NOBL PARK, LLC OF VANCOUVER v. Shell Oil Co.

• Decision Date: 10 August 2004
• Docket Number: No. 30325-6-II.,30325-6-II.
• Citation: 95 P.3d 1265
• Court: Washington Court of Appeals
• Parties: NOBL PARK, L.L.C. OF VANCOUVER, Appellant, v. SHELL OIL COMPANY, dba Shell Chemical Company; Hoechst Celanese Corporation; Familian Northwest, Inc.; and Keller Supply Co., a Washington corporation, Respondents.

95 P.3d 1265

NOBL PARK, L.L.C. OF VANCOUVER, Appellant, v. SHELL OIL COMPANY, dba Shell Chemical Company; Hoechst Celanese Corporation; Familian Northwest, Inc.; and Keller Supply Co., a Washington corporation, Respondents.

No. 30325-6-II.

Court of Appeals of Washington, Division 2.

August 10, 2004.

Todd S. Baran, Attorney at Law, Portland, OR, Jason Matthew Whalen, Eisenhower & Carlson PLLC, Tacoma, WA, Joseph Vance, Davis Wright Tremaine LLP, Portland, OR, David T. Harvin, Vinson & Elkins, LLP, Houston, TX, for Respondents.

Paul M. O'Connor, Seth A. Moskowitz, Kasowitz, Benson, Torres & Friedman, LLP, New York, NY, for Respondent Hoechst Celanese Corp.

Ben Shafton, Attorney at Law, Vancouver, WA, Shawn Michael O Neil, Mitchell Lang & Smith, Portland, OR, Frank A. Moscato Jr., Attorney at Law, Portland, OR, for Appellant.

QUINN-BRINTNALL, C.J.

Nobl Park, L.L.C. of Vancouver, an apartment complex owner in Clark County, appeals the trial court's summary judgment order dismissing its claims against suppliers of defective polybutylene plumbing. The trial court ruled that a prior Tennessee class action settlement agreement entered in Cox v. Shell Oil Co., No. 18844, 1995 WL 775363 (Tenn.Ch. Nov.17, 1995) (Cox), precluded Nobl Park from suing Shell Oil Company dba Shell Chemical Company (Shell) and Hoechst Celanese Corporation (Celanese). The court also dismissed Nobl Park's "economic damages" claims against Familian Northwest, Inc. (Familian) and Keller Supply Co. (Keller).

On appeal, Nobl Park argues that due process considerations exempt it from the Cox settlement. But because Nobl Park purchased the apartment complex with notice of its plumbing defects and of Section 10.6 of the Cox Settlement Agreement; it is not exempt as an innocent initial purchaser. Moreover, Nobl Park's damages resulting from the faulty plumbing were economic losses of a contractual nature not recoverable under the Washington Products Liability Act (WPLA). Thus, summary judgment was proper and we affirm.

FACTS

During the 1970s, the U.S. Brass Corporation manufactured polybutylene plumbing. Shell and Celanese supplied raw materials to manufacturers of polybutylene plumbing. In 1978, Celanese began studying a corrosion problem occurring in the residential plumbing fittings. In a 1979 study, Celanese revealed that zinc chloride in the hot water pipes caused the corrosion. In 1981, Celanese issued a recommendation that polybutylene plumbing exposure to chlorine not exceed one part per million in these pipes. But two years later, a 1983 Shell marketing report expressed confidence in the polybutylene plumbing and blamed the corrosion in pipes of several Texas apartment complexes on poor installation practices. Despite the continuing polybutylene plumbing failures, Celanese continued to manufacture polybutylene plumbing although it listed residential use under "non-recommended conditions." 4 Clerk's Papers (CP) at 683. Further studies confirmed that exposure to chlorine in hot water was a primary cause of the pipe corrosion.

In September 1993, Robert Beeman filed the first class action lawsuit in Harris County, Texas, for damages to his home from failing polybutylene plumbing. Tina M. Cox filed a similar suit in Tennessee. Counsel for Beeman and Cox collaborated to prosecute the cases. The Obion County Chancery Court in Union City, Tennessee, joined actions from several jurisdictions and held a fairness hearing for a possible settlement. In July 1995, the parties agreed to a Settlement Agreement under Cox (hereinafter Cox Settlement). The Cox Settlement included several provisions for the class, notably: free replacement of polybutylene plumbing installed after January 1, 1978; reimbursement of expenses; unlimited funding potential by the defendants; and provisions requiring notice of the plumbing deficiency every three years until 2009. Notices of the class action and the proposed settlement were published in several major media outlets, including newspapers, magazines, and television networks. The court defined the class as:

All persons and entities that (1) own real property or structures in the United States in which there was installed between January 1, 1978 and July 31, 1995, polybutylene plumbing with acetal insert or metal insert fittings or a polybutylene yard service line; (2) own or previously owned such real property or structures and have already incurred any cost or expense, by reason of leakage from, or from failure, repair, or removal of, all or any portion of such polybutylene plumbing or yard service line which was installed between January 1, 1978 and July 31, 1995; or (3) will own such real property or structures during the term of entitlement to relief under the Settlement Agreement.

I Supp. CP at 1517-18. The court excluded from this class "[a]ll persons who, in accordance with the terms of the Settlement Agreement, execute a timely request for exclusion from the Settlement Class." I Supp. CP at 1518.

The Nobl Park Apartments is a 144-unit complex located in Vancouver, Clark County. At the time of construction, Robert Oja, Robert Broselle, and Leonard Ledoux, who are not parties to this appeal, owned the complex. The complex was constructed between 1985 and 1990. Action Plumbing, who also is not a party to this appeal, installed the plumbing in the complex. Familian, owned by Keller, supplied the pipes and fixtures to Action Plumbing. Nobl Park purchased the complex in December 1999.

During the discussions prior to purchase, Nobl Park received notice of certain rights in connection with the Cox Settlement.¹ The notice specifically stated that owners of structures with polybutylene plumbing who acquired the structures after 1995 could "opt out" (7 CP at 1199) by sending a specified opt-out notice to the Consumer Plumbing Recovery Center (CPRC) by December 31, 1999. In a separate document from the notice Nobl Park received, the Cox Settlement provided that a party who acquires a multiple family unit after the initial notice date loses its right to opt out upon acquisition.

According to Nobl Park, the apartment units have experienced several plumbing failures. As a result, Nobl Park has had to replace the components and clean and repair the damage to tenants' units.

On January 18, 2002, Nobl Park sued Shell, Celanese, Familian, and Keller for damages that the failed polybutylene plumbing caused. On March 25, 2002, both Shell and Celanese requested summary judgment, claiming that the Cox Settlement precluded Nobl Park's cause of action.² The trial court granted summary judgment to Shell and Celanese on November 26, 2002. On January 2, 2003, Familian and Keller filed a summary judgment motion and argued that Nobl Park's economic loss claims are not recoverable under the WPLA. Familian and Keller also argued that the trial court's prior summary judgment and the statute of limitations barred Nobl Park's breach of warranty claim under the Uniform Commercial Code (UCC). The trial court granted summary judgment to Familian and Keller on February 25, 2003. On May 2, 2003, the trial court dismissed with prejudice Nobl Park's claims against Shell, Celanese, Familian, and Keller. Nobl Park appeals.

ANALYSIS

SUMMARY JUDGMENT FOR SHELL AND CELANESE

Nobl Park argues that the Cox Settlement's "opt out" clause denied it due process by failing to adequately inform Nobl Park of its right to opt out. Nobl Park also claims that because the settlement did not provide adequate due process, we should not give full faith and credit to the Cox Settlement.

The U.S. Constitution requires that "[f]ull faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state." U.S. Const. art. IV, § 1. This applies to court judgments in which "the judgment of a state court should have the same credit, validity, and effect, in every other court of the United States, which it had in the state where it was pronounced." Underwriters Nat'l Assurance Co. v. N. Carolina Life & Accident & Health Ins. Guar. Ass'n, 455 U.S. 691, 704, 102 S.Ct. 1357, 71 L.Ed.2d 558 (1982) (quoting Hampton v. McConnel, 16 U.S. 234, 3 Wheat. 234, 235, 4 L.Ed. 378 (1818)). The federal Full Faith and Credit Act implements the protection of the U.S. Constitution's Full Faith and Credit Clause. 28 U.S.C. § 1738.

A state court's judgment in a class action is a "judicial proceeding" under section 1738 and is presumptively entitled to full faith and credit from the courts of other jurisdictions. Matsushita Elec. Indus. Co., Ltd. v. Epstein, 516 U.S. 367, 374, 116 S.Ct. 873, 134 L.Ed.2d 6 (1996). However, a foreign state is not required to give full faith and credit to a judgment against an affected party who did not receive due process when the judgment was entered. Kremer v. Chem. Constr. Corp., 456 U.S. 461, 482-83, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982).

Here we consider whether the Cox Settlement notice deprived Nobl Park of due process.³ If it did, then we need not give full faith and credit to the Cox Settlement. Due process in a class action notice requires: (1) "reasonable notice" that apprises the party of the pendency of the action, affords the party the opportunity to present objections, and describes the parties' rights; (2) the opportunity to remove themselves from the action by "executing and returning" an "opt out" or "request for exclusion" form to the court; and (3) a named plaintiff who adequately represents the absent plaintiffs' interests. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985).

Nobl Park does not dispute that it received notice of the settlement in 1999. But it claims that the notice was inadequate. We thus consider whether the notice was adequate and whether it gave Nobl Park the opportunity to "opt out" of the Cox Settlement.

Nobl Park received notice stating that a settlement agreement existed. This notice also included provisions for...