(6), the Court must determine whether plaintiffs have alleged “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. 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.” Ray v. Watnick, 688 Fed.Appx. 41 (2d Cir. 2017) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations and internal quotation marks omitted)). While the Court must “draw all reasonable inferences in favor of the non-moving party, ” Vietnam Ass'n for Victims of Agent Orange v. Dow Chem. Co., 517 F.3d 104, 115 (2d Cir. 2008), it must grant the moving party's motion if “a complaint is based solely on wholly conclusory allegations and provides no factual support for such claims. . . .” Scott v. Town of Monroe, 306 F.Supp.2d 191, 198 (D. Conn. 2004).

         Allegations of fraud “must be pled with particularity. . . .” Eternity Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168, 187 (2d Cir. 2004). Under Fed.R.Civ.P. 9(b), a party must “(1) detail the statements (or omissions) that the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where and when the statements (or omissions) were made, and (4) explain why the statements (or omissions) are fraudulent.” Id. (quoting Harsco Corp. v. Segui, 91 F.3d 337, 347 (2d Cir. 1996)). The purpose of this heightened pleading standard is “to provide a defendant with fair notice of a plaintiff's claim, to safeguard a defendant's reputation from improvident charges of wrongdoing, and to protect a defendant against the institution of a strike suit.” O'Brien v. Nat'l Prop. Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991) (internal quotation marks omitted).

         III. ...

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