In Re Chinese Manufactured Drywall Products Liability Litigation. this Document Relates To All Cases. Mdl No. 2047.

• Decision Date: 13 January 2010
• Docket Number: MDL No. 2047.
• Parties: In re CHINESE MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION. This Document Relates to All Cases. MDL No. 2047.
• Court: U.S. District Court — Eastern District of Louisiana

680 F.Supp.2d 780

In re CHINESE MANUFACTURED DRYWALL PRODUCTS LIABILITY LITIGATION This Document Relates to All Cases. MDL No. 2047.

MDL No. 2047.

United States District Court, E.D. Louisiana.

Decided: Jan. 13, 2010.

COPYRIGHT MATERIAL OMITTED

Phillip A. Wittmann, Stone, Pigman Walther, Wittmann, LLC, New Orleans LA, Jeffery N. Luthi, One Columbus Circle, NE, Washington, DC, pro se.

ORDER & REASONS ELDON E. FALLON, District Judge.

Before the Court are two motions involving application of the economic loss rule to tort claims for economic damages brought under Florida, Alabama, Mississippi, and Louisiana law. These motions are, (1) Distributor Defendants' Motion to Dismiss or, Alternatively, to Strike Plaintiffs' Claims for Economic Damages (Rec Doc. No. 295), and (2) Manufacturer Defendants' Joinder in Distributors' Rule 12(b)(6) Motion to Dismiss or, Alternatively, to Strike Plaintiffs' Tort Claims for Economic Damages (Rec. Doc. No. 304). For the following reasons, these Motions are DENIED.

I. BACKGROUND

This case involves claims for damages allegedly resulting from the manufacturing, exportation, importation, distribution sale, and installation of defective Chinese drywall. In the aftermath of Hurricanes Katrina and Rita, rebuilding put a strain on U.S. building supplies, including drywall. As a result, drywall manufactured in China was imported into the U.S. and used in the construction and refurbishing of homes in the Gulf Coast area and elsewhere. Sometime after installation of the Chinese drywall, homeowners began to complain of emissions of smelly gasses and the corrosion of appliances and certain other components of their homes. Some homeowners also began to complain of headaches, nosebleeds, difficulty breathing and other physical afflictions believed to be caused by the Chinese drywall. Accordingly, homeowners began to file suit in both federal and state courts against homebuilders, installers, realtors, brokers, suppliers, importers, exporters, distributors, and manufacturers who were involved with the Chinese drywall. Because of the commonality of facts in the various cases, this litigation was designated as multidistrict litigation. Pursuant to a Transfer Order from the United States Judicial Panel on Multidistrict Litigation on June 15, 2009, 626 F.Supp.2d 1346 (Jud.Pan. Mult.Lit.2009), all federal cases involving Chinese drywall were consolidated for pretrial proceedings in the U.S. District Court, Eastern District of Louisiana. The state cases which could not be removed remain where filed, with Florida, Louisiana, Alabama, Mississippi, Virginia, and North Carolina having the most Chinese drywall cases to date.

Many of the same issues are implicated in Chinese drywall cases pending in federal and state courts. One such issue is the application of the economic loss rule ("ELR") which is involved in motions before the MDL Court and the Florida State Courts. The MDL and Florida State Courts held a consolidated hearing on November 13, 2009, to address the role of the Florida ELR as it applies in the Chinese drywall cases. On November 19, 2009, the MDL Court held a hearing to address the role of the Alabama, Mississippi, and Louisiana ELRs as they apply in the MDL cases. After hearing oral argument, reviewing the briefs submitted by the parties, and considering the applicable law, the Court is now ready to rule on this issue.

The ELR is a judicially created doctrine which prevents a plaintiff from bringing tort claims for economic losses when the only damage alleged is to a product caused by the product itself. See E. River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 87175, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986); see also Indem. Ins. Co. of N. Am. v. Am. Aviation, 891 So.2d 532, 536-41 (Fla.2004). However, the doctrine does not bar tort claims for economic losses for damage cause by the product to "other property" or for personal injuries. See id. In order to determine whether the ELR applies to bar the tort claims of the Plaintiffs in the instant matter, the Court will first address the arguments raised by the parties in their briefs and oral arguments, and then it will consider the arguments and applicable case law in relation to the instant matter. The Court now turns to the Motions.

II. PRESENT MOTIONS

A. Distributor Defendants' Motion to Dismiss or, Alternatively, to Strike Plaintiffs' Claims for Economic Damages

Distributor Defendants filed a Motion to Dismiss or, Alternatively, to Strike Plaintiffs' Claims for Economic Damages alleging that all, or a substantial majority of Plaintiffs' claims subject to Florida law are barred by the Florida ELR. Rec. Doc No. 295. The Distributors limit their Motion to Plaintiffs' property damage claims against them based upon tort theories of recovery. The Distributors argue that the ELR limits tort recovery to personal injury and/or damage to "other property," barring any recovery for economic damages such as injury to the product, repair costs, inspection costs, relocation costs, and diminution in value.

In support of their Motion, the Distributors largely rely upon the Florida Supreme Court's decision in Casa Clara Condo. Ass'n, Inc. v. Charley Toppino & Sons, Inc., 620 So.2d 1244 (Fla.1993). They cite Casa Clara's definition of the ELR as "prohibit[ing] tort recovery when a product damages itself, causing economic loss, but does not cause personal injury or damage to any property other than itself." Id. at 1246. Casa Clara held that the ELR barred plaintiff homeowners' tort claims for economic losses caused by crumbling, cracking concrete used to construct their homes on the basis that the homes plaintiffs purchased were the "product" and the concrete was an integral part of the product-home which only damaged itself. Id. at 1246-48. The Distributors read Casa Clara as supporting their argument that,

In the case of building products used in home construction, 'the product' is the home itself, or that product (in its completed state) purchased by the consumer, so that the Economic Loss Rule prohibits any recovery in tort for economic damages to the finished product purchased by Plaintiffs, i.e. the home, by an allegedly defective component of the finished product. Brief of Distributor De- fendants at 5, In re Chinese Manufactured Drywall Prods. Liab. Litig., No. 09-md-2047 (E.D.La. Sept. 28, 2009).

Specifically, they define the "product" in the present matter as the purchased home and the Chinese drywall as a component of that product, and thus argue that the economic damages caused by the drywall are only to the product itself, not to "other property" or to persons in that home. The Distributors also note that the court in Casa Clara acknowledged that homeowners are a sympathetic and appealing class, but still went on to hold that the ELR barred the homeowners' tort claims for economic damages. Casa Clara, 620 So.2d at 1246-47.

Additionally, the Distributors claim that the Florida Supreme Court's more recent decision in Indemnity Insurance Co. of North America v. American Aviation, Inc., 891 So.2d 532 (Fla.2004), reaffirms Casa Clara and the continuing vitality of the ELR. The Distributors also cite the following cases in support of their Motion: Fishman v. Boldt, 666 So.2d 273 (Fla.Dist. Ct.App.1996), which held the ELR precluded tort recovery for damages caused by a defective seawall to a pool, patio, and home because such were not "other property;" In re Masonite Corp. Hardboard Siding Products Liability Litigation, 21 F.Supp.2d 593 (E.D.La.1998), which held that damage caused by defective siding is not "other property" but rather part of the finished product and thus tort recovery would be barred by the ELR; and Pulte Home Corp. v. Osmose Wood Preserving, Inc., 60 F.3d 734 (11th Cir. 1995), which held the ELR precluded tort damages where chemicals in plywood used for roofing rendered the roof defective because the roof was not "other property."

With regard to tort claims brought by Plaintiffs against Distributors under Alabama law, Distributors argue that the ELR bars tort claims for damage to a product caused by the product itself. Distributors cite Lloyd Wood Coal Co. v. Clark Equipment Co., 543 So.2d 671 (Ala. 1989), as evidence that Alabama has adopted the ELR. In Lloyd Wood, the court held that the ELR barred tort damages caused by a front-end loader because no damage to other property or personal injuries occurred, the only damage was to the front-loader itself. Id. at 672. Distributors contend Lloyd Wood is analogous to the instant matter. Distributors cite Wellcraft Marine, a Division of Genmar Industries, Inc. v. Zarzour, 577 So.2d 414, 418 (Ala. 1990), for the Alabama Supreme Court's conclusion that the ELR applies to products sold to consumers and commercial buyers alike and its refusal to adopt a distinction under the doctrine between the two. Distributors also rely on the Eastern District's application of Alabama's ELR in In re FEMA Trailer Formaldehyde Products Liability Litigation, 2008 WL 5217594, 2008 U.S. Dist. LEXIS 103249 (E.D.La. Dec. 12, 2008), to support their Motion. In FEMA Trailer, plaintiffs alleged property damage to the trailers in which they lived and personal injuries resulting from high levels of formaldehyde in the trailers. The Eastern District held that plaintiffs' property damage tort claims for economic losses were barred by the ELR. Id. at *17, 2008 U.S. Dist. LEXIS 103249 at *58.

With regard to Mississippi law, Distributors argue that Plaintiffs' claims arising out of negligence and strict liability are barred by the ELR. Distributors cite Progressive Insurance Co. v. Monaco Coach Corp., 2006 WL 839520, at *3 (S.D.Miss. Mar. 29, 2006), as evidence that Mississippi has adopted the ELR. Distributors argue that Plaintiffs have no tort claims for damage caused by the drywall to their homes because under State Farm Mutual Auto- mobile Insurance Co. v. Ford Motor Co. 736 So.2d 384, 388 (Miss....