Sebago, Inc. v. Beazer East, Inc.
| Citation | 18 F.Supp.2d 70 |
| Decision Date | 31 March 1998 |
| Docket Number | C.A. No. 96-10069-MLW.,C.A. No. 96-10656-MLW. |
| Parties | SEBAGO, INC., et al., Plaintiffs, v. BEAZER EAST, INC., f/k/a Koppers Company, Inc., Manville Corporation and Schuller International, Inc., Defendants. Robert T. KARAM, Michael Biszko and Alan Biszko d/b/a Flint Village Plaza, Plaintiffs, v. BEAZER EAST, INC., f/k/a Koppers Company, Inc., Manville Corporation and Schuller International, Inc., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Kenneth G. Gilman, Gilman & Pastor, Boston, MA, David J. Guin, Donaldson, Guin & Slate, P.C., Birmingham, AL, for Sebago, Inc.
Brian J. Donnell, Kevin M. Roache, Halloran & Sage, Hartford, CT, John A. Childers, Johnson & Bell, Ltd., Chicago, IL, Thomas J. Burgunder, Beazer East, Inc., Pittsburgh, PA, for Beazer East, Inc.
Thomas J. Dougherty, Skadden, Arps, Slate, Meagher & Flom, Boston, MA, Curtis M. Canton, Paul W. Sugarman, Heller, Ehrman, White & McAuliffe, San Francisco, CA, Robert D. Batson, Schuller International, Inc., Denver, CO, for Manville Corp., Schuller International, Inc.
Plaintiffs Sebago, Inc. ("Sebago"), and Robert Karam, Michael Biszko and Alan Biszko doing business as Flint Village Plaza ("the Flint Village plaintiffs") brought this case, individually and as the representatives of a proposed class of plaintiffs, against defendants Beazer East, Inc. ("Beazer") and Manville Corp. ("Manville"). Plaintiffs base their action upon defendants' alleged misrepresentations regarding phenolic foam roof insulation ("PFRI"), and upon various defects in the design of PFRI, which defendants developed, marketed and manufactured.1 The Second Amended and Consolidated Complaint alleges violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c); RICO conspiracy, 18 U.S.C. § 1962(d); fraud; negligent misrepresentation; negligence; breach of express warranty; breach of implied warranties; violation of deceptive trade practices statutes, and strict product liability. Defendants have filed motions to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). For the reasons stated below, the court is denying in part and allowing in part the defendants' motions to dismiss.
More specifically, both defendants' motions to dismiss are being allowed as to plaintiffs' negligent misrepresentation claim (Count IV), negligence claim (Count V), and strict product liability claim (Count IX). Both defendants' motions to dismiss are being denied as to plaintiffs' RICO claim (Count I) and the RICO conspiracy claim (Count II). Both defendants' motions to dismiss the deceptive trade practices claim (Count VIII) are denied as to the Flint Village plaintiffs and allowed as to Sebego. Defendant Manville's motions to dismiss are being allowed as to the fraud claim (Count III) and the breach of express warranty claim (Count VI). Defendant Koppers' motions to dismiss the fraud claim (Count III) are denied as to the Flint Village plaintiffs and allowed as to Sebego. Defendant Koppers' motions to dismiss the breach of express warranty claim are denied as to Sebego and allowed as to the Flint Village plaintiffs. As a result, no party is dismissed from this action. A scheduling conference will held on May 12, 1998, at 4:00 p.m.
The facts as presented here are drawn from the allegations in the Second Amended and Consolidated Complaint ("Compl.") and do not constitute findings by the Court. Plaintiff Sebago, a Maine corporation, owns a building which serves as its headquarters in Gorham, Maine. Compl., ¶ 21. Plaintiff Robert Karam, a resident of Massachusetts, and plaintiffs Michael and Alan Biszko, residents of Rhode Island, are the owners of Flint Village Plaza, a shopping center located in Fall River, Massachusetts. Id. at ¶ 22.
Defendant Beazer is a Delaware corporation with its principal place of business in Pennsylvania. Id. at ¶ 23. It is the successor in interest to Koppers Company, Inc., a Delaware corporation (collectively, "Koppers"). Manville Corp. and Schuller International, Inc. (collectively, "Manville") are Delaware corporations with principal places of business in Colorado. Schuller is a wholly-owned subsidiary of Manville. Id.
PFRI is a thermal insulation product intended for use in flat and low slope roofing systems. Id. at ¶¶ 1, 3. Once exposed to moisture, PFRI degrades and releases an acidic leachate, which, over time, causes severe corrosion to the metal components of roofing systems, resulting in property damage and a risk of personal injury from collapsing structures. Id. at ¶¶ 2, 15. The defendants knew most property owners — including plaintiffs and other class members — ordinarily rely upon their contractor, builder, roofing contractor or other "specifier" of building products (collectively, "Specifiers") to determine the appropriate type of insulation. Id. at ¶ 3. During the class period, defendants possessed detailed technical information indicating that PFRI was highly corrosive and unfit for its intended purposes as roof insulation. Id. at ¶¶ 31-32, 49. The defendants nonetheless manufactured and sold the product. Id. at ¶¶ 1, 2, 34-35, 48, 59-62.
The defendants also engaged in an intentional campaign of false advertising by publishing brochures that deceived the general public and the roofing industry about the properties of PFRI. Id. at ¶ 3. In addition, the defendants published their brochure in Sweet's Catalog, a multi-volume set of books distributed nationally to Specifiers. By failing to disclose PFRI's defects, the defendants also obtained the imprimatur of national organizations that rate building products. Id. at ¶¶ 10-13. As a result, PFRI was installed in thousands of buildings across the country. Id. at ¶¶ 3-6, 48.
Defendant Manville designed and supplied Koppers with fiber glass facers, which comprise the front and back of the PFRI, no later than 1985. Id. at ¶ 27. In addition, Manville actively worked with Koppers in the development, testing, manufacturing, marketing, and distribution of PFRI products no later than 1986. Id. at 28. Defendants formalized this relationship by establishing the MA-KO Insulation Company in October of 1987. Id. The PFRI installed on both plaintiffs' buildings contains a fiber glass facer manufactured by Manville. Id. at ¶ 76.
In 1987 or 1988, the prior owner of Sebago's corporate headquarters building purchased and installed PFRI in its roof as part of a renovation. Id. at ¶ 73. Plaintiffs allege that defendants "fraudulently induced" the manufacturer of the roof membrane of Sebego's building — Cooley Roofing Systems, Inc. — to approve the use of PFRI. Id. at ¶ 74. Sebago claims the PFRI and fiberglass facer caused approximately $100,000 in damage to its property. Id. at ¶ 75.
The Flint Village plaintiffs developed the Flint Village Plaza in Fall River, Massachusetts in 1987, and served as the general contractor. Id. at ¶ 78. The Flint Village plaintiffs' roofing subcontractor, Galego Roofing Systems, Inc., sent the plaintiffs a Koppers brochure. See id. at ¶¶ 5, 7, 8. Biszko read and reviewed the Koppers brochure sent by Galego, and reviewed the 1987 Sweet's Catalog File regarding Kopper's PFRI. Id. at ¶ 78. Plaintiffs allege that:
[i]n direct reliance on the Defendants' claims as to the suitability of using their PFRI product in flat or lowslope roof systems, and in reliance on the approval given to PFRI by the manufacturer of their roof membrane ..., they and their partner, Plaintiff Karam, purchased and installed PFRI in the roof assembly of the Flint Village Plaza in the fall of 1987.
Id. at ¶ 79. The Flint Village plaintiffs claim that the PFRI and fiberglass facer caused damages, amounting to several hundred thousand dollars, which include damage to their and their tenants' property, lost rents, and diminution in the shopping plaza's value. Id. at ¶ 80.
Sebago initiated this action on January 12, 1996, by filing a diversity-based nationwide class action complaint. On March 29, 1996, counsel for Sebago filed an identical action on behalf of the Flint Village plaintiffs. Defendants moved to dismiss both complaints on various grounds. By stipulation and order dated July 1, 1996, the two actions were consolidated. On July 15, 1996, plaintiffs filed an amended and consolidated class action complaint. On August 8, 1996, defendants filed motions to dismiss this complaint and to stay discovery pending resolution of the motions to dismiss. Plaintiffs filed a consolidated opposition to the motions to dismiss and motion to stay discovery on October 31, 1996, and defendants replied on December 13, 1996. The motion to stay discovery was allowed on March 5, 1997.
Following a hearing on defendants' motions to dismiss on April 16, 1997, the Court ordered the plaintiffs to file a further amended complaint by May 16, 1997, to cure defects identified by the defendants. Plaintiffs served the Complaint on May 19, 1997. Defendants' four motions to dismiss followed. A further hearing was held on January 28-29, 1998.
"In considering a motion to dismiss, a court must take the allegations in the complaint as true and must make all reasonable inferences in favor of the plaintiffs." Watterson v. Page, 987 F.2d 1, 3 (1st Cir.1993). "A complaint should not be dismissed for failure to state a claim unless it appears beyond a reasonable doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Miranda v. Ponce Federal Bank, 948 F.2d 41, 44 (1st Cir.1991) (quoting Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
The standard for stating a claim upon which relief can be granted is not, however, "toothless." Dartmouth Review...
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