Wilson v. Metals, United States, Inc.
| Decision Date | 12 July 2017 |
| Docket Number | No. 2:12-cv-568-KJM-DB,2:12-cv-568-KJM-DB |
| Parties | JAMES WILSON, an individual, and JACK WHITE, an individual, on behalf of themselves and all others similarly situated, Plaintiffs, v. METALS, USA, INC., a Delaware Corporation, and DOES 1-100, inclusive, Defendant. |
| Court | U.S. District Court — Eastern District of California |
A class of homeowners sues a roofing tile manufacturer for allegedly defective tiles. Defendant Metals USA, Inc. ("Metals"), the alleged successor to the company that manufactured the tiles, brings this motion for summary judgment or, in the alternative, partial summary judgment. Mot., ECF No. 102. The representatives of the class, plaintiffs James Wilson and Jack White, oppose the motion. Opp'n, ECF No. 105. Metals replied. Reply, ECF No. 106. The court held a hearing on November 18, 2016, at which Richard Lambert appeared for plaintiffs and Bartholomew Dalton, Adrian Sawyer and Frank Busch appeared for Metals. Hr'g Mins., ECF No. 108. As explained below, the court DENIES the motion.
/////
/////
Plaintiffs filed the original complaint on March 5, 2012 against 604471 Ontario, Inc., a Canadian corporation formerly known as Dura-Loc Roofing Systems Limited ("Dura-Loc"), and Allan Reid, a principal of Dura-Loc. Compl. at 1-2, ECF No.1. After Dura-Loc filed for bankruptcy in Canada in April 2012, plaintiffs filed a first amended complaint on May 5, 2012, against Metals, the alleged successor of Dura-Loc, and Reid. First Am. Compl. ("FAC") at 9 n.2, ECF No. 11. Metals moved to dismiss for failure to state a claim on July 9, 2012, and Reid moved to dismiss for lack of personal jurisdiction on August 18, 2012. ECF Nos. 15, 22. The court granted Metals's motion, ECF No. 31, and sua sponte dismissed the complaint for failure to join 604471 Ontario, Inc. as a necessary party, ECF No. 34. Plaintiffs filed a second amended complaint on May 8, 2013, against Metals only. Second Am. Compl. ("SAC"), ECF No. 49. The court denied Metals's motion to dismiss this complaint. ECF Nos. 50, 57.
Plaintiffs filed the operative third amended complaint on June 29, 2015, asserting four claims against Metals: (1) breach of express warranties under California Civil Code §§ 1790 et seq.; (2) breach of express warranties under California Commercial Code §§ 2313 et seq.; (3) violations of the California Consumer Legal Remedies Act, California Civil Code §§ 1750 et seq.; and (4) violations of California Unfair Competition Law, California Business and Professions Code § 17200. Third Am. Compl. ("TAC") ¶¶ 48-55, ECF No. 78. On July 5, 2016, the court granted plaintiffs' motion to certify their second express warranties claim for class treatment. Mot. Class Cert., ECF No. 81; Cert. Order, ECF No. 93.1
On September 4, 2016, Metals filed the instant motion for summary judgment or, in the alternative, partial summary judgment. See Mot.
/////
/////
The parties raise several objections to each other's proffered statements of undisputed facts. See Def.'s Statement of Undisputed Facts ("DSUF"), ECF No. 102-2; Pls.' Response to DSUF, ECF No. 105-1 (objecting to DSUF 1, 29); Pls.' Statement of Undisputed Facts ("PSUF"), ECF No. 105-1; Def.'s Objs., ECF No. 106-3 (objecting to PSUF 169, 184). The court does not rely on most of the material a party finds objectionable and therefore addresses only relevant objections below, in the course of reviewing the facts of the case.
When considering a motion for summary judgment, the court relies on whatever facts are undisputed and otherwise considers the evidentiary record in the light most favorable to the party opposing the motion. See, e.g., A.G. v. Paradise Valley Unified Sch. Dist. No. 69, 815 F.3d 1195, 1202 (9th Cir. 2016). The following facts are not disputed unless otherwise noted.
A few details about Dura-Loc and its roofing tiles help set the stage. Dura-Loc started its business in Ontario, Canada in 1984. TAC Ex. D ("Reid Decl.") ¶ 15. Between 1985 and 2006, Dura-Loc manufactured part-metal, part-stone, layered roofing tiles. Id.; see also Stonebarger Decl. Ex. D, at MUSA 003923, ECF No. 81-3. The tiles' top sides, which were the sides eventually exposed to the elements, were coated with crushed stone chips, granules of "Colorquartz Aggregate" manufactured by 3M. See Dalton Decl. (Class Cert.) Exs. B, D, ECF No. 82-2. Each tile is just over four feet wide and about fifteen inches long. Stonebarger Decl. Ex. D, at MUSA 003923. When installed on a roof, each tile overlaps with adjacent tiles to protect the structure below. Id.
In 2006, the year Metals purchased Dura-Loc's assets, Dura-Loc employed about fifty people, and Allan Reid was Dura-Loc's president and director. Reid Decl. ¶ 15. Before the 2006 asset sale, Reid had been a member of Dura-Loc's board of directors for over ten years and owned about thirty percent of its voting shares. Id. ¶ 18.
/////
/////
In May 2006, Metals purchased a majority of Dura-Loc's assets for $9.4 million. DSUF 1; see also TAC Ex. H ("Purchase Agreement"). At the time, the purchase price was nearly $1.6 million less than Dura-Loc's gross sales in 2005 and nearly $2.1 million less than Dura-Loc's projected total sales for 2006. PSUF 122-23.
Under the Purchase Agreement, Metals and Dura-Loc initially agreed to jointly administer a warranty program and share certain defined "Warranty Costs." DSUF 3. Metals and Dura-Loc split the Warranty Costs using a sliding scale, with Dura-Loc agreeing to pay an increasing share of the Warranty Costs as the total annual claims increased. DSUF 4-5; see also Purchase Agreement §§ 2.9-2.10. At the extremes, Metals agreed to pay 100 percent of the total warranty costs between $0 and $65,000 in annual claims, and Dura-Loc agreed to pay 100 percent of the total warranty costs for total annual claims above $260,000. Id. Metals's maximum possible annual warranty cost-sharing liability was $161,000. DSUF 4. The parties dispute whether, aside from the cost-sharing arrangement under the Purchase Agreement, warranty liability for Dura-Loc tiles rested solely with Dura-Loc. Compare DSUF 6, with PSUF 133.
In addition, as part of the Purchase Agreement, Metals paid $500,000 into an escrow account to satisfy any future claims Metals might raise for breaches of the covenants, representations and warranties in the Purchase Agreement, or Warranty Costs incurred outside the warranty cost sharing agreement. PSUF 137. As part of the Purchase Agreement, Metals also employed Reid, one of Dura-Loc's principals, whose responsibilities with Metals included investigating warranty claims. PSUF 138.
Before executing the Purchase Agreement, Metals reviewed Dura-Loc's operations and information about the warranty claims Dura-Loc's purchasers had made. PSUF 140. Metals's due diligence report reflects the following number of warranty claims in each year reviewed: 56 claims in 2000; 40 claims in 2001; 43 claims in 2002; 43 claims in 2003; 37 claims in 2004; and 77 claims in 2005. TAC Ex. Q. Metals also reviewed information regarding seven pending lawsuits against Dura-Loc, which Metals concluded were "all . . . related to product quality or installation." PSUF 142; TAC Ex. L. In one suit, a purchaser alleged the granularcoating of his tiles was coming off prematurely due to a manufacturing or materials defect. PSUF 143; TAC Ex. M.
After the asset sale, Dura-Loc ceased manufacturing, marketing and selling the tiles and changed its name to 604471 Ontario Inc. PSUF 139; Reid Decl. ¶ 14.
Soon after the asset sale, conflict arose between Dura-Loc and Metals. Metals became aware of seventy-four total warranty claims on the tiles in 2006, nearly all of which were for granule loss. PSUF 147; TAC Exs. Q, T, K. Metals alleged that Dura-Loc, Reid and Spriet, another principal of Dura-Loc whom Metals never employed, all had significantly underrepresented the extent of customer complaints and warranty claims regarding Dura-Loc products in breach of their contractual obligations to Metals under the Purchase Agreement. PSUF 151; TAC Exs. B, R. Specifically, according to Metals, Dura-Loc underrepresented the extent of its tile degranulation issues. PSUF 148.
Around June 1, 2007, approximately a year after the Purchase Agreement was signed and apparently prior to any litigation, Metals settled with Dura-Loc, Reid and Spriet ("Settlement Agreement"). DSUF 7. Under the Settlement Agreement, Dura-Loc paid Metals $450,000 (CDN2) and assumed sole administrative responsibility for "handling and resolving" outstanding, pending and future warranty claims. DSUF 8; TAC Ex. U. Dura-Loc, Reid and Spriet also released Metals from various obligations in the Purchase Agreement, such as responsibility for costs associated with warranty administration, and Metals released Dura-Loc, Reid and Spriet from liability for certain alleged misrepresentations and nondisclosures. DSUF 8; TAC Ex. U.
After the parties executed the Settlement Agreement, problems with the performance by Dura-Loc, Reid and Spriet of their ongoing warranty obligations persisted. On April 26, 2011, Metals filed a suit in the Ontario (Canada) Superior Court of Justice claiming damages for lost sales, injury to Metals's reputation and goodwill and legal costs. DSUF 9-10.Metals's allegations included its dissatisfaction with Dura-Loc's disclosure of relevant warranty issues. DSUF 11; TAC Ex. B at 13-15. A little over a month later, the parties amended their earlier Settlement Agreement ("Amendment"). DSUF 12. Under the Amendment, Metals received $845,055.75 (CDN): $345,055.75 (CDN) from the remaining Escrow Amount, $350,000 (CDN) from Dura-Loc, and $150,000 (CDN) from Reid and Spriet. DSUF 12; PSUF 167. Metals released Reid and Spriet from all liability. DSUF 12; TAC Ex. Z.
In June 2004, plaintiff James Wilson...
To continue reading
Request your trial