Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-01947/USCOURTS-casd-3_13-cv-01947-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Contract Dispute

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

THE SHERWIN-WILLIAMS COMPANY,

f/k/a SHERWIN-WILLIAMS

AUTOMOTIVE FINISHES CORP.,

Plaintiff/Counter-Defendant,

CASE NO. 13-CV-1947-LAB-WVG

ORDER ON MOTION TO DISMISS

DEFENDANTS’

COUNTERCLAIMS

vs.

JJT, INC., d/b/a JOHN’S COLLISION

CENTER, and JOHN TYCZKI, an

individual,

Defendant/Counter-Claimants.

Plaintiff Sherwin-Williams makes paints and coatings for cars. Defendant John’s

Collision Center is a body shop. In May, 2011, the parties entered into a supply agreement. 

John’s agreed to buy all of its paints and coatings from Sherwin-Williams until the net

amount of its purchases equaled $250,000, and in return Sherwin-Williams agreed sell its

products to John’s at a discount and to advance John’s $40,000. Defendant John Tyczki,

the owner of John’s, personally guaranteed the supply agreement. 

In early 2013, John’s stopped buying all of its paints and coatings from SherwinWilliams, and on February 28, 2013 it sent Sherwin-Williams a letter saying it would no

longer exclusively buy Sherwin-Williams products. Later, in April, 2013, John’s returned the

$40,000 advance.

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That led to this case. Sherwin-Williams filed a complaint asserting breach of contract

claims against John’s and Tyczki, and they filed counterclaims for breach of contract, breach

of implied warranties of merchantability and fitness, concealment and fraud, intentional

misrepresentation, negligent misrepresentation, breach of covenant of good faith and fair

dealing, and unjust enrichment. The crux of the counterclaims is that Sherwin-Williams’s

products were no good. John’s also takes the position that it was entitled to terminate the

supply agreement early provided it returned the $40,000 advance.

Now before the Court is Sherwin-Williams’s motion to dismiss all counterclaims but

the first, for breach of contract. As Sherwin-Williams sees it, this is a straightforward contract

dispute that John’s is complicating needlessly with counterclaims that add nothing of legal

substance.

I. Legal Standard

A 12(b)(6) motion to dismiss for failure to state a claim challenges the legal sufficiency

of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The Court must accept

all factual allegations as true and construe them in the light most favorable to John’s. 

Cedars-Sinai Med. Ctr. v. Nat’l League of Postmasters of U.S., 497 F.3d 972, 975 (9th Cir.

2007). To defeat Sherwin-Williams’s motion to dismiss, the factual allegations of John’s

needn’t be detailed, but they must be sufficient to “raise a right to relief above the speculative

level . . . .” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). That is, “some threshold

of plausibility must be crossed at the outset” before a case can go forward. Id. at 558

(internal quotations omitted). A claim has “facial plausibility when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the defendant is liable for

the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility

standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility

that a defendant has acted unlawfully.” Id. 

While the Court must draw all reasonable inferences in a way that is favorable to

John’s, it need not “necessarily assume the truth of legal conclusions merely because they

are cast in the form of factual allegations.” Warren v. Fox Family Worldwide, Inc., 328 F.3d

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1136, 1139 (9th Cir. 2003) (internal quotations omitted). In fact, the Court does not need to

accept any legal conclusions as true. Iqbal, 556 U.S. at 678. A complaint does not suffice

“if it tenders naked assertions devoid of further factual enhancement.” Id. (internal

quotations omitted). Nor does it suffice if it contains a merely formulaic recitation of the

elements of a cause of action. Twombly, 550 U.S. at 555.

II. Discussion

The Court will address the counterclaims in the order that John’s asserts them.

A. Breach of Implied Warranties of Merchantability and Fitness

Sherwin-Williams argues that the claims for breach of implied warranties must fail

because these warranties were explicitly waived in the supply agreement. This is what the

supply agreement says:

WARRANTIES. Customer will be entitled to participate in any

product warranty program offered by Sherwin-Williams for which

Customer qualifies. EXCEPT AS PROVIDED IN AWARRANTY

PROGRAM REFERRED TO IN THE PRECEDING SENTENCE

IN WHICH CUSTOMER IS PARTICIPATING, SHERWINWILLIAMS DISCLAIMS ALL WARRANTIES OF ANY KIND,

EXPRESS OR IMPLIED, ORAL OR WRITTEN, INCLUDING

BUT NOT LIMITED TO THE IMPLIED WARRANTY OF

MERCHANTABILITY AND THE IMPLIED WARRANTY OF

FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT

SHALL SHERWIN-WILLIAMS BE LIABLE FOR SPECIAL,

INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES.

Regardless of whether the Court applies Ohio or California law here, that’s a valid waiver of

warranties substantively and stylistically, and John’s doesn’t appear to argue otherwise. See

Ohio Rev. Code Ann. § 1302.29(B); Cal. Com. Code § 2316. It argues, instead, that the first

sentence of the provision somehow saves its claim. All the first sentence says, however, is

that John’s is entitled to participate in any warranty program offered by Sherwin-Williams for

which it qualifies. It doesn’t, by itself, actually effectuate any warranties, and John’s doesn’t

allege that it is a participant in any warranty program that preserves the warranties of

merchantability and fitness. 

John’s does have a fall-back argument, though: “The warranty waiver provision of the

Agreement is unconscionable under California law.” (FACC ¶¶ 29.) The Court disagrees. 

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First, the supply agreement is clear that it “shall be governed by the internal laws of the State

of Ohio.” John’s tries to get past this by arguing that California has a materially greater

interest in this case than Ohio does, but that’s only decisive if, in the final analysis, Ohio and

California law are in conflict. See Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459 , 466

(1992); Facebook, Inc. v. Profile Tech. Ltd., 2014 WL 492369 at *2 (N.D. Cal. Feb. 5, 2014). 

John’s doesn’t argue that they are. The Court simply sees no reason not to look to Ohio law

here. “In determining the enforceability of a choice of law provision in a diversity action, a

federal court applies the choice of law rules of the forum state, in this case California . . . .

[I]f the parties state their intention in an express choice-of-law clause, California courts

ordinarily will enforce the parties’ stated intention.” Hatfield v. Halifax PLC, 564 F.3d 1177,

1182 (9th Cir. 2009).

Second, even under John’s own Ohio authorities the waiver is not unconscionable. 

Pruitt v. Strong Style Fitness instructs that “[i]n order to rescind an unconscionable contract,

the party seeking rescission must show both procedural and substantive unconscionability,”

and it further instructs that there’s no procedural unconscionability where a plaintiff is

educated and the relevant contractual provision is clear. 2011 WL 4842485 at *4 (Ohio Ct.

App. Oct. 13, 2011). This case is no different. John’s is an experienced business whose

owner had a prior relationship with Sherwin-Williams before signing the supply agreement,

and the supply agreement is just two pages (9 paragraphs) long with the waiver provision

appearing in bold and capital letters. The claim that “Sherwin-Williams drafted the printed

form Agreement and exercised far superior bargaining power” is completely conclusory and

misaligned with the plain facts of this case. Even assuming the Court were to find

procedural unconscionability here, it would not find its substantive counterpart. The one

case on which John’s relies, Weco Supply Co., Inc. v. Sherwin-Williams, involved a limitation

of remedies clause that disclaimed an entire class of damages “arising from any cause

whatsoever” and that, as the court explained, “gives Weco no recourse for any wrongful

conduct act against it, related to the . . . agreement or not, and whether intentional or not

2012 WL 1910078 at *1, 14 (E.D. Cal. May 25, 2012). That is not this case. Indeed,

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Sherwin-Williams concedes that John’s may be able to claim direct damages, repair and

replacement, and other UCC remedies under a breach of contract theory.

John’s knowingly signed a supply agreement in which it clearly waived claims for

breach of the implied warranty of merchantability and the implied warranty of fitness for a

particular purpose. The Court does not find these waivers embedded in the supply

agreement to be unconscionable. The breach of implied warranties claims are therefore

DISMISSED WITH PREJUDICE.

B. Concealment/Fraud

John’s accuses Sherwin-Williams of concealment and fraud for “intentionally fail[ing]

to disclose the poor quality and defects of Sherwin-Williams’s paint and related products.” 

(FACC ¶ 36.) “As a direct and proximate result of Sherwin-Williams’s deceit and

concealment,” John’s alleges, it was “induced to and purchased Sherwin-Williams’s defective

paint and related products.” (FACC ¶ 38.) John’s accuses Sherwin-Williams of acting with

“intent to deceive.” (FACC ¶ 36.) It claims that it was deceived to both enter into the supply

agreement and to refrain from terminating it. (FACC ¶ 37.) There are a number of

problems, though, with John’s concealment and fraud claim.

The first is that John’s fails to connect allegations of concealment and fraud to any

particular statements by Sherwin-Williams, leaving it to Sherwin-Williams (and the Court) to

flip back and forth in its counterclaims to piece the claim together. John’s does identify eight 

representations and misrepresentations in its counterclaims, but it doesn’t single out any in

its specific concealment and fraud claim to draw a clear connection. (FACC ¶ 11(a)–(h).) 

This is just a basic pleading problem. 

The second problem is that the factual bases for the counterclaim—the

representations and misrepresentations the Court just alluded to—are copied verbatim from

counterclaims asserted in the related case involving a different body shop owned by Tyczki,

and in that case the supply agreement was signed in September, 2008. As a result, the

claim asserted in this case doesn’t map so neatly onto the facts alleged. For example,

John’s alleges that it complained to Sherwin-Williams about its products “[f]rom September

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2008 through February 2013,” which would suggest that after Tyczki used Sherwin-Williams

products for over two years in another body shop, and wasn’t entirely pleased with them, he

signed another supply agreement for John’s. (FACC ¶ 11(g).) That certainly cuts against

the claim that John’s was deceived into signing a supply agreement; Tyczki was presumably

well aware of the perceived problems with Sherwin-Williams products when he signed the

supply agreement. In fairness, John’s rebuttal might be that, as it alleges, it was deceived

into not terminating the agreement just as much as it was deceived into signing the supply

agreement in the first place. (See FACC ¶¶ 11, 37.) But even then, it’s hard to accept that

John’s was defrauded into continuing the supply agreement after its owner was a dissatisfied

customer of Sherwin-Williams for over two years.

Third, the Court agrees with Sherwin-Williams that the concealment and fraud claim

lacks adequate particularity. The parties don’t disagree that Federal Rule of Civil Procedure

9(b) applies to John’s concealment and fraud claim. Under that Rule, “[a]verments of fraud

must be accompanied by ‘the who, what, when, where, and how’ of the misconduct alleged.” 

Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v.

Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). “The plaintiff must set forth what is false or

misleading about a statement, and why it is false.” In re GlenFed, Inc. Sec. Litig., 42 F.3d

1541, 1548 (9th Cir. 1994). John’s tries to soften this standard by opportunistically quoting

a case from Ohio in which the court said “Rule 9(b) may be relaxed when there has been a

lack of discovery and the information needed for a plaintiff to achieve particularity is held

exclusively by the opposing party.” In re Porsche Cars North America, Inc., 880 F.Supp.2d

801, 815 (S.D. Ohio 2012). But that has little to no traction in a case like this where a

plaintiff’s fraud allegations are based entirely on statements made to that plaintiff. It

shouldn’t be hard for John’s to allege who from Sherwin-Williams said what, and when and

where it was said. 

And yet many of its allegations come up short. John’s alleges, for example, that “[i]n

September 2008, Kurt Hammond (Sherwin-Williams) and Jose Garcia (Sherwin-Williams)

met with Counter-Claimant Tyczki at the Brigantine Restaurant, and made repeated

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misrepresentations in order to induce Counter-Claimants to refrain from terminating the

subject Agreement . . . .” (FACC ¶ 11(c).) That allegation supplies the when, the who, and

the where, but not the what: “repeated misrepresentations” doesn’t satisfy the particularly

requirement of Rule 9(b). For another example, John’s alleges that “[f]rom

August/September 2008 through 2012, Jose Garcia (Sherwin-Williams) made numerous and

repeated misrepresentations concerning the quality of Sherwin-Williams products and

service.” (FACC ¶ 11(b).) This allegation supplies the who, but the when, the where, and

the what (“repeated misrepresentations concerning the quality of . . . products”) are either

absent or too vague. Likewise, the allegation that “Jack Lowry (Sherwin-Williams) initially

made representations concerning the claimed high quality of Sherwin-Williams products

during negotiation of the Agreement” is clear only as to the who; the when is vague, the

where is vague, and the what is vague. (FACC ¶ 11(e).)

Fourth, for the purposes of a fraud claim that is compliant with Rule 9(b), there is a

difference between false representations and non-actionable puffery, and the Court agrees

with Sherwin-Williams that at least some of John’s allegations fall on the puffery end of the

spectrum. See Elias v. Hewlett-Packard Co., 903 F.Supp.2d 843, 858 (N.D. Cal. 2012). 

“Generalized, vague, and unspecified assertions constitute ‘mere puffery’ upon which a

reasonable consumer could not rely, and hence are not actionable.” Anunziato v.

eMachines, Inc., 402 F.Supp.2d 1133, 1139 (C.D. Cal. 2005). By contrast, “misdescriptions

of specific or absolute characteristics of a product [generally] are actionable.” Cook, Perkiss

and Liehe, Inc. v. Northern California Collection Serv. Inc., 911 F.2d 242, 246 (9th Cir. 1990). 

John’s alleges that Sherwin-Williams “made numerous misrepresentations that SherwinWilliams products and services were the best in the industry, that they were a higher quality

than Spies Hecker/Dupont, that they had perfect color match, and that the colors would not

fade or dye-back, among other things . . . .” (FACC ¶ 11(a).) The Court would find that the

words “best in the industry,” “higher quality,” and “perfect color match” are all non-actionable

puffery; the representations about fading and dye-back come closer, the Court concedes,

to misdescriptions of a specific characteristic. See Anunziato, 402 F.Supp.2d at 1133. 

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Fifth, and finally, there’s a clear difference between committing fraud to sell a product

on the one hand, and, on the other hand, simply selling a product that fails to meet a

customer’s expectations or standards. John’s allegations are more of the latter variety. 

Fraud requires: (1) a misrepresentation (such as a false representation or concealment); (2)

knowledge of falsity; (3) intent to defraud or induce reliance; (4) justifiable reliance; and (5)

resulting damage. As the Court reads the allegations, they come up short at least on (2) and

(3)—knowledge of falsity with an intent to defraud. Of the eight “representations and

misrepresentations” John’s identifies, most don’t allege that Sherwin-Williams knew its

claims were false and was just trying to dupe John’s into doing business with it. (See FACC

¶¶ 11(a), 11(b), 11(c), 11(f), 11(h).) The only allegation potentially giving rise to the

inference that Sherwin-Williams knew it was misrepresenting its products to John’s is that

“Mr. Lowry admitted to Counter-Claimant Tyczki that there were serious and numerous

problems concerning the poor quality of the Sherwin-Williams products, and that those

products could not be corrected, and that the high-quality of the services provided by JB

Collision were not compatible with the substandard quality of the Sherwin-Williams products

and services.” (FACC ¶ 11(e).) But even then, this statement doesn’t necessarily mean that

Sherwin-Williams knew it was misleading John’s all along. It can also be read to suggest

that after an extended back-and-forth between the parties in which John’s communicated

its discontent with Sherwin-Williams’s products and Sherwin-Williams tried to answer its

complaints, Sherwin-Williams gave in and admitted that John’s might never be satisfied with

its products. That isn’t necessarily fraud; it could be the result of two companies that simply

have different quality standards in mind. 

In the ordinary case, the Court would invite John’s to cure these problems by

amending his concealment and fraud claim. Leave to amend “shall be freely given when

justice so requires,” Fed. R. Civ. P. 15(a), and “this policy is to be applied with extreme

liberality.” Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990)

This would apply, also, to John’s intentional and negligent misrepresentation claims. See

Gross v. Metropolitan Life Ins. Co., N.Y., 2013 WL 1628138 at *3 (S.D. Cal. Apr. 12, 2013)

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(citing Neilson v. Union Bank of Cal, 290 F.Supp.2d 1101, 1141 (C.D. Cal. 2003)); but see

Petersen v. Allstate Indem. Co., 281 F.R.D. 413, 416–18 (C.D. Cal. 2012) (“Thus, the Court

holds that the California tort of negligent misrepresentation need not satisfy the heightened

pleading standard of Rule 9(b).”). But there is an additional argument Sherwin-Williams

makes that threatens all of John’s tort claims irrespective of whether it can tighten them up.

That argument is that its remedies lie entirely in contract, and that the “economic loss rule”

forbids the layering of tort damages on top.

The economic loss rule “is that no tort cause of action will lie where the breach of duty

is nothing more than a violation of a promise which undermines the expectations of the

parties to an agreement.” Oracle USA, Inc. v. XL Global Servs., Inc., 2009 WL 2084154 at

*4 (N.D. Cal. July 13, 2009). “Quite simply, the economic loss rule prevents the law of 1

contract and the law of tort from dissolving into one another.” Robinson Helicopter Co. v.

Dana Corp., 34 Cal.4th 979, 988 (Cal. 2004). It “requires a purchaser to recover in contract

for purely economic loss due to disappointed expectations, unless he can demonstrate harm

above and beyond a broken contractual promise.” Id. While it’s particularly relevant when

a party alleges that some commercial relationship negligently or inadvertently went awry, it

“can still bar fraud and other intentional tort liability if those claims do not arise independently

of the breach of contract claims.” WeBoost Media S.R.L. v. LookSmart Ltd., 2014 WL

824297 at *4 (N.D. Cal. Feb. 28, 2014). Indeed, the rule “hinges on a distinction drawn

between transactions involving the sale of goods for commercial purposes where economic

expectations are protected by commercial and contract law, and those involving the sale of

defective products to individual consumers who are injured in a manner which has

traditionally been remedied by resort to the law of torts.” Robinson Helicopter, 34 Cal.4th

at 988. 

John’s claims for concealment and fraud, intentional misrepresentation, and negligent

misrepresentation all seek the same thing:

The Court transitions to California law with respect to the economic loss rule 1

because the claims John’s asserts for fraud and misrepresentation arise under California

law—not under Ohio law. There is no disagreement between the parties on this point. 

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As a direct and proximate result of Sherwin-Williams’s [conduct],

Counter-Claimants were induced to and purchased SherwinWilliams’s defective paint and related products. In purchasing

and using Sherwin-Williams’s defective paint and related

products, Counter-Claimants have suffered damages including,

without limitation, the costs of repeat repair or paint jobs on

Counter-Claimants’ customers’ vehicles made necessary by

Sherwin-Williams’s defective products, the lost profits caused by

lost business due to loss of customers caused by SherwinWilliams’s defective products, the value of the damage to

Counter-Claimants’ professional community and amongst its

customers, and the amount of attorneys’ fees and costs incurred

in defendingagainst Sherwin-Williams’s meritless claims against

Counter-Claimants, all in amounts to be proven at trial. (FACC

¶¶ 38, 45, 52.)

Sherwin-Williams takes the position, relying on Robinson Helicopter, that these are

essentially contract damages for economic loss that, as such, can’t give rise to a claim in

tort. That’s a fair argument, but it relies on too fast a reading of the case. As the Court

reads Robinson Helicopter, the question is less whether the damages for contract and tort

claims necessarily overlap, and more whether the conduct giving rise to the separate claims

is distinct. The economic loss rule doesn’t bar tort claims for fraud or intentional

misrepresentation if the allegedly tortious conduct is independent of the conduct constituting

a breach. Robinson Helicopter, 34 Cal.4th at 989. See also WeBoost Media, 2014 WL

824297 at *5 (“Under the rule, parties alleging fraud or deceit in connection with a contract

must establish tortious conduct independent of a breach of the contract—not just violation

of a promise that undermines a party’s expectations under the contract.”). One example of

this is “where the contract was fraudulently induced,” in which case the injured party can

assert both contract and tort claims. Id. at 989–90. See also Results ByIQ LLC v.

Netcapital.com LLC, 2013 WL 4835838 at *6 (N.D. Cal. Sept. 11, 2013) (“In this case, the

jury found that Defendants had fraudulent induced Plaintiff to enter a contract via a false

promise—that is enough to avoid application of the economic loss rule.”).

While the Court has already said that John’s fraud and misrepresentation claims

aren’t very well pled, this seems to be where it wants to go. It wants to claim that SherwinWilliams made a series of misrepresentations about the quality of its products that induced

John’s to both enter into a supply agreement and, later on, to not terminate that supply

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agreement. (FACC ¶¶ 11, 37, 44, 51.) So, just as John’s may be able to tighten up its fraud

and misrepresentation claims and plead them with more precision to satisfy Rule 9, the

Court finds it may also be able to plead them in a way that avoids application of the

economic loss rule. These claims are therefore DISMISSED WITHOUT PREJUDICE.

C. Covenant of Good Faith and Fair Dealing

John’s sixth counterclaim alleges a breach of the covenant of good faith and fair

dealing. But at least under Ohio law, which the Court has already determined governs the

contract-based claims in this case, a straightforward breach of contract claim subsumes the

covenant-based claim. Gilchrist v. Saxon Mortgage Servs., 2013 WL 1091112 at *6 (Ohio

Ct. App. Mar. 14, 2013); MERS v. Mosley, 2010 WL 2541245 at *11 (Ohio Ct. App. June 24,

2010); Tabor Revocable Trust v. WDR Properties, Inc., 2010 WL 1840738 at *6 (May 7,

2010) (“With respect to counts two (breach of contract) and three (breach of covenant of

good faith and fair dealing) of appellant’s counterclaim, we note that the covenant of good

faith is part of a contract claim, and does not stand alone as a separate cause of action from

a breach of contract claim.”) (internal quotations and citation omitted); Ireton v. JTD Realty

Investments, LLC, 944 N.E.2d 1238, 1255 (Ohio Ct. Common Pleas 2010)

John’s rebuttal to this is a California case, Koehrer v. Superior Court, holding that a

breach of contract and bad faith claim can co-exist, at least in the employment context where

the plaintiff alleges an unlawful firing. 181 Cal.App.3d at 1155, 1168–72 (Cal. Ct. App.

1986). This is because the legal obligations underlying the respective claims have different

sources; the obligations underlying a contract claim come from the agreed-upon terms of the

contract, while the obligations underlying a bad faith claim derive from “the normative values

of society.” Id. at 1169. 

Even assuming the Court looks to Koehler rather than the Ohio cases here, John’s

claim is pled in too conclusory a manner. It alleges that Sherwin-Williams “unfairly interfered

with JB Collision’s right to receive the benefit of the Agreement by making false

representations regarding the quality of Sherwin-Williams’s paint and related products to JB

Collision, and by supplying JB Collision with defective products.” (FACC ¶ 54.) These are

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in essence, however, the very same allegations behind the breach of contract claim. (See

FAC ¶¶ 22.) The damages associated with the claims are also identical. (See FACC ¶¶ 23,

55.) Even under California law, there’s no claim for breach of the covenant of good faith and

fair dealing under these circumstances. It is simply duplicative of the breach of contract

claim. See Bionghi v. Metropolitan Water Dist., 70 Cal.App.4th 1358, 1370 (Cal. Ct. App.

1999) (“Here, Abacus’s claim of breach of the implied covenant relies on the same acts, and

seeks the same damages, as its claim for breach of contract.”). The California Supreme

Court has even cast doubt over Koehler, announcing in a later case “a general rule

precluding tort recovery for noninsurance contract breach, at least in the absence of violation

of an independent duty arising from principles of tort law other than the bad faith denial of

the existence of, or liability under, the breached contract.” Freeman & Mills, Inc. v. Belcher

Oil Co., 11 Cal.4th 85, 102 (1995) (internal quotations and citation omitted). 

John’s claim for breach of the covenant of good faith and fair dealing is DISMISSED

WITH PREJUDICE.

D. Unjust Enrichment

John’s final claim is for unjust enrichment. Ordinarily, “the doctrine of unjust

enrichment cannot apply when an express contract exists.” Bickham v. Standley, 917

N.E.2d 330 at 335 (Ohio Ct. App. 2009). This is because “[u]njust enrichment is an equitable

doctrine, not based on contract law but upon quasi-contract.” Id. 

To overcome this, John’s cites a case holding that “[a] claim for unjust enrichment

may be pled in the alternative when the existence of an express contract is in dispute and

may be maintained despite the existence of an express contract where there is evidence of

fraud, bad faith, or illegality.” Cheers Sports Bar & Grill v. DirecTV, Inc., 563 F.Supp.2d 812,

819 (N.D. Ohio 2008). The Court reads this in the disjunctive. If the existence of an express

contract is up for debate, an unjust enrichment claim may be pled. But even if the existence

of an express contract isn’t up for debate, an unjust enrichment claim may be pled where

there are also allegations of fraud. Sherwin-Williams tries to argue that because the supply

/ /

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agreement isn’t in dispute John’s unjust enrichment claim has to fail. That’s only true with

respect to the first half of the Cheers holding.

Because the Court is allowing John’s to tighten up its fraud and misrepresentation

claims, it will allow the unjust enrichment claim to remain for now.

III. Conclusion

Two of John’s counterclaims are DISMISSED WITH PREJUDICE—its claim for

breach of the implied warranties of merchantability and fitness for a particular purpose, as

well as its claim for breach of the covenant of good faith and fair dealing. Its claims for fraud

and concealment, intentional misrepresentation, negligent misrepresentation, and unjust

enrichment are DISMISSED WITHOUT PREJUDICE AND WITH LEAVE TO AMEND. 

The Court notes that John’s shouldn’t be surprised by the result here. It attached to

its opposition brief similar cases in which Sherwin-Williams was the plaintiff, in an attempt

only to show that it was “on notice of defects with its products, or at least on notice of

allegations of same.” (Opp’n Br. at 2 n.1.) And yet in two of those cases the defendants

responded with counterclaims that the courts dismissed. See, e.g., Sherwin-Williams Co.

v. Novak’s Collision Center, Inc., 2013 WL 5500107 (E.D. Mo. Oct. 3, 2013) (dismissing

fraudulent and negligent misrepresentation counterclaims without prejudice under Missouri

law); Sherwin-Williams Co. v. Bolton, 2011 WL 1519135 (E.D. Mich. Apr. 20, 2011) (finding

that Ohio’s economic loss rule barred counterclaims for fraud and misrepresentation). In the

one case brought against Sherwin-Williams, it overwhelming prevailed on summary

judgment. See Weco (granting summary judgment for Sherwin-Williams on claims asserted

against it for unfair business practices, misappropriation of trade secrets, intentional

interference with prospective economic advantage, and breach of contract).

John’s second amended counterclaims must be filed within TWO WEEKS OF THE

DATE THIS ORDER IS ENTERED. This is, of course, not an imperative to file amended

counterclaims. The Court senses that Sherwin-Williams is mostly right that this is essentially

a breach of contract case, and that John’s is putting up a kind of porcupine defense by firing

back with a multitude of tort claims. If John’s doesn’t believe it can amend its claims to the

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Court’s satisfaction, it may file amended counterclaims that simply omit them and SherwinWilliams may file an answer.

IV. Motion to Consolidate

Finally, there is the question of whether to consolidate this case, Sherwin-Williams v.

John’s, 13-CV-1947, with another case, Sherwin-Williams v. JB Collision Services, 13-CV1946.

First, the Court observes that the counterclaims in JB Collision and the briefing on the

motion to dismiss them are for all intents and purposes identical to the counterclaims and

briefing in this case. For that reason, the Court’s ruling above applies equally to the pending

motion to dismiss the counterclaims in JB Collision. (See 13-CV-1946, Doc. No. 20.)

Second, the motion to consolidate filed by JB Collision in JB Collision Services is

GRANTED. All it takes is “a common question of law or fact”, Fed. R. Civ. P. 42(a), and the

two cases certainly have that even if there are subtle differences between them. The Court

notes that Sherwin-Williams seems to not object to consolidation at this time anyway. 

“Instead, Sherwin Williams submits that these matters should be consolidated for discovery

and motion practice, and the parties should reserve the issue of consolidation until after the

close of discovery.” (Case No. 13-CV-1946, Doc. No. 17.) There is no harm in consolidating

the cases now, however. Rule 42(b) allows for separate trials even where cases have been

consolidated, and even after discovery has closed and summary judgment motions loom,

the parties can still make separate arguments in those motions with respect to the two

cases. But because Sherwin-Williams is amendable to consolidation for motion practice and

discovery, which is precisely where these two cases stand, the Court will consolidate them

at this time. 

IT IS SO ORDERED.

DATED: June 9, 2014

HONORABLE LARRY ALAN BURNS

United States District Judge

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