Benson Tower Condo. Owners Ass'n, an Or. Nonprofit Corp. v. Victaulic Co.

• Decision Date: 15 October 2014
• Docket Number: Case No. 3:13-cv-01010-SI
• Court: U.S. District Court — District of Oregon
• Parties: BENSON TOWER CONDOMINIUM OWNERS ASSOCIATION, an Oregon nonprofit corporation, Plaintiff, v. VICTAULIC COMPANY, a foreign corporation, Defendant.

BENSON TOWER CONDOMINIUM OWNERS ASSOCIATION, an Oregon nonprofit corporation, Plaintiff, v. VICTAULIC COMPANY, a foreign corporation, Defendant.

Case No. 3:13-cv-01010-SI

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

October 15, 2014

Amended

OPINION AND ORDER

Michelle K. McClure and Stuart K. Cohen, LANDYE BENNETT BLUMSTEIN, LLP, 3500 Wells Fargo Center, 1300 S.W. Fifth Avenue, Suite 3500, Portland, OR 97201; Jennifer L. Snodgrass and Richard N. Sieving, THE SIEVING LAW FIRM, P.C., 100 Howe Avenue, Suite 220N, Sacramento, CA 95825. Of Attorneys for Plaintiff.

Anne Cohen and Sharlei C. Hsu, SMITH FREED & EBERHARD, 111 S.W. Fifth Avenue, Suite 4300, Portland, OR 97204. Of Attorneys for Defendant.

Michael H. Simon, District Judge.

Plaintiff, Benson Tower Condominium Owners Association ("Plaintiff" or "Association"), brings this action against Defendant, Victaulic Company ("Defendant" or "Victaulic"), as the manufacturer of allegedly defective plumbing products installed in the Benson Tower Condominium. Before the Court is Defendant's Motion for Summary Judgment(Dkt. 89) on Plaintiff's claims for strict products liability, negligence, breach of express warranty, and fraud, and Defendant's Motion to Strike Punitive Damages (Dkt. 82). For the reasons that follow, Defendant's motions are granted in part and denied in part. Defendant's motion is granted with respect to Plaintiff's claims for breach of warranty and fraud and is denied in all other respects.

STANDARDS

A party is entitled to summary judgment if the "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although "[c]edibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a motion for summary judgment," the "mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient . . . ." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation and quotation marks omitted).

BACKGROUND

Plaintiff is a condominium association organized under the Oregon Condominium Act, Or. Rev. Stat. (hereinafter "O.R.S.") § 100.005, et seq., and is the governing body of the Benson Tower Condominium ("Benson Tower"). Benson Tower was completed in approximately 2008 and includes 143 separate living units. Each individual owner of a separate living unit in BensonTower owns the interior of his or her respective unit, and each is a member of Plaintiff. All of the individual owners own in common the general common elements of Benson Tower. The general common elements include, but are not limited to, the pipes, ducts, flues, conduits, wires, and other utility installations to their respective outlets in each individual living unit. Except for certain items not relevant here, Plaintiff is responsible for the maintenance, repair, and replacement of the general common elements in Benson Tower. Although Plaintiff arranges and pays for the cost of that work, Plaintiff then assesses and apportions those costs to the individual unit owners.

Defendant, Victaulic, is a New Jersey corporation that develops, markets, and supplies valves, pipe couplings, flanges, and gaskets for piping systems. Defendant distributes these components to suppliers and installers, including those doing business in Portland, Oregon. Certain products made by Defendant, including, but not limited to, butterfly valves, pipe couplings, flanges, and gaskets contain ethylene propylene diene monomer ("EPDM") rubber.

Certain Victaulic products containing EPDM were installed in the domestic, potable water piping system at Benson Tower ("Victaulic Products"). Plaintiff alleges that the potable water piping system installed throughout Benson Tower includes Victaulic Products that have prematurely deteriorated and failed or otherwise failed to properly perform. This deterioration, Plaintiff alleges, has resulted not only in damage to the Victaulic Products themselves, but also has caused property damage to Benson Tower's general common elements, including the domestic, potable water and entire water system within Benson Tower.

Benson Tower was constructed by ITC Construction Group ("ITC") as general contractor on behalf of the developer, Benson Tower, LLC (the "Developer"). In 2005, ITC contracted with JRT Mechanical, Inc. ("JRT") to install the plumbing systems in Benson Tower, pursuant toengineering performed by Yoneda & Associates ("Yoneda"). JRT purchased Victaulic Products from F&S Distributors, Inc., a third-party distributor that purchased the Victaulic Products directly from Victaulic. Plaintiff alleges that JRT also purchased additional products for use in the Benson Tower directly from Victaulic. The Victaulic Products used in the Benson Tower's construction were delivered no later than February of 2007.

Plaintiff alleges that "[s]ince the early 1990s, Victaulic was aware that its Victaulic Products were susceptible to failure when exposed to chloramines or other approved and recommended applications and that the failure of the Victaulic Products caused damage to the systems and buildings into which they were installed." Specifically, "[b]efore construction of [Benson Tower], Victaulic knew that the Victaulic Products would fail when exposed to temperatures far less than 230° Fahrenheit, even though Victaulic represented and approved that the Victaulic Products were acceptable and recommended for use up to 230° F. Victaulic failed to disclose this fact to its consumers, including Plaintiff." Further, "Victaulic knew that the Victaulic Products would fail when exposed to chloramines, yet Victaulic recommended and approved the use of the Victaulic Products in systems where chloramines were used as a disinfecting agent. Victaulic failed to disclose this fact to its consumers, including Plaintiff."

Plaintiff further alleges that the Victaulic Products installed in Benson Tower's piping systems contain EPDM designated by Victaulic as "Grade E" and that Victaulic expressly represented that Grade E gaskets are recommended for both cold and hot potable water service up to 230° Fahrenheit. Plaintiff further alleges that beginning in the early 2000s, Victaulic became aware that the Grade E EPDM used in the Victaulic Products was defective and exhibited severe degradation, deterioration, and disintegration. By 2008, Victaulic was aware that its Grade E EPDM degraded when exposed to chloramines. Moreover, before theconstruction of Benson Tower, Victaulic "knew of claims of black particles and sludge in potable water as a result of its defective Victaulic Products." In sum, Plaintiff alleges that, before Benson Tower was constructed, Victaulic was aware of significant defects in the Victaulic Products, misrepresented the qualities and capabilities of those products, and failed to disclose material information about those products and their defects necessary to make Victaulic's representations not misleading (i.e., half-truths).

DISCUSSION

A. Strict Liability and Negligence

Defendant moves for Summary Judgment on Plaintiff's negligence and strict products liability claims, arguing that: (1) both claims are barred by the economic loss doctrine; (2) Plaintiff lacks the necessary special relationship with Defendant to recover purely economic loss; and (3) Plaintiff's damages are too speculative.

1. Economic Loss Doctrine

It is a fundamental principle of tort law that all persons are liable in negligence if their conduct unreasonably creates a foreseeable risk of harm to others. Harris v. Suniga, 344 Or. 301, 307 (2008). There are, however, several exceptions to that general rule. Id. Under Oregon law, a negligence claim may not be premised solely on "causing a stranger's purely economic loss without injuring his person or property. For a plaintiff to recover in those circumstances, the plaintiff would have to show some source of duty outside the common law of negligence, such as a special relationship or status that imposed a duty on the defendant beyond the common-law negligence standard." Id. at 308 (citations and quotation marks omitted). Thus, if a plaintiff alleges only economic losses flowing from a defendant's negligence, a special relationship or statutory standard of care is required.

Economic loss has been defined by the Oregon Supreme Court as "financial losses such as indebtedness incurred and return of monies paid," as distinguished from "damages for injury to person or property." Id. at 306 (citing Onita Pac. Corp. v. Trs. of Bronson, 315 Or. 149, 159 n.6 (1992). The Oregon Court of Appeals has similarly discussed a line of Oregon cases defining "economic losses" as "financial losses to intangibles," such as lost profits, lost insurance proceeds, attorney's fees, and failed loan transactions. Harris v. Suniga, 209 Or. App. 410, 418 (2006) (citing Oregon cases), aff'd 344 Or. 301 (2008). "Unlike economic losses to third parties, which can be indeterminate and potentially unlimited, physical damage to property ordinarily can be ascertained, assessed, and paid." Harris, 344 Or. at 312 (economic loss doctrine did not bar claim for dry rot damage caused by negligent construction).

In this case, Plaintiff does not base its claim on a special relationship or status, but rather seeks to...