Gines v. D.R. Horton, Inc.

• Citation: 699 F.3d 812
• Decision Date: 17 October 2012
• Docket Number: No. 12–30183.,12–30183.
• Parties: Mike GINES, Individually and on Behalf of All Others Similarly Situated, Plaintiff–Appellant, v. D.R. HORTON, INCORPORATED, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

699 F.3d 812

Mike GINES, Individually and on Behalf of All Others Similarly Situated, Plaintiff–Appellant,

v.D.R. HORTON, INCORPORATED, Defendant–Appellee.

No. 12–30183.

United States Court of Appeals,

Fifth Circuit.

Oct. 17, 2012.

Phillip W. Preis (argued), Crystal DiBenedetto Burkhalter, Charles Malcolm Gordon, Jr., Caroline Preis Graham, Charles Matthew Thompson, Preis Gordon, A.P.L.C., Baton Rouge, LA, for Plaintiff–Appellant.

Erick Yukihiko Miyagi (argued), Taylor, Porter, Brooks & Phillips, L.L.P., Baton Rouge, LA, for Defendant–Appellee.

Appeal from the United States District Court for the Middle District of Louisiana.

Before KING, SMITH and BARKSDALE, Circuit Judges.

KING, Circuit Judge:

This case concerns the remedy under Louisiana law for the purchaser of a newly constructed home with a construction defect that has not resulted in actual physical damage to the home. We are presented with two questions. First, we are asked to decide whether the Louisiana New Home Warranty Act provides the exclusive remedy against a builder for a purchaser of a newly constructed home with a construction defect. Second, we are asked to decide whether a claim brought under the Act must allege that the defect in question resulted in actual physical damage to the home. We answer both questions in the affirmative. Accordingly, we affirm the judgment of the district court dismissing the case.

I. FACTS AND PROCEEDINGS

On or about November 21, 2006, Plaintiff–Appellant Mike Gines (“Gines”) purchased a new home in Louisiana built by Defendant–Appellee D.R. Horton, Inc. (“Horton”). The air conditioning system in the home was installed by Reliant Heating and Air Conditioning of Louisiana, L.L.C. (“Reliant”) and designed by Reliant Heating & Air Conditioning, Inc. After Gines took possession of the home, he discovered that the system's capacity was not large enough to maintain an appropriate temperature in the home. On July 9, 2007, Gines made a written demand on Horton to repair the system. Horton and Reliant made several attempts to do so, but the alleged problems persisted.

On August 22, 2008, Gines filed a class action petition against Horton and Reliant in state court. After Reliant and Horton removed to federal court, Gines filed an amended complaint, asserting causes of action for violations of the Louisiana New Home Warranty Act (“NHWA”), redhibition, breach of contract, poor workmanship, non-compliance of contract, and negligence. Gines alleged that Horton and Reliant were liable because the air conditioning system was not reasonably fit for its ordinary use, failed to cool the home properly, was undersized, and continually ran on hot days. Gines further alleged that Horton and Reliant were liable for any other defects in the air conditioning system to be shown at trial. Gines sought reimbursement for a replacement air conditioning system, increased energy bills caused by the system, and attorney's fees and costs associated with this lawsuit.

On September 29, 2008, before the amended complaint was filed, Horton and Reliant filed a motion to dismiss. In support of this motion, Horton argued that Gines failed to state a claim under the NHWA because the alleged defect did not result in “actual physical damage” to Gines's home, as required under the Act. After Gines filed his amended complaint, Horton filed a supplemental memorandum in which it reaffirmed its position that Gines had failed to state a claim under the NHWA because he had not alleged actual physical damage to his home. Horton argued for the first time that the NHWA provides Gines's exclusive remedy, and therefore Gines's amended claims should be dismissed.

On July 28, 2011, the district court granted Horton's motion to dismiss, holding that the NHWA provided Gines's exclusive remedy against Horton, and that Gines's claims under the Act failed because Gines did not allege that the system caused physical damage to his home. Gines timely appealed, and now asks this court to reverse the district court's judgment. ¹ In addition, Gines moves this court to certify the two questions of state law raised in this appeal to the Louisiana Supreme Court.

II. STANDARD OF REVIEW AND APPLICABLE LAW

A. Standard of Review

Dismissal of a complaint for failure to state a claim is reviewed de novo. Lindquist v. City of Pasadena, Tex., 525 F.3d 383, 386 (5th Cir.2008). We “accept[ ] all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.2007) (internal quotation marks and citations omitted). The plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. at 555, 127 S.Ct. 1955 (internal citations and footnote omitted).

B. Applicable Law

When jurisdiction is based on diversity, we apply the substantive law of the forum state. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Holt v. State Farm Fire & Cas. Co., 627 F.3d 188, 191 (5th Cir.2010). Louisiana law applies in this case. “To determine Louisiana law, we look to the final decisions of Louisiana's highest court.” Holt, 627 F.3d at 191 (citation omitted). “In the absence of a final decision by that court addressing the issue at hand, a federal court must determine, in its best judgment, how the state's highest court would resolve the issue if presented with it.” Id. (citation omitted). In “making an Erie-guess in the absence of explicit guidance from the state courts, [this court] must attempt to predict state law, not to create or modify it.” Am. Waste & Pollution Control Co. v. Browning–Ferris, Inc., 949 F.2d 1384, 1386 (5th Cir.1991) (citations and internal quotation marks omitted); see also Cerda v. 2004–EQR1 L.L.C., 612 F.3d 781, 794 (5th Cir.2010) (“In making an Erie guess, we defer to intermediate state appellate court decisions, unless convinced by other persuasive data that the higher court of the state would decide otherwise.”) (citation and internal quotation marks omitted). We are “not free to fashion new theories of recovery under Louisiana law.” Am. Waste, 949 F.2d at 1386 (citation and internal quotation marks omitted).

III. DISCUSSION

A. The Exclusivity of the NHWA's Remedies

The NHWA's policy objective is to “promote commerce in Louisiana by providing clear, concise, and mandatory warranties for the purchasers and occupants of new homes in Louisiana.” La.Rev.Stat. Ann. § 9:3141. Section 9:3150 of the NHWA provides that the Act establishes “the exclusive remedies, warranties, and peremptiveperiods as between builder and owner relative to home construction and no other provisions of law relative to warranties and redhibitory vices and defects shall apply.”

Gines argues that the district court erred in ruling that the NHWA provides the sole remedy under Louisiana law for a purchaser of a new home with construction defects. Gines contends that the ruling below “essentially transformed the NHWA into a caveat emptor statute where the buyer has no recourse for defective construction” that does not result in “actual physical damage.” According to Gines, if the NHWA provides the only remedy for purchasers of new homes with construction defects, then the actual physical damage requirement “essentially eliminates a whole line of case law requiring, as a matter of public policy, [that] builders ... complete residential housing in a workmanlike manner.”

Horton agrees that the general rule implied in construction contracts is that the work will be free of defects and performed in a workmanlike manner, but Horton contends that the general rule is inapplicable in this case. Rather, in Horton's view, the NHWA provides “the exclusive remedies for claims regarding alleged defects to a new residence.” According to Horton, “the breach of contract and implied warranty claims generally available in other construction contracts are not available under the NHWA.”

In accordance with the statute's plain language, and as Gines concedes, the Louisiana Supreme Court has held that the NHWA provides a homeowner's exclusive remedy against a builder for defects in new home construction. In Carter v. Duhe, the Louisiana Supreme Court stated that “the NHWA provides the exclusive remedy between owners and new home builders.” 921 So.2d 963, 968 (La.2006). In Carter, new homeowners argued that they should have been able to assert claims outside of the NHWA because their builder did not give them notice of the Act's requirements as required by law. Id. at 967. The Carter court held that the NHWA does not provide a penalty for failure of the builder to provide notice to homeowners. Id. at 968. Accordingly, it concluded that the builder did not waive the exclusivity provision of the NHWA, and it reinstated the trial court's dismissal of all non-NHWA claims. Id. at 969–71.

In Marks v. New Orleans Police Department, the Louisiana Supreme Court clarified that the rationale in Carter is not limited to disputes over the NHWA's notice provisions. 943 So.2d 1028, 1035 (La.2006). Although the facts of Marks do not pertain to new home construction defects or the NHWA, ² the Marks court confirmed that the holding in Carter was that “the NHWA provides the exclusive remedies, warranties, and peremptive periods between the builder and owner relative to new home construction.” Id.

We further note that the six cases Gines cites to support his argument that he may bring a breach of contract claim against Horton are inapposite. Several of these cases involve construction not covered by the NHWA, such as defective driveways and sidewalks,³ construction relatedto a waste water treatment plant,⁴ new roof installation,⁵ and...