J Supor & Son Trucking & Riggi v. Kenworth Truck Co ( 2019 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 18-2353
_____________
J SUPOR & SON TRUCKING & RIGGINS COMPANY, INC.,
Appellant
v.
KENWORTH TRUCK CO, A Division of Paccar Inc.;
PACCAR INC, d/b/a Kenworth Truck Company, Inc.;
COOPERSBURG KENWORTH, INC.;
ABC COPORATION 1-5, Fictitious Corporation;
JOHN DOES 1-5, Fictitious Names
____________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2-17-cv-08057)
District Judge: Hon. Susan D. Wigenton
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
September 9, 2019
Before: CHAGARES, JORDAN, and RESTREPO, Circuit Judges.
(Filed: October 23, 2019)
____________
OPINION ∗
____________
∗
This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
CHAGARES, Circuit Judge.
In this appeal, plaintiff J. Supor & Son Trucking & Rigging Company, Inc.
(“Supor”) appeals the dismissal of its complaint alleging various causes of action relating
to its purchase of a truck. It also challenges the District Court’s decision to grant a
defendant’s motion to vacate entry of default. For the reasons set forth below, we will
affirm the orders of the District Court.
I.
We write principally for the parties and therefore recite only those facts necessary
to our decision. 1 In August 2013, Supor bought a new Kenworth T800 Truck —
“manufactured by [defendant] Paccar, Inc. and/or its subsidiary, [defendant] Kenworth
Truck (collectively, ‘Kenworth’)” — from defendant Coopersburg Kenworth, Inc.
(“Coopersburg”). Joint Appendix (“J.A.”) 27. On September 3, 2013, it executed a
document entitled “Kenworth Truck Company Limited Warranty Agreement” (the
“Agreement”), which defined “the respective rights and responsibilities” of Supor,
Kenworth, and Coopersburg. 2 J.A. 110–11. The Agreement provided:
Kenworth warrants . . . that the Kenworth vehicle (“Vehicle”)
. . . will be free from defects in materials and factory
1
In this appeal, we review the District Court’s orders granting the defendants’
motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Accordingly,
we set forth the facts here as alleged in Supor’s complaint, “accept[ing] all of [its]
allegations as true and view[ing] the facts in the light most favorable to [it].” Buck v.
Hampton Twp. Sch. Dist., 452 F.3d 256, 258 n.1 (3d Cir. 2006).
2
We consider the Agreement in this appeal although it was not attached to Supor’s
complaint. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.
1997) (explaining that a court deciding a motion to dismiss may consider “document[s]
integral to or explicitly relied upon in the complaint” (emphasis omitted) (quoting Shaw
v. Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996)).
2
workmanship (“Warrantable Failures”) appearing under
normal commercial use and service during the time or mileage
limitations set forth in the attached Warranty Schedule . . . .
YOUR SOLE AND EXCLUSIVE REMEDY AGAINST
KENWORTH AND THE SELLING DEALER ARISING
FROM YOUR PURCHASE AND USE OF THIS VEHICLE
IS LIMITED TO THE REPAIR OR REPLACEMENT OF
“WARRANTABLE FAILURES” . . . SUBJECT TO
KENWORTH’S TIME AND MILEAGE LIMITATIONS
LISTED IN THE ATTACHED VEHICLE ONLY
WARRANTY SCHEDULE. The maximum time and mileage
limitations in the Warranty Schedule begin on the Date of
Delivery to the First Purchaser, as shown below.
...
TIME LIMIT ON COMMENCING LEGAL ACTION /
OTHER TERMS
It is agreed that you have 12 months from the accrual of the
cause of action to commence any legal action arising from the
purchase or use of the Vehicle, or be barred forever.
J.A. 110–11.
After Supor took delivery of the truck in September 2013, it began experiencing
problems with the vehicle, including with its electrical system. Supor requested that
Kenworth and/or Coopersburg repair the truck on several occasions. The vehicle was
unusable while it was being serviced, and the same issues recurred despite the
defendants’ attempts to fix the truck. Supor claims that it “repeatedly asked [the
defendants] to rectify this matter by reimbursing [it] for its damages relating to the
Truck” or providing written promises to “repair[] the Truck as necessary in the future.”
J.A. 29. Both defendants allegedly “failed to rectify the defects . . . and/or to compensate
Supor for its damages.” J.A. 30.
3
Supor filed suit against the defendants in state court on August 28, 2017, setting
forth the following causes of action: (1) breach of contract; (2) breach of the implied
covenant of good faith and fair dealing; (3) breach of express and/or implied warranty of
merchantability; (4) breach of express and/or implied warranty of fitness for a particular
purpose; (5) violation of New Jersey Lemon Law, N.J. Stat. Ann. § 56:12-29, et seq.;
(6) violation of the New Jersey Consumer Fraud Act, N.J. Stat. Ann. § 56:8-1, et seq.;
and (7) rescission. It alleged that the truck was unusable for ninety-six days and that it
incurred $193,440 in damages. Kenworth removed the action to federal court and moved
to dismiss the claims against it, arguing in part that Supor’s complaint was untimely
pursuant to the Agreement.
The District Court entered an order on February 15, 2018 granting Kenworth’s
motion to dismiss after concluding that a provision within the Agreement shortening
Supor’s time to file a cause of action barred Supor’s complaint and that its enforcement
would not be unconscionable. Specifically, the District Court concluded that: “[t]he
truck was delivered to [Supor] on September 3, 2013”; through the Agreement, Kenworth
promised to “pay warranty claims for ‘Warrantable Failures’ that occur within twelve
months or 50,000 miles after delivery of the truck, whichever occurs first”; Supor’s
“cause of action accrued no later than September 3, 2014”; the Agreement required an
action to be brought within one year of its accrual; and, therefore, Supor “had twelve
months from September 3, 2014, to commence a lawsuit to recover damages for any
warrantable failures related to the purchase of the truck.” J.A. 6 & n.3. The District
4
Court also rejected Supor’s argument that the Agreement was unconscionable, as Supor
“failed to provide any sufficient grounds” in the complaint to make that inference. J.A. 6.
Coopersburg subsequently moved to vacate the default that was entered against it
on December 8, 2017. The District Court granted Coopersburg’s motion on March 6,
2018, concluding in an order that, “[p]ursuant to Fed. R. Civ. P. 55(c), all criteria ha[d]
been met to vacate the default . . ., as good cause ha[d] been set forth.” J.A. 11. Then,
Coopersburg also filed a motion under Federal Rule of Civil Procedure 12(b)(6), seeking
to dismiss Supor’s claims against it on primarily the same grounds relied upon by
Kenworth. Through an order entered on May 21, 2018, the court granted that motion for
the same reasons it granted Kenworth’s. Supor now appeals the February 15, 2018,
March 6, 2018, and May 21, 2018 orders.
II.
The District Court had jurisdiction over this matter pursuant to 28 U.S.C. § 1332,
and we have appellate jurisdiction under 28 U.S.C. § 1291. We exercise plenary review
over the District Court’s order granting the defendants’ motions to dismiss. Buck v.
Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006). A court may grant a motion
to dismiss a complaint as barred by a statute of limitations if “the time alleged in the
statement of a claim shows that the cause of action has not been brought within the
statute of limitations.” Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (quoting
Robinson v. Johnson, 313 F.3d 128, 134–35 (3d Cir. 2002)). We review a district court’s
decision to vacate an entry of default for abuse of discretion. Doe v. Hesketh, 828 F.3d
159, 167 (3d Cir. 2016).
5
III.
Supor raises three arguments on appeal. First, the District Court erred in
concluding that the Agreement’s one-year statute of limitations provision (the
“Limitation”) barred its claims 3 because the Limitation is unreasonable under the
circumstances. Second, the court incorrectly concluded that the Agreement was not
unconscionable. Third, the District Court abused its discretion in vacating Coopersburg’s
entry of default. We find each argument meritless.
A.
Under New Jersey law, “[a]n action for breach of any contract for sale must be
commenced within four years after the cause of action has accrued.” N.J. Stat. Ann. §
12A:2-725(1). “A cause of action [on the contract] accrues when the breach occurs,” and
an action for breach of warranty accrues “when tender of delivery is made.” Id. § 12A:2-
725(2); see also Deluxe Sales & Serv., Inc. v. Hyundai Eng’g & Constr. Co., Ltd., 603
A.2d 552, 554 (N.J. Super. Ct. App. Div. 1992). However, the parties may agree in their
original agreement to “reduce the period of limitation to not less than one year,” N.J. Stat.
Ann. § 12A:2-725(1), as the parties did here.
Supor contends that the Limitation does not bar its claims under the New Jersey
UCC because the provision is unreasonable based on the interplay between it and the
3
Supor appears to confine its argument on appeal to its claims under New Jersey’s
Uniform Commercial Code (“UCC”), N.J. Stat. Ann. § 12A:1-101, et seq. We will
circumscribe our analysis accordingly. See Barna v. Bd. of Sch. Dirs. of Panther Valley
Sch. Dist., 877 F.3d 136, 145 (3d Cir. 2017) (“[A]n appellant’s opening brief must set
forth and address each argument the appellant wishes to pursue in an appeal.”).
6
Agreement’s provision limiting Supor’s remedy during the warranty period. Specifically,
it contends that it was contractually obligated to engage in the time-consuming process of
repair and replacement and that it would be “nearly impossible . . . to realize that [Supor]
ha[d] a cognizable cause of action within the span of merely a year while waiting for the
promised ‘repairs’ to have the intended effect.” Supor Br. 13–14. We are unpersuaded.
Supor was only contractually obligated to seek repair or replacement for one year, the
duration of the warranty period. Thereafter, it was free to file suit, provided it filed
within one year of the accrual of his cause of action. And we cannot agree that it is
“impossible” for a truck owner to realize, within one year of discovering a defect in the
truck, that it had a cause of action relating to the truck.
Moreover, the Limitation is reasonable. New Jersey courts have enforced
“[c]ontract provisions limiting the time parties may bring suit,” so long as they are
reasonable. Eagle Fire Prot. Corp. v. First Indem. of Am. Ins. Co., 678 A.2d 699, 704
(N.J. 1996). The one-year period provided in the Limitation is reasonable not only
because the New Jersey Supreme Court “has routinely upheld contract provisions that
create a one-year time limitation in which claimants may bring suit,” id.; see also id.
(upholding a “one-year limitation provision in [a] surety bond”); A.J. Tenwood Assocs.
v. Orange Senior Citizens Hous. Co., 491 A.2d 1280, 1284 (N.J. Super. Ct. App. Div.
1985) (upholding as reasonable a one-year limitation period in a construction contract),
but also because New Jersey’s UCC explicitly permits such a limitation, N.J. Stat. Ann. §
7
12A:2-725(1). 4 Accordingly, we conclude that the District Court did not err in holding
that the Limitation was reasonable and shortened the period of time during which Supor
could file claims under the UCC.
Supor relies upon Rodriguez v. Raymours Furniture Co., 138 A.3d 528 (N.J.
2016), and Martinez-Santiago v. Public Storage, 38 F. Supp. 3d 500 (D.N.J. 2014), to
support its claim of unreasonableness. But those cases are distinguishable. The
Rodriguez court’s determination that a limitations period less than the two years provided
by statute “effectively eliminates claims” depended in part on the unique public interest
— not present here — in protecting claims under the New Jersey Law Against
Discrimination (“LAD”), N.J. Stat. Ann. § 10:5–1 to –49. Rodriguez, 138 A.3d at 539–
40 (noting that a LAD claimant “may not immediately realize that he or she has been a
victim of discrimination”); see also id. at 538–39 (explaining that “a contractual
limitation on an individual’s right to pursue and eradicate discrimination . . . would
curtail a claim designed to also further a public interest”). And the Martinez-Santiago
court concluded that, where the plaintiff sought to challenge an agreement’s
4
To the extent New Jersey courts require a limitations period to provide a
“sufficient opportunity to investigate and file an action,” “not be so short as to work a
practical abrogation of the right of action,” and “not . . . bar[] [an action] before the loss
or damage can be ascertained,” in order to be reasonable, Eagle Fire Prot. Corp., 678
A.2d at 706 (quoting Camelot Excavating Co. v. St. Paul Fire & Marine Ins. Co., 301
N.W.2d 275, 277 (Mich. 1981), overruled by Rory v. Cont’l Ins. Co., 703 N.W.2d 23, 31
(Mich. 2005)), we are satisfied that a limitations period of one year to discover a defect in
a vehicle meets those requirements. Cf. Martinez-Santiago v. Pub. Storage, 38 F. Supp.
3d 500, 506, 507 (D.N.J. 2014) (concluding that a one-year limitation period to file suit
challenging the enforceability of provisions within an agreement was unreasonable
because it would require the plaintiff “to challenge contractual fine print addressed to
circumstances . . . that did not themselves arise when the contract was signed”).
8
indemnification provision and a provision limiting the time within which to file suit or
assert a defense in a suit arising out of the agreement, a one-year limitations period to file
suit was unreasonable because it would force the plaintiff into action before she suffered
any ascertainable loss. Martinez-Santiago, 38 F. Supp. 3d at 507. Here, Supor is not
challenging a provision of the Agreement itself but rather filing suit for breach of the
agreement, and it cannot be said that Supor was forced to act before it suffered a loss. Id.
As further support for Supor’s argument regarding the Limitation’s inapplicability,
Supor contends that the Agreement’s repair or replacement remedy failed of its essential
purpose and therefore, Supor should be permitted to seek alternative remedies. We agree
with the defendants that whether or not the remedy failed of its essential purpose is
immaterial in light of the fact that Supor’s complaint was not timely filed. 5
Finally, Supor argues that the District Court erroneously “failed to consider that
Supor’s causes of action for breach of the Agreement may have accrued . . . significantly
later” than September 3, 2014. 6 Supor Br. 16–17. Supor here focuses on the provision
within the Agreement whereby the defendants agreed to repair or replace Warrantable
Failures, which Supor argues amounts to a future performance warranty. 7 Invoking the
5
For that reason, we cannot agree with Supor that the District Court was required
to hold a hearing or permit discovery regarding whether the remedy failed of its essential
purpose.
6
Supor does not dispute that the truck was delivered on September 3, 2013, or that
Kenworth promised in the Agreement to repair and replace Warrantable Failures “that
occur within twelve months or 50,000 miles after delivery of the truck, whichever occurs
first.” J.A. 6 n.3.
7
We note that it appears to be an open question in New Jersey whether a provision
like the one at issue amounts to “a warranty of future performance . . . or an independent
promise to repair defects . . . that appear during the term of the warranty.” Poli v.
9
delayed limitation period that applies to such warranties, see N.J. Stat. Ann. § 12A:2-
725(2), Supor argues that the District Court should have held that “the accrual of Supor’s
causes of action was delayed by [its] inability to discover Defendants’ breaches of the
Agreement.” Supor Br. 18. Supor’s argument lacks merit.
Although New Jersey law provides that a cause of action for breach of a future
performance warranty “accrues when the breach is or should have been discovered,” N.J.
Stat. Ann. § 12A:2-725(2), it appears that the breach must have been discovered during
the warranty period in order for the cause of action to succeed, cf. Comm’rs of Fire Dist.
No. 9, Iselin, Woodbridge, N.J. v. Am. La France, 424 A.2d 441, 444 (N.J. Super. Ct.
App. Div. 1980) (“[I]f the warranty explicitly extended to future performance of the
truck, the . . . limitations period did not begin to run until the breach . . . was or should
have been discovered by plaintiff, provided the defect arose within the warranty period.”
(emphasis added)). Here, in order for Supor’s claim for breach of the future performance
warranty to succeed, it must have been discovered by the last day of the warranty period.
Accordingly, the District Court did not err in concluding — for purposes of the
limitations period analysis — that Supor’s “cause of action accrued no later than
September 3, 2014,” the last day of the warranty period. J.A. 6.
DaimlerChrysler Corp., 793 A.2d 104, 110–11 (N.J. Super. Ct. App. Div. 2002). We
treat the provision as a future performance warranty — expressing no opinion on whether
that characterization is proper — because the parties assume that it is one.
We also note Supor’s suggestion that the defendants’ breach of the obligation to
repair and replace did not arise from “the purchase or use of the Vehicle,” precluding
application of the Limitation. Supor Br. 16 (quoting J.A. 111). We disagree: there is no
indication that that obligation would exist but for Supor’s purchase of the truck, and
Supor does not seriously contend otherwise.
10
B.
Supor next contends that the District Court should not have dismissed its claims as
time-barred because the Limitation was unconscionable. To determine whether a
contract is unconscionable, we examine both how it was formed (for procedural
unconscionability) and its substance (for substantive unconscionability). See Rodriguez,
138 A.3d at 541. When undertaking this analysis for a contract of adhesion — which
Supor contends the Agreement to be — we consider: “the subject matter of the contract”;
“the parties’ relative bargaining positions”; “the degree of economic compulsion
motivating the ‘adhering’ party”; and “the public interests affected by the contract.” Id.
at 542 (quoting Rudbart v. N. Jersey Dist. Water Supply Comm’n, 605 A.2d 681, 687
(N.J. 1992)).
But the complaint lacks any allegation speaking to either procedural or substantive
unconscionability. It merely states that “[a]ny alleged limitation on Supor’s remedies,
expressly or impliedly, is unenforceable, unconscionable and unlawful where, as here,
circumstances would cause an allegedly exclusive or limited remedy to fail of its
essential purpose within the meaning of N.J. [Stat. Ann. §] 12A:2-719(2).” J.A. 30. That
is a legal conclusion that we will disregard in reviewing the disposition of the defendants’
motions to dismiss. See Santiago v. Warminster Twp., 629 F.3d 121, 128 (3d Cir. 2010).
The District Court correctly concluded that Supor failed to sufficiently plead
unconscionability. 8
8
Supor takes issue with the District Court describing it as “a sophisticated buyer
with experience in making [truck] purchases,” arguing that those facts were not pleaded
11
C.
Supor’s final arguments on appeal are that the District Court abused its discretion
in granting Coopersburg’s motion to vacate the entry of default against it because
Coopersburg failed to set forth a meritorious defense and because the court failed to
“perform[] [an] analysis” regarding whether “Coopersburg’s claimed defenses would
provide a complete defense at trial.” Supor Br. 24.
A district court “may set aside an entry of default for good cause.” Fed. R. Civ. P.
55(c). And we review its decision to do so for abuse of discretion. Doe, 828 F.3d at 167.
“In exercising that discretion . . ., we have instructed district courts to consider the
following factors: ‘(1) whether the plaintiff will be prejudiced; (2) whether the defendant
has a meritorious defense; [and] (3) whether the default was the result of the defendant’s
culpable conduct.’” Id. at 175 (alteration in original) (quoting United States v.
$55,518.05 in U.S. Currency, 728 F.2d 192, 195 (3d Cir. 1984)).
We cannot conclude that the District Court abused its discretion in granting
Coopersburg’s motion. “The showing of a meritorious defense is accomplished when
‘allegations of defendant’s answer, if established on trial, would constitute a complete
defense to the action.’” $55,518.05 in U.S. Currency, 728 F.2d at 195 (quoting Tozer v.
Charles A. Krause Milling Co., 189 F.2d 242, 244 (3d Cir. 1951)). Here, Coopersburg
alleged that it “has viable defenses to all claims against it, similar to those asserted by co-
in the complaint and therefore were improperly used to reject Supor’s claim of
unconscionability. J.A. 6. Whether or not those words were found verbatim in the
complaint, it is clear from the pleading that the instant contract was one entered into by a
corporation for the purchase of a truck to be used for business.
12
defendant Paccar, Inc., in its pending motion to dismiss,” including the defense that the
Limitation bars all of Supor’s claims against Coopersburg. J. Supor & Son Trucking &
Rigging Co. v. Kenworth Truck Co., Certification of Counsel, No. 2:17-cv-08057-SDW-
CLW, ECF No. 21-1 at 4 (Jan. 31, 2018). This allegation satisfies the meritorious-
defense requirement. See Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 870 (3d
Cir. 1984) (concluding that a defendant-insurer set forth a meritorious defense when it
alleged that the plaintiff’s claim “was not brought within a year of the loss, as required by
the [insurance] policy,” and was therefore untimely). Supor’s only response to
Coopersburg’s claim of a meritorious defense was to incorporate the arguments it had
made in opposition to Kenworth’s motion to dismiss — arguments that the District Court
had already rejected. As set forth in this opinion, we are also unpersuaded by Supor’s
arguments regarding the Limitation’s alleged unreasonableness and the Agreement’s
claimed unconscionability. Thus, the District Court did not abuse its discretion in
granting Coopersburg’s motion to vacate entry of default for lack of a meritorious
defense.
We also reject Supor’s contention that the District Court abused its discretion with
respect to the motion because it did not provide an explanation for its conclusion.
Although the court did not explain its reasoning for granting the motion beyond a
statement that, “all criteria ha[d] been met to vacate the default in this matter, as good
cause ha[d] been set forth,” J.A. 11, we do not believe that the court abused its discretion
in granting Coopersburg’s motion. See KPS & Assocs., Inc. v. Designs by FMC, Inc.,
318 F.3d 1, 12 (1st Cir. 2003) (rejecting the argument that a district court’s ruling from
13
the bench on a motion to vacate default, which “did not comment in detail upon” the
pertinent factors, necessarily amounted to an abuse of discretion). By the time it ruled on
Coopersburg’s motion, the District Court had before it not only Coopersburg’s motion,
which discussed each of the factors set out in $55,518.05 in U.S. Currency, 728 F.2d at
195, but also it had considered and found persuasive Kenworth’s defense relying on the
Limitation, upon which Coopersburg also relied.
IV.
For the aforementioned reasons, we will affirm the orders of the District Court
granting the defendants’ motions to dismiss Supor’s claims and granting Coopersburg’s
motion to vacate entry of default against it.
14