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H&M Co., Inc. v. Technical Heat Transfer Services, Inc.

United States District Court, D. Maryland

March 30, 2015

H&M COMPANY, INC., Plaintiff,


THEODORE D. CHUANG District Judge.

This matter is before the Court on separate Motions to Dismiss filed by Defendant Technical Heat Transfer Services. Inc. ("THIS"), ECF No. 10, and Atlantis Equipment Corporation ("Atlantis"), ECF No. 31. The issue before the Court is whether the Complaint sufficiently states claims for breach of implied warranty, breach of express warranty, negligence, and negligent misrepresentation arising from the design and provision of heat exchanger equipment that failed to perform as promised. The Court has reviewed the Complaint and briefs and has determined that no hearing is warranted. See Local Rule 105.6 (D. Md. 2014). For the following reasons, the Motions to Dismiss are GRANTED IN PART and DENIED IN PART.


Plaintiff H&M Company, Inc. ("H&M"), a general contractor incorporated in Tennessee. contracted with Mirant Power to provide certain heat exchanger equipment (the "Equipment") for installation at a power plant in Newburg, Maryland (the "Project"). Compl. ¶ ¶ 1, 7, ECF No. 1. H&M then entered into a subcontract with T.J. O'Brien Engineering Company ("TJO"), under which TJO agreed to design, supply, deliver, warrant, and guarantee the Equipment. Id. ¶ 8. H&M alleges that "[u]pon information and belief, TJO subcontracted with THTS to design, supply, deliver, warrant and guarantee the Equipment, " and that, in turn, "THTS contracted with Atlantis to design, supply, deliver, warrant, and guarantee the Equipment." Id. ¶¶ 9-10. Both THTS and Atlantis are New York corporations. Id. ¶¶ 2-3.

H&M also alleges that THTS "received and reviewed the contract specifications for the Equipment" and "provided and designated" them to Atlantis, and that Atlantis "received and reviewed the contract specifications and then designed and manufactured the Equipment for use on the Project" Id. ¶¶ 11-13. H&M alleges that THTS and Atlantis (collectively, "Defendants") then "prepared product data establishing the specifications for the Equipment" and "represented to Plaintiff and others that the Equipment, among other things, was suitable for the Project, complied with the applicable specifications for the Project, was properly designed, and would provide the required level of cooling capacity." Id ¶¶ 14-15. H&M alleges that it "relied on the representations of Defendants" that the Equipment complied with the specifications. Id. ¶ 16.

After it was installed, the Equipment failed. H&M alleges that the Equipment "failed to perform as suitable heat exchanger equipment for the Project, failed to comply with the Project specifications, and failed to perform as represented by Defendants, " and that in the performance of their duties. Defendants "should have discovered the defect by exercising reasonable care." Id. ¶¶ 18-19. H&M further alleges that representatives of Atlantis visited the Project to review the Equipment, but did not provide an adequate remedy for its failure. Id. ¶ 20. As a result of the failure, H&M alleges that it incurred additional costs M investigating and evaluating the defective Equipment, as well as in procuring and installing suitable replacement equipment, which resulted in damages in excess of $500, 000. Id, ¶¶ 22-23.

On May 7, 2014, H&M filed the instant action alleging claims against Defendants for breach of implied warranty of fitness for a particular purpose (Count I), breach of express warranty (Count II), professional negligence (Count III). and negligent misrepresentation (Count IV)[1] ECF No. 1. On June 16, 2014. THTS filed its Motion to Dismiss. ECF No. 10. The Court subsequently granted various consent motions by the parties requesting that the case be stayed during the parties' attempts to resolve the dispute through mediation. See ECF Nos. 25, 27, 29. The stay expired on January 18, 2015, see ECF No. 29, and Atlantis filed its Motion to Dismiss on January 21, 2015, ECF No. 31. Both Motions are now ripe for adjudication.


I. Legal Standard

A court must deny a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for failure to state a claim where the complaint alleges enough facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. V. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible when "the plaintiff pleads factual content that allows the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Albal, 556 U.S. at 678, In assessing whether this standard has been met, the Court must examine the complaint as a whole, consider the factual allegations in the complaint as true, and construe the factual allegations in the light most favorable to the plaintiff. Albright v. Oliver, 510 U.S. 266. 268 (1994); Lambeth v. Bd. of Comm'rs of Davidson Cnty., 407 F.3d 266, 268 (4th Cir. 2005) (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). Legal conclusions or conclusory statements do not suffice and are not entitled to the assumption of truth. iqbal, 556 U.S. at 678.

II. Choice of Law

Federal courts sitting in diversity apply the law of the state in which the court is located, including the forum states choice of law rules. Colgan Air, Inc. v. Raytheon Aircraft Co., 507 F.3d 270. 275 (4th Cir. 2007). With regard to contract claims, unless the parties have chosen a different law, Maryland's Uniform Commercial Code governs claims for breach of warranty arising out of "transactions bearing an appropriate relation to this State." Md. Code Ann., Com. Law § 1-301(b) (West 2015). Although Defendants note that the Court could, in its discretion, decide to apply the law of New York (Defendants' place of incorporation) or lennessee (H&M's place of incorporation), the parties appear to agree that the application of Maryland law to the contract claims is proper. Among the factors to be considered in determining whether a breach of warranty claim bears an "appropriate relation" to the state are: the residence of the parties, the place of purchase, the place of performance, where the defective product was stored and maintained, and the place of injury. See Thornton v. Cessna Aircraft co., 886 F.2d 85, 90 (4th Cir. 1989) (interpreting identical "appropriate relation" language in the South Carolina Commercial Code). Although the parties in this case are incorporated in different states other than Maryland, the Equipment was installed in Maryland, the alleged defect in the Equipment arose in Maryland, and H&M's economic loss occurred in Maryland. Thus, the Court concludes that Maryland law applies to the contract claims.

Maryland law also applies to the tort claims of negligence and negligent misrepresentation. Under Maryland law, the tort doctrine of lex loci delicti provides that the substantive law to he applied in a tort case is that of the state in which the wrong occurred, in this case, ...

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