Lisk v. Lumber One Wood Preserving, LLC

• Decision Date: 10 July 2015
• Docket Number: No. 14–11714.,14–11714.
• Citation: 792 F.3d 1331
• Parties: Robert C. LISK, individually and on behalf of a class of similarly situated persons, Plaintiff–Appellant, v. LUMBER ONE WOOD PRESERVING, LLC, Defendant–Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

792 F.3d 1331

Robert C. LISK, individually and on behalf of a class of similarly situated persons, Plaintiff–Appellant

v.LUMBER ONE WOOD PRESERVING, LLC, Defendant–Appellee.

No. 14–11714.

United States Court of Appeals, Eleventh Circuit.

July 10, 2015.

Hirlye R. Lutz, III, F. Jerome Tapley, Adam Wade Pittman, Cory Watson Crowder & Degaris, P.C., Birmingham, AL, for Plaintiff–Appellant.

Michael M. Shipper, Davis & Fields, P.C., Mobile, AL, for Defendant–Appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before MARCUS and JILL PRYOR, Circuit Judges, and HINKLE,^* District Judge.

Opinion

HINKLE, District Judge:

In this proposed class action, the named plaintiff asserts that wood he bought for a fence at his home was not properly pressure-treated and that it prematurely rotted. He asserts claims against the defendant wood manufacturer under Alabama law, first for violating the Alabama Deceptive Trade Practices Act, and second for breach of express warranty. The district court dismissed the claims.

This appeal presents two issues. The first arises from a conflict between Federal Rule of Civil Procedure 23, which authorizes class actions including for consumer claims of this kind, and the ADTPA, which creates a private right of action but forbids private class actions. We hold that Rule 23 controls.

The second issue arises from the lack of privity between the plaintiff and the defendant. Alabama law allows a consumer to recover for breach of an express warranty, even in the absence of privity, in some circumstances. We hold that the complaint adequately alleges the required circumstances and thus states a claim on which relief can be granted.

I

The complaint alleges these facts. The named plaintiff Robert Lisk entered a contract with Clean Cut Fence Company for installation of a fence at his home. The contract called for Clean Cut to use “treated” wood. The contract said, “All fencing materials shall be warranted only through their respective manufacturers.”

Clean Cut built the fence using wood it purchased from Capitol Wholesale Fence Company. Capitol was a distributor for, and obtained the wood from, the defendant Lumber One Wood Preserving, LLC (“Lumber One”). Lumber One manufactured the wood.

Lumber One warranted—and said on its website, advertising, and product labeling—that its wood was treated with MCA technology licensed by Osmose, Inc. MCA-treated wood remains free from rot, fungal decay, and termite attacks for at least 15 years. But Lumber One defectively manufactured and treated its wood—if it treated the wood at all.

Within three years after installation, Mr. Lisk's fence posts were rotten. Clean Cut informed Mr. Lisk that other customers had experienced similar problems with Lumber One's wood.

II

Mr. Lisk filed a complaint seeking to represent a nationwide class of all purchasers of Lumber One's defectively “treated” wood. The complaint names Lumber One as the only defendant. Mr. Lisk and Lumber One are citizens of different states—Tennessee and Alabama—but the amount of Mr. Lisk's individual claim does not exceed $75,000. Mr. Lisk invoked federal jurisdiction under the Class Action Fairness Act. The parties assume, and for present purpose we accept, that Alabama law governs the substantive claims.

Lumber One moved to dismiss, asserting that the ADTPA does not authorize a private class action, that the complaint does not adequately plead an express warranty that runs to a remote purchaser, that dismissal of the defective claims would leave pending only an ADTPA individual claim, and that this would leave no basis for federal jurisdiction.

The district court granted the motion and dismissed the complaint. Mr. Lisk appeals.

III

The district court's order is correct only if the complaint fails to state a class-action claim on which relief can be granted under the ADTPA and fails to state an express-warranty claim at all. To avoid dismissal for failure to state a claim, a complaint must include “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The complaint's factual allegations, though not its legal conclusions, must be accepted as true. Id.; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The complaint must include “allegations plausibly suggesting (not merely consistent with)” the plaintiff's entitlement to relief. Twombly, 550 U.S. at 557, 127 S.Ct. 1955. The complaint must set out facts—not mere labels or conclusions—that “render plaintiffs' entitlement to relief plausible.” Id. at 569 n. 14, 127 S.Ct. 1955.

We review de novo a district court's ruling that a complaint fails to state a claim. Hill v. White, 321 F.3d 1334, 1335 (11th Cir.2003).

IV

The ADTPA prohibits a variety of deceptive practices, including misrepresenting the characteristics or qualities of goods and representing that goods are of a particular standard or quality when they are not. Ala.Code § 8–195(5), (7) (1975). Misrepresenting that wood is MCA pressure-treated, when it is not, violates the statute.

The ADTPA creates a private right of action in favor of a consumer against a person who violates the statute. The consumer may recover the greater of $100 or actual damages or, in the court's discretion, up to three times actual damages, together with attorney's fees. Id. § 8–19–10(a). But the ADTPA provides that only the Alabama Attorney General or a district attorney may bring a class action; a private individual may not:

A consumer or other person bringing an action under this chapter may not bring an action on behalf of a class; provided, however, that the office of the Attorney General or district attorney shall have the authority to bring action in a representative capacity on behalf of any named person or persons. In any such action brought by the office of the Attorney General or a district attorney the court shall not award minimum damages or treble damages, but recovery shall be limited to actual damages suffered by the person or persons, plus reasonable attorney's fees and costs.

Id. § 8–19–10(f).

If this case were pending in an Alabama state court, the statute would preclude presentation of the ADTPA claims in a private class action. But the case is in federal court. Federal Rule of Civil Procedure 23 allows class actions and makes no exception for cases of this kind. Instead, the rule provides that “[o]ne or more members of a class may sue or be sued as representative parties on behalf of all members,” if specified conditions are met. The complaint alleges, and for present purposes we assume, that the conditions are met here.

The issue, then, is whether Rule 23 applies or is instead displaced by the contrary provision of the ADTPA.

The Supreme Court addressed a nearly identical issue in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393, 130 S.Ct. 1431, 176 L.Ed.2d 311 (2010). A New York statute required insurers to pay valid claims within 30 days and imposed interest at two percent per month on late payments. A separate New York statute allowed class actions on conditions tracking those in Federal Rule of Civil Procedure 23 but prohibited class actions for claims seeking statutory penalties. Under New York law, the two-percent monthly interest was a penalty within the meaning of the class-action statute. An individual whose claim was paid late filed a proposed class action against his insurer in federal court seeking to recover the statutory interest. The issue there, as here, was which provision controlled—Rule 23 or the state-law prohibition on class actions for claims of this kind.

The Supreme Court held that Rule 23 governed. The decision compels the same result here.

There is room for debate only because in Shady Grove the Court split 4–1–4; no single rationale garnered five votes. Justice Scalia authored a plurality opinion for four justices. Justice Stevens concurred separately. Four justices dissented.

In our case the parties debate with vigor whether we should follow the analysis of Justice Scalia (under which Rule 23 plainly controls) or that of Justice Stevens (under which the issue is closer). But before turning to that question, it is important to note that Justice Stevens joined parts of Justice Scalia's opinion. Those parts, labeled sections I and II–A, thus were joined by five justices; those parts were the opinion of the Court. And those parts confirmed the analysis long followed in resolving conflicts between the Federal Rules of Civil Procedure and contrary provisions of state law.

The short version of that analysis is this. The federal Rules Enabling Act authorizes the Supreme Court to adopt rules of practice and procedure that apply not only in cases arising under federal law but also in cases in which state law supplies the rule of decision. The Act provides:

(a) The Supreme Court shall have the power to prescribe general rules of practice and procedure and rules of evidence for cases in the United States district courts (including proceedings before magistrate judges thereof) and courts of appeals.

(b) Such rules shall not abridge, enlarge or modify any substantive right. All laws in conflict with such rules shall be of no further force or effect after such rules have taken effect.

28 U.S.C. § 2072. Under the plain terms of the statute, a federal rule applies in any federal lawsuit, and thus displaces any conflicting state provision, so long as the federal rule does not “abridge, enlarge or modify any substantive right.” See, e.g., Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). A state statute precluding class actions for specific kinds of claims conflicts with Rule 23 and so is displaced for claims in federal court so long as applying Rule 23 does not “abridge, enlarge or modify any substantive right.”

To this point in the analysis, the...