Ellis v. La.–Pac. Corp.

• Decision Date: 02 November 2012
• Docket Number: No. 11–2319.,11–2319.
• Citation: 699 F.3d 778
• Parties: Bianca ELLIS, individually and on behalf of all others similarly situated; Mark Sroka, individually and on behalf of all others similarly situated; Jaqueline Sroka, individually and on behalf of all others similarly situated, Plaintiffs–Appellants, v. LOUISIANA–PACIFIC CORPORATION, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

699 F.3d 778

Bianca ELLIS, individually and on behalf of all others similarly situated; Mark Sroka, individually and on behalf of all others similarly situated; Jaqueline Sroka, individually and on behalf of all others similarly situated, Plaintiffs–Appellants,

v.LOUISIANA–PACIFIC CORPORATION, Defendant–Appellee.

No. 11–2319.

United States Court of Appeals,Fourth Circuit.

Argued: Sept. 19, 2012.

Decided: Nov. 2, 2012.

ARGUED:Gary Edward Mason, Whitfield Bryson & Mason LLP, Washington, D.C., for Appellants. Richard Thell Boyette, Cranfill, Sumner & Hartzog, LLP, Raleigh, North Carolina, for Appellee. ON BRIEF:Daniel K. Bryson, Scott C. Harris, Whitfield Bryson & Mason LLP, Raleigh, North Carolina; Nicholas A. Migliaccio, Whitfield Bryson & Mason LLP, Washington, D.C.; Joel R. Rhine, Rhine Law Firm, PC, Wilmington, North Carolina; Auley M. Crouch, III, Christopher K. Behm, Block Crouch Keeter Behm & Sayed, LLP, Wilmington, North Carolina; Charles A. Schneider, Martha B. Schneider, Schneider & Schneider, Washington, D.C., for Appellants. John Parker Sweeney, Womble Carlyle Sandridge & Rice LLP, Baltimore, Maryland; James E. Weatherholtz, Womble Carlyle Sandridge & Rice LLP, Charleston, South Carolina; Meghan N. Knight, Cranfill, Sumner & Hartzog, LLP, Raleigh, North Carolina; Scott Burnett Smith, J. Thomas Richie, Bradley Arant Boult Cummings LLP, Huntsville, Alabama, for Appellee.

Before WILKINSON and THACKER, Circuit Judges, and MICHAEL F. URBANSKI, United States District Judge for the Western District of Virginia, sitting by designation.

Affirmed by published opinion. Judge THACKER wrote the opinion, in which Judge WILKINSON and Judge URBANSKI joined.

OPINION

THACKER, Circuit Judge:

Bianca Ellis, Mark Sroka, and Jaqueline Sroka (collectively, the “Appellants”) appeal the district court's order dismissing their putative class action complaint. They claim that Louisiana–Pacific Corp. (“LP” or the “Appellee”) negligently designed and manufactured Trimboard, a composite building product designed and marketed for use as exterior trim around windows and doors, and violated the provisions of the North Carolina Unfair and Deceptive Trade Practices Act (the “UDTPA”). Appellants also asked the district court for a declaratory judgment that Trimboard is defective, prematurely deteriorates, and that its warranty is unconscionable. The district court dismissed the negligence and UDTPA claims pursuant to North Carolina's economic loss rule, and it dismissed the declaratory judgment claim because Appellants are pursuing a breach of warranty claim in a separate class action suit. For the reasons that follow, we affirm.

I.

A.

On April 18, 2011, Appellants filed this putative class action lawsuit in the WesternDistrict of North Carolina based on alleged latent and patent defects in Trimboard. Appellants never directly purchased Trimboard themselves but, rather, bought homes in which Trimboard had already been installed. Ellis's house was completed in 2005, and the Srokas' house was completed in 2006. Ellis discovered problems with Trim-board on her house in 2010, and the Srokas discovered problems in 2009. They allege that the Trimboard on their houses is either “failing” or “defective but has not yet manifested signs of failure.” Compl. ¶ 25.¹

The complaint contains three counts: (1) a claim for negligent design and manufacture (the “negligence claim”); (2) an unfair or deceptive trade practices claim under N.C. Gen.Stat. § 75–1.1, et seq. (the “UDTPA claim”); and (3) a declaratory relief claim concerning Trimboard's alleged latent defects and its warranty (the “declaratory judgment claim”). Specifically, the complaint states as follows:

• LP “failed to provide adequate instructions for the installation of the Trimboard for exterior use ... [including] fail[ing] to provide adequate instructions as to the need to seal and to prime the site-cut ends of Trimboard”;

• LP's “installation instructions are misleading and in some cases contrary to advisable construction practices, specifically as they relate to flashing and caulking”;

• Class members' builders and subcontractors “utilized and followed the installation instructions provided by [LP] for the installation of Trim-board” or, in the alternative, “LP wrongly assumed that typical construction site workers would read, understand, and implement the complex instructions supplied”;

• LP's Trimboard is “inherently defective for exterior use and fails to perform as intended because it prematurely deteriorates, rots, swells, buckles, delaminates, absorbs water, warps, and/or bulges under normal conditions and natural, outdoor exposure; causes consequential water and structural damages; and promotes growth of mold, mildew, fungi, and insect infestation in the structures in which it is installed”; and

• LP “engaged in unfair or deceptive acts or practices in violation of [the UDTPA] when, in selling and advertising the Trimboard for exterior use, LP failed to give Plaintiffs and members of the Classes adequate warnings and notices regarding the defect in the Trimboard when used in exterior applications despite the fact that LP knew or should have known of this defect[.]”

Compl. ¶¶ 21–24, 62.

Per the complaint, LP provided an express warranty to “the owners of the residences on which Trimboard was installed and/or applied,” Compl. ¶ 15, which stated the following:

[LP] warrants to the original purchaser and to any subsequent owner of a structure on which its LP [ ] Trimboard (the Product) is installed that the Product substrate will not delaminate, check, split, crack, or chip for a period of ten years from the date of installation under normal conditions of use and exposure, provided the trim is properly stored, installed, maintained, and protected as specified in the ... Trim-board application instructions.J.A. 161 (emphasis added). However, the complaint alleges that “the consumer, in most cases, would not have been aware of the warranty because it was only included in bundles of Trimboard sent to the wholesaler or distributor and was most likely not passed on through the contractor to the consumer.” Compl. ¶ 15. Ellis was able to obtain a copy of the warranty and filed a warranty claim,² but the Srokas did not, although they do not dispute that they are covered by it.

The district court granted LP's Rule 12(b)(6) motion to dismiss as to all three counts in the complaint on November 8, 2011. In its order, the court held, first, that the negligence claim was barred by North Carolina's economic loss rule (the “ELR”); second, that the UDTPA claim was also barred by the ELR; and third, that the declaratory judgment claim should have been raised in a similar class action suit in the Eastern District of North Carolina, explained directly below. See Ellis v. Louisiana–Pacific Corp., No. 3:11–cv–191, 2011 WL 5402878 (W.D.N.C. Nov. 8, 2011). Appellants timely noted this appeal.

B.

Prior to the filing of the complaint that is subject of this appeal, in 2008, another group of plaintiffs filed a class action suit against LP, which was removed to the Eastern District of North Carolina. See Hart v. Louisiana–Pacific Corp., No. 2:08–cv–47–BO (E.D.N.C. Nov. 21, 2008). The Hart class action was ongoing at the time Appellants chose to file the instant case in the Western District of North Carolina.³ The Hart complaint alleges that the Trimboard deteriorated or failed too early, causing property damage and destruction in their homes. It also alleges that LP “held itself out as knowledgeable in the design and manufacture of exterior building products and represented that Trimboard was a high quality product that was superior to wood for use as exterior trim [but] that Trimboard is actually defective in design and manufacture[.]” J.A. 188. Finally, the Hart complaint alleges that the warranty is void as unconscionable for many reasons, including that “installation instructions were defective so that the installers would necessarily have to deviate from [them], thereby voiding the warranty.” Id. at 189. The Hart complaint asserts only a breach of express warranty claim because North Carolina's statute of repose barred any tort claims that the class plaintiffs could have asserted. Appellants concede that they are also members of the Hart class and “acknowledge that they have no express warranty claim in the present lawsuit because they are putative class members [in Hart ].” Id. at 135.

II.

This court reviews the dismissal of a complaint de novo. See Flood v. New Hanover Cnty., 125 F.3d 249, 251 (4th Cir.1997). Because this case is in federal court based on diversity jurisdiction, the law of the forum state—in this case, North Carolina—applies. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). We should determine

how the Supreme Court of [North] Carolina would rule. If th[at] [court] has spoken neither directly nor indirectly on the particular issue before us, we are called upon to predict how that court would rule if presented with the issue. In making that prediction, we may consider lower court opinions in [North] Carolina, the teachings of treatises, and the practices in other states.

Twin City Fire Ins. Co. v. Ben Arnold–Sunbelt Beverage Co. of S.C., 433 F.3d 365, 369 (4th Cir.2005) (internal quotation marks and citations omitted). ⁴

III.

A.

Appellants first challenge the district court's decision to dismiss their negligence claim as barred by North Carolina's ELR. We hold that this claim is barred by the ELR, and thus affirm.

1.

The ELR provides, “[o]rdinarily, a breach of contract does not give rise to a tort action by the promisee against the promisor.” N.C. State Ports Auth. v. Lloyd A. Fry Roofing Co., 294 N.C. 73, 240 S.E.2d 345, 350 (1978). Thus, the rule “prohibits the purchaser of a defective product from bringing a negligence action against the manufacturer or seller of that product to recover purely economic losses sustained as a result of that...