A Brooklyn homeowner's claims against American Water Resources, over a sewer line repair that he said wasn't covered by a line protection plan he purchased from the company and paid monthly premiums for, has survived a motion to dismiss.

U.S. District Judge Noel L. Hillman

In a ruling issued Monday, U.S. District Judge Noel L. Hillman of the District of New Jersey denied AWR's motion to dismiss the complaint, filed in June 2018 by named plaintiff Joseph Rabinowitz on behalf of homeowners asserting that AWR regularly violated its contractual duties.

AWR, a water utility, is a publicly traded Delaware corporation headquartered in Voorhees.

“The Court finds that AWR takes an overly myopic view of the plaintiff's case,” Hillman wrote. “Plaintiff's claims against AWR boil down to this: Plaintiff purchased sewer and water line protection plans from AWR, and the parties' obligations are defined by the line protection plan agreements.”

Rabinowitz alleged in his complaint that he “fulfilled his obligations under the agreement by paying his premiums, but AWR failed to fulfill its obligation to provide and pay for the services covered by the agreement,” Hillman said.

In denying AWR's motion to dismiss, Hillman said Rabinowitz sufficiently pleaded his claim that the water company evaded its responsibility to fix and cover repair costs to an exterior sewer line that was under the protection plan he purchased in February 2013.

“A district court, in weighing a motion to dismiss, asks 'not whether a plaintiff will ultimately prevail but whether claimant is entitled to offer evidence to support the claim.' Twombly, 550 U.S. at 563 n.8 (quoting Scheuer v. Rhoades, 416 U.S. 232, 236 (1974),” Hillman wrote.

He added that a court in reviewing a Rule 12 motion need only consider “the facts alleged in the pleadings, the documents attached thereto as exhibits, and matters of judicial notice.”

Hillman also rejected AWR's motion for striking certain allegations in the complaint that AWR argued were not at all related to the controversy.

“For the foregoing reasons, all of plaintiff's claims and allegations survive AWR's motion to dismiss and strike,” Hillman said. “Plaintiff will now have the task, at the appropriate time, of proving his allegations and, eventually, establishing the propriety of class certification.”

The suit seeks to shed light on how far a company can go to evade its responsibilities under a protection program paid for wholly by premium-paying consumers.

About 1.4 million consumers are enrolled in the water and sewer line protection programs offered by AWR, according to the suit. Rabinowitz was one of them.

It was in February 2018 that Rabinowitz claims he contacted AWR over a sewer leak in his home. AWR has contended all along that any damage to the sewer line inside of a home was not covered under company-sponsored sewer line protection agreements.

But the leak, Rabinowitz later discovered through a private plumber he hired, extended to the exterior portion of the sewer line, which should have been protected by the protection agreements he paid into, according to his claim. He alleged that the interior and exterior portions of the sewer line were similarly rotted, cracked and damaged.

For the next month, Rabinowitz said, he repeatedly contacted AWR on covering costs of repairs to his exterior sewer line to no avail.

This, he contends, despite AWR's broad duty under the line-protection agreements to dispatch an independent contractor to a home to investigate such claims. Rabinowitz said AWR refused to do so, citing nonexistent exceptions.

When the company did finally dispatch an independent contractor to investigate his exterior sewer line, Rabinowitz said, AWR denied his claim in late March 2018 and blamed his private plumber for causing the damage.

This formed the basis for Rabinowitz's claim that AWR regularly denied covering claims for the payment of repairs without cause, and in violation of the terms and conditions of its line-protection agreements.

Hillman said Rabinowitz sufficiently pleaded: breach of contract, with AWR's breach of contractual obligations; a breach of the covenant of good faith and fair dealing, with AWR's evading investigating plaintiff's claims; and violation of the New Jersey Consumer Fraud Act and New York General Business Law.

“The gravamen of plaintiff's complaint is that based on his own experience and complaints by many other customers, plaintiff's experience not only constitutes a breach of contract, but also evidences AWR's bad faith and fraudulent consumer practices because it markets and receives payment for sewer and water line protection that it has no intention of providing,” Hillman wrote. “Even this boiled down version of the plaintiff's detailed complaint readily meets the pleading requirements for all of his alleged claims.”

In keeping certain complaint allegations by Rabinowitz intact, including one asserting that AWR purposely avoided referring to sewer line protection plans as “insurance” to avoid certain regulatory oversight, Hillman again said the allegations were relevant.

“The Court does not find that the paragraphs in plaintiff's complaint cited by AWR should be stricken,” Hillman said. “In the context those allegations are pleaded, the allegations are relevant to plaintiff's claims.”

Stephen J. Fearon Jr. at Squitieri & Fearon in New York, representing Rabinowitz, said he was pleased with the judge's ruling.

“Hardworking homeowners like Mr. Rabinowitz have faithfully paid for the water and sewer line protection programs offered by American Water Resources, but when they needed the company the most, the company made excuses and refused to repair the lines,” he said in an email. “We're grateful that the judge upheld our claims, and we are looking forward to pursuing the claims for Mr. Rabinowitz and other damaged homeowners.”

AWR is represented by Michael F. Daly of Drinker, Biddle & Reath's Florham Park office. Daly didn't return a call on Hillman's ruling. Co-counsel Daniel Elliott Brewer, also at the same firm, also didn't return a call.