A Defective Products Class Action Fails for a Unique Reason

Gonzalez v. Owens Corning, ___ F.3d ___ (3d Cir. 2018).  This putative class action case, brought by consumers in four states, asserted that “Oakridge” roof shingles sold by defendants (“Owens Corning”) were defective, and that defendants misrepresented the shingles’ useful life.  The District Court denied plaintiffs’ motion for class certification.  Plaintiffs sought interlocutory review of that ruling under Federal Rule of Civil Procedure 23(f), which the Third Circuit granted.   With Judge Hardiman writing for the panel, the Third Circuit affirmed the denial of class certification, applying the abuse of discretion standard of review that applies to decisions regarding class certification.

Plaintiffs sought several different classes: a nationwide class under Rules 23(b)(1) and/or (b)(2), and a four-state class under Rule 23(b)(3).  As an alternative to the latter, plaintiffs also requested an issues class under Rule 23(c)(4).  None of those requests succeeded.

The nationwide class was sought because of the alleged risk of inconsistent judgments arising out of Owens Corning’s reorganization after bankruptcy proceedings.  For plaintiffs, a key common question was “what legal standard governs the dischargeability of claims against Owens Corning?”  Owens Corning stated that it would not raise a dischargeability defense.  Judge Hardiman ruled that the nationwide class could not be certified because that question was not justiciable, since there was “no actual controversy between the parties,” but only a potential dispute that would arise if Owens Corning did assert a dischargeability defense.  Article III of the United States Constitution, which limits courts’ power to “Cases and Controversies,” made any ruling on the issue projected an improper advisory opinion.  Thus, plaintiffs could not satisfy the commonality criterion of Rule 23, and the nationwide class was properly denied.

Plaintiffs’ request for a four-state damages class under Rule 23(b)(3) foundered for a different reason: there were “23 types of Oakridge shingles designed according to 500 different specifications,” and plaintiffs did not allege that every shingle was defective.  Rather, plaintiffs admitted “that a great many Oakridge shingles will last through the end of their warranty periods, and that a shingle-by-shingle inspection is necessary to distinguish ones that are likely to fail before the end of their warranty periods from ones that are likely to perform as expected (i.e., that are not defective).”

Judge Hardiman distinguished this case from those involving washing machines that accumulated mold due to an alleged design defect, upon which plaintiffs here relied.  The washing machine cases involved a latent defect that “was allegedly present in all washing machines manufactured under a particular line, even if the defect had not yet manifested itself.”  In contrast, plaintiffs here did not identify a defect, latent or otherwise, that affected or would subsequently affect (once it manifested) all Oakridge shingles.

Plaintiffs also contended that the District Court had improperly considered the merits of their case, in contravention of Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 568 U.S. 455 (2013).  The District Court did rather aggressively reject plaintiffs’ defect theory, leading to what plaintiffs called that court’s “obsession with the merits.”  But Judge Hardiman found no error.  District courts may “delve beyond the pleadings,” he noted, and the District Court here did nothing more than the “rigorous analysis” of the Rule 23 factors that courts are mandated to perform.

Given that analysis, the panel dealt very tersely with plaintiffs’ argument for an issues class under Rule 23(c)(4).  “Unlike a situation in which a Rule 23(c)(4) class might be appropriate because liability is capable of classwide treatment but damages are not, Plaintiffs offer no theories of liability for which class treatment is apt.”  The District Court thus did not abuse its discretion in denying an issues class.

Finally, plaintiffs objected to the District Court’s exclusion of their expert.  Judge Hardiman found no reason to address that issue, since even if all of that expert’s testimony were admissible, “Plaintiffs would not have been able to cure their inability to identify a meaningful defect in Oakridge shingles susceptible to classwide evidence.”

In short, plaintiffs lost on class certification because they were in an unusual situation:  their claim was that some, or even many, but not all of the shingles were defective.  Without being able to allege or show that all the shingles had a defect, whether manifested or latent, plaintiffs went down to defeat.  In most products cases, however, plaintiffs have expert testimony that shows that all of the products have a defect that will (if it has not already) manifest itself to the detriment of plaintiffs and class members.  Thus, the effect of this opinion is likely to be limited.

I held back reporting on this decision in order to see whether plaintiffs would seek rehearing or en banc review.  They have now done so, based on the Amgen issue.  Though the rate of granting en banc review in the Third Circuit is not high, this might be a case where such review would be appropriate.

 

 

 

 

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