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Orlander v. Staples, Inc.

United States Court of Appeals, Second Circuit

September 16, 2015

ANDREW ORLANDER, individually and on behalf of all others similarly situated, Plaintiff-Appellant,
v.
STAPLES, INC., Defendant-Appellee. [1]

Argued January 22, 2015

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[Copyrighted Material Omitted]

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Plaintiff Andrew Or. lander appeals from the judgment of the United States District Court for the Southern District of New York granting Defendant Staples, Inc.'s Rule 12(b)(6) motion to dismiss claims for breach of contract and violations of New York General Business Law (" N.Y.GBL" ) Sections 349 and 350, which prohibit deception of consumers and false advertising. Plaintiff purchased both a computer and a two-year Protection Plan from Defendant and brought suit after he was denied the Protection Plan services for which he allegedly paid. The district court ruled that the Protection Plan unambiguously excluded all but one of the services Plaintiff sought, that to the extent that Defendant breached, the breach was immaterial, and that Plaintiff failed to adequately allege damages. The district court also ruled that Plaintiff failed to allege an actual injury under N.Y. GBL Sections 349 and 350.

The Court of Appeals concludes that Plaintiff has adequately alleged a materially misleading practice and an injury under N.Y. GBL Sections 349 and 350. With respect to the breach of contract claim, the Court concludes that the Protection Plan's terms are ambiguous as a matter of law, that the materiality of Defendant's breach is not a basis on which to dismiss Plaintiff's contract claim, and that Plaintiff has adequately alleged damages in the amount of his restitution interest. Accordingly, the judgment is VACATED and REMANDED with instructions to the district court to deny Defendant's motion to dismiss and to grant Plaintiff leave to amend his complaint with respect to any further damages he suffered from Defendant's alleged breach of contract.

Megan A. Farmer, Gardy & Notis, LLP, New York, New York, for Plaintiff-Appellant.

Barry M. Kazan, Thompson Hine LLP, New York, New York, for Defendant-Appellee.

Before: LEVAL, POOLER, Circuit Judges, MURTHA,[2] District Judge.

OPINION

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Leval, Circuit Judge.

Plaintiff Andrew Orlander, a resident and citizen of New York State, appeals from the district court's dismissal, under Fed.R.Civ.P. 12(b)(6) for failure to state a claim, of his claims for breach of contract and for violations of New York General Business Law (" N.Y. GBL" ) Sections 349 and 350, which prohibit deception of consumers and false advertising. Defendant Staples, Inc. is a Delaware corporation that advertises, distributes, markets, and sells its Computer and Monitor Protection Plans to consumers throughout New York State.[3] Plaintiff purchased both a computer and a two-year, $99.99 " Carry-in" Protection Plan from Staples, and brought suit, individually and on behalf of all others similarly situated, after Staples denied Plaintiff the services for which he allegedly paid.

Plaintiff argues that the district court erred in finding the language of the Protection Plan Brochure (" the Contract" ) to be unambiguous; in requiring Plaintiff to show a " material" breach of that contract; and in finding that the Plaintiff suffered no damages. Plaintiff also argues that the district court erred in finding that Plaintiff failed to plead an actual injury under N.Y. GBL Sections 349 and 350. Staples responds that the contract terms were unambiguous, that Plaintiff failed to allege a breach of the unambiguous contract, and that Plaintiff failed to show damages from the alleged breach. Defendant also argues that Plaintiff failed sufficiently to allege either a materially misleading practice or an actual injury under N.Y. GBL Sections 349 and 350.

We conclude that Plaintiff has adequately alleged both a materially misleading

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practice and an actual injury under N.Y. GBL Sections 349 and 350. We also conclude, with respect to the breach of contract claim, that the district court erred in finding the Contract to be unambiguous, in requiring Plaintiff to allege a " material" breach, and in finding that Plaintiff had failed to adequately allege damages. Construing the contract's ambiguities in Plaintiff's favor, he has alleged Staples's failure to perform in the first year of the contract and damages in the amount of his restitution interest. Should Plaintiff seek damages beyond his restitution interest, he should amend his complaint as authorized by this opinion. Accordingly, we vacate the judgment and remand with instructions to the district court to deny Staples's motion to dismiss and to allow Plaintiff to amend his complaint with respect to contract damages.

BACKGROUND

On March 3, 2012, Plaintiff purchased a Hewlett Packard computer at a Staples store, and also purchased Staples's two-year " Carry-in" Protection Plan for $99.99. He was given a Protection Plan Brochure (" the Contract" ), as well as verbal assurances from a Staples sales representative that " [t]he manufacturer's warranty [would] not be sufficient to address issues that arise with the computer," that " pursuant to the manufacturer's plan, Plaintiff [would] be required to package his computer and ship it back to the manufacturer," and that, in contrast, the Staples Protection Plan would " provide complete coverage so that Plaintiff would never need to contact the manufacturer for repairs or replacement." A 13-14.

The second page of the Contract listed prices for both " 3 Year" and " 2 Year" Carry-in Protection Plans on desktop computers. A 32. Prices were pegged to the purchase price of the computer to be protected. Plaintiff paid $509.99 for his computer and $99.99 for a " 2YR" protection plan. A 32-33.

The second page of the Contract promised purchasers of Protection Plans, " [Y]ou can count on," inter alia, " 24/7 technical support and customer service," " 100% parts and labor coverage," and " [o]ne-time replacement or cash settlement if equipment cannot be repaired*." A 32. This latter " replacement" provision alone was starred (" *" ). The single star referred to a paragraph in small type on the back page of the Contract, which reads in pertinent part: " Some restrictions apply. For complete details, including Obligor Information, see Terms and Conditions. The plan term is inclusive of manufacturer's warranty and store return policy and does not replace the manufacturer's warranty." A 31. The second page of the Contract also promised purchasers of Carry-in Protection Plans, " We will refer you to the nearest authorized repair center for service." A 32.

On November 21, 2012, after several months of use, Plaintiff brought the computer back to Staples, reporting internet-connectivity issues, and sought an exchange. A Staples employee told Plaintiff to contact Hewlett Packard directly and explained that " there was no coverage from the Protection Plan until the manufacturer's warranty expired." A 13 (emphasis added). Plaintiff did not attempt to contact Hewlett Packard directly, but instead inquired further with Staples about the underlying " Terms and Conditions" of the Protection Plan he had purchased, which are mentioned exclusively (but are not set forth) in the small-print, starred paragraph on the back of the Contract. Plaintiff was ultimately unable to procure these Terms and Conditions.

On January 4, 2013, however, Plaintiff did receive a letter from a Staples Sales Manager stating:

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Staples Protection Plans does not cover the first year, Staples Protection Plans covers the 2nd year when the warranty expires from the manufacturer, In Andrew Orlander [sic] case HP should cover the repair on the HP Desktop, Staples will pick up the second year on his replacement plan.

A 14.

On January 31, 2013, Plaintiff brought this putative class action for breach of contract, violations of N.Y. GBL Sections 349 and 350, breach of express and implied warranties, and unjust enrichment. Staples filed a motion to dismiss pursuant to both Rules 12(b)(3) (improper venue) and 12(b)(6) (failure to state a claim). On June 30, 2013, after briefing and a hearing on the motion, the district court issued a memorandum and order granting the motion to dismiss for failure to state a claim. Orlander v. Staples, Inc., No. 13 Civ. 703 NRB, 2014 WL 2933152 (S.D.N.Y. June 30, 2014). The district court rejected the venue argument because the binding arbitration clause on which the motion was grounded was contained only in the Terms and Conditions of the Purchase Plan, which the Plaintiff allegedly never received, and which the district court accordingly did not consider part of the Contract. Orlander, 2014 WL 2933152, at *2-4. Plaintiff now appeals from the dismissal of his breach-of-contract and N.Y. GBL Sections 349 and 350 claims.

DISCUSSION[4]

I. Breach of Contract Claim


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