MORRISON v. AQ TEXTILES LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

AMY HILL, et al., )

)

Plaintiffs, )

)

v. ) 1:19CV983

)

AQ TEXTILES LLC, and CREATIVE )

TEXTILE MILLS PVT. LTD, )

)

Defendants. )

)

MEMORANDUM OPINION AND ORDER

LORETTA C. BIGGS, District Judge.

Before the Court is a Motion to Amend First Amended Complaint filed by Plaintiffs.

(ECF No. 36.) Plaintiffs seek relief from the Court’s March 17, 2021, Order, (ECF No. 35),

and leave to amend their First Amended Complaint pursuant to Rules 15(a) and 60(b) of the

Federal Rules of Civil Procedure. (ECF Nos. 36; 37.) Defendants oppose the motion, arguing

that (1) Plaintiffs have not met the requirements of Rule 60(b)(6), and (2) Plaintiffs’ proposed

Second Amended Complaint (“PSAC”) suffers from undue delay, prejudices Defendants, and

is futile. (ECF No. 39.) For the reasons stated herein, Plaintiff’s motion will be granted in

part and denied in part.

I. BACKGROUND

Plaintiffs filed this class action on September 23, 2019, (ECF No. 1), and filed a First

Amended Complaint (“FAC”) on December 12, 2019, (ECF No. 15). According to the FAC,

Plaintiffs Dominique Morrison, Sara Hawes, Cassandra Chiaraluce, and Jonathan Fontaine

purchased bed linens labeled as having thread counts of 800 or more from retail stores in

Missouri, California, New Hampshire, and Massachusetts.1 (Id. ¶¶ 33, 37, 41, 45.) The sheets

were manufactured by Defendant Creative Textile Mills Pvt. Ltd. (“Creative”), an Indian

company, and imported and distributed by AQ Textiles LLC (“AQ”), a North Carolina

corporation. (Id. ¶¶ 48, 50, 90) Plaintiffs alleged that Defendants represented the sheets to

have higher thread counts than they actually had. (Id. ¶ 90.) More specifically, they claimed

that Defendants ignored the “long-standing industry standards for calculating thread counts,”

(id. ¶ 84) and doubled or tripled “the true thread count” by counting plied yarns not as a single

thread, but as the number of intertwined strands from which they are comprised, (Id. ¶ 76).

Plaintiffs sued on behalf of themselves and six classes to include consumers in

California, Massachusetts, Missouri, New Hampshire, North Carolina, and the nation as a

whole who purchased sheets that had lower thread counts than Defendants stated on the

products’ labels. (Id. ¶ 98.) The FAC alleged thirteen causes of action arising under the

Magnuson Moss Warranty Act (“MMWA”) (Count I); the Implied Warranty of

Merchantability (Count II); an Express Warranty (Count III); common law Negligent

Misrepresentation (Count IV); Missouri’s Merchandising Practices Act (Count V); the North

Carolina Unfair and Deceptive Trade Practices Act (“NCUDTPA”) (Count VI); the California

Consumer Legal Remedies Act (Count VII); the California Unfair Competition Law (Counts

VIII, IX, & X); the Massachusetts Consumer Protection Law (Count XI); the New Hampshire

1 Plaintiff Amy Hill, also included in the FAC, was voluntarily dismissed from this action on February

8, 2020. (ECF No. 21.)

Consumer Protection Act (Count XII); and common law Unjust Enrichment (Count XIII).

(Id. at 24–52.)

Defendants moved to dismiss Plaintiffs’ FAC for failure to state a claim pursuant to

Fed. R. Civ. P. 12(b)(6) on January 9, 2020. (ECF No. 18.) On September 25, 2020,

Defendants additionally moved to dismiss the FAC for lack of subject-matter jurisdiction

pursuant to Fed. R. Civ. P. 12(b)(1). (ECF No. 29.)

On March 17, 2021, the Court dismissed Plaintiffs’ claims. Hill v. AQ Textiles LLC,

No. 1:19CV983, 2021 WL 1026740, at *3 (M.D.N.C. Mar. 17, 2021). The Court found sua

sponte that Named Plaintiffs had not sufficiently alleged a concrete and particularized injury

and, therefore, the Court lacked subject matter jurisdiction. Id. at *2–3.

Plaintiffs filed the present motion on March 29, 2021, seeking relief from the Court’s

Order and leave to again amend their complaint. (ECF No. 36.) In their attached proposed

Second Amended Complaint (“PSAC”) (ECF No. 36-1), Plaintiffs do not allege any new

causes of action but do allege additional facts and limit their proposed classes to include only

those consumers who purchased bedding sheets (rather than those who purchased either

“bedding or linen”). (Compare ECF Nos. 36-1 ¶ 115 with 15 ¶ 98.) The factual allegations in

Plaintiffs’ PSAC include the following:

Plaintiff Fontaine is a resident of Massachusetts. (ECF No. 36-1 ¶ 57.) He purchased

Fairfield Square Essex Stay Fit brand queen-size sheets in or around October 2017 from a

Macy’s retail store in Massachusetts for $84.99 ($79.99 plus tax). (Id. ¶¶ 58, 60.) The sheets

were manufactured by Defendant Creative and labeled and distributed by Defendant AQ. (Id.

¶ 58.) The sheets were labeled “1200 Thread Count.” (Id.)

Plaintiff Hawes is a resident of California. (Id. ¶ 48.) She purchased a Somerset

Collection brand queen-size sheet set from a Macy’s retail store in California in or around May

2017 for $76.11 ($69.99 plus tax). (Id. ¶¶ 49, 52.) The sheets were manufactured by Defendant

Creative and labeled and distributed by Defendant AQ. (Id. ¶ 49.) The sheets were labeled

“900 Thread Count.” (Id.)

Plaintiff Morrison is a resident of Missouri. (Id. ¶ 35.) She purchased Grande Estate

800TC Luxurious Sateen Weave sheets from a Ross store in Missouri. (Id. ¶ 36.) Plaintiffs

estimate that she purchased the sheets for $40.00 in the fall of 2016 or early winter of 2017.

(Id. ¶¶ 36, 37.) The sheets were manufactured by Defendant Creative and labeled and

distributed by Defendant AQ. (Id. ¶ 38.) The sheets were represented to have 800 thread

count. (Id. ¶¶ 39–41.)

Plaintiff Chiaraluce is a resident of Massachusetts. (Id. ¶ 53.) She purchased a Bradford

Stay Fit brand queen-size sheet set from a Macy’s retail store in New Hampshire in or around

October 2017 for $69.99. (Id. ¶¶ 54, 56.) The sheets were manufactured by Defendant

Creative and labeled and distributed by Defendant AQ. (Id. ¶ 54.) The sheets were labeled

“800 Thread Count.” (Id.)

After receiving complaints about sheets distributed by AQ, the Texas Department of

Agriculture had the thread counts of three AQ products tested in November and December

of 2017. (Id. ¶ 7.) These tests showed that the Fairfield Square Essex Stay Fit 1200 thread

count sheets, the same brand purchased by Plaintiff Fontaine, had an actual thread count of

363 according to industry standards.2 (Id.) Similar AQ sheets advertised at 1200 and 800

thread counts had actual counts of 441 and 293, respectively. (Id.)

Plaintiffs Hawes and Morrison then had their sheets independently tested. (Id. ¶¶ 12,

13.) Hawes’s sheets, which were labeled “900 Thread Count,” had an actual thread count of

approximately 227 according to industry standards. (Id. ¶ 12.) Morrison’s sheets, which were

labeled “800 Thread Count,” had an actual thread count of approximately 224 according to

industry standards. (Id. ¶ 13.) Plaintiffs allege that they would not have purchased the sheets

had they known that the sheets’ thread counts were so much lower than represented. (Id.

¶¶ 21, 42, 113, 200.)

II. LEGAL STANDARD

Plaintiffs bring their motion pursuant to Rules 60 and 15 of the Federal Rules of Civil

Procedure “for relief from the Court’s Order and for leave to amend their First Amended

Complaint.” (ECF No. 36 at 1 (internal citations omitted).)

A. Rule 60(b)

Rule 60(b) of the Federal Rules of Civil Procedure provides that a court “may relieve a

party . . . from a final judgment, order, or proceeding” in limited circumstances. Fed. R. Civ.

P. 60(b)(1)–(6). In the Fourth Circuit, a dismissal without prejudice is not considered a final

order or judgment if “the plaintiff could save his action by merely amending his complaint.”

Young v. Nickols, 413 F.3d 416, 418 (4th Cir. 2005) (quoting Domino Sugar Corp. v. Sugar Workers

Local Union 392, 10 F.3d 1064, 1066–67 (4th Cir. 1993)); see Hui Kun Li v. Shuman, No. 5:14-

2 Plaintiffs define this industry standard, adopted by the American Society for Testing Materials

(“ASTM”), at length in the PSAC. (ECF No. 36-1 ¶¶ 83–88.)

CV-00030, 2015 WL 4274167, at *2 (W.D. Va. July 14, 2015) (finding that, for purposes of

Rule 60(b) analysis, the court’s dismissal without prejudice of ten counts did “not operate as a

final judgment or order from which relief can be granted” where plaintiffs were permitted to

amend their complaint). Such a dismissal is not a final order “unless the grounds for dismissal

clearly indicate that ‘no amendment [in the complaint] could cure the defects in the plaintiff’s

case.’” Domino Sugar, 10 F.3d at 1067 (quoting Coniston Corp. v. Village of Hoffman Estates, 844

F.2d 461, 463 (7th Cir. 1988)).

Here, the Court’s March 17, 2021, Order made no finding or determination that an

amendment could not cure the defects in the FAC. On the contrary, the Court found that

Plaintiffs failed to set forth specific facts demonstrating a concrete and particularized injury,

such as facts establishing that Defendants sheets were of lower quality, higher prices, or lower

thread count. Hill, 2021 WL 1026740, at *2–3. Accordingly, the Court dismissed Plaintiffs’

claims for lack of standing—a dismissal that “must be one without prejudice, because a court

that lacks jurisdiction has no power to adjudicate and dispose of a claim on the merits.” S.

Walk at Broadlands Homeowner’s Ass’n, Inc. v. OpenBand at Broadlands, LLC, 713 F.3d 175, 185

(4th Cir. 2013). The Court’s Order did not by its terms terminate the action or enter a

judgment dismissing the action. Therefore, the Court finds that its previous Order was not a

final judgment or order pursuant to Rule 60(b) and is instead an interlocutory order.3 See

3 Even if the Court’s Order were construed to be a final judgment, Rule 15(a) would still govern

Plaintiffs’ motion. A court considering a post-judgment motion to amend a complaint “need not

concern itself with [Rule 60(b)’s] legal standards.” Katyle v. Penn Nat. Gaming, Inc., 637 F.3d 462, 471

(4th Cir. 2011). Instead, “[t]he court need only ask whether the amendment should be granted, just

as it would on a prejudgment motion to amend pursuant to Fed. R. Civ. P. 15(a),” i.e. “for prejudice,

bad faith, or futility.” Id.

generally Am. Canoe Ass’n v. Murphy Farms, Inc., 326 F.3d 505, 514 (4th Cir. 2003) (“Rule 60(b)

does not govern relief from interlocutory orders.”). As an interlocutory order, it is “subject

to reopening at the discretion of the district judge,” Moses H. Cone Mem. Hosp. v. Mercury Const.

Corp., 460 U.S. 1, 12 (1983), at “any time prior to the entry of final judgment,” Am. Canoe, 326

F.3d at 515 (quoting Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1469 (4th Cir.

1991)). The Court will therefore consider Plaintiffs’ motion to amend pursuant to Rule 15(a)

to determine if Plaintiffs PSAC could cure the defects reflected in the Court’s March 17, 2021,

Order.

B. Rule 15(a)

The determination of whether to grant or deny a motion to amend a pleading under

Rule 15(a) lies within the sound discretion of the district court. Foman v. Davis, 371 U.S. 178,

182 (1962); Deasy v. Hill, 833 F.2d 38, 40 (4th Cir. 1987). Under Rule 15(a), courts should

freely grant leave to amend a pleading “when justice so requires.” Fed. R. Civ. P. 15(a)(2).

“This liberal rule gives effect to the federal policy in favor of resolving cases on their merits

instead of disposing of them on technicalities.” Laber v. Harvey, 438 F.3d 404, 426 (4th Cir.

2006). Indeed, motions to amend are “[s]o useful . . . and of such service in the efficient

administration of justice that they ought to be allowed as a matter of course, unless some

particular reason for disallowing them appears.” New Amsterdam Cas. Co. v Waller, 323 F.2d

20, 28–29 (4th Cir. 1963).

“[L]eave to amend a pleading should be denied only when the amendment would be

prejudicial to the opposing party, there has been bad faith on the part of the moving party, or

the amendment would be futile.” Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986)

(citing Foman, 371 U.S. at 182). A plaintiff’s request to amend a complaint is futile if the

proposed amended complaint could not satisfy the appropriate requirements of the Federal

Rules of Civil Procedure and Article III. See U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525

F.3d 370, 376 (4th Cir. 2008).

III. DISCUSSION

A. Plaintiffs’ motion was not unduly delayed

Defendants first argue that Plaintiffs’ motion should be denied for undue delay. (ECF

No. 39 at 9–13.) A district court may deny a motion to amend where “the delay in amending,

the late hour of the motion to amend, and the burdens it would impose on the opposing party”

counsel denial. Equal Rts. Ctr. v. Niles Bolton Assocs., 602 F.3d 597, 604 n.3 (4th Cir. 2010)

(citing Smith v. Angelone, 111 F.3d 1126, 1135 (4th Cir. 1997); see also Foman, 371 U.S. at 182

(“In the absence of any apparent or declared reason—such as undue delay . . . —the leave

sought should, as the rules require, be ‘freely given.’”)

Here, however, there was no apparent delay. Plaintiffs filed their motion just twelve

days after the Court dismissed their claims for lack of Article III standing. This quick response

suggests “diligence” and “dispels any inference of bad faith” or undue delay. See Laber, 438

F.3d at 428. Further, Plaintiffs’ motion comes in response to this Court’s sua sponte Article III

ruling. Thus, while Plaintiffs may have “known this information [newly asserted in the PSAC]

for years” as Defendants claim, (ECF No. 39 at 12), they only knew of the deficiencies in their

FAC after the Court’s Order. Thus, the Court does not find Plaintiffs’ delay to be undue as

to justify denying their motion.

B. Any prejudice to Defendants is minimal

Second, Defendants argue that they will be prejudiced if the Court grants Plaintiffs’

motion. (ECF No. 39 at 13–14.) Prejudice is a particular concern in assessing post-judgment

Rule 15(a) motions, they argue, since “the interest in finality that attaches to every judgment

must of necessity weigh in the exercise of the district court's discretion.” Laber, 438 F.3d at

433 (Wilkinson, J., concurring). After a court enters judgment for a defendant, “defendants

have an interest in the finality of the judgment in their favor and would be prejudiced if they

were unable to rely on such a judgment.” Logar v. W. Va. Univ. Bd. of Governors, No. CIV.A.

1:10CV201, 2012 WL 243692, at *8 (N.D. W. Va. Jan. 25, 2012), aff’d, 493 F. App’x 460 (4th

Cir. 2012).

However, as the Court discussed in Part II.A, supra, no final judgment was entered in

this case. Unlike in Logar, where plaintiffs’ claims were dismissed on summary judgment, this

Court dismissed Plaintiffs’ claims for without prejudice for lack of standing. Further, Plaintiffs

bring no new claims or theories for recovery in their PSAC, but instead merely allege additional

facts in an attempt to establish an injury in fact. Thus, the Court finds that any prejudice to

Defendants is minimal and outweighed by the Court’s interests in judicial economy, disposing

with the case on its merits, and avoiding the inefficiencies that could ensue were Plaintiffs to

refile their case rather than reinstating this one.

C. Plaintiffs’ PSAC is not futile

Finally, Defendants argue that Plaintiffs’ PSAC is futile because (1) Plaintiffs’ PSAC

still does not allege a cognizable injury for purposes of standing under Article III, (2) Plaintiffs

do not have standing to represent the purported class; and (3) Plaintiffs’ PSAC would not

survive a 12(b)(6) motion to dismiss.

i. Plaintiff’s PSAC states a concrete and particularized injury

The jurisdiction of a federal court is limited to cases and controversies under Article

III of the United States Constitution. U.S. Const. art. III, § 2. To establish constitutional

standing, a plaintiff must plausibly allege that they have: “(1) suffered an injury in fact, (2) that

is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be

redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016).

Plaintiffs bear the burden of establishing these elements. Lujan v. Defs. of Wildlife, 504 U.S. 555,

561 (1992). “Where, as here, a case is at the pleading stage, [Plaintiffs] must ‘clearly . . . allege

facts demonstrating’ each element.” Spokeo, 578 U.S. at 338 (quoting Warth v. Seldin, 422 U.S.

490, 518 (1975)).

To establish an injury-in-fact, a plaintiff “must show that he or she suffered ‘an invasion

of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual and imminent,

not conjectural or hypothetical.’” Id. at 339 (quoting Lujan, 504 U.S. at 560). The Supreme

Court has held that when a party has “set forth no specific facts demonstrating” the alleged

injury, such allegations “are necessarily conjectural.” Clapper v. Amnesty Int’l USA, 568 U.S.

398, 412, 420 (2013) (finding that plaintiffs did not have standing when they “present[ed] no

concrete evidence to substantiate their fears” and could “only speculate” as to whether an

injury might have occurred or will occur in the future).

This Court dismissed Plaintiffs’ FAC for lack of standing. Hill, 2021 WL 1026740, at

*2–3. Specifically, this Court found that Plaintiffs failed to set forth specific facts

demonstrating (1) Defendants’ sheets were of lower quality, softness, or comfort than sheets

Plaintiffs deem to accurately display corresponding thread counts, (2) Plaintiffs paid more for

Defendants sheets than they would have for comparable sheets, or (3) Defendants’ sheets

actually had thread counts that were lower than advertised. Id. Thus, Plaintiffs had failed to

allege any concrete and particularized injury. Id.

Plaintiffs have rectified this shortcoming in their PSAC. Unlike in their earlier

complaint, Plaintiffs specifically allege that Defendants’ sheets have been tested by the Texas

Department of Agriculture and a New York quality assurance and compliance textile testing

lab and were determined to have much lower thread counts than Defendants claimed that they

had. (See ECF No. 36-1 ¶ 7.) Plaintiffs additionally allege that the sheets purchased by Named

Plaintiffs have also been independently tested, and that those tests revealed that the “true

thread count” of each set of sheets is less than one-third the represented thread count. (Id.

¶¶ 10–13.) Thus, Plaintiffs’ allegation that Defendants’ sheets were misleadingly labeled is no

longer conjecture but instead is rooted in specific factual allegations. Plaintiffs now have a

concrete, particularized injury; namely, they expended money for products they “would not

have purchased” if they had known of the lower thread count. (Id. ¶¶ 42, 113, 200, 336.) This

is a tangible injury that was allegedly caused by Defendants’ misrepresentation and can be

redressed through money damages. See Maya v. Centex Corp., 658 F.3d 1060, 1069 (9th Cir.

2011) (“Plaintiffs claim that, as a result of defendants’ actions, . . . they would not have

purchased their homes had defendants made the disclosures allegedly required by law. . . . This

is a quintessential injury-in-fact.”); see also Sierra Club v. Morton, 405 U.S. 727, 733 (1972)

(“[P]alpable economic injuries have long been recognized as sufficient to lay the basis for

standing”).

ii. Plaintiffs have standing to represent the putative class members

Defendants next argue that Plaintiffs’ motion is futile because, while Named Plaintiffs

may have standing in their own right, they lack standing to represent the class. (ECF Nos. 39

at 18; see 30 at 5–18.) Citing cases from select district courts outside this circuit, Defendants

contend that class members who bought different products from Named Plaintiffs have

different injuries, and therefore cannot be represented by Named Plaintiffs under Article III.

(ECF No. 30 at 6 (citing Kisting v. Gregg Appliances, Inc., No. 16-CV-141, 2016 WL 5875007, at

*3 (E.D. Wis. Oct. 7, 2016)).)

Defendants’ position is inconsistent with Supreme Court and Fourth Circuit precedent.

While “[t]he strictures of Article III standing are no less important in the context of class

actions,” Baehr v. Creig Northrop Team, P.C., 953 F.3d 244, 252 (4th Cir.), cert. denied, 141 S. Ct.

373 (2020), “[t]hat a suit may be a class action . . . adds nothing to the question of standing,”

Lewis v. Casey, 518 U.S. 343, 357 (1996). The Fourth Circuit has consistently held that to assess

standing in a class action suit, “we analyze standing based on the allegations of personal injury

made by the named plaintiffs.” Baehr, 953 F.3d at 252 (quoting Hutton v. Nat’l Bd. of Exam’rs

in Optometry, Inc., 892 F.3d 613, 620 (4th Cir. 2018)); see Beck v. McDonald, 848 F.3d 262, 269

(4th Cir. 2017); Doe v. Obama, 631 F.3d 157, 160 (4th Cir. 2011). If named plaintiffs lack

standing, the class lacks standing. Baehr, 953 F.3d at 252–53 (“A putative class thus cannot

establish Article III standing without a sufficient allegation of harm to the named plaintiff in

particular.”). Once the named plaintiff has established standing, however, a case or

controversy exists under Article III. Id.

This does not mean that Article III imposes no restrictions on class action suits. One

such restriction is that “[e]very class member must have Article III standing in order to recover

individual damages.” TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2208 (2021); see also Allee v.

Medrano, 416 U.S. 802, 829 (1974) (Berger, C.J., concurring in the result in part and dissenting

in part) (“Standing cannot be acquired through the back door of a class action.”). Another is

that “standing is not dispensed in gross; rather, plaintiffs must demonstrate standing for each

claim that they press and for each form of relief that they seek.” TransUnion, 141 S. Ct. at

2208. Finally, a class action may only challenge conduct that injured the named plaintiffs—

named plaintiffs lack standing to challenge conduct that did not cause their injury. See Blum v.

Yaretsky, 457 U.S. 991, 999 (1982) (holding that an injured plaintiff has standing only to

challenge putatively “injurious conduct of one kind” cannot litigate “conduct of another kind,

although similar, to which he has not been subject”) (citing Moose Lodge No. 107 v. Irvis, 407

U.S. 163, 166–67 (1972)).

The present case, however, is not an unusual one that requires lengthy analysis. As

discussed in detail above, Plaintiffs challenge Defendants’ alleged practice of advertising their

sheets at higher thread counts than the sheets actually possess. This practice allegedly caused

Named Plaintiffs to suffer a concrete and particularized injury by inducing them to spend

money they otherwise would not have spent. And this injury can be redressed by awarding

monetary damages. As defined in Plaintiffs’ PSAC, every member of the proposed classes

suffered this same injury caused by this same conduct: each was induced to purchase sheets

by allegedly inflated thread counts.4 (ECF No. 36-1 ¶ 115.) The mere fact that the products

purchased by class members had different names and were of different sizes is immaterial,

since the alleged injury and challenged conduct is uniform across the classes.

The Court finds that Plaintiffs have sufficiently alleged facts to support standing and

their motion is not futile for want thereof. To the extent Defendants argue that individual

issues concerning product labels, types, and thread counts will predominate in this suit, or that

Named Plaintiffs’ claims are not typical of class members’ claims, those arguments are properly

raised at the class certification stage. Van Buren v. Walmart, Inc., No. DKC 19-0911, 2020 WL

1064823, at *3 (D. Md. Mar. 5, 2020), aff’d, 855 F. App’x 156 (4th Cir. 2021). Defendants may

also continue to challenge Plaintiffs’ standing in future stages of the litigation. See TransUnion,

141 S. Ct. at 2208 (“Plaintiffs must maintain their personal interest in the dispute at all stages

of litigation.”).

iii. Plaintiffs’ PSAC would survive a motion to dismiss

Finally, Defendants argue that Plaintiffs’ motion is futile because it would not survive

a 12(b)(6) motion to dismiss for failure to state a claim. (ECF No. 39 at 18; see ECF Nos. 19;

25.)

A plaintiff’s request to amend a complaint is futile if the proposed amended complaint

could not satisfy the appropriate requirements of the Federal Rules of Civil Procedure,

including Rule 12(b)(6). See Wilson, 525 F.3d at 376. Under Rule 12(b)(6), “a complaint must

contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on

4 While Plaintiffs’ FAC included class members who purchased either bedding or linens, (ECF No. 15

¶ 98), Plaintiffs appear in their PSAC to limit the classes to customers who purchased bedding sheets,

(ECF No. 36-1 ¶ 115).

its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.

544, 570 (2007)). In considering whether a plaintiff has stated a claim, a court “must accept

as true all of the factual allegations contained in the complaint,” Erickson v. Pardus, 551 U.S.

89, 94 (2007) (per curiam), and all reasonable inferences must be drawn in the non-moving

party’s favor, Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997).

Here, Defendants argue: (1) Plaintiffs’ MMWA claim fails because advertised thread

counts do not constitute written warranties; (2) Plaintiffs’ breach of implied warranty claims

fail because they have not alleged that the sheets were unfit for ordinary use; (3) Plaintiffs’

breach express warranty claims fail because they did not give Defendants notice of the breach

within a “reasonable” time; (4) Plaintiffs’ fraud-based claims fail because they failed to plead

the time, place, and contents of the alleged fraudulent representations with particularity against

individual Defendants; (5) Plaintiffs’ claims under N.C. Gen. Stat. § 75-1.1 fail because they

are beyond the scope of that law; (6) Plaintiffs’ negligent misrepresentation claims are barred

by the economic loss doctrine; (7) Plaintiffs’ claims under Massachusetts Consumer Protection

Act fail because they did not comply with the law’s notice requirement; and (8) Plaintiffs’

unjust enrichment claims are duplicative. (ECF No. 19 at 5–22.)

1. Magnuson-Moss Warranty Act (“MMWA”) (Count I)

The MMWA provides plaintiffs with a remedy against a defendant who fails to comply

with “a written warranty, implied warranty, or service contract.” 15 U.S.C. § 2310(d)(1). A

“written warranty” means:

any written affirmation of fact or written promise made in connection with the

sale of a consumer product by a supplier to a buyer which relates to the nature

of the material or workmanship and affirms or promises that such material or

workmanship is defect free or will meet a specified level of performance over a

specified period of time.

§ 2301(6)(A). An “implied warranty” is defined as “an implied warranty arising under State

law . . . in connection with the sale by a supplier of a consumer product.” § 2301(7).

Courts generally distinguished between “written warranties” and mere “product

descriptions.” See In re Lumber Liquidators Chinese-Manufactured Flooring Durability Mktg. & Sales

Prac. Litig., No. 1:16MD2743 (AJT/TRJ), 2017 WL 2911681, at *17 (E.D. Va. July 7, 2017);

Perez v. Monster Inc., 149 F. Supp. 3d 1176, 1183 (N.D. Cal. 2016); Bowling v. Johnson & Johnson,

65 F. Supp. 3d 371, 378 (S.D.N.Y. 2014); Viggiano v. Hansen Nat. Corp., 944 F. Supp. 2d 877,

898 (C.D. Cal. 2013); see also In re Shop-Vac Mktg. & Sales Pracs. Litig., 964 F. Supp. 2d 355, 361

(M.D. Pa. 2013) (finding claims about a vacuum’s horsepower and tank capacity did not

constitute a written warranty); cf. Dorsey v. Rockhard Lab’ys, LLC, No. CV 13-07557 DDP RZX,

2014 WL 4678969, at *9 (C.D. Cal. Sept. 19, 2014) (finding that “Sexual Performance

Enhancer for Men” and “Fast & Effective” were claims that “relate to the nature of the

product and are not mere product descriptions”). Promises about a product’s quality or

character do not constitute a “written warranty” unless they promise “a specified level of

performance over a specified period of time.” Hawes v. Macy’s Inc., 346 F. Supp. 3d 1086, 1092

(S.D. Ohio 2018). This interpretation is consistent with the Federal Trade Commission’s

interpretation of the MMWA, which provides that that certain product representations, such

as “energy efficiency ratings” and clothing “care labeling” are product descriptions rather than

written warranties because “a written promise of a specified level of performance must relate

to a specified period of time in order to be considered a ‘written warranty.’” 16 C.F.R.

§ 700.3(a). “A product information disclosure without a specified time period to which the

disclosure relates is therefore not a written warranty.” Id.; see Viggiano, 944 F. Supp. 2d at 898

n.45; Kelley v. Microsoft Corp., No. C07-0475MJP, 2007 WL 2600841, at *5 (W.D. Wash. Sept.

10, 2007).

Two courts have previously determined that a thread count guarantee is a not a “written

warranty.” See Hawes, 346 F. Supp. 3d at 1092; Beautiful Home Textiles (USA) v. Burlington Coat

Factory Warehouse Corp., 2014 WL 4054240, at *12 (S.D.N.Y. Aug. 15, 2014). “Even if thread

count provides a certain character and quality over time,” they held, “the thread count listed

on the bedsheets does not list a specified level of performance over a specified period of time.”

Hawes, 346 F. Supp. 3d at 1092; see Beautiful Home Textiles, 2014 WL 4054240, at *12.

Here, a promised thread count may guarantee a specified level of performance.

Accepting all alleged facts as true and making all inferences in plaintiffs favor, thread count is

considered by sellers and consumers alike as an objective measure of softness and comfort

during sleep and may be the closest thing bedsheets have to an objective promise of

performance. (See ECF No. 36-1 ¶ 19 n.1 (“[T]he higher the thread count, the denser &

smoother the sheet will feel.” (quoting Macy’s, Meet the Sheets,

https://www.macys.com/ce/splash/how-to-choose-bed-sheets/index (last visited Dec. 15,

2021))).) Even if this were true, however, Plaintiffs have not alleged that Defendants made

any guarantees of performance over a specified period of time. Thus, the Court finds that

Plaintiffs have not sufficiently alleged the existence of a “written warranty” under the MMWA.

On the other hand, Plaintiffs have stated a claim for breach of an implied warranty

under state law, as determined in Section III.C.iii.2, infra. Thus, Plaintiffs have likewise stated

a claim under the MMWA. See Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir.

2008) (“[T]his court’s disposition of the state law warranty claims determines the disposition

of the [MMWA] claims.”).

Therefore, Plaintiffs’ motion to amend will be granted as to their MMWA claims for

breach of an implied warranty but denied as to any claim for breach of a written warranty

under the MMWA.

2. Breach of implied warranty of merchantability (Count II)

Under the Uniform Commercial Code (“UCC”), “[g]oods to be merchantable must be

at least such as . . . (e) are adequately contained, packaged, and labeled as the agreement may

require; and (f) conform to any promises or affirmations of fact made on the container or

label.” Mass. Gen. Laws ch. 106, § 2A-212(2)(e)–(f); Mo. Rev. Stat. § 400.2A-212(2)(e)–(f);

N.C. Gen. Stat. § 25-2A-212(2)(e)–(f); see Cal. Com. Code § 2314(2)(e)–(f) (West); N.H. Rev.

Stat. Ann. § 382-A:2-314(e)–(f) (West).5 Courts in the relevant states have found breaches of

the implied warranty of merchantability where cans of tuna were underfilled and weighed

substantially less than stated on the label, Hendricks v. StarKist Co., 30 F. Supp. 3d 917, 933

(N.D. Cal. 2014); where “all natural” almond milk contained artificial ingredients, Vass v. Blue

Diamond Growers, No. CV 14-13610-IT, 2015 WL 9901715, at *9 (D. Mass. Aug. 11, 2015),

report and recommendation adopted, No. 14-CV-13610-IT, 2016 WL 1275030 (D. Mass. Mar. 31,

2016); and where a deodorant can had an insufficient warning on its label, Reid v. Eckerds Drugs,

Inc., 253 S.E.2d 344, 349–50 (N.C. Ct. App. 1979).

5 The parties dispute which state’s law governs Plaintiffs’ implied warranty claims. (ECF Nos. 19 at

8–9; 24 at 5–7; 25 at 2–4.) However, neither party has identified an actual conflict of laws in this case.

(See ECF Nos. 24 at 7–11 (arguing that Plaintiffs stated a claim under the UCC as adopted by each

state); 25 at 4 (“Plaintiffs’ breach-of-warranty claims must be dismissed regardless of which state’s law

applies.”)). Thus, the Court need not reach the choice of law issue at this stage.

Here, Plaintiffs allege that Defendants’ sheets were not adequately labeled and did not

conform to the affirmations of fact made on the labels, in that the sheets did not have the

thread counts promised on the labels. These allegations appear to fit squarely within the

definitions of merchantable contained in Sections 2-212 (e) and (f) of the UCC quoted above.

Thus, Plaintiffs have stated claims of breach of the implied warranty of merchantability.

Defendants argue that Hawes v. Macy’s is on point. (ECF Nos. 19 at 10–11 (citing Hawes,

346 F. Supp. 3d at 1093; 25 at 4–5). In Hawes, a parallel case in which Plaintiffs sued Macy’s

over the same sheets at issue in this case, the U.S. District Court for the Southern District of

Ohio dismissed Plaintiffs’ claims for breach of an implied warranty of merchantability. Hawes,

346 F. Supp. 3d at 1093. There, however, Plaintiffs argued that the sheets were “unfit for the

ordinary purpose for which they are used.” Id. The court therefore analyzed Plaintiffs’ claims

under UCC § 2-212(c), which requires products to “satisfy a minimum level of quality,” and

found the complaint lacking. Id. (citing Birdsong v. Apple, Inc., 590 F.3d 955, 958 (9th Cir. 2009);

Hope v. Nissan N. Am., Inc., 353 S.W.3d 68, 90 (Mo. Ct. App. 2011)). Here, Plaintiffs argue

that Defendants’ products do not satisfy UCC § 2-212(e) or (f). Thus, while the factual

allegations in the two cases may be similar, Plaintiffs’ divergent legal theories require the

Court’s analysis, and ultimate conclusion, to differ from the analysis and conclusion in Hawes.

Finally, Defendants argue that Named Plaintiff Hawes’s implied warranty claim is

barred because she failed to notify Defendants of the defect within one year of sale as required

by California law. (ECF No. 19 at 11 n.8 (citing Cal. Civ. Code § 1791.1.)) However, “[t]here

is nothing that suggests a requirement that the purchaser discover and report to the seller a

latent defect within that time period.” Mexia v. Rinker Boat Co., 95 Cal. Rptr. 3d 285, 295–96

(Cal. Ct. App. 2009) (emphasis added) (holding that interpreting the one-year provision as a

statute of limitations would be inconsistent with the statute’s “legislative intent to expand

consumer protections and remedies”). Here, Plaintiffs have alleged that the sheets’ actual

thread count was unobservable to the naked eye and only discovered after independently

tested by a textile expert. (ECF No. 36-1 ¶ 10, 244–45.) Thus, the Court finds that these

allegations are sufficient to withstand a motion to dismiss on this claim.

Plaintiff’s motion will be granted as to this claim.

3. Breach of an express warranty (Count III)

Under the UCC, claims for breach of express warranty must be brought “within a

reasonable time after he or she discovers or should have discovered any breach.” Cal. Com.

Code § 2607(3)(A) (West); see Mass. Gen. Laws ch. 106, § 2-607(3)(a); Mo. Rev. Stat. § 400.2-

607(3)(a); N.H. Rev. Stat. Ann. § 382-A:2-607(3)(a) (West); N.C. Gen. Stat. § 25-2-607(3)(a).

Whether the time between discovery and suit is “reasonable” is fact and case specific. In one

case, three months was too long to wait; in another, three years was still reasonable. Compare

P & F Construction Corp. v. Friend Lumber Corp., 575 N.E.2d 61, 64 (Mass. Ct. App. 1991) (finding

that “three and one half months is not soon enough” where a construction company notified

a door manufacturer of readily apparent flaws after payment was past due), with Maybank v. S.

S. Kresge Co., 273 S.E.2d 681, 685 (N.C. 1981) (“While three years might conceivably be a per

se unreasonable delay in a commercial context, differing considerations applicable in retail

situations may mean that a delay of three years by a consumer in giving notice to a retail seller

is within the bounds of a reasonable time.”) For this reason, reasonable delay is generally a

question of fact for the jury. See Gober v. Revlon, Inc., 317 F.2d 47, 52 (4th Cir. 1963) (applying

California law); Delano Growers’ Coop. Winery v. Supreme Wine Co., 473 N.E.2d 1066, 1072 (Mass.

1985); Rowe Int’l, Inc. v. J-B Enterprises, Inc., 647 F.2d 830, 833 (8th Cir. 1981) (applying Missouri

law); Dudley v. Bus. Exp., Inc., 882 F. Supp. 199, 211 (D.N.H. 1994) (citing Russell v. First National

Stores, Inc., 79 A.2d 573, 577 (N.H. 1951)); Maybank, 273 S.E.2d at 684 n.1.

Here, Named Plaintiffs each notified Defendants of the defects roughly two years after

purchase. While the sheets’ alleged defect was not readily apparent at the time of purchase,

Plaintiffs have failed to allege when the defects were detected. Defendants are correct that

“Plaintiffs should not be allowed to benefit from any ambiguity created by their own failure

to disclose material facts.” (ECF No. 25 at 6.) Nevertheless, the Court cannot find that

Plaintiffs’ delays were unreasonable as a matter of law so as to render their PSAC futile. Two

years is within the range found reasonable by at least one state’s supreme court in consumer

transactions, and Defendants alleged concealment of the defect and other factors prevent this

Court from determining that Plaintiffs’ delays are unreasonable as a matter of law at this early

stage in the litigation.

Thus, Plaintiffs’ motion will be granted as to these claims.

4. Fraud based claims (Counts IV through XII)

“In alleging fraud or mistake, a party must state with particularity the circumstances

constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Rule 9(b) applies to any cause of action

“that has the substance of fraud,” not only those labelled as fraud claims. Bakery &

Confectionary Union & Indus. Int’l Pension Fund v. Just Born II, Inc., 888 F.3d 696, 705 (4th Cir.

2018) (quoting Cozzarelli v. Inspire Pharms. Inc., 549 F.3d 618, 629 (4th Cir. 2008)). This

heightened pleading standard requires the plaintiff to “at a minimum, describe the time, place,

and contents of the false representations, as well as the identity of the person making the

misrepresentation and what he obtained thereby.” Id. (internal quotations omitted). “These

facts are often referred to as the ‘who, what, when, where, and how’ of the alleged fraud.’”

Wilson, 525 F.3d at 379 (quoting U.S. ex rel. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d

375, 384 (5th Cir. 2003)). Rule 9(b) “serves several policy objectives,” Topshelf Mgmt., Inc. v.

Campbell-Ewald Co., 117 F. Supp. 3d 722, 725 (M.D.N.C. 2015), including “to provide

defendants with fair notice of claims against them and the factual ground upon which they are

based, forestall frivolous suits, prevent fraud actions in which all the facts are learned only

following discovery, and protect defendants’ goodwill and reputation,” McCauley v. Home Loan

Inv. Bank, F.S.B., 710 F.3d 551, 559 (4th Cir. 2013). Ultimately, the Rule’s purpose is to satisfy

the court “(1) that the defendant has been made aware of the particular circumstances for

which she will have to prepare a defense at trial, and (2) that plaintiff has substantial

prediscovery evidence of those facts.” Harrison v. Westinghouse Savannah River Co., 176 F.3d 776,

784 (4th Cir. 1999).

Defendants argue that nine of Plaintiffs’ thirteen claims sound in fraud, and Plaintiffs

do not dispute this characterization. (ECF Nos. 19 at 14; 24 at 13–16.) Defendants further

argue that these claims were not plead with sufficient particularity because Plaintiffs (1) failed

to identify which Defendant is responsible for the alleged misrepresentations, and (2) base too

many allegations on “information and belief.” (ECF No. 19 at 15–17.) Thus, Defendants

argue, Plaintiffs’ request to assert these claims in their PSAC is futile. (ECF No. 39 at 18.)

The Court, however, finds, that the PSAC does satisfy Rule 9(b). With respect to

Defendants’ first argument, Plaintiffs allege that the sheets in question “were imported and

labeled by AQ Textiles,” and that “AQ Textiles represented and sold them to consumers as if

they were of the higher quality represented on the labels.” (ECF No. 36-1 ¶¶ 38, 44.) With

respect to Defendants’ second argument, it appears that Plaintiffs’ allegations are no longer

based solely on information and belief. Instead, Plaintiffs have submitted prediscovery

evidence, including the content of the alleged misrepresentations (the “what”), as attachments

to the PSAC. (Id. at 87; see id. ¶ 51.) And the “when” and “where” are also based on

prediscovery evidence, such as Named Plaintiffs’ recollections of the times and places they

purchased the sheets. (See id. ¶¶ 36, 49, 54, 58.) Finally, Plaintiffs allege that they gave AQ

money in exchange for the sheets. (Id. ¶¶ 37, 52, 56, 60.) The Court is therefore satisfied that

the allegations are supported by prediscovery evidence and put Defendants on notice of the

particular circumstances for which they will need to prepare a defense for trial.

Plaintiffs’ motion will be granted as to these claims except as otherwise addressed

below.

5. N.C. Unfair and Deceptive Trade Practices Act (Count VI)

Defendants next argue that Plaintiffs’ claims are beyond the scope of the North

Carolina Unfair and Deceptive Trade Practices Act (“NCUDTPA”). (ECF No. 19 at 17–18.)

The NCUDTPA declares unlawful “[u]nfair methods of competition in or affecting

commerce, and unfair or deceptive acts or practice in or affecting commerce.” N.C. Gen.

Stat. § 75-1.1(a). To state a claim, a plaintiff must allege (1) an unfair or deceptive act or

practice; (2) in or affecting commerce; (3) which proximately caused injury to the plaintiff or

his business.” Champion Pro Consulting Grp., Inc. v. Impact Sports Football, LLC, 845 F.3d 104,

109 (4th Cir. 2016) (citing Walker v. Fleetwood Homes of N.C., Inc., 653 S.E.2d 393, 399 (N.C.

2007)). The statute’s plain language is broad in scope and applies to all acts or practices “in

or affecting commerce,” including “all business activities, however denominated.” § 75-

1.1(a)–(b). The General Assembly removed language limiting that scope to business “within

this state” in 1977, indicating its desire to make the law “applicable ‘to the full extent

permissible under conflicts of law principles and the Constitution.’” Hardee’s Food Sys., Inc. v.

Beardmore, No. 5:96–CV–508–BR(2), 1997 WL 33825259, at *3 (E.D.N.C. June 6, 1997)

(quoting American Rockwool, Inc. v. Owens–Corning Fiberglass, 640 F. Supp. 1411, 1427 (E.D.N.C.

1986)).

Relying on The ‘In’ Porters, S.A. v. Hanes Printables, Inc., 663 F. Supp. 494 (M.D.N.C.

1987), Defendants argue that the NCUDTPA only reaches cases where the plaintiff has shown

an in-state injury. (ECF No. 19 at 17–18.) In ‘In’ Porters, a court in this District addressed

“whether section 75-1.1 is available to a foreign plaintiff suing a resident defendant over

alleged foreign injuries having a negligible effect, if any, on North Carolina trade or

commerce.” ‘In’ Porters, 633 F. Supp. at 501. Ultimately, the court held that the NCUDTPA

could not reach the facts of that case. Id. at 502–03.

Since ‘In’ Porters, other federal district courts in North Carolina have distinguished its

holding. See Hometown Pub., LLC v. Kidsville News!, Inc., No. 5:14-CV-00076-FL, 2014 WL

7499450, at *3 (E.D.N.C. Oct. 3, 2014); Verona v. U.S. Bancorp, No. 7:09-CV-057-BR, 2011

WL 1252935, at *15 (E.D.N.C. Mar. 29, 2011); Ada Liss Grp. v. Sara Lee Corp., No. 06CV610,

2010 WL 3910433, *12 (M.D.N.C. April 27, 2010); Hardee’s, 1997 WL 33825259, at *3. These

courts limit ‘In’ Porter to cases concerning “exclusively foreign misconduct with damages to

the plaintiff’s exclusively foreign operations.” Verona, 2011 WL 1252935, at *14.

This Court likewise finds ‘In’ Porters distinguishable. ‘In’ Porters’ narrow interpretation

of the NCUDTPA was based on concerns about personal jurisdiction under North Carolina’s

long arm statute, consistency of the NCUDTPA with federal antitrust law, and potential

violations of the Commerce and Due Process Clauses of the U.S. Constitution. ‘In’ Porters,

633 F. Supp. at 501–02. These concerns are not present in this case. There is no personal

jurisdiction concern because Defendant AQ is a North Carolina corporation. See N.C. Gen.

Stat. 1-75.4(1)(c). Since Plaintiffs are U.S. residents, applying the NCUDTPA will also not

create the concerning “anomaly” presented in ‘In’ Porters that could allow state law to reach

farther than federal law in regulating international trade. See In’ Porters, 633 F. Supp. at 502 n.

8.

Further, while statutes should be construed to avoid constitutional problems, see

Boumediene v. Bush, 553 U.S. 723, 787 (2008), Defendants have not shown how applying the

NCUDTPA in this case would violate the Commerce Clause. See ITCO Corp. v. Michelin Tire

Corp., Com. Div., 722 F.2d 42, 48 n. 9 (4th Cir. 1983) (“Absent some reason to believe that the

[NCUDTPA] is an attempt directly to regulate interstate commerce . . . we perceive no cause

for constitutional concern.”). Unlike in ‘In’ Porter, Plaintiffs here invoke the NCUDTPA to

regulate Defendant AQ’s alleged mislabeling of their products—conduct that appears to have

occurred in whole or in part at AQ’s headquarters in North Carolina. (ECF No. 36-1 ¶¶ 25–

28, 61.) Thus, this is not a case where state law “targets conduct that occurs entirely outside

[North Carolina’s] borders.” See Ass’n for Accessible Medicines v. Frosh, 887 F.3d 664, 671 (4th

Cir. 2018); see also Nat’l Pork Producers Council v. Ross, 6 F.4th 1021, 1029 (9th Cir. 2021) (“A

state law is not impermissibly extraterritorial unless it directly regulates conduct that is wholly

out of state.”).

Lastly, Defendants have not shown how application of the NCUDTPA would violate

the Due Process Clause. Application of state law may be unconstitutional if a lack of

“significant contact or significant aggregation of contacts” between the state and case “creating

state interests” renders application of the law “arbitrary” or “fundamentally unfair.” Allstate

Ins. Co. v. Hague, 449 U.S. 302, 313 (1981) (pl. opinion). Here, North Carolina has significant

contacts with Defendant AQ in that AQ is a North Carolina corporation and engaged in

allegedly proscribed conduct in North Carolina. See id. at 314 n. 19 (“Numerous cases have

applied the law of a jurisdiction other than the situs of the injury where there existed some

other link between that jurisdiction and the occurrence.”). Application of North Carolina law

to a North Carolina corporation is not arbitrary or unfair. Consequently, the Court joins the

cases cited above and interprets the NCUDTPA broadly to reach some cases where the injury

occurred outside of North Carolina.

Defendants alternatively argue that Plaintiffs have failed to adequately allege that

Defendants’ misconduct occurred in North Carolina. Plaintiffs have alleged:

25. Defendant AQ Textiles is a North Carolina LLC with it principal place

of business and registered offices located in Greensboro, North Carolina

27410.

26. Defendants’ improper conduct set forth herein occurred in this District

or was conceived of and executed from this District in whole or in part.

27. Defendants’ decisions to engage in the improper conduct set forth

herein were made in this District.

28. Further, Defendants’ bedding sheets at issue were advertised, marketed,

sold and/or distributed in this District.

. . .

70. The sheets at issue were manufactured by Creative Textiles and

imported, labeled, and sold by AQ Textiles. . . .

(ECF No. 36-1 ¶¶ 25–28, 70.) These allegations are sufficient to create the reasonable

inference that Defendant AQ engaged in the alleged misconduct—labeling sheets with

misleadingly high thread counts—in North Carolina.

Therefore, the Court finds that the facts of this case fall within the broad scope of the

NCUDTPA. The Court makes no finding as to whether the NCUDTPA applies to this case

under North Carolina’s choice of law rules, as that issue has not been raised by Defendants

nor briefed by the parties. Instead, the Court merely finds that ‘In’ Porter does not render

Plaintiffs’ motion to assert NCUDTPA claims in their PSAC futile.

6. Negligent misrepresentation (Count IV) and economic loss

Defendants next argue that Plaintiffs’ negligent misrepresentation claim is barred by

the economic loss doctrine. (ECF No. 19 at 18–20.) Plaintiffs argue that their claims fall

within an exception to the economic loss rule under North Carolina law. (ECF No. 24 at 18

(citing Rountree v. Chowan Cty., 796 S.E.2d 827, 830 (N.C. Ct. App. 2017)).) Defendants argue

that North Carolina law does not apply to this case. (See ECF No. 25 at 10.)

A federal court sitting in diversity or exercising supplemental jurisdiction over state law

claims must apply the substantive law of the forum state, including the form state’s choice of

law rules. Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 623–24 (4th Cir. 1999); see

Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941) (citing Erie R.R. Co. v. Tompkins,

304 U.S. 64 (1938)). North Carolina courts follow the First Restatement of Conflict of Laws

in actions sounding in tort and apply the tort law of the state where the injury occurred. See

SciGrip, Inc. v. Osae, 838 S.E.2d 334, 343 (N.C. 2020); Boudreau v. Baughman, 368 S.E.2d 849,

854 (N.C. 1988). Here, Defendants’ alleged negligent misrepresentation caused injury where

Plaintiffs purchased the sheets: California, Massachusetts, Missouri, and New Hampshire.

Thus, Plaintiffs claims are governed by the substantive laws of these states. See SciGrip, 838

S.E.2d at 344 (noting that “the lex loci test can be difficult in some circumstances, including

cases involving events that occur in and entities associated with multiple jurisdictions.”).

All four states recognize the economic loss rule, which limits “remedies for economic

loss sustained by reason of damage to or defects in products sold . . . to those under the

warranty provisions of the UCC.” Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d

112, 130–31 (Mo. 2010) (en banc); see Robinson Helicopter Co. v. Dana Corp., 102 P.3d 268, 272

(Cal. 2004); Sebago, Inc. v. Beazer E., Inc., 18 F. Supp. 2d 70, 89 (D. Mass. 1998) (citing Jacobs v.

Yamaha Motor Corp., U.S.A., 649 N.E.2d 758, 763 n.5 (Mass. 1995)); Wyle v. Lees, 33 A.3d 1187,

1190–91 (N.H. 2011). However, the states apply the rule differently to negligent

misrepresentation claims. The Eighth Circuit predicted that “the Supreme Court of Missouri,

if confronted with the issue, would hold that the economic loss doctrine bars negligent

misrepresentation claims.” Bruce Martin Const., Inc. v. CTB, Inc., 735 F.3d 750, 752 (8th Cir.

2013) (citing Dannix Painting, LLC v. Sherwin-Williams Co., 732 F.3d 902, 904–05 (8th Cir.

2013)). In Massachusetts, on the other hand, “the economic-loss doctrine does not apply to

claims of negligent misrepresentation.” Stokes v. Wells Fargo Bank, N.A., 37 F. Supp. 3d 525,

535 n.6 (D. Mass. 2014); Passatempo v. McMenimen, 960 N.E.2d 275, 294 (Mass. 2012) (“[The

economic loss doctrine] does not apply to ‘pecuniary loss incurred as a result of an actionable

misrepresentation.’” (quoting Nota Constr. Corp. v. Keyes Assocs. Inc., 694 N.E.2d 401 (Mass. Ct.

App. 1998))); see also Softub, Inc. v. Mundial, Inc., 53 F. Supp. 3d 235, 260 (D. Mass. 2014)

(allowing plaintiff’s negligent misrepresentation claim against manufacturer for false promises

that pump was suitable for installation in portable spa tubs).6

In the remaining two states, it appears that a negligent misrepresentation claim is barred

if the misrepresentation constituted a breach of contract but is not barred if the

misrepresentation was independent of the contract terms and instead induced contract

formation. Compare Robinson Helicopter, 102 P.3d at 274 (allowing an intentional

misrepresentation claim where defendant falsified certificates of performance, inducing

plaintiff’s purchase of its products), and Banks v. R.C. Bigelow, Inc., 536 F. Supp. 3d 640, 646

(C.D. Cal. 2021) (allowing a claim that alleged the label, “manufactured in the USA,” was false

and induced plaintiffs’ purchase), and Wyle, 33 A.3d at 1192 (allowing a claim where

defendant’s misrepresentation that a property was licensed for immediate occupancy induced

plaintiff’s purchase), with Soil Retention Prod., Inc. v. Brentwood Indus., Inc., 521 F. Supp. 3d 929,

955 (S.D. Cal. 2021) (barring plaintiff’s negligent misrepresentation claims that “allege nothing

more than the product it purchased . . . did not live up to the expectations that had been

created by Defendant’s advertising”), and Wyle, 33 A.3d at 1192 (noting that economic loss

6 Defendants cite Sebago, Inc. v. Beazer E., Inc., 18 F. Supp. 2d 70 (D. Mass. 1998), which applied the

economic loss rule to a negligent misrepresentation claim after finding in 1998 that “Massachusetts

has not expressly decided whether the economic loss doctrine bars claims of negligent

misrepresentation where the damages result from a defective product.” Id. at 95. State courts have

since repeated that negligent misrepresentation is categorically excepted from the economic loss rule,

see Passatempo, 960 N.E.2d at 294, and the U.S. District Court in Massachusetts has allowed negligent

misrepresentation claims related to defective products to proceed, Softub, 53 F. Supp. 3d at 260.

rule bars claims that “merely relate to a breached promise to perform the terms of the contract

or attempt to recharacterize a breach of contract claim as a negligent misrepresentation”).

Here, Defendants’ alleged misrepresentations go to the nature and performance of the

sheets. Plaintiffs repeatedly allege that Defendants’ thread count claims were not mere

characterizations of the sheets, but product descriptions that created warranties. Thus, this is

not a case where alleged promises are independent of the purchase, such as a promise that a

product is properly licensed or “manufactured in the USA.” In such a case, the plaintiff has

received the correct product, but was persuaded to purchase the product by the defendant’s

misrepresentations. By contrast, Plaintiffs in this case allege they did not receive the products

they purchased—luxury sheets with the advertised thread counts. Thus, their California and

New Hampshire negligent misrepresentation claims merely restate their breach of warranty

claims and are barred by the economic loss doctrine.

Plaintiffs’ motion will therefore be granted as to the negligent misrepresentation claims

brought by Plaintiffs who allegedly suffered an injury in Massachusetts. Plaintiffs’ request to

assert remaining negligent misrepresentation claims will be denied as futile.

7. Massachusetts Consumer Protection Act (“MCPA”) (Count XI)

Defendants next argue that Plaintiffs’ request to assert MCPA claims in their PSAC is

futile because Plaintiffs did not provide Defendants with sufficient notice. (ECF No. 19 at

20–21.)

The MCPA provides that “[a]t least thirty days prior to the filing of any such action, a

written demand for relief, identifying the claimant and reasonably describing the unfair or

deceptive act or practice relied upon and the injury suffered, shall be mailed or delivered to

any prospective respondent.” Mass. Gen. Laws ch. 93A, § 9(3). “The statutory notice

requirement is not merely a procedural nicety, but, rather, ‘a prerequisite to suit.’” Young v.

Wells Fargo Bank, N.A., 828 F.3d 26, 34 (1st Cir. 2016) (quoting Entrialgo v. Twin City Dodge,

Inc., 333 N.E.2d 202, 204 (Mass. 1975)). The demand letter “is a prerequisite to suit and as a

special element must be alleged and proved.” Baldassari v. Pub. Fin. Tr., 337 N.E.2d 701, 707

(Mass. 1975).

In the class action context, proper demand made by one plaintiff satisfies this

requirement for “others similarly situated,” so long as the letter (1) identifies him as the

claimant, (2) reasonably describes the act or practice being challenged, and (3) reasonably

describes his injury. Id. In Bosque v. Wells Fargo Bank, N.A., 762 F. Supp. 2d 342 (D. Mass.

2011), the U.S. District Court for the District of Massachusetts held that one named plaintiff’s

demand put defendant on sufficient notice such that other named plaintiffs could join suit

without issuing additional demands. Id. at 354.

“One function of the demand letter is to encourage negotiation and settlement by

notifying prospective defendants of claims arising from allegedly unlawful conduct.” Casavant

v. Norwegian Cruise Line, Ltd., 952 N.E.2d 908, 913 (Mass. 2011) (internal quotations omitted);

see also Young, 828 F.3d at 34 (“The demand letter requirement puts the defendant on notice of

the plaintiff’s claim, thereby encouraging negotiation and settlement.”). Notice of a plaintiff’s

claim satisfies this requirement only if it “describes the injuries in sufficient detail to permit

the defendant reasonably to ascertain its exposure.” Richards v. Arteva Specialties S.A.R.L., 850

N.E.2d 1068, 1076 (Mass. Ct. App. 2006) (internal quotation omitted). Thus, “[i]n order to

qualify as a written demand under Chapter 93A, the letter must define the injury suffered and

the relief sought and refer to the nature of the claim as one under the consumer protection act.” In re

Bushay, 327 B.R. 695, 702 (B.A.P. 1st Cir. 2005) (emphasis added), aff’d, 187 F. App’x 17 (1st

Cir. 2006).

Here, Plaintiffs allege the following:

310. Plaintiff Morrison provided Defendants with notice of her and the

Classes’ claims by letter dated November 27, 2018.

311. Plaintiff Hawes provided Defendants with notice of her and the Classes’

claims by letter on or around May 17, 2019.

312. Plaintiffs Chiaraluce and Fontaine provided Defendants with notice of

their and the Classes’ claims by letter on or around December 5, 2019.

(ECF No. 36-1 ¶¶ 310–312.) Plaintiffs first raised their MCPA claim in their FAC, filed on

December 12, 2019. Thus, only Plaintiff Hawes’s letter was mailed or delivered at least thirty

days before Plaintiffs filed their MCPA claim.7

Plaintiffs argue that Hawes’s demand was sufficient to put Defendants on notice of

other Plaintiffs’ claims as well. (ECF No. 24 at 20.) However, Hawes is a citizen of California

who purchased her sheets in California, and Plaintiffs have not alleged that Hawes or the

sheets she purchased had any connection to Massachusetts. Thus, nothing in her demand

letter would have put Defendants on notice that their alleged conduct may have violated the

MCPA, nor could it have encouraged settlement of claims which Defendants did not know

7 Plaintiffs do not argue that the untimeliness of Plaintiffs Chiaraluce’s and Fontaine’s demands have

been cured by their PSAC, nor does the Court find that this amended complaint cures the defects.

Plaintiffs had ample time between January 5, 2020—thirty days after Chiaraluce and Fontaine mailed

their letter—and this Court’s Order on March 17, 2021, to amend their complaint to cure this defect

but failed to do so. After Plaintiffs’ suit was dismissed by the Court, Defendants no longer had

incentive to respond to the demand letter and settle the suit. Thus, the purposes of the demand

requirement, including to encourage settlement and limit damages, are not served by allowing Plaintiffs

to reassert their MCPA claims in their PSAC.

could be raised. Plaintiffs have therefore failed to allege that they submitted a timely demand

for relief.

Accordingly, Plaintiffs’ motion will be denied as to claims arising under the MCPA as

futile.

8. Unjust enrichment (Count XIII)

Finally, Defendants argue that Plaintiffs cannot maintain unjust enrichment claims

alongside their warranty claims. (ECF No. 19 at 21–22.)

It is true that the relevant states’ laws do not permit recovery on an unjust enrichment

theory when a valid contract governs the subject matter of the parties’ dispute. See Progeny

Ventures, Inc. v. W. Union Fin. Servs., Inc., 752 F. Supp. 2d 1127, 1135 (C.D. Cal. 2010) (“As a

matter of [California] law, an unjust enrichment claim does not lie where the parties have an

enforceable express contract.”); Tomasella v. Nestle USA, Inc., 364 F. Supp. 3d 26, 37 (D. Mass.

2019) (“[A] plaintiff who has an adequate remedy at law cannot maintain a parallel claim for

unjust enrichment.”); Banner Iron Works, Inc. v. Amax Zinc Co., 621 F.2d 883, 889 (8th Cir. 1980)

(finding of a valid contract precludes recovery on a quantum meruit theory under Missouri

law); Clapp v. Goffstown Sch. Dist., 977 A.2d 1021, 1025 (N.H. 2009) (“It is a well-established

principle that the court ordinarily cannot allow recovery under a theory of unjust enrichment

where there is a valid, express contract covering the subject matter at hand.”); Wireless

Commc’ns, Inc. v. Epicor Software Corp., No. 3:10CV556-DSC, 2011 WL 90238, at *7 (W.D.N.C.

Jan. 11, 2011) (“If there is a contract between the parties, the contract governs the claim and

the law will not imply a contract [under a theory of unjust enrichment].”).

However, at this early stage of the litigation, Plaintiffs are permitted to pursue their

unjust enrichment claims in the alternative. Fed. R. Civ. P. 8(d)(2) (“A party may set out 2 or

more statements of a claim or defense alternatively or hypothetically, either in a single count

or defense or in separate ones.”). “The fact that a plaintiff cannot simultaneously recover

damages for both breach of an express contract and unjust enrichment does not preclude that

plaintiff from pleading both theories in her complaint.” Owen v. Gen. Motors Corp., No. 06-

4067-CV-CNKL, 2006 WL 2808632, at *2 (W.D. Mo. Sept. 28, 2006); see, e.g., Dorney v. Pindrop

Sec., Inc., No. 15-CV-11505-ADB, 2015 WL 5680333, at *6 (D. Mass. Sept. 25, 2015) (“[T]he

existence of statutory and contractual claims does not necessitate the dismissal of [plaintiff’s]

equitable quantum meruit/unjust enrichment claim.”); Performance Sales & Mktg., LLC v. Lowe's

Companies, Inc., No. 5:07CV140, 2010 WL 2294323, at *5 (W.D.N.C. June 4, 2010) (“Until the

existence of an express contract is proven, [a plaintiff] is allowed to plead quantum meruit and

unjust enrichment as alternative theories of recovery.”).

Plaintiffs’ motion will therefore be granted for these claims.

CONCLUSION

The Court here concludes that its March 17, 2021, Order dismissing Plaintiffs’ First

Amended Complaint without prejudice was not a final judgment or order and was instead

interlocutory. Therefore, the Court will instruct the Clerk to reinstate the case and need not

vacate the former Order. The Court further concludes that Plaintiffs’ proposed Second

Amended Complaint does allege an injury in fact and cures the defect that led the Court to

dismiss the First Amended Complaint. Plaintiffs’ motion to amend their complaint would

survive a motion to dismiss and is not futile, with the exception of their claims for Breach of

a Written Warranty under the MMWA (Count I); for Negligent Misrepresentation brought by

Plaintiffs Morrison, Hawes, and Chiaraluce, and the California, Missouri, New Hampshire,

and North Carolina classes (Count IV); and for violations of the MCPA (Count XI). Finally,

the Court concludes that the following Order advances the Court’s interests in judicial

economy, efficiency, and disposing with cases on their merits.

For the reasons stated herein, the Court enters the following:

ORDER

IT IS THEREFORE ORDERED that the Clerk of the United States District Court

for the Middle District of North Carolina shall reinstate the case.

IT IS FURTHER ORDERED that Plaintiffs’ Motion to Amend First Amended

Complaint, (ECF No. 36), is GRANTED in part and DENIED in part as follows: Plaintiffs’

motion to amend is DENIED as to any claim for breach of a written warranty under the

MMWA (Count I); any negligent misrepresentation claims brought by Plaintiffs Morrison,

Hawes, and Chiaraluce, and the California, Missouri, New Hampshire, and North Carolina

classes (Count IV); and any claims arising under the MCPA (Count XI). Plaintiffs’ motion

will be GRANTED as to all other claims.

This, the 27th day of January 2022.

/s/ Loretta C. Biggs.

United States District Judge