UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Animal Hospital of Nashua. Inc.. Plaintiff

v. Case No. ll-cv-448-SM Opinion No.

Antech Diagnostics and Sound-Eklin, Defendants

O R D E R

Plaintiff, Animal Hospital of Nashua, Inc. ("AHN"), is suing

its suppliers of veterinary diagnostic services and equipment

support services, VGA Cenvet, d/b/a Antech Diagnostics

("Antech"), and Sound Technologies, Inc., d/b/a Sound-Eklin

("Sound-Eklin"). AHN seeks to recover economic losses incurred

as a result of defendants' failure to provide adequate services

and equipment.

Before the court is defendants' motion for judgment on the

pleadings with respect to several of plaintiff's claims (document

no. 27). For the reasons given, defendants' motion is granted in

part and denied in p a r t .

Legal Standard

"A motion for judgment on the pleadings under Federal Rule

of Civil Procedure 12(c) is treated much like a Rule 12(b)(6) motion to dismiss." Estate of Bennett v. Wainwright,

(1st Cir. 2008) (citing Perez-Acevedo v. Rivero-Cubano,

(1st Cir. 2008)). When ruling on a motion for

judgment on the pleadings under Rule 1 2 (c), the court takes the

facts pled in the light most favorable to the plaintiff and

"draw[s] all reasonably supported inferences in [its] favor."

Abraham v. Woods Hole Oceanographic Inst.,

(1st

Cir. 2009) (citation omitted) . " [T] o survive a Rule 12(b) (6)

motion (and, by extension, a Rule 1 2 (c) motion) a complaint must

contain factual allegations that 'raise a right to relief above

the speculative level . ' " Gray v. Evercore Restructuring L.L.C.,

(1st Cir. 2008) (citation omitted). In other

words, a Rule 12(c) motion should be granted "if the complaint

fails to state facts sufficient to establish a 'claim to relief

that is plausible on its face.'" .Id. (quoting Trans-Spec Truck

Serv., Inc. v. Caterpillar Inc.,

(1st Cir.

2008)).

Background

The following facts are drawn from AHN's complaint, and are

construed favorably to AHN.

AHN is a veterinary hospital located in Nashua, New

Hampshire, and owned by Dr. Leo G. Bishop. Donna Cole is AHN's

2 chief executive officer. In 2008, Antech, a provider of

veterinary diagnostic and clinical laboratory services,

approached Bishop and Cole. It represented itself as a "leading

animal care company" offering "better pricing than [its]

competitors with equivalent or superior service and quality."

Antech offered to provide AHN with lab services, an x-ray system,

and a loan of $100,000, in exchange for AHN's commitment to use

Antech's laboratory services for six years and make an annual

payment to Antech of $200,000 during that period.

On August 1, 2 008, AHN and Antech entered into a Loan

Service Agreement and an Equipment Service Agreement. Under the

agreements, Antech was to provide "all veterinary diagnostic and

clinical laboratory Services" to AHN for six years, but AHN was

free to "use a laboratory other than a[n] Antech Lab to perform

services that a[n] Antech lab cannot perform." Amended

Complaint, pars. 14, 15, document no. 17. Under the Equipment

Services Agreement, Antech provided AHN with an x-ray system and

other equipment manufactured by Sound Technologies, Inc.

(collectively "STI Equipment"), and it purchased service and

warranty coverage to support AHN's use of the equipment (the

"Service and Warranty Agreement"). Defendant Sound-Eklin was a

3 party to the Service and Warranty Agreement.1 Under that

agreement, Sound-Eklin warranted that the STI Equipment would be

free from defects for one year, and it further promised to

provide, among other things, remote diagnostics, call support,

and software downloads and fixes.

Starting sometime in 2009, "numerous" laboratory test

results AHN received using the STI Equipment and Antech's

laboratory services were "incorrect." AHN told Antech of the

errors, but Antech failed to address or respond to AHN's

concerns.

In February of 2011, two and one-half years into the

contract term, AHN began experiencing significant problems with

the STI Equipment. It soon discovered that Antech and Sound-

Eklin had discontinued the x-ray system's "imaging receptor" - a

piece of hardware that captures images during exposure. It also

learned that defendants had discontinued software support for the

x-ray system.

1 In 2004, Antech acquired Sound, a provider of medical technology equipment. In 2009, after the parties entered into their agreements, Antech acquired Eklin, a leading seller of digital radiology, ultrasound, and practice management software systems in the veterinary market. Antech merged Eklin and Sound to create Sound-Eklin, the second named defendant in this case.

4 In August 2011, AHN brought its business to an alternative

laboratory services provider. When Antech threatened litigation,

AHN, under protest and subject to a reservation of its rights,

repaid Antech the remaining balances on the loan and all open

invoices, and it made the STI Equipment available for pick-up by

Antech.

AHN then filed suit in this court alleging that it incurred

costs in excess of $450,000 as a result of defendants' conduct.

It asserts claims for breach of contract, breach of the covenant

of good faith and fair dealing, negligence, negligent

misrepresentation, fraud, unjust enrichment, and violation of New

Hampshire's Consumer Protection Act.

Defendants move for judgment on the pleadings with regard to

the consumer protection and unjust enrichment claims, and as to

all tort claims.

Discussion

I. Tort Claims

Defendants seek dismissal of the tort claims primarily on

grounds that this dispute arises from the parties' contractual

relationship and tort law offers no remedy. They point out,

correctly, that AHN alleges damages solely for economic losses.

5 Tort claims brought to secure relief only for economic losses are

generally barred under the "economic loss doctrine".2 See

Plourde Sand & Gravel Co. v. JGI Eastern, Inc.,

(2007); Robinson Helicopter Co. v. Dana Corp.. 102 P.3d at 272

(Cal. 2004)). The doctrine is a "judicially-created remedies

principle that operates generally to preclude contracting parties

from pursuing tort recovery for purely economic or commercial

losses associated with the contract relationship." Plourde.

(quotation omitted).3

But there are exceptions. See generally

. A

party may recover solely economic losses in tort, for example, if

he shows that the losses resulted from defendant's breach of an

independent duty arising "outside the terms of the contract."

I d . at 794. See also Robinson Helicopter. 102 P.3d at 273-74.

Here, in its general negligence counts (Counts III and X ) ,

AHN alleges that defendants owed it a duty to use their

2 The Agreements contain a California choice-of-law provision. The applicable law in California and New Hampshire is substantially in accord with respect to the issues raised in defendants' motion. Neither party argues otherwise.

3 The doctrine, under New Hampshire law, also bars tort claims for economic losses where the parties are not in privity, see Plourde,

. Plaintiff's contention that, notwithstanding the doctrine, it is entitled to assert tort claims "in the alternative" to its breach of contract claims, is a non-starter.

6 professional "skill and diligence ... in connection with

[their] responsibilities to provide . . . services." The

"services" identified are the same as those specified in the

Agreements: "veterinary diagnostic and clinical laboratory

services" and "equipment support and service, remote diagnostics,

software downloads, fixes, and enhancements, and other remote

solutions." Amended Complaint, Count III, par. 112; Count X,

par. 151, document no. 17. In short, AHN posits duties owed by

defendants that arise from the terms of the contracts - and not

from "outside" the contractual relationship. The general

negligence claims, Counts III and X, are, therefore, barred under

the economic loss doctrine. See Deutsche Bank Nat'l Trust Co. v.

Fadili.

, at *9 (D.N.H. Oct. 4, 2011) (McCafferty,

M.J.) (holding negligence claim was barred by the economic loss

doctrine where "the factual allegations supporting [the]

negligence claim are virtually identical to those supporting

[the] breach of contract claim."),4

4 The court also rejects AHN's theory that its general negligence claims escape the reach of the economic loss doctrine because, as a laboratory, Antech owed AHN a special duty of care independent of its contractual obligations. AHN has not shown that such a duty exists. The cases it cites are inapposite because all involve the duty of care a laboratory owes to patients who are injured by erroneous lab results, see e . g . Garlick v. Quest Diagnostics, Inc..

, at *10 (D.N.J. Dec. 14, 2009), or the duty of care a veterinarian owes to a pet owner in its medical treatment of the animal. See e. g . , de Mercado v. Superior Court, 148 Cal. A p p . 4th 711, 716 (2007) .

7 As for AHN's negligent misrepresentation claims, those, too,

are barred. Negligent misrepresentation claims can avoid

dismissal under the economic loss doctrine, see Plourde,

, but only when they allege "independent, affirmative

misrepresentations unrelated to the performance of the contract."

Wyle v. Lees,

(2011). In other words, the

alleged misrepresentation must not "'concern the quality or

characteristics of the subject matter of the contract or

otherwise relate to the offending party's expected performance.'"

I d . at 411 (quotation omitted).

Here, AHN identifies as representations of "fact" Antech's

statements (1) that it would "provid[e] a functioning X-ray

system" and "a laboratory that produced correct results and/or

provided proper and reliable service"; (2) "that it would respond

in dealing with both the X-ray System and any problems with

erroneous laboratory results"; and (3) that it would "provid[e] a

level of service" that was "superior or equivalent to its

competitors." Amended Complaint, Count IV, par. 116, document

no. 17. AHN further alleges that Sound-Eklin represented that it

would "provid[e] a functioning X-ray System, and that it would

respond in dealing with problems or deficiencies associated with

the X-ray System." .Id. at Count XI, par. 155.

8 As an initial matter, Antech's statement about the quality

of its service, as pled, constitutes "mere puffery," and cannot

support a misrepresentation claim.5 The remaining statements,

although not plainly puffery, fare no better since they relate to

"the quality or characteristics of the subject matter of the

contract" or to defendants' "expected performance." Wyle,

. That is, AHN's negligent misrepresentation claims,

Counts IV and XI, are "based only on breach of . . . contractual

dut[ies],"

and so, are barred by the economic loss

doctrine.6

AHN's fraud claim (Count VI) also does not survive, but for

a different reason. AHN fails to plausibly allege that Antech

5 See Evans v. Taco Bell Corp.,

, at *12 and n.19 (D.N.H. Sept. 23, 2005) (Diclerico, J.) ("[G]eneral claims to superiority" are "'puffery'" and "do not amount to actionable representations."); Cook, Perkiss & Liehe, Inc. v. Northern California Collection Serv., Inc.,

, 246 (9th Cir. 1990) (finding no false representation of fact in violation of the Lanham Act where defendant's statement that it could provide the same quality of service as competitors at a lower price was a non-actionable "general assertion[...] of superiority rather than [a] factual misrepresentation").

6 The court necessarily rejects AHN's argument to the effect that its general allegation that each defendant "should have known that its representations were false" suffices as an allegation that defendants had no intention of fulfilling their contractual obligations. See Tarmann v. State Farm M u t . Auto Ins. C o .,

(Cal. App. 6 Dist. 1991) (The "specific intent" required to show that the "promisor did not intend to perform at the time he or she made the promise," "precludes pleading a false promise claim as a negligent misrepresentation.").

9 had the fraudulent intent required to turn a mere promise into an

actionable statement of fact.

In its fraud claim, AHN alleges that Antech intentionally

made false statements of fact on which AHN reasonably relied to

its detriment. The alleged false "facts" on which AHN is said to

have reasonably relied are identified as statements by Antech (1)

that it was a "leading animal care company"; (2) that it would

offer "better pricing than [its] competitors with equivalent or

superior service and quality"; (3) that it would "provide AHN

with . . . X-ray equipment worth $95,000 . . . $100,000 in cash,

and . . . 'capitation billing'"; and (4) that "it would fulfill

and perform all of the terms of the Service Agreements." Amended

Complaint, Count VI, pars. 128-131, document no. 17.

Of course, Antech's alleged "puffery" about its superior

pricing and leading position in the industry are not actionable.

What is left are mere promises. Under both New Hampshire and

California law, "'a promise is not a statement of fact.'" See

Yorgo Foods, Inc. v. Orics Indus., In c .

, *12

(D.N.H. Sept. 29, 2011) (quoting Hvdraform Prods. Corp. v. Am.

Steel & Aluminum C o r p .,

(1985)); Tarmann,

. Nevertheless, AHN's fraud claim could

avoid dismissal by plausibly alleging that Antech "'at the time

10 it [made its promises], . . . had no intention to fulfill'" them.

Yorgo Foods,

, at *12, quoting Thompson v. H.W.G.

Group,

(1995) ("[A] promise can imply a

statement of material fact about the promisor's intention and

capacity to honor the promise.") (quotation omitted); Tarmann.

-159 & n.2 (promises made with "actual

contemporaneous intent not to perform" are misrepresentations of

fact actionable as "actual fraud").

Here, the amended complaint alleges, at least generally,

that Antech had such fraudulent intent at the time it promised to

provide money, equipment, services, and support to AHN.

Specifically, it alleges "on information and belief" that Antech

made those promises "with knowledge of their falsity." Amended

Complaint, document no. 17, Count VI, par. 132. Accepting that

allegation as an assertion - albeit a general one - that Antech

did not intend to fulfill its promises when they were made, still

it falls short.

Although, in a claim for fraud, a defendant's knowledge or

state of mind may be "alleged generally," Fed. R. Civ. P. 9(b),

the general allegation of fraudulent intent here is directly

contradicted by specific factual allegations in the complaint.

See Carrol v. Xerox Corp.,

(1st Cir. 2002)

11 (complaint failed to state claim for fraud and misrepresentation

where general allegation that plaintiff reasonably relied on

misrepresentations was contradicted by specific factual

allegations); see also Libby v. Merril.

, at *4

(D. Me. July 29, 2003) ("bald assertion" that defendant acted

pursuant to "policy or regulation" not accepted as true where it

was "undermined" by other allegations).

With regard to Antech's promise to provide equipment, the

amended complaint states that " [o]n or after" the parties

executed the Equipment Service Agreement, "Antech provided AHN

with the STI Equipment." Amended Complaint, par. 31, document

no. 17. The complaint further alleges that "AHN received" money

from Antech in the form of a $125,000 loan. .Id. at par. 60.

With regard to Antech's promise to provide laboratory services,

the amended complaint asserts that Antech provided such services,

but alleges that, starting sometime in 2009, "numerous laboratory

test results" were "incorrect." .Id. at par. 50. With regard to

Antech's promise to provide continuing support for the equipment

and software, the amended complaint alleges that Antech's

defaults did not begin until February 2011, two and one-half

years into the six-year contractual period. .Id. at par. 34.

12 The picture painted by the specific allegations is one of

Antech undertaking to perform its contractual obligations, but

failing, as the performance period progressed, to fulfill its

obligations, to AHN's economic detriment. Absent more specific

and pertinent factual allegations, the amended complaint does not

adequately allege that Antech had no intention of keeping its

contractual promises at the time they were first made.

AHN's conclusory allegation of fraudulent intent is also not

saved by its specific allegation that Antech's conduct was part

of a "corporate pattern and practice" of wrongful conduct - as

evidenced by similar lawsuits filed in 2011 involving Antech and

other animal hospitals. See Amended Complaint, Count VI, par.

132, document no. 17. An adequate inference of fraudulent intent

does not arise from the fact that defendants failed to fulfill

virtually identical contractual obligations owed to other

similarly-situated customers.

II. CPA Claim

AHN alleges in Counts V and XII that defendants committed

unfair and deceptive trade practices in violation of N.H. Rev.

Stat. Ann. ("RSA") 358-A. It says defendants' deceptive

practices included "providing an X-ray System that became

obsolete"; "providing a laboratory that frequently produced

13 erroneous results and/or provided poor service"; "non­

responsiveness" to problems relating to the "obsolete X-ray

System" and to "the erroneous lab results." Amended Complaint,

Count V, par. 122; Count XII, par. 161.

New Hampshire's Consumer Protection Act makes it "unlawful

for any person to use any unfair method of competition or any

unfair or deceptive act or practice in the conduct of any trade

or commerce within this state." RSA 358-A:2. Unfair or

deceptive acts include " [r]epresenting that goods or services

have . . . uses, benefits, or quantities that they do not have,"

and " [r]epresenting that goods or services are of a particular

standard, quality, or grade, ... if they are of another." RSA

358-A:2, V, VII. The Act also reaches any other unfair or

deceptive practice that "attaints] a level of rascality that

would raise an eyebrow of someone inured to the rough and tumble

of the world of commerce." Barrows v. Boles,

,

(1996) (quotation omitted). See also Tagliente v.

Himmer,

(1st Cir. 1991) (applying "rascality"

test).

Defendants argue that AHN has not alleged that they engaged

in any conduct specified in the Act or rising to the requisite

level of "rascality." AHN responds that it has plausibly alleged

14 that defendants falsely represented that their goods and services

had "uses, benefits, or quantities" which they did not have, or

that the goods and services met "a particular standard, quality,

or grade" which they did not m e e t . AHN further contends that

defendants engaged in "unfair, unethical, and oppressive

conduct."

To state a claim under the Act for misrepresentations

relating to the quality of a good or service, a plaintiff must

allege that defendant misrepresented a "particular standard or

[level of] quality." Private Jet Serv. Group, Inc. v. Sky King,

Inc..

, at *5 (D.N.H. Oct. 4, 2206) (DiClerico,

J.) (defendant's promises to "keep its aircraft operative and

airworthy" and to provide "high quality" services and equipment

were "too vague" to support a claim for misrepresentation under

RSA 358-A:2, VII) (emphasis added). Here, AHN has not alleged

that defendants made anything more than vague or general puffery-

type representations with respect to the quality of their goods

and services.

AHN has also not alleged any conduct that meets the

"rascality" standard. Both parties are business entities who

negotiated an arms-length contractual relationship. Although the

Act does apply to business-to-business transactions, see Mountain

15 Platform Tennis, Inc. V. Sherwinn-Williams C o . ,

, 497

(1st Cir. 1994), it is "especially difficult" to show rascality

in such circumstances. Knapp Shoes, Inc. v. Svlvania Shoe Mfg.

C o r p ..

(1st Cir. 1995) (applying rascality

standard under the Massachusetts consumer protection la w ) . See

also Wentworth-Douglass Hosp. v. Young & Nov i s ,

,

at *4 (D.N.H. March 30, 2012) ("[W]hat is 'rascality' in a

transaction between a seller and an ultimate consumer may be

nothing more than 'rough and tumble' where two businesses are

involved."). In the "rough and tumble" business world, disputes

over broken promises ordinarily will not rise to a level

sufficient to support a claim under the Act. See Yorgo Foods,

, at *13.

That is so here, at least as the facts have been pled. As

discussed, the alleged wrongful conduct relates entirely to

defendants' failures to fulfill their contractual obligations.

No additional facts are alleged that might suggest a degree of

rascality. The fact that defendants are involved in other,

similar litigation, may suggest a general inability or

unwillingness to perform their contractual obligations, but does

not suggest why, and, of course, plaintiff has presumably pled

all facts it deemed relevant to this case in its amended

complaint.

16 Accordingly, defendants' motion for judgment on the

pleadings as to AHN's claims under New Hampshire's Consumer

Protection Act, Counts V and XII, is granted.

Ill. Unjust Enrichment

Defendants' correctly urge dismissal of AHN's claims for

unjust enrichment, Counts VII and XIII, on grounds that recovery

under that equitable theory is not available when the parties'

relationship is governed by a valid contract. See Yorgo Foods,

at *12 ("A cause of action for unjust enrichment

does not lie when a valid unrescinded contract governs the rights

of the parties."). But AHN is equally correct in arguing that it

may pursue a claim for unjust enrichment, as an alternative

theory of liability, in case the court ultimately finds that no

enforceable contract existed between the parties - an issue

potentially raised by defendants' denial of AHN's contractual

allegations. See Answer to Amended Complaint, document no. 25,

pars. 14-22 (denying language quoted verbatim from the

Agreements).

Defendants' motion for judgment on the pleadings as to

Counts VII and XIII is, therefore, denied.

17 Conclusion

For these reasons, defendants' motion for judgment on the

pleadings (document no. 2j7) is granted with regard to Counts III,

IV, V, VI, X, XI, and XII, and denied with regard to Counts VII

and X I I I .

SO ORDERED.

Streven J./McAuliffe United States District Judge

May 17, 2012

cc: Julie B. Brennan, Esq. Adam J. Chandler, Esq. Robert M. Fojo, Esq. Brian H. Lamkin, Esq.

18