Sun Chemical Corp v. Fike Corp

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________
No. 18-1062
________________
SUN CHEMICAL CORPORATION,
Appellant
v.
FIKE CORPORATION;
SUPPRESSION SYSTEMS INCORPORATED
________________
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 2-13-cv-04069)
District Judge: Honorable John M. Vazquez
________________
Argued January 8, 2019
Before: AMBRO, KRAUSE, and FUENTES, Circuit Judges
(Dated November 27, 2020)
Jeffrey A. Beer, Jr., Esquire
Lance J. Kalik, Esquire (Argued)
Riker Danzig Scherer Hyland & Perretti
One Speedwell Avenue
Headquarters Plaza
Morristown, NJ 07962
Counsel for Appellant
Gino P. Mecoli, Esquire (Argued)
Suzanne I. Turpin, Esquire
Reilly Janiczek McDevitt Henrich & Cholden
3 Executive Campus, Suite 310
Cherry Hill, NJ 08002
Counsel for Appellees
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OPINION OF THE COURT
________________
AMBRO, Circuit Judge
After an explosion at its ink-manufacturing facility,
appellant Sun Chemical Corporation sued the manufacturer of
its explosion-suppression system under the New Jersey
Consumer Fraud Act (“CFA”), N.J. Stat. Ann. § 56:8-1 et seq.
The District Court granted summary judgment in favor of
appellees Fike Corporation and Suppression Systems Inc.
(collectively, “Fike”), holding that (1) Sun’s CFA claims were
absorbed by the New Jersey Products Liability Act (“PLA”),
N.J. Stat. Ann. § 2A:58C-1 et seq., and (2) Sun could not prove
2
that Fike’s allegedly fraudulent conduct caused any of its
damages. Sun Chem. Corp. v. Fike Corp., No. 13-4069, 2017
WL 6316644 (D.N.J. Dec. 11, 2017) (“Sun I”). On appeal, we
certified the PLA-absorption issue to the New Jersey Supreme
Court. Sun Chem. Corp. v. Fike Corp., No. 18-1062, 2019 WL
9525200 (3d Cir. Apr. 18, 2019).
We now hold, consistent with the New Jersey Supreme
Court’s opinion, that some of Sun’s CFA claims are absorbed
by the PLA and some are not. As to Sun’s remaining CFA
claims, we conclude that Sun demonstrated a genuine issue of
material fact on most of those claims. We therefore affirm in
part and reverse in part the judgment of the District Court and
remand for further proceedings.
I. BACKGROUND
For nearly a century, Sun and its predecessors have
made black news ink at a manufacturing facility in East
Rutherford, New Jersey. In 2012, Sun purchased a dust-
collection system that filtered the facility’s air for flammable
particles produced in the ink-production process. The
collection system included a Fike suppression system designed
to contain any explosions in case of a fire in the collection
system. Sun and Fike communicated many times about the
various features of the suppression system before Sun made the
purchase. It initially requested a mechanical suppression
system using vents but ultimately purchased Fike’s chemical
explosion-suppression system after discussing the options with
a Fike representative.
On the first day the system was fully operational, the
dust-collection system caught fire. The suppression system
3
activated an alarm. Though nearby workers did not hear it,
they did see a small fire near one of the ducts for the dust-
collection system. Shortly after workers extinguished the fire,
an explosion sent flames out of the dust-collector system’s
ducts. It severely injured several Sun employees and caused
significant property damage to the facility. The explosion also
triggered government investigations and ultimately caused Sun
to end its black-ink production at the East Rutherford facility.
Sun sued Fike under the CFA in federal District Court,
alleging that Fike misrepresented various aspects of the
suppression system in its pre-purchase conversations with Sun.
Specifically, Sun complains Fike misrepresented that: (1) the
suppression-system alarm would be audible;1 (2) the
suppression system would comply with a specific industry
standard, “FM 5700,” that required, among other things, two
pressure detectors; (3) Fike would provide training to Sun
employees; (4) the suppression system had never experienced
any failures in the field; and (5) the system was capable of
preventing an explosion from entering the facility. Based on
these misrepresentations, Sun contends Fike is liable for all
injuries and property damage from the explosion, increased
1
On appeal, Sun also argues that Fike misrepresented that its
alarm system would be integrated with the Sun facility’s fire-
alarm system. But Sun did not make this assertion before the
District Court, so the argument is forfeited. Cf. Tri-M Grp.,
LLC v. Sharp, 638 F.3d 406, 416 (3d Cir. 2011) (“It is
axiomatic that arguments asserted for the first time on appeal
are deemed to be waived and consequently are not susceptible
to review in this Court absent exceptional circumstances.”
(quoting United States v. Petersen, 622 F.3d 196, 202 n.4 (3d
Cir. 2010)) (internal quotations omitted)).
4
distribution and labor costs from the closed facility, expenses
incurred by the government investigations, litigation costs and
fees, and treble damages.
After the close of discovery, the parties filed cross-
motions for summary judgment. The District Court denied
Sun’s motion and granted Fike’s. It held that Sun failed to
demonstrate how most of Fike’s alleged misrepresentations
caused Sun’s harm. For instance, the Court concluded that
even if the suppression system had only one pressure detector
and thus did not comply with FM 5700, Sun still had not shown
how the lack of a second pressure detector caused the explosion
or any related harm. As to Sun’s remaining claims, the District
Court held the PLA absorbed Sun’s CFA claim. The Court
reasoned that, at bottom, Sun was seeking damages because
various features of the suppression system failed and that
failure caused personal injury to Sun’s employees. Because
Sun could not “avoid the requirements of the PLA by artfully
crafting its claims under the CFA,” the Court concluded that
Sun’s CFA claims were entirely absorbed and precluded by the
PLA. Sun I, 2017 WL 6316644, at *13. Sun appealed to us.
After reading the briefs and submissions of the parties,
hearing oral argument, and reviewing applicable New Jersey
law, we certified four questions to the New Jersey Supreme
Court concerning the interplay between the CFA and the PLA.
Sun Chem. Corp. v. Fike Corp., No. 18-1062, 2019 WL
9525200 (3d Cir. Apr. 18, 2019). The Supreme Court
reformulated the questions into a single inquiry and answered
it unanimously. Sun Chem. Corp. v. Fike Corp., 235 A.3d 145,
148 (N.J. 2020) (“Sun II”). We now proceed with the benefit
of the Court’s thoughtful opinion.
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II. ANALYSIS2
A. Absorption Under the PLA
1. The New Jersey Supreme Court
Opinion
As noted, the New Jersey Supreme Court distilled our
certified questions down to a single issue, which was “whether
a Consumer Fraud Act claim [can] be based, in part or
exclusively, on a claim that also might be actionable under the
Products Liability Act.” Sun II, 235 A.3d at 148 (alteration in
original) (internal quotation marks omitted).
The CFA targets “unlawful sales and advertising
practices designed to induce customers to purchase
merchandise or real estate.” Real v. Radir Wheels, Inc., 969
A.2d 1069, 1075 (N.J. 2009) (quoting Daaleman v.
Elizabethtown Gas Co., 390 A.2d 566, 568 (N.J. 1978)). Its
scope is “both wide and deep,” id., as it prohibits “any
unconscionable commercial practice, deception, fraud, false
pretense, false promise, misrepresentation, or the knowing[]
concealment, suppression, or omission of any material fact . . .
in connection with the sale or advertisement of any
merchandise or real estate,” N.J. Stat. Ann. § 56:8-2. The
statute has “three main purposes: to compensate the victim for
2
The District Court had jurisdiction under 28 U.S.C. §
1332(a), and we have jurisdiction over this appeal pursuant to
28 U.S.C. § 1291. We review the District Court’s summary-
judgment ruling de novo. Cranbury Brick Yard, LLC v. United
States, 943 F.3d 701, 708 (3d Cir. 2019).
6
his or her actual loss; to punish the wrongdoer through the
award of treble damages; and, by way of the counsel fee
provision, to attract competent counsel to counteract the
community scourge of fraud.” Lettenmaier v. Lube
Connection, Inc., 741 A.2d 591, 593 (N.J. 1999) (internal
citations omitted). The CFA, then, is an expansive remedial
statute that allows for recovery of damages—as well as treble
damages, costs, and fees—arising out of a host of
unconscionable business practices. Sun II, 235 A.3d at 148.
But damages under the CFA are limited to economic losses.
Gennari v. Weichert Co. Realtors, 691 A.2d 350, 369 (N.J.
1997).
The PLA is more limited in scope: it codifies certain
“actions for damages for harm caused by products.” N.J. Stat.
Ann. § 2A:58C-1(a). By its own terms, the PLA does not
address “all issues related to product liability.” Id. Rather, it
governs products-liability actions based on “manufacturing
defects, warning defects, and design defects.” Sun II, 235 A.3d
at 153 (internal quotation marks omitted). Under the PLA, a
“manufacturer or seller of a product” is liable if the product
“was not reasonably fit, suitable[,] or safe for its intended
purpose.” N.J. Stat. Ann. § 2A:58C-2. Further, consistent with
the common-law economic loss rule barring recovery for
economic losses in a tort action, damages under the PLA are
limited to purely non-economic losses. Dean v. Barrett
Homes, Inc., 8 A.3d 766, 777 (N.J. 2010).
Here, in view of these separate statutory frameworks,
the New Jersey Supreme Court concluded that a plaintiff can
bring a CFA claim based on a course of conduct that might also
be actionable under the PLA. Sun II, 235 A.3d at 156. The
CFA and the PLA “target different wrongs, address distinct
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types of harm, and provide for divergent remedies.” Id. at 148.
The Court reasoned that allegations of fraudulent or
unconscionable business practices could support a CFA claim,
whereas claims based solely on a product’s “manufacturing,
warning, or design defect” would be actionable only under the
PLA. Id. at 155. Because the claims would rest on different
theories of liability and would be premised on different types
of conduct, the Court held that a plaintiff could maintain both
causes of action in a single suit. Id.
The Court further clarified that “[h]ow a given claim
must be pled, in turn, depends on what is at the ‘heart of
plaintiffs’ case’—the underlying theory of liability.” Id. at 156
(quoting Sinclair v. Merck & Co., 948 A.2d 587, 596 (N.J.
2008)). The Court rejected Sun’s arguments that sought to
distinguish CFA and PLA claims based on the nature or source
of the harm suffered. Id. It acknowledged language in
previous decisions suggesting that the “essential nature of the
claim[]” determines how a plaintiff must plead a claim. Id.
(alteration in original) (quoting In re Lead Paint Litig., 924
A.2d 484, 503 (N.J. 2007)). But it declined to endorse that
standard, explaining that it was “helpful” but not the definitive
“interpretative guide” to distinguishing the two claims. Id.
The Court also noted that the nature of the damages sought
does not determine a claim’s proper characterization. Id. The
result? “[A] CFA claim alleging express misrepresentations—
deceptive, fraudulent, misleading, and other unconscionable
commercial practices—may be brought in the same action as a
PLA claim premised upon product manufacturing, warning, or
design defects. In other words, the PLA will not bar a CFA
claim alleging express or affirmative misrepresentations.” Id.
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2. Application
Here, three of Sun’s claims—regarding the suppression
system’s compliance with FM 5700’s pressure-sensor
requirement, the training Fike would provide to Sun
employees, and the system’s lack of failures in the field—fall
squarely within the New Jersey Supreme Court’s description
of claims properly pled under the CFA. These claims rest only
on allegations of “express or affirmative misrepresentations”
rather than on any “manufacturing, warning, or design defects”
with the suppression system itself. See id. Put differently,
these claims are not premised on the allegation that something
was wrong with the system; rather, the “nature of the action”
is that the system did not do what Fike promised. See id.
Sun’s two remaining claims present closer questions.
First, Sun claims Fike misrepresented that the system’s alarm
would be audible. Sun alleges, among other things, that Fike
represented that the system would comply with several
industry standards that required audible alarms.3 In another
3
The District Court granted summary judgment on this claim
in part because it concluded that Sun had no evidence of this
alleged misrepresentation. Sun I, 2017 WL 6316644, at *10.
According to the Court, Sun did not assert that Fike directly
represented the alarm would be audible. Id. at *8. Instead, Sun
claimed that Fike represented that the system would comply
with industry standard National Fire Protection Association
(“NFPA”) 69, which governs explosion-prevention systems;
NFPA 69 incorporates by reference NFPA 72, which governs
fire alarms; and NFPA 72 requires an audible alarm. Id. The
District Court concluded, however, that Fike was entitled to
summary judgment because NFPA 69 did not incorporate the
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case, this set of facts might set up a claim under the PLA—a
plaintiff might, for example, plead that the lack of an audible
alarm was a defect in the system’s design. But we must
presume that the CFA applies to a covered activity, “even in
the face of other existing sources of regulation,” unless “a
direct and unavoidable conflict exists” between the CFA and
the other regulation. Lemelledo v. Beneficial Mgmt. Corp., 696
A.2d 546, 554 (N.J. 1997). The CFA will yield only if the other
regulation “deal[s] specifically, concretely, and pervasively
with the particular activity,” and “the conflict [is] patent and
sharp.” Id.
There is no such conflict here. Sun’s “underlying theory
of liability” as to this claim is not that the suppression system
was defective. See Sun II, 235 A.3d at 156. Rather, Sun asserts
that Fike made a specific “affirmative misrepresentation”
about a specific feature of the system—the audible alarm—and
the system did not include that feature as promised. See id.
This feature was not necessary for the product itself to fulfill
its “intended purpose” under the PLA: for example, the system
could have successfully suppressed the explosion but not given
audibility requirements in NFPA 72. Id. at *10. This was
incorrect. Although the Court expressly acknowledged that
NFPA 69’s language was “unclear,” it found “unlikely” that
NFPA 69 incorporated all of NFPA 72’s requirements. Id. at
*9. But because the language of NFPA 69 is “unclear,” a
reasonable jury might conclude that Fike did, in fact,
misrepresent that the alarm would be audible under NFPA 72’s
standards. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). And because Fike’s alleged misrepresentation is a
material fact, summary judgment on this issue is not called for.
See id.
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an audible alarm. See N.J. Stat. Ann. § 2A:58C-2. In that
scenario, Sun would still have a claim under the CFA (as long
as it had economic damages) based on Fike’s alleged
misrepresentation even though the product itself was not
defective. The heart of Sun’s claim, then, is not that the
product did not work. Rather, Sun’s claim is premised on the
underlying theory that Fike broke its promise. The CFA thus
neither directly nor unavoidably conflicts with the PLA as
applied to that claim, and the presumption in favor of
preserving a CFA remedy stands. Lemelledo, 696 A.2d at 554.
Sun’s second and final claim, however, is a different
matter. Sun asserts Fike represented that the suppression
system had several interrelated capabilities, including
(1) suppressing or decreasing the severity of an explosion, (2)
preventing an explosion from entering specific parts of the
facility via connected ducts or piping, and (3) preventing
“catastrophic destruction” and secondary explosions. Because
the system failed to do these things, Sun claims Fike
misrepresented the system’s capabilities.
But this claim’s “underlying theory of liability” is that
the product did not work. See Sun II, 235 A.3d at 156. The
heart of Sun’s second claim is that the suppression system was
not “reasonably fit, suitable[,] or safe” for its “intended
purpose” of suppressing explosions and preventing
destruction. N.J. Stat. Ann. § 2A:58C-2; see also Lead Paint,
924 A.2d at 503 (holding that plaintiffs were limited to an
action under the PLA when the “focus” of the plaintiffs’ claim
was that lead-containing paint was not safe for its intended use
in homes and businesses). Unlike with the alarm function,
there is no scenario in which the suppression system could
simultaneously perform its intended purpose and still fail to
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fulfill Fike’s representations on this point. The PLA thus
“deal[s] specifically, concretely, and pervasively” with this
“particular activity,” and Sun cannot maintain a claim under
the CFA for this alleged wrong. Lemelledo, 696 A.2d at 554.
We therefore affirm the District Court’s grant of
summary judgment on Sun’s claim concerning
misrepresentations about the capabilities of the suppression
system itself. Sun cannot maintain that claim under the CFA
because the core of that cause of action is products liability.
We conclude, however, that the PLA does not swallow Sun’s
other misrepresentation claims. We thus turn to the rest of the
District Court’s summary judgment analysis.
B. Evidence of Causation
Sun’s remaining CFA claims are based on four alleged
misrepresentations: (1) the suppression-system alarm would be
audible; (2) the suppression system would comply with FM
5700’s pressure-sensor requirements; (3) Fike would provide
training to Sun employees; and (4) the suppression system had
never experienced any failures in the field. The District Court
concluded that, as a matter of law, Sun could not show that any
of these alleged misrepresentations caused its harm. Sun I,
2017 WL 6316644, at *6–*11.
We disagree with the Court as to Fike’s representations
about additional training for Sun employees. To be actionable
under the CFA, misrepresentations must be “material to the
transaction” and “made to induce the buyer to make the
purchase.” Gennari, 691 A.2d at 366 (internal quotation marks
omitted). Implicit in this standard is the requirement that the
misrepresentations occur before or during the purchase
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transaction. Here the District Court granted summary
judgment on Sun’s training claim because Sun purchased the
suppression system from Fike in May 2012, but it requested
additional training in September 2012. Sun I, 2017 WL
6316644, at *11. The Court thus concluded that because the
complained-of misrepresentations did not occur until after Sun
purchased the suppression system, the misrepresentations
could not have been “material to the transaction” or made to
“induce” the purchase. Id. However, Sun has consistently
argued that Fike represented pre-sale that it would comply with
industry standard NFPA 69 and that this standard requires
more detailed training. Sun’s expert also testified that the
training provided by Fike did not comply with NFPA 69. Thus,
a reasonable jury might conclude that Fike’s pre-sale
representations concerning NFPA 69 encompassed
representations about further training. The District Court thus
should not have granted summary judgment on this claim.
We also part ways with the District Court as to the other
three alleged misrepresentations. Its causation analysis
assumed that Sun had to prove that the misrepresentations
directly caused the explosion or other immediate, related harm.
See, e.g., Sun I, 2017 WL 6316644, at *10 (“To prevail,
Plaintiff would need to show that someone was appropriately
monitoring the control panel, there was no audible alarm, and
the lack of alarm caused Plaintiff appreciable loss.”).
However, the CFA’s causation standard is not so stringent—it
requires only that the plaintiff show ascertainable loss “as a
result of” the complained-of conduct. N.J. Stat. Ann. § 56:8-
19. And the complained-of conduct in a CFA case, unlike in a
products-liability case, is the seller’s pre-sale
misrepresentations—not the malfunctioning of the product
itself. Sun II, 235 A.3d at 155. We thus focus our causation
13
analysis on the harm flowing from the alleged
misrepresentations.
Here, at a minimum, Sun has demonstrated a fact issue
as to whether it would have purchased the suppression system
without Fike’s alleged misrepresentations. Sun initially
requested a much different type of suppression system but later
chose the Fike chemical-suppression system on the advice of
Fike representatives. Fike and Sun also communicated
extensively about the various features and benefits of the
suppression system before Sun made its purchase. From this
evidence, a reasonable jury could conclude that Fike’s alleged
misrepresentations—individually or collectively—caused Sun
to purchase the chemical-suppression system. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A reasonable
jury could likewise conclude that the explosion and its related
harm would not have occurred if Sun had not purchased the
suppression system. See id. Hence there is a fact issue on
whether Sun suffered harm “as a result of” Fike’s alleged
misrepresentations, and the District Court’s grant of summary
judgment on that basis is reversed.
Fike makes two final arguments in support of its
summary judgment motion. First, it asserts it is entitled to
summary judgment because it did not actually make some of
the alleged misrepresentations. But, as Fike’s detailed factual
arguments on this issue demonstrate, there is at least some
evidence that Fike made each of the remaining complained-of
representations before the sale and that those representations
were false. Fike may or may not prevail at trial, but its factual
arguments belong in front of a jury.
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Second, Fike cursorily argues that the CFA does not
apply to the sale of the suppression system because it is not a
good or service “sold to the public at large.” Fike’s Br. at 53
(quoting Cetel v. Kirwan Fin. Grp., Inc., 460 F.3d 494, 514 (3d
Cir. 2006)); see also N.J. Stat. Ann. § 56:8-1(c) (defining
“merchandise” under the PLA as “any objects, wares, goods,
commodities, services or anything offered, directly or
indirectly to the public for sale”). But the New Jersey Supreme
Court explicitly rejected this narrow view of the CFA in All the
Way Towing, LLC v. Bucks County International, Inc., 200
A.3d 398 (N.J. 2019). In that case, the seller of specialized tow
trucks argued that the trucks were not “merchandise” under the
CFA because the “public at large” did not purchase the trucks.
Id. at 408. The Court, however, held that the CFA’s
applicability “does not turn on whether the public at large
purchases” the specific good. Id. Rather, the CFA applies as
long as “a member of the public could, if inclined, purchase”
that good “regardless of the popularity of the product.” Id.
Here, Sun has at least some evidence that any member
of the public could, if inclined, purchase Fike’s explosion-
suppression system. Sun points to evidence that the system
was a “standard design.” It also argues that Fike markets its
products to “customers around the world” via a publicly
available website. At a minimum, this evidence creates a fact
issue on whether the suppression system is “merchandise”
under the CFA, and Fike is not entitled to summary judgment
on this ground.
* * * * *
In sum, four of Sun’s five CFA misrepresentation
claims survive summary judgment. The PLA does not
subsume those claims because they are premised on Fike’s
affirmative misrepresentations rather than on a deficiency in
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the suppression system itself. Sun has also demonstrated that
a fact issue exists to determine if the complained-of
misrepresentations caused the harm it suffered. We therefore
conclude that the District Court should not have granted
summary judgment on those claims.4
Accordingly, we affirm in part and reverse in part the
judgment of the District Court and remand this case for further
proceedings consistent with this opinion.
4
We note Fike’s assertion that it challenged the sufficiency of
Sun’s pleadings in a motion to strike before it filed the current
motion for summary judgment. Fike argues in passing that Sun
raised new theories of liability on summary judgment that were
not sufficiently pled in the complaint. The District Court,
however, granted Fike’s summary judgment motion on the
merits and dismissed the motion to strike as moot. Sun I, 2017
WL 6316644, at *15. On remand, Fike may renew its pleading
challenges if it so chooses and if the District Court does not
grant Sun leave to amend under Federal Rule of Civil
Procedure 15(a)(2).
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