Harbison v. Louisiana-Pacific Corp., 021815 FED3, 14-1863

Docket Nº:14-1863
Opinion Judge:FISHER, Circuit Judge.
Party Name:WILLIAM HARBISON, individually and on behalf of all others similarly situated, Appellant v. LOUISIANA-PACIFIC CORPORATION
Judge Panel:Before: FISHER, JORDAN and GREENAWAY, Jr., Circuit Judges.
Case Date:February 18, 2015
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

WILLIAM HARBISON, individually and on behalf of all others similarly situated, Appellant

v.

LOUISIANA-PACIFIC CORPORATION

No. 14-1863

United States Court of Appeals, Third Circuit

February 18, 2015

NOT PRECEDENTIAL

Submitted Pursuant to Third Circuit LAR 34.1(a) January 20, 2015

On Appeal from the United States District Court for the Western District of Pennsylvania (W.D. Pa. No. 2-13-cv-00814) (District Judge: Arthur J. Schwab)

Before: FISHER, JORDAN and GREENAWAY, Jr., Circuit Judges.

OPINION [*]

FISHER, Circuit Judge.

William Harbison installed TrimBoard, a non-structural trim lumber, on his house in 2003. The TrimBoard came with a ten-year warranty in which the manufacturer, Louisiana-Pacific Corp., agreed to compensate the owner for repair and replacement up to twice the original purchase price of the affected trim. In 2010, the TrimBoard failed. Harbison sued Louisiana-Pacific, claiming that Louisiana-Pacific breached the warranty and that the damages limitation was unconscionable. The District Court dismissed Harbison's unconscionability claim, denied him leave to amend his complaint, and granted summary judgment to Louisiana-Pacific on the breach of warranty claim. We will affirm.

I.

We write principally for the parties, who are familiar with the factual context and legal history of this case. Therefore, we will set forth only those facts that are necessary to our analysis.

In 2003, Harbison hired contractors and subcontractors to install trim on his garage. His contractor purchased TrimBoard, made by Louisiana-Pacific. The TrimBoard came with the following warranty:

Should the product fail within ten years of the date of installation, [the manufacturer] after investigation and verification, will replace the defective trim on the following basis: [the manufacturer] will compensate the owner for repair and replacement of the affected trim no more than twice the original purchase price of the affected trim if failure occurs within ten years.1

In 2010, Harbison discovered that the TrimBoard had begun to rot, leading to water damage to the TrimBoard and possibly other parts of his home.

Harbison made a claim to Louisiana-Pacific under the warranty. In 2011, an inspector for Louisiana-Pacific inspected the TrimBoard. Louisiana-Pacific offered Harbison $2, 780.08. Louisiana-Pacific calculated this offer by measuring the amount of TrimBoard affected, increasing that amount by twenty percent to account for material wasted during the installation, then applying the original purchase price and sales tax, for a total price of $1, 390.04 for the TrimBoard installed. Louisiana-Pacific then doubled this amount to reach its offer under the warranty. Harbison declined the offer.

In June 2013, Harbison filed a purported class-action complaint against Louisiana-Pacific. In December 2013, he filed an amended purported class-action complaint for breach of warranty and declaratory judgment. Harbison claimed that the damages limitation in the ten-year warranty was unconscionable and should be stricken and that once the limitation was stricken, Louisiana-Pacific breached the express warranty.

Louisiana-Pacific moved to dismiss the amended complaint. The District Court granted the motion in part and denied it in part. The District Court found that Harbison could claim the benefit of the express warranty under the Pennsylvania Commercial Code but that Harbison could not claim that the damages limitation was unconscionable. Accordingly, the District Court denied Harbison's claims to the extent he requested the court strike the allegedly unconscionable damages limitation from the warranty. Harbison moved for leave to file a second amended complaint to reiterate his claim that the damages limitation was unconscionable. The District Court denied the motion because the amendments would be futile. Louisiana-Pacific then moved for summary judgment on the basis that it had complied with the express warranty and its damages limitation. The District Court granted Louisiana-Pacific's motion and terminated the case. Harbison filed a timely appeal.

II.

The District Court had jurisdiction over this action under 28 U.S.C. § 1332, and we have appellate jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over the District Court's orders on the motion to dismiss and on the motion for summary judgment.2 We may affirm on any basis supported by the record.3 We review a denial of a motion for leave to amend for abuse of discretion.4

III.

A.

We begin with the District Court's decision to dismiss Harbison's unconscionability claim. A complaint states a claim upon which relief can be granted, and survives a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), when it contains a short, plain statement of facts that allows the court to draw a reasonable inference that the defendant is liable for the misconduct alleged.5

Under Pennsylvania law, a court may decline to enforce a contract clause "[i]f the court as a matter of law finds" that the clause was "unconscionable at the time it was made."6 To prove a contract clause was unconscionable, a plaintiff must show that the clause was both procedurally and substantively unconscionable.7 "In examining these two prongs, the Pennsylvania Supreme Court has indicated that it might be appropriate to use a 'sliding-scale approach' so that 'where the procedural unconscionability is very high, a lesser degree of substantive unconscionability may be required' and presumably, vice- versa."8

Procedural unconscionability exists "where there was a lack of meaningful choice in the acceptance of the challenged provision."9 Contracts of adhesion, such as the warranty included with the TrimBoard here, are generally considered to satisfy the procedural unconscionability requirement.10 However, the degree of procedural unconscionability is low because the warranty was provided to Harbison with the TrimBoard, and the warranty at issue is featured in the first paragraph and not in fine print.11

Substantive unconscionability, on the other hand, involves "contractual terms that are...

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