Pella Corp. v. Saltzman

• Decision Date: 20 May 2010
• Docket Number: No. 09-8025.,09-8025.
• Citation: 606 F.3d 391
• Parties: PELLA CORPORATION and Pella Windows and Doors, Inc., Petitioners,v.Leonard E. SALTZMAN, Kent Eubank, Thomas Riva, and William and Nancy Ehorn, Individually and on behalf of all others similarly situated, Respondents.
• Court: U.S. Court of Appeals — Seventh Circuit

606 F.3d 391

PELLA CORPORATION and Pella Windows and Doors, Inc., Petitioners,v.Leonard E. SALTZMAN, Kent Eubank, Thomas Riva, and William and Nancy Ehorn, Individually and on behalf of all others similarly situated, Respondents.

No. 09-8025.

United States Court of Appeals Seventh Circuit.

Submitted March 12, 2010.

Decided May 20, 2010.

Rehearing and Rehearing En Banc Denied June 14, 2010. ^*

John A. Roberts (submitted), Wildman, Harrold, Allen & Dixon, Chicago, IL, for Petitioners.

Paul M. Weiss (submitted), Attorney, Freed & Weiss, Chicago, IL, for Respondents.

Before POSNER, WILLIAMS and TINDER, Circuit Judges.

PER CURIAM.

Pella Corporation manufactures windows for homes and sells them through its subsidiary, Pella Windows and Doors, Inc. (collectively “Pella”). Over the last 18 years, Pella has sold more than six million aluminum-clad wood “ProLine” casement windows nationwide. Plaintiffs, owners of structures containing the windows in question, allege that the windows contain a design defect that permits water to seep behind the aluminum cladding and causes the wood to rot at an accelerated rate. In response to the number of windows needing replacement, Pella created the “Pella ProLine Customer Service Enhancement Program” to compensate affected customers. According to Plaintiffs, Pella attempted to modify its warranty through the program but never informed the end consumers of the program's existence or of the defect. Plaintiffs brought suit against Pella, alleging that it committed consumer fraud by not publicly declaring the role that the purported design defect plays in allowing rot. After the district court certified two classes of plaintiffs, Pella sought permission to appeal the certification pursuant to Federal Rule of Civil Procedure 23(f). We grant Pella's Rule 23(f) petition for permission to appeal and affirm the district court's decision certifying the classes.

I. BACKGROUND

The district court certified two classes of consumers in this action. First, it certified a nationwide class under Federal Rule of Civil Procedure 23(b)(2), consisting of all class members who own structures containing Pella ProLine aluminum-clad casement windows manufactured from 1991 to the present, whose windows have not yet manifested the alleged defect or whose windows have some wood rot but have not yet been replaced. The district court found the class met the criteria of Rule 23(b)(2) because Pella “has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Fed.R.Civ.P. 23(b)(2). If successful, these class members would be entitled to six declarations that together essentially declare that all ProLine windows have a defect which results in premature rotting and this defect requires disclosure; that Pella modified its warranty without notice by creating the enhancement program; that Pella must notify owners of the defect; that the ten-year limitation in the original warranty is removed; that Pella will reassess all prior warranty claims related to wood rot; and that Pella, upon a class member's request, will pay the cost of inspection to determine whether the wood rot is manifest, with any coverage disputes adjudicated by a Special Master. This class adjudication process would be followed by an individual claims process in which class members may file a claim with Pella for service “[i]f and when their windows manifest wood rot due to the alleged defect.” The district court explained that absent class members also may bring individual suits for money damages.

The second group of certified classes is much narrower and consists of only those who have had a manifest defect and whose windows already have been replaced. The court certified six statewide liability classes under Federal Rule of Civil Procedure 23(b)(3) in California, Florida, Illinois, Michigan, New Jersey, and New York, on the theory that Pella violated state consumer fraud laws by failing to disclose the defect. Certification under Rule 23(b)(3) requires that “the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.” Fed.R.Civ.P. 23(b)(3). The district court explicitly declined to certify issues related to causation, damages, and statute of limitations.

Pella seeks interlocutory review of these class certifications pursuant to Federal Rule of Civil Procedure 23(f), arguing inter alia, that consumer fraud cases as a general matter are not amenable to class treatment, due to problems with causation, reliance, and calculating damages. We grant the petition in order to address the contention that consumer fraud claims are inappropriate for class treatment. See Blair v. Equifax Check Servs., Inc., 181 F.3d 832, 835 (7th Cir.1999) (acceptance of an appeal is appropriate to “facilitate the development of the law” governing class actions). The parties' arguments are clearly set forth in Pella's Rule 23(f) petition and respondents' opposition, and no further briefing or argument is necessary. We affirm the district court's certification of the two classes.

II. ANALYSIS

While consumer fraud class actions present problems that courts must carefully consider before granting certification, there is not and should not be a rule that they never can be certified. Pella relies on various decisions from this circuit reversing the grant of class certification in consumer fraud actions to draw the broad conclusion that consumer fraud cases are inappropriate for class treatment as a general matter. But those cases did not opine that class certification was never appropriate in consumer fraud cases, only that it was inappropriate in the circumstances before it. See, e.g., Thorogood v. Sears, Roebuck and Co., 547 F.3d 742, 748 (7th Cir.2008) (no common issues of law because there did not appear to be a single understanding of the significance of labeling or advertising of the allegedly deceptive statements); Oshana v. Coca-Cola Co., 472 F.3d 506, 514 (7th Cir.2006) (class certification inappropriate because the proposed class representative's claims were not typical of putative class); In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1018-19 (7th Cir.2002) (tire-defect class action unmanageable given numerous different designs of allegedly defective tires and varying recalls).

In Thorogood, the court noted that there are times when class certification is “a sensible and legally permissible alternative to remitting all the buyers to individual suits each of which would cost orders of magnitude more to litigate than the claims would be worth to the plaintiffs.” 547 F.3d at 748. We reassert that proposition here and hold that the district court properly weighed the facts before it and exercised its discretion to conclude that the common predominant issue of whether the windows suffer from a single, inherent design defect leading to wood rot is the essence of the dispute and is better resolved by class treatment. The district court reasonably determined that the individual issues that necessarily arise in a consumer fraud action would not prevent class treatment of the narrow liability issues here.

Class treatment of consumer fraud cases can certainly present difficulties, and courts should consider these concerns before deciding to grant class certification, as the district court did below. One concern is the risk of error in having complex issues that have enormous consequences decided by one trier of fact rather than letting a consensus emerge from multiple trials. Mejdrech v. Met-Coil Sys. Corp., 319 F.3d 910, 912 (7th Cir.2003); see also Thorogood, 547 F.3d at 745. This is not a case where the issues are so complex, and Pella does not claim that the consequences are so high, that a decentralized process of multiple trials is necessary for an accurate evaluation of the claims. The district court held that the commonality requirement of Rule 23(a)(2) and the predominance requirement of Rule 23(b)(3) are both satisfied because the central questions in the litigation are the same for all class members-whether the ProLine windows suffered from an inherent defect when they left the factory, whether and when Pella knew of this defect, the scope of Pella's warranty, and the nature of the ProLine Customer Enhancement Program and whether it amended the warranty.

In contrast to Thorogood where there were no common issues of law or fact and the court questioned whether anyone besides the plaintiff shared the same concerns with the product, here there is an economy to class treatment of the question whether the ProLine windows suffer from a basic design defect, the resolution of which has the potential to eliminate the need for multiple, potentially expensive expert testimony and proof that would cost considerably more to litigate than...