Summary
In Freeman, the court concluded that certain plaintiffs' express warranty claims failed because those plaintiffs "did not satisfy the condition that they send potentially defective products to [the defendant] for inspection"; thus, the defendant "could not possibly have breached the terms of the express warranty" with respect to those plaintiffs because the defendant's "duty to perform never arose."
Summary of this case from Hurry v. Gen. MotorsOpinion
Case No.: 5:18-cv-00205-LCB
2020-09-24
Jason FREEMAN, et al., Plaintiffs, v. NIBCO, INC., Defendant.
David Horsley, H. Arthur Edge PC, H. Arthur Edge, III, Arthur Edge, III, P.C., John David Lawrence, Kirby D. Farris, Farris, Riley & Pitt, LLP, Birmingham, AL, for Plaintiffs Jason Freeman, Shana Freeman, Joe Garcia, Sandra Garcia, Amelia Law, Perry Law, Alphenso McFarlin, Pauline McFarlin, Betty Lovelace, Jeff McQuillan, Gregory Skaff, Kimberly Skaff, Treva Slaughter, Irving Slaughter, Eveline Picerno, Salvatore Picerno, Charles Mason, Heather Mason, Derrick Williams, Felicia Williams, Tamara Cumberland, Derrick Cumberlander, Premier Business Properties Inc. Franco A. Corrado, Pro Hac Vice, Morgan Lewis & Bockius LLP, Philadelphia, PA, Gregory S. Ritchey, Ritchey Law Firm, PLLC, Birmingham, AL, for Defendant.
David Horsley, H. Arthur Edge PC, H. Arthur Edge, III, Arthur Edge, III, P.C., John David Lawrence, Kirby D. Farris, Farris, Riley & Pitt, LLP, Birmingham, AL, for Plaintiffs Jason Freeman, Shana Freeman, Joe Garcia, Sandra Garcia, Amelia Law, Perry Law, Alphenso McFarlin, Pauline McFarlin, Betty Lovelace, Jeff McQuillan, Gregory Skaff, Kimberly Skaff, Treva Slaughter, Irving Slaughter, Eveline Picerno, Salvatore Picerno, Charles Mason, Heather Mason, Derrick Williams, Felicia Williams, Tamara Cumberland, Derrick Cumberlander, Premier Business Properties Inc.
Franco A. Corrado, Pro Hac Vice, Morgan Lewis & Bockius LLP, Philadelphia, PA, Gregory S. Ritchey, Ritchey Law Firm, PLLC, Birmingham, AL, for Defendant.
MEMORANDUM OPINION AND ORDER
LILES C. BURKE, UNITED STATES DISTRICT JUDGE
The Plaintiffs are 24 individuals and one business that own houses containing allegedly defective plumbing products manufactured by the Defendant, NIBCO, Inc. The Plaintiffs assert five causes of action against NIBCO: negligence/wantonness based on failure to warn of allegedly known defects in the plumbing products (Count I) (Doc. 58, p. 21); negligence/wantonness based on design defects (Count II) (Doc. 58, p. 22); general negligence/wantonness (Count III) (Doc. 58, p. 23); breach of warranties (Count IV) (Doc. 58, p. 24); and products liability pursuant to the Alabama Extended Manufacturer's Liability Doctrine (Count V) (Doc. 58, p. 25). Presently before the Court is NIBCO's motion to dismiss the Plaintiffs’ third amended complaint (Doc. 59) and NIBCO's motion for partial summary judgment as to Count IV and Count V in the third amended complaint (Doc. 75). For the reasons stated below, the Court finds that both the motion to dismiss and the motion for partial summary judgment are due to be granted in part and denied in part.
I. BACKGROUND
NIBCO manufactures and sells cross-linked polyethylene ("PEX") plumbing tubes and fittings used to construct a plumbing system. (Doc. 58, ¶ 19). NIBCO markets its PEX products as exceptionally durable because of the way the company alters the molecular structure of the polyethylene in its products. (Doc. 58, ¶ 20).
NIBCO's PEX tubes come with an express limited warranty:
NIBCO INC. warrants that when NIBCO® PEX tube is used with NIBCO® PEX fittings, and NIBCO® valves and installation accessories, they will, under normal conditions, use and service in potable water and radiant heat systems, be free from defects in materials and workmanship for a period of twenty-five (25) years from the date of purchase when installed by a licensed professional contractor.
(Doc. 75-3, p. 2). A 10-year warranty replaces the 25-year warranty if the PEX tubes are used with non-NIBCO products in the PEX system. (Doc. 75-3, p. 2). And a separate 10-year warranty applies to NIBCO PEX fittings. (Doc. 75-3, p. 2).
The express limited warranty states how owners can obtain service under the warranty:
In the event any defect occurs which the owner believes is covered by this warranty, the owner should immediately contact NIBCO Technical Services, either in writing or by telephone .... The owner will be instructed to return said tube, fittings or accessories, at the owner's expense, to NIBCO, INC., or an authorized representative for inspection. In the event said inspection discloses to the satisfaction of NIBCO INC. that said tube, fitting or accessory is defective, a replacement shall be mailed free of charge to the owner.
(Doc. 75-3, p. 2).
The Plaintiffs own houses located in a subdivision in Madison County, Alabama. (Doc. 58, ¶ 48). NIBCO's PEX products were installed in each house during construction. (Doc. 58, ¶ 49). None of the Plaintiffs purchased the PEX products themselves; rather, their homebuilders contracted with NIBCO for the PEX products that they installed in the houses, and the Plaintiffs then purchased the houses. (Doc. 58, ¶ 48; Doc. 64, p. 6).
The Plaintiffs contend that "[o]ver the course of occupancy of the homes, Plaintiffs have experienced leaks in the PEX piping and as a result, have experienced damage to the homes akin to flooding, mold, and property damage, including but not limited to drywall, flooring, and cabinetry." (Doc. 58, ¶ 50). They allege that NIBCO is liable for the following damages caused by the leaks: diminution in the value of their houses; costs to repair the property and structure of the houses; alternative living expenses while repairs were made; costs of mold abatement; mental anguish and emotional distress; and costs to replace defective plumbing products. (Doc. 58, ¶ 52). In their three counts for negligence/wantonness, the Plaintiffs contend that NIBCO is liable for their damages because of the company's failure to warn them of known defects in the PEX products, defective design of the products, and breach of the duty to exercise reasonable care not to subject the Plaintiffs and their property to harm. (Doc. 58, pp. 21–23). In Count IV, the Plaintiffs assert that they are intended third-party beneficiaries of NIBCO's warranties that covered the PEX products, and that NIBCO breached those warranties by "failing to design, manufacture, market and distribute a product free of defects," and by failing to replace the PEX products. (Doc. 58, pp. 24–25). And in Count V, the Plaintiffs assert that NIBCO is liable for their damages under the AEMLD. (Doc. 58, pp. 25–26).
NIBCO has filed a motion to dismiss the third amended complaint in its entirety. (Doc. 59). NIBCO also has filed a motion for partial summary judgment as to Count IV (breach of warranty) and Count V (AEMLD). (Doc. 75). So the two motions partially overlap. The motion for partial summary judgment as to Count IV and Count V supersedes the motion to dismiss those two counts, so the Court will address Count IV and Count V with respect to NIBCO's motion for partial summary judgment. See Al-Rayes v. Willingham , No. 3:15-CV-107-J-34JBT, 2017 WL 2470943, at *5 (M.D. Fla. May 17, 2017) ("When the same arguments are raised in a pending motion to dismiss and a pending motion for summary judgment, several district courts within the Eleventh Circuit have concluded that it is appropriate to address the arguments in the context of the summary judgment motion.") (collecting cases); Bodiford v. State of Ala. , 854 F. Supp. 886, 888 (M.D. Ala. 1994) ("Because the motions to dismiss involve the same issues and arguments addressed in defendants’ motion for summary judgment, the court will consolidate the motions to dismiss with the motion for summary judgment and address the motions simultaneously as a motion for summary judgment."). NIBCO has not moved for summary judgment on Counts I, II, or III, so the Court will address those counts only with respect to NIBCO's motion to dismiss.
II. STANDARDS OF REVIEW
This memorandum opinion addresses both a Rule 12(b)(6) motion to dismiss and a Rule 56 motion for partial summary judgment. Different standards of review apply to the motions.
A. Standard of Review – Motion to Dismiss
Federal Rule of Civil Procedure Rule 8(a)(2) mandates that a pleading contains "a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). A pleading does not have to include "detailed factual allegations" to survive. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). However, a complaint cannot simply have "a formulaic recitation of the elements of a cause of action." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal , 556 U.S. at 678, 129 S. Ct. 1937.
A defendant can move to dismiss a complaint when he believes it is deficient. Rule 12(b)(6) allows defendants to request that the court dismiss a case for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). To survive a motion to dismiss, a plaintiff must "state a claim to relief that is plausible on its face." Iqbal , 556 U.S. at 678, 129 S. Ct. 1937 (quoting Twombly , 550 U.S. at 570, 127 S. Ct. 1955 ). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S. Ct. 1937.
When reviewing a motion to dismiss, the court "accept[s] the allegations in the complaint as true and construe[s] them in the light most favorable to the plaintiff." Hunt v. Aimco Properties , 814 F.3d 1213, 1221 (11th Cir. 2016). The court is not bound to accept the plaintiff's allegations as true if they are legal conclusions. Iqbal , 556 U.S. at 678, 129 S. Ct. 1937.
B. Standard of Review – Motion for Summary Judgment
Under Federal Rule of Civil Procedure 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The party asking for summary judgment always bears the initial responsibility of informing the court of the basis for its motion and identifying those portions of the pleadings or filings which it believes demonstrate the absence of a genuine issue of material fact. Id. at 323, 106 S. Ct. 2548. Once the moving party has met its burden, Rule 56(c) requires the non-moving party to go beyond the pleadings and -- by pointing to affidavits, or depositions, answers to interrogatories, and/or admissions on file -- designate specific facts showing that there is a genuine issue for trial. Id. at 324, 106 S. Ct. 2548.
The substantive law will identify which facts are material and which are irrelevant. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986) (" Anderson "). All reasonable doubts about the facts and all justifiable inferences are resolved in favor of the non-movant. See Allen v. Bd. of Pub. Educ. for Bibb Cty. , 495 F.3d 1306, 1314 (11th Cir. 2007) ; Fitzpatrick v. City of Atlanta , 2 F.3d 1112, 1115 (11th Cir. 1993). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson , 477 U.S. at 248, 106 S. Ct. 2505. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. See id. at 249, 106 S. Ct. 2505.
When faced with a "properly supported motion for summary judgment, [the non-moving party] must come forward with specific factual evidence, presenting more than mere allegations." Gargiulo v. G.M. Sales, Inc. , 131 F.3d 995, 999 (11th Cir. 1997). As Anderson teaches, under Rule 56(c) a plaintiff may not simply rest on her allegations made in the complaint; instead, as the party bearing the burden of proof at trial, she must come forward with at least some evidence to support each element essential to her case at trial. See Anderson , 477 U.S. at 252, 106 S. Ct. 2505. "[A] party opposing a properly supported motion for summary judgment ‘may not rest upon the mere allegations or denials of [her] pleading, but ... must set forth specific facts showing that there is a genuine issue for trial.’ " Id. at 248, 106 S. Ct. 2505 (citations omitted).
"[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson , 477 U.S. at 249, 106 S. Ct. 2505. "Essentially, the inquiry is ‘whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law.’ " Sawyer v. Southwest Airlines Co. , 243 F. Supp. 2d 1257, 1262 (D. Kan. 2003) (quoting Anderson , 477 U.S. at 251–52, 106 S.Ct. 2505 ); see also LaRoche v. Denny's, Inc. , 62 F. Supp. 2d 1366, 1371 (S.D. Fla. 1999) ("The law is clear ... that suspicion, perception, opinion, and belief cannot be used to defeat a motion for summary judgment.").
III. DISCUSSION – MOTION TO DISMISS
A. Motion to Dismiss Claims of 20 Plaintiffs as a Matter of Course
NIBCO first contends that the parties stipulated to the dismissal of two Plaintiffs whom the Court should dismiss entirely. NIBCO also contends that the Court should dismiss the non-warranty claims (Counts I, II, III, and V) brought by 18 other Plaintiffs as a matter of course because, according to NIBCO, the Plaintiffs conceded those claims. (Doc. 60, p. 7).
The issue of the Plaintiffs’ prior concessions arises from an unordinary procedural history. On August 16, 2018, the Court, in response to issues raised by NIBCO in its motion to dismiss the Plaintiffs’ first amended complaint, ordered the parties to confer and file a joint status report addressing their respective positions on the timeliness of each Plaintiff's claims, whether each Plaintiff presented a warranty claim to NIBCO, the status of any such warranty claims, "[w]hat, if any, claims have been presented to Defendant," and whether each Plaintiff was the first purchaser of their house. (Doc. 29, ¶ 2.a.). The Court sought to streamline the issues in this case because, as stated in NIBCO's motion to dismiss the first amended complaint, and as this Court and the Alabama Supreme Court have stated, Alabama law requires buyers to notify sellers of a breach of warranty before suing for breach of warranty. See (Doc. 21, pp. 16–17); Parker v. Bell Ford, Inc. , 425 So. 2d 1101, 1102 (Ala. 1983) ("This court, on several occasions, has characterized notice, such as required by [Ala. Code] § 7–2–607, as a condition precedent to recovery [for breach of warranty]."); Fowler v. Goodman Mfg. Co. LP , No. 2:14-CV-968-RDP, 2014 WL 7048581, at *5 (N.D. Ala. Dec. 12, 2014) ("Under Alabama law, a buyer must provide notice to a seller before suing for breach of warranty. Ala. Code § 7–2–607(3)(a). Notice is a condition precedent to any claim for breach of warranty.") (citing Consolidated Pipe and Supply Co., Inc. v. Stockham Valves and Fittings, Inc. , 365 So. 2d 968 (Ala. 1978) ).
The parties responded to the Court's order with a joint status report filed on November 5, 2018. (Doc. 33). In it, the parties agreed that "[n]o claims were made with NIBCO" with respect to several Plaintiffs’ breach of warranty claims, or, stated differently, that several Plaintiffs "have not filed any claims with NIBCO." (Doc. 33, pp. 1–3). The parties agreed that only two pairs of Plaintiffs made any claims with NIBCO before suing for breach of warranty: Jason and Shana Freeman, and Joe and Sandra Garcia. (Doc. 33, ¶¶ 1–2). So, according to the joint status report, 21 of the 25 Plaintiffs in this case did not make any claims with NIBCO before suing for breach of warranty.
Also, in their joint status report, the parties stated "the only claim they can maintain is for a breach of warranty" with respect to 20 Plaintiffs: Joe and Sandra Garcia; Charles Kennedy and Diane Imken; Perry and Amelia Law; Alphenso and Pauline McFarlin; Jeff McQuillan and Betty Lovelace; Gregory and Kimberly Skaff; Derrick and Tamara Cumberlander; Salvatore and Eveline Picerno; Charles and Heather Mason; and Derrick and Felicia Williams. (Doc. 33, ¶¶ 2–6, 8–12). In other words, the parties agreed that only five Plaintiffs—Jason and Shana Freeman, Premier Business, and Irving and Treva Slaughter—could maintain claims other than breach of warranty. At that time, all Plaintiffs had alleged claims for negligence/wantonness, fraud, suppression, breach of warranties, and AEMLD products liability. See (Doc. 8, pp. 16–20).
At the end of their joint status report, the parties stated that "Plaintiffs are in the process of amending their complaint in order to comply with the above listed claims," and noted that the Plaintiffs would then file a new amended complaint. (Doc. 33, p. 3). That new amended complaint, presumably, would comply with the parties’ agreement that 20 Plaintiffs could not maintain any non-warranty claims and that only four Plaintiffs made claims with NIBCO before filing suit. The Plaintiffs’ second amended complaint partially complied with their concessions in the joint status report. They eliminated the negligence/wantonness and AEMLD claims for 18 Plaintiffs, two less than agreed (Gregory and Kimberly Skaff were the two Plaintiffs still included). See (Doc. 38, pp. 16–17, 19). And all of the Plaintiffs repleaded their breach of warranty claims, demonstrating the Plaintiffs’ belief that they can maintain a breach of warranty claim even though most of them did not give pre-suit notice to NIBCO. See (Doc. 38, p. 18).
The composition of the Plaintiffs continued to change. On October 10, 2019, the Plaintiffs stipulated to the dismissal of Charles Kennedy and Diane Imken because those two did not opt out of a related class action case in the U.S. District Court for the District of New Jersey. (Doc. 55, ¶ 2).
Then the Plaintiffs had to again amend their complaint. On November 4, 2019, the Court, on NIBCO's motion to dismiss or for more detailed statement, ordered the Plaintiffs to file a third amended complaint. (Doc. 56). In that order, the Court noted that the second amended complaint did not specifically identify which factual allegations supported each cause of action and contained conflicting allegations about which company constructed the Plaintiffs’ homes, which was "a typographical error about a material fact that has persisted through several iterations of the Plaintiffs’ complaint." (Doc. 56, p. 3). The Court cautioned that "[t]he Plaintiffs should take great care to ensure that future pleadings do not contain such errors, especially when the errors have been pointed out by opposing counsel in prior motions. See (Doc. 38, p. 4) (pointing out the same conflicting allegations)." (Doc. 56, p. 3).
The Plaintiffs reversed course with their third amended complaint. First, they ignored their prior stipulation of dismissal of Charles Kennedy and Diane Imken. See (Doc. 58, p. 2, ¶ 3). Second, they ignored the concession they made in the parties’ November 5, 2018 joint status report that 20 of the Plaintiffs could only maintain breach of warranty claims. The 18 Plaintiffs who were omitted from the negligence/wantonness and AEMLD counts in the second amended complaint have returned; all of the Plaintiffs assert negligence/wantonness and AEMLD claims in the third amended complaint. (Doc. 58, pp. 21–26).
Because the parties agreed in their joint status report that 20 of the Plaintiffs could only maintain breach of warranty claims, NIBCO contends that the Court should dismiss the negligence/wantonness and AEMLD claims asserted by those 20 Plaintiffs in the third amended complaint as a matter of course. (Doc. 60, p. 7). The Plaintiffs agree only as to Charles Kennedy and Diane Imken; the Plaintiffs concede that those two should be dismissed from this case based on their prior stipulation of dismissal, and consider their inclusion a mere oversight. (Doc. 64, p. 8). But the Plaintiffs challenge the dismissal of the other 18 Plaintiffs because, according to the Plaintiffs’ counsel who signed the Plaintiffs’ brief in opposition to NIBCO's motion to dismiss, the November 5, 2018 joint status report "is simply a status report that was produced in conjunction with prior counsel for the Plaintiffs. Undersigned counsel does not agree that any plaintiff other than Charles Kennedy and Diane Imken are due to be dismissed at this juncture." (Doc. 64, p. 8).
This dispute requires the Court to determine the effect of the November 5, 2018 joint status report on the Plaintiffs’ third amended complaint filed on November 26, 2019. The agreements reached in the joint status report constitute stipulations made to streamline the issues in this case. "[P]arties are bound by their stipulations and a pretrial stipulation frames the issues for trial." G.I.C. Corp. v. United States , 121 F.3d 1447, 1450 (11th Cir. 1997). A district court "has broad discretion in determining whether to hold a party to its stipulation." Morrison v. Genuine Parts Co. , 828 F.2d 708, 709 (11th Cir. 1987). And district courts "will normally enforce a stipulation unless enforcement would cause a manifest injustice." Hill v. Nelson , 676 F.2d 1371, 1373 n.8 (11th Cir. 1982).
Here, the Court first will grant NIBCO's motion to dismiss Charles Kennedy and Diane Imken as plaintiffs in this action. The parties jointly stipulated to Charles Kennedy's and Diane Imken's dismissal and the Plaintiffs concede the point. See (Doc. 55, ¶ 2; Doc. 64, p. 8).
But the Court will not dismiss any other Plaintiffs as a matter of course. But the Court will not dismiss any other Plaintiffs as a matter of course. The record is unclear as to why Plaintiffs’ new counsel chose to reverse course on this issue. One explanation could be a simple oversight by previous counsel. Nevertheless, the Court, in its discretion, will release the Plaintiffs from their two-year-old agreement that 18 Plaintiffs cannot maintain any non-warranty claims. Several reasons support the Court's decision. First, the Plaintiffs made the agreement outside of their pleadings and they have since twice amended their complaint. Second, the parties made their stipulations at the motion to dismiss stage well in advance of trial, so the stipulations are conceivably not the kind of "pretrial stipulation [that] frames the issues for trial" that demands the strictest enforcement. See G.I.C. Corp. , 121 F.3d at 1450. After all, the Plaintiffs do not seek to revive dismissed parties on the eve of trial or make NIBCO scramble to conduct discovery on claims once thought to be long gone. There is simply no element of surprise here. Third, the record is silent as to how the 18 Plaintiffs who purportedly cannot maintain non-warranty claims are different, if at all, from the other five Plaintiffs who can. All Plaintiffs plead the same factual allegations for their non-warranty claims. Finally, the consideration of preventing manifest injustice favors the Plaintiffs over NIBCO. NIBCO does not assert that it will suffer, and the Court cannot conceive, any undue burden by having to challenge the Rule 8(a) sufficiency of the identical non-warranty claims pled by 23 Plaintiffs as opposed to five. NIBCO's arguments against the non-warranty claims of one Plaintiff apply to the non-warranty claims of all. And NIBCO has plenty of chances moving forward to discover whether those 18 Plaintiffs can actually maintain non-warranty claims. On the other hand, 18 Plaintiffs would suffer injustice if they cannot so early in this case defend the Rule 8(a) sufficiency of their non-warranty claims based on the exact same factual allegations made by their five neighbors who can.
That said, the Plaintiffs’ counsel's explanation for the about-face concerns the Court. Had the circumstances described above not existed, the Court likely would not release the Plaintiffs from their past stipulation based only on an internal disagreement between co-counsel. And the Court cautions the Plaintiffs’ counsel against downplaying the significance of representations made to the Court in a joint status report.
Based on the foregoing, the Court finds that the November 5, 2018 joint status report does not justify dismissing the non-warranty claims of any Plaintiff besides Charles Kennedy and Diane Imken. B. Count I – Negligence/Wantonness Based on Failure to Warn
The Plaintiffs allege that NIBCO knew that the PEX products installed in the Plaintiffs’ houses were defective and negligently and/or wantonly failed to warn them of such. (Doc. 58, ¶ 54). The Plaintiffs do not allege that NIBCO became aware of specific defects in any specific PEX products in any specific house after the products were installed. Rather, the Plaintiffs "plead that NIBCO knew of the defects in its PEX Products prior to sale and prior to Plaintiffs’ purchase of their homes and failed to warn them." (Doc. 64, pp. 26–27).
NIBCO moves to dismiss the Plaintiffs’ failure to warn claim under two overarching theories: insufficient factual allegations, and failure to plead recoverable damages. See (Doc. 60, pp. 20–25). For the most part, both theories fail.
Under Alabama law, a supplier is liable for negligently failing to warn of a product's danger if the supplier (1) "knows or has reason to know that the chattel is or is likely to be dangerous for the use for which it is supplied"; (2) "has no reason to believe that those for whose use the chattel is supplied will realize its dangerous condition"; and (3) "fails to exercise reasonable care to inform them of its dangerous condition or of the facts which make it likely to be dangerous." Ex parte Chevron Chem. Co. , 720 So. 2d 922, 925 (Ala. 1998) (emphasis omitted) (quoting Restatement (Second) of Torts § 388 (1965) ). Additionally, to state a claim for wanton failure to warn, the plaintiff must also show that the defendant "consciously and intentionally failed to give reasonable and adequate warnings with knowledge of, or reckless indifference to, the fact that the lack of warnings made [the plaintiff's] injury likely or probable." Richards v. Michelin Tire Corp. , 21 F.3d 1048, 1058 (11th Cir. 1994).
Here, the Plaintiffs have adequately pled facts to support each element of a negligent and wanton failure to warn cause of action. The Plaintiffs allege that NIBCO knew that the PEX plumbing products it manufactured would be used to carry water in home plumbing systems. (Doc. 58, ¶¶ 18–24). The Plaintiffs allege that they used the PEX products in their homes for this very purpose. (Doc. 58, ¶¶ 42, 49). They allege the dangerous conditions of the products: "slow growth cracking mechanisms indicative of oxidative failure and/or creep rupture"; "insufficient stabilization and/or improper cross-linking of the PEX material used"; dezincification corrosion in the PEX fittings; "chloride-induced stress corrosion cracking" in the PEX clamps; and more. (Doc. 58, ¶¶ 24, 30, 38). The Plaintiffs allege that they had no reason to realize on their own that the PEX products were defective because the products were already installed in their houses when they purchased the houses and NIBCO touted the superiority of its products. (Doc. 58, ¶¶ 20, 49). The Plaintiffs allege that NIBCO knew or should have known of the alleged defects. (Doc. 58, ¶¶ 31–33, 40, 54). They allege that NIBCO did not warn them of the defects, asserting specifically that NIBCO did not in its step-by-step instructions warn the installer of PEX clamps "against allowing the chloride-rich flux to come into contact with the stainless steel PEX Clamp", did not disclose the products’ vulnerabilities to chlorides, and instead only represented the products’ resistance to degradation. (Doc. 58, ¶¶ 32–33, 41, 54). And the Plaintiffs allege that NIBCO failed to warn them with knowledge of the fact that a lack of warning would likely cause damage. (Doc. 58, ¶ 54). These allegations, accepted as true, support facially plausible claims for negligent and wanton failure to warn. NIBCO disagrees because the Plaintiffs "plead no facts suggesting that an adequate pre-sale warning ‘would have been read and heeded’ in a manner that would have avoided injury." (Doc. 60, pp. 23–24) (quoting Allain v. Wyeth Pharm., Inc. , No. 2:14-CV-00280-KOB, 2015 WL 178038, at *6 (N.D. Ala. Jan. 14, 2015) ). But the Plaintiffs have sufficiently alleged causation by alleging that they suffered damages that would have been prevented with a warning from NIBCO. And Allain , the only case that NIBCO cites for its argument that Alabama law demands a higher standard for pleading causation in this case, turned on the "learned intermediary doctrine." See Allain , 2015 WL 178038, at *6. That doctrine governs a pharmaceutical company's or a pharmacist's duty to warn a prescribing physician of dangers to a patient and does not apply in this case. See id. ; see also Nail v. Publix Super Markets, Inc. , 72 So. 3d 608, 614 (Ala. 2011) (explaining the "learned intermediary doctrine").
But the Plaintiffs must also sufficiently plead damages. See Chaparro v. Carnival Corp. , 693 F.3d 1333, 1337 (11th Cir. 2012). The issue of damages is the crux of NIBCO's motion to dismiss.
As damages, the Plaintiffs allege that the defective PEX products leaked and damaged surrounding property. (Doc. 58, ¶ 52). More specifically, the Plaintiffs allege the following consequential damages: "flooding and extensive property damage"; mold abatement; costs to repair, remove, and replace the PEX products; diminution in value of the Plaintiffs’ houses; "costs of repairing any damage to their real and personal property"; damage to property including but not limited to drywall, flooring, and cabinetry; and alternative living expenses while repairs were made. (Doc. 58, ¶¶ 38–39, 43–45, 50, 52).
NIBCO contends that Alabama's "economic loss rule" bars the Plaintiffs from recovering all of those damages. (Doc. 60, pp. 20–22). "Under [the economic loss rule], a cause of action does not arise under tort theories of negligence, wantonness, strict liability, or the AEMLD where a product malfunctions or is defective and thereby causes damage only to the product itself." Ford Motor Co. v. Rice , 726 So. 2d 626, 631 (Ala. 1998). However, the economic loss rule does not bar recovery for damages caused by a defective product to "other property." Vesta Fire Ins. Corp. v. Milam & Co. Const. , 901 So. 2d 84, 107 (Ala. 2004) ; Tuscumbia City Sch. Sys. v. Pharmacia Corp. , 871 F. Supp. 2d 1241, 1266 (N.D. Ala. 2012) ; Hanover Ins. Co. v. BASF Corp. , No. 2:18-CV-1418-TMP, 2019 WL 220240, at *6 (N.D. Ala. Jan. 16, 2019).
The Plaintiffs assert that they have alleged damages to "other property" (e.g., floors, walls, ceilings, cabinets, etc.) that are not barred by the economic loss rule. NIBCO disagrees. Relying on Hanover and cases outside of Alabama, NIBCO asserts that its plumbing products were so integrated into the Plaintiffs’ houses that damage to the houses’ ceiling, walls, and floors is effectively the same as damage to the plumbing products themselves, such that the economic loss rule bars those damages. (Doc. 60, pp. 21–22 & n.5) (citing Hanover , 2019 WL 220240, at *6 ; Premix-Marbletite Mfg. Corp. v. SKW Chems., Inc. , 145 F. Supp. 2d 1348, 1359 (S.D. Fla. 2001) ; Wash. Apts., L.P. v. Oetiker, Inc. , 43 Misc. 3d 265, 978 N.Y.S.2d 731 (N.Y. Sup. Ct. 2013) ; and Wausau Tile, Inc. v. Cnty. Concrete Corp. , 226 Wis.2d 235, 593 N.W.2d 445, 452 (1999) ). For the following reasons, Alabama law does not prevent the Plaintiffs from recovering all of their asserted damages. No case applying Alabama law has analyzed specifically whether the ceiling, walls, or floors of a house damaged by defective plumbing is "other property" that escapes the economic loss rule, but Hanover comes close. There, the plaintiff asserted negligence and AEMLD claims against the manufacturer of a stucco wall system installed over the original stucco of the plaintiff's building that failed to prevent water seepage. The plaintiff attempted to circumvent the economic loss rule by arguing that the sealants used in the wall system were the defective products, such that damage to the larger wall system was damage to "other property" not barred by the economic loss rule. The court disagreed because "[t]he sealants were an integral part of the [ ] Stucco Wall System, not a separate or unrelated product. Without the sealants, the stucco wall system would be ineffective as a ‘watertight envelope.’ They were a necessary and integral part of the design of the system, and the failure of the sealants was a failure of the stucco wall system itself." Hanover , 2019 WL 220240, at *6. The court found that "[t]he remedy for damage to a building caused by the failure of a building component is in breach of contract or warranty, not tort." Id. The court concluded: "Plaintiff's claims arising from negligence and the AEMLD ... are based upon the failure of the stucco product itself. As such the tort claims in negligence and AEMLD are barred by Alabama's economic loss rule." Id.
Hanover does not convince the Court to dismiss the Plaintiffs’ tort claims in this case. A plumbing system is not as integrated into a house as a sealant is integrated into a stucco wall, or as a wall is integrated into a house. A stucco wall fails its purpose to create a watertight barrier if its sealants fail. Likewise, a house fails its purpose to secure its inhabitants from the outside if one of its walls fails. In both cases, damage to one component is the same as damage to the whole. But a house without plumbing is still a house. A house without plumbing continues to fulfill its purpose of securing its inhabitants from the outside, plumbing is not necessary to construct a house, and plumbing does not aid in the structural integrity of a house. Damage to plumbing is simply not the same as damage to the house.
Another distinction between this case and Hanover is that the plaintiff in Hanover alleged only vague damages to her building from the failed stucco wall. See (Complaint, Doc. 1-1, ¶¶ 33, 39, The Hanover Insurance Company v. BASF Corporation , Case No.: 2:18-cv-01418-TMP, (N.D. Ala.)) (alleging only that "[the plaintiff's] building was damaged as a result."); see also Hanover , 2019 WL 220240, at *1 (describing damages as the wall "allowing water and moisture to leak into the building"). The court in Hanover , therefore, had to determine only whether a wall was a component of a building for purposes of the economic loss rule. In contrast, the Plaintiffs here specify water damages to ceilings, floors, walls, cabinets, and other "real and personal property." A plumbing system is even less so integrated into these properties than a house or building itself.
And other cases applying Alabama law support the inapplicability of the economic loss rule in this case. In Everett v. Brad Ragan, Inc. , No. CIV.A.99-663CBC, 2000 WL 360240 (S.D. Ala. Mar. 28, 2000), the plaintiff alleged that the defendant negligently replaced the fuel filter on his truck and, in doing so, damaged the truck's O-ring and the truck in general. The court found that the economic loss rule did not bar the plaintiff's negligence claim because "neither the truck nor the O-ring are ‘the product itself.’ [The defendant] replaced the fuel filter, and when doing so damaged ‘other property’, i.e., the O-ring or more generally, the vehicle." Everett , 2000 WL 360240, at *3. The fuel filter's and the O-ring's mere installation in the vehicle did not render them the same property as the vehicle for purposes of the economic loss rule. Likewise, the installation of NIBCO's PEX products in the Plaintiffs’ houses does not render them the same for purposes of the economic loss rule.
Also, in Holmes v. Behr Process Corp. , No. 2:15-CV-0454-WMA, 2015 WL 7252662 (N.D. Ala. Nov. 17, 2015), the court found that the plaintiff sufficiently alleged damages to "other property" to escape the economic loss rule by alleging that a defective primer damaged a top-coat of paint and required the plaintiff to repair, reprime, and repaint walls. Holmes , 2015 WL 7252662, at *5. Though walls, primer, and paint adhere to each other, and though repairing one may require repairing all, damage to one does not equate to damage to all. Similarly, even though a plumbing system is constructed within a house, and even though repairing defective plumbing may also require repairing surrounding walls and ceiling, damage to a plumbing system is not necessarily the same as damage to a house's ceiling, walls, floor, cabinets, and personal property within it.
Alabama's economic loss rule also does not bar the Plaintiffs’ tort claims for diminution in value of their homes and for alternative living expenses while repairs were being made to their homes. Indeed, those are purely economic losses. But Alabama's economic loss rule "does not mean that ‘purely economic losses can never be recovered’ on a tort claim under Alabama law." Harbin v. RoundPoint Mortg. Co. , No. 2:15-CV-01069-RDP, 2019 WL 7167588, at *5 (N.D. Ala. Nov. 6, 2019) (quoting Birmingham Emergency Commc'ns Dist. v. TW Telecom Holdings, Inc. , 2017 WL 11068541, at *4 (N.D. Ala. Mar. 2, 2017) ). Rather, "[w]hat the economic loss rule means is that ‘Alabama does not recognize a tort-like cause of action for the breach of a duty created by contract.’ " Harbin , 2019 WL 7167588, at *5 (quoting Blake v. Bank of Am., N.A. , 845 F. Supp. 2d 1206, 1210 (M.D. Ala. 2012) ). As the Alabama Supreme Court explained when adopting the economic loss rule, "when a product injures itself, the commercial user stands to lose the value of the product, risks the displeasure of its customers who find that the product does not meet their needs, or, as in this case, experiences increased costs in performing a service. Losses like these can be insured." Lloyd , 543 So. 2d at 673 (quotations omitted). These kinds of economic damages are "most naturally understood as a warranty claim. Such damage means simply that the product has not met the customer's expectations, or, in other words, that the customer has received ‘insufficient product value.’ " Id. at 673–74 (emphasis in original). And, as this Court has explained, "the economic loss rule provides that there is no liability in tort for economic loss caused by negligence in the performance or negotiation of a contract between the parties." Harbin , 2019 WL 7167588, at *5 (emphasis in original) (quotations omitted).
The Alabama Court of Civil Appeals has illustrated the distinction between economic losses caused only by the defendant's defective product and economic losses caused by damage to other property. In Harris Moran Seed Co. v. Phillips , 949 So. 2d 916 (Ala. Civ. App. 2006), the plaintiffs, a group of farmers, suffered consequential economic losses from a defective crop of tomatoes grown from the defendant's seeds. The farmers argued that the tomatoes and the seeds were different products, such that their economic losses were traceable to damage to property other than the defendant's product and thus recoverable. But the Alabama Court of Civil Appeals found that the economic losses caused by the defective tomatoes were effectively the same as economic losses caused by the defective seeds themselves. Harris Moran , 949 So. 2d at 933. Therefore, the farmers could not recover consequential economic losses. Id.
Unlike the farmers in Harris Moran that could not sever their defective tomatoes from the defendant's defective seeds, the Plaintiffs here, as the Court has explained, have alleged property damage severable from damage to NIBCO's PEX products. If the Plaintiffs can trace their diminution in value and alternative living expenses damages to damage to property other than the PEX products themselves , then those consequential economic losses are recoverable. Those damages would not be for insufficient product value or for NIBCO's failure in the performance or negotiation of a contract; they would be damages allegedly arising from damage to other property. The economic loss rule does not preclude such damages.
But the Plaintiffs cannot recover damages for the costs to repair and replace NIBCO's PEX products. Those economic losses arise exclusively from damage to the allegedly defective products themselves and are thus barred by the economic loss rule.
And the Plaintiffs may potentially recover mental anguish and emotional distress damages from their wantonness claims, but not from their negligence claims. "Alabama law does not permit recovery of mental-anguish damages based on a claim of simple negligence where the negligent act or omission results in mere injury to property." Ex parte Grand Manor, Inc. , 778 So. 2d 173, 180 (Ala. 2000). But, "[w]here the injury to property is committed under circumstances of insult or contumely, mental suffering may be recoverable." Reinhardt Motors, Inc. v. Bos. , 516 So. 2d 509, 511 (Ala. 1986). "The known, intentional and willful violation of the law and of plaintiffs’ rights in and of itself is legal insult, contumely and malice." Chestang v. IPSCO Steel (Alabama), Inc. , 50 So. 3d 418, 437 (Ala. 2010) (emphasis and quotations omitted). Here, for their wantonness claims, the Plaintiffs have alleged that NIBCO knowingly failed to warn them of the harm likely to result from the PEX products, so the Plaintiffs have sufficiently pled a basis for recovering mental anguish and emotional distress damages. See (Doc. 58, ¶ 54).
Based on the foregoing, the Plaintiffs have alleged a facially plausible claim to relief for negligent and wanton failure to warn. The motion to dismiss Count I is due to be granted only with respect to Plaintiffs Charles Kennedy and Diane Imken, the costs to repair and replace the PEX products, and mental anguish and emotional distress damages sought under a negligence theory. The motion to dismiss Count I is due to de denied in all other respects.
C. Count II – Negligence/Wantonness Based on Design Defect
The Plaintiffs premise their next negligence/wantonness claim on alleged design defects in the NIBCO PEX products. (Doc. 58, ¶¶ 58–61). The Plaintiffs assert that NIBCO negligently and wantonly breached its duty to design the PEX products free of defects when put to their intended use, and that the Plaintiffs suffered damages (the same damages as alleged for their failure to warn claim) as a result.
To state a negligence claim under Alabama law, the plaintiff must establish that the defendant breached a duty owed to the plaintiff and that such breach proximately caused injury to the plaintiff. McMahon v. Yamaha Motor Corp., U.S.A. , 95 So. 3d 769, 771 (Ala. 2012). When the plaintiff bases his negligence claim on an alleged design defect in a product, he must "establish[ ] that the product at issue is sufficiently unsafe so as to render it defective" and "that the manufacturer failed to exercise due care in the product's manufacture, design, or sale." Id. at 772. And, to show that the defendant's breach was wanton, the plaintiff must additionally show that the manufacturer failed to exercise reasonable care in the design of the product while knowing that injury would likely result. Id. at 773.
The Plaintiffs in this case have sufficiently alleged a facially plausible negligence and wantonness claim based on design defects. They allege that NIBCO breached its duty owed to them by failing to exercise reasonable care in designing PEX products that were defective because of cracking, ruptures, improper cross-linking of PEX material, dezincification, and more. (Doc. 58, ¶¶ 24, 30, 38, 58–59). The Plaintiffs allege that NIBCO breached its duty with knowledge of the defects in the PEX products. (Doc. 58, ¶ 59). And the Plaintiffs allege that the design defects caused the same damages as the failure to warn. (Doc. 58, ¶ 61). The damages plausibly recoverable for the Plaintiffs’ failure to warn claim are likewise plausibly recoverable for their design defect claim—the economic loss rule does not change shapes between different theories of negligence. So the motion to dismiss Count II is due to be granted in part and denied in part to the same extent as the motion to dismiss Count I.
NIBCO does not raise any challenges specific to the Plaintiffs’ design defect claim that the Court has not already addressed in this memorandum opinion. NIBCO challenges all tort claims for the same reasons and raises a unique argument only with respect to the failure to warn claim. See (Doc. 60, pp. 20–25).
D. Count III – General Negligence/Wantonness
The Plaintiffs’ tort claims conclude with a general negligence/wantonness claim. The Plaintiffs allege that NIBCO "had a duty to exercise reasonable care not to subject Plaintiffs, or their properties, to harm," that NIBCO breached that duty by manufacturing and selling the defective PEX products installed in the Plaintiffs’ homes, that NIBCO breached its duty with knowledge of the defects in its products, and that NIBCO's breach caused the same damages allegedly caused by the company's failure to warn and defective design. (Doc. 58, ¶¶ 62–66). With these factual allegations, the Plaintiffs have pled facially plausible general negligence and wantonness claims. See McMahon , 95 So. 3d at 771 (setting out the elements of negligence and wantonness claims). So the motion to dismiss Count III is due to be granted in part and denied in part to the same extent as the motion to dismiss Counts I and II.
IV. DISCUSSION – MOTION FOR PARTIAL SUMMARY JUDGMENT
A. Count IV – Breach of Warranties
1. Express warranties
NIBCO has moved for summary judgment as to the Plaintiffs’ claim that NIBCO breached the express warranties that covered its PEX products. Those express warranties provided that the PEX products would operate without defects for certain durations. (Doc. 75-3, p. 2). The Plaintiffs contend that NIBCO breached those warranties by manufacturing PEX products that failed within the warranted timeframe and by taking no steps to replace the defective products. (Doc. 58, ¶ 70). For the following reasons, no genuine dispute of material fact exists as to 23 of the Plaintiffs’ breach of express warranty claims, and NIBCO is entitled to judgment as a matter of law on those claims.
The express warranty contains a condition precedent to NIBCO's performance that 23 Plaintiffs did not satisfy. The owner of the potentially defective product must contact NIBCO and return the product to NIBCO for an inspection. (Doc. 75-3, p. 2). NIBCO will then send a replacement product if the inspection reveals that the product is indeed defective. (Doc. 75-3, p. 2). The evidence shows that only Jason and Shana Freeman, Joe and Sandra Garcia, Betty Lovelace, and Jeff McQuillan ever contacted NIBCO about defective products. (Doc. 33, ¶ 1; Doc. 75-2, ¶ 5). Of those Plaintiffs, only Joe and Sandra Garcia ever returned products to NIBCO for inspection. (Doc. 26-2, ¶ 4; Doc. 75-2, ¶ 6). So NIBCO's duty to perform according to the express terms of the warranty did not arise with respect to 23 of the 25 Plaintiffs.
To overcome this undisputed fact, the Plaintiffs argue that the notice requirement in the express warranty did not apply to them because they were not parties to the contract for the express warranty, and instead were only third-party beneficiaries of the contract. (Doc. 77, p. 5). "Under Alabama law, a manufacturer's express warranty, like any contractual obligation, may run in favor of a third-party beneficiary." Lisk v. Lumber One Wood Preserving, LLC , 792 F.3d 1331, 1338 (11th Cir. 2015). Alabama law does not require third-party beneficiaries of a contract to give notice to a seller of a breach of warranty before bringing suit. Simmons v. Clemco Indus. , 368 So. 2d 509, 513 (Ala. 1979). That requirement applies only to a "buyer" of goods, defined as "a person who buys or contracts to buy goods." Ala. Code §§ 7-2-103(1)(a), 7-2-607(3)(a). "Clearly, then, a warranty beneficiary is not within this definition." Simmons , 368 So. 2d at 513.
No Plaintiff was a "buyer" of NIBCO's PEX products under Alabama law because no Plaintiff ever contracted with NIBCO, purchased any products from NIBCO, or even knew that NIBCO's products were in their houses before they bought them. But whether the Plaintiffs can state breach of warranty claims as third-party beneficiaries is a different question.
A successful breach of express warranty claim under a third-party beneficiary theory requires proof of three elements: (1) "that the contracting parties intended, at the time the contract was created, to bestow a direct benefit upon a third party"; (2) "that the complainant was the intended beneficiary of the contract"; and (3) "that the contract was breached." Lisk , 792 F.3d at 1338.
The record construed in the light most favorable to the Plaintiffs supports a reasonable inference that the parties to the contract for NIBCO's products—NIBCO and the Plaintiffs’ homebuilders—intended to bestow the benefit of the express warranty upon the Plaintiffs. According to the Eleventh Circuit applying Alabama law, "a ‘court [may] look at the surrounding circumstances’ in determining whether an end user is a third-party beneficiary.... One of the circumstances a court may consider is the foreseeability of harm to end users." Lisk , 792 F.3d at 1339 (quoting Harris Moran , 949 So. 2d at 920–21 ). In this case, a reasonable jury could find that NIBCO and the Plaintiffs’ homebuilders intended for the eventual occupants of the homes to benefit from the express warranty because of the foreseeability of harm to those occupants from defective plumbing. After all, the homeowners—not the homebuilders—would use the plumbing for the 10- or 25-year warranty term and be the ones to suffer harm from any defects. See Harris Moran , 949 So. 2d at 924–25 (upholding jury finding that farmers who purchased seeds from a seller who bought from a distributor who bought from the defendant manufacturer were third-party beneficiaries of an express warranty); Lisk , 792 F.3d at 1339 ("[The defendant lumber manufacturer] knew its wood was bound for end users and that they would suffer substantial harm if the wood did not conform to the warranty. Here, as in Harris Moran , the circumstances provide substantial support for the third-party-beneficiary claim."). So evidence supports that the Plaintiffs are third-party beneficiaries of the express warranty.
But the record contains no evidence to satisfy the final element of 23 of the Plaintiffs’ breach of express warranty claims under a third-party beneficiary theory: that NIBCO actually breached the contract. As third-party beneficiaries, the Plaintiffs may be relieved from the express warranty's notice requirement, but they are not relieved from the warranty's other express terms that they return potentially defective products to NIBCO for an inspection. That condition does not simply disappear because of the Plaintiffs’ standing as third-party beneficiaries.
"Express warranties should be treated like any other type of contract and interpreted according to general contract principles." Ex parte Miller , 693 So. 2d 1372, 1376 (Ala. 1997). "[T]he crux of all express warranty claims is that the goods did not conform to the warranty ," not just that the goods were defective. Id. (emphasis added). A manufacturer does not necessarily breach an express warranty to repair by selling defective goods; rather, breach occurs if the manufacturer fails its promise to remedy defects under the terms of the warranty. See Fowler , 2014 WL 7048581, at *6 ("[T]he language of an express warranty to repair cannot be construed as a representation that a product is free of defects.... An express warranty to repair anticipates that defects may occur and that, if detected during the term of the warranty, they will be remedied under the terms of the warranty.... The fact that Plaintiff had to have his HVAC Unit repaired does not equate to a breach of the Limited Warranty at issue.") (internal citations omitted).
Here, NIBCO could not possibly have breached the terms of the express warranty with respect to 23 Plaintiffs because NIBCO's duty to perform never arose. Those Plaintiffs did not satisfy the condition that they send potentially defective products to NIBCO for inspection, so NIBCO never had an express duty to repair or replace those Plaintiffs’ products.
The Plaintiffs assert that the product-return requirement does not apply to them because they did not bargain for that provision. They contend that "NIBCO and Plaintiffs are not in contract with one another, no consideration given for this alleged condition precedent, and, as such, the conditions precedent to bringing a claim against NIBCO do not apply." (Doc. 77, p. 6). So the Plaintiffs attempt to claim the benefits of the warranty (the right to repair or replace) and repudiate its burdens and conditions (to return products for inspection). They cannot do so. See S. Energy Homes, Inc. v. Ard , 772 So. 2d 1131, 1134 (Ala. 2000) ("A plaintiff cannot simultaneously claim the benefits of a contract and repudiate its burdens and conditions.") (citing five Alabama Supreme Court cases).
Therefore, there is no genuine dispute of material fact that NIBCO did not breach the express warranty with respect to 23 of the Plaintiffs, and NIBCO is entitled to judgment as a matter of law on those claims.
The other two Plaintiffs, Joe and Sandra Garcia, did comply with the terms of the express warranty by returning products to NIBCO for inspection. Even so, NIBCO asserts that summary judgment is appropriate as to the Garcias’ breach of warranty claims because the Garcias purportedly assigned their claims to their homeowners’ insurance carrier, Nationwide, and because Nationwide paid the Garcias for some claims arising from leaks. (Doc. 75, pp. 11–12). The Court disagrees.
The evidence that NIBCO offers as proof that the Garcias assigned their claims to Nationwide, a letter sent from Nationwide to NIBCO, establishes only that Nationwide has a right to subrogation for damages the Garcias may recover for a leak that occurred on July 18, 2016. (Doc. 75-4). Subrogation is not the same as assignment. "[A]n assignment to one's insurer of one's rights of recovery"—not subrogation—"renders the insurer the real party in interest." Broadnax v. Griswold , 17 So. 3d 656, 660 (Ala. Civ. App. 2008) (emphasis in original). "By an assignment, the insurer receives legal title to the claim, and the exclusive right to pursue the tortfeasor," whereas "[i]n subrogation, the insured retains legal title to the claim. By paying the insured, the insurer has a right to subrogation. The exclusive right to pursue the tortfeasor remains with the insured, which holds the proceeds for the insurer." Id. (quotation omitted). So no evidence supports NIBCO's argument that the Garcias assigned their claims to Nationwide.
Likewise, the fact that Nationwide paid the Garcias for claims arising out of leaks does not affect the Garcias’ right to maintain their breach of warranty claims. See Broadnax , 17 So. 3d at 660 (" ‘[T]he mere fact that the insured has been reimbursed by the insurer does not affect his right to maintain an action against the alleged wrongdoer who caused the damages, and whether the insurance company is entitled to the proceeds of any recovery is a matter which does not concern the defendant.’ ") (quoting Allen v. Zickos , 37 Ala.App. 361, 68 So. 2d 841, 843 (1953) ) (emphasis omitted). No insurance issues currently stand in the way of the Garcias pursuing their claims on their own. Therefore, summary judgment is not appropriate with respect to the Garcias’ breach of express warranty claims.
2. Implied warranties
The Plaintiffs do not explicitly bring a breach of implied warranty claim in their third amended complaint. But they allege in several different ways throughout their third amended complaint that NIBCO's PEX products were not fit for the ordinary purposes for which they are used, which the Alabama Supreme Court has held is sufficient to allege a breach of implied warranty claim. See Spain v. Brown & Williamson Tobacco Corp. , 872 So. 2d 101, 108 (Ala. 2003). NIBCO did not mention any breach of implied warranty claims in its motion for partial summary judgment, but the company did in its Rule 12(b)(6) motion move to dismiss those claims to the extent that they exist. (Doc. 60, pp. 18–19). For the following reasons, any breach of implied warranty claims survive NIBCO's motion to dismiss and motion for partial summary judgment.
Under Alabama law, "a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind." Ala. Code § 7-2-314(1). To be merchantable, the goods must be "fit for the ordinary purposes for which such goods are used." Ala. Code § 7-2-314(2)(c). The implied warranty of merchantability extends from the seller to the buyer. Rhodes v. Gen. Motors Corp., Chevrolet Div. , 621 So. 2d 945, 947 (Ala. 1993).
Here, a seller-buyer relationship did not exist between NIBCO and the Plaintiffs. NIBCO sold its plumbing products to the Plaintiffs’ homebuilders who then installed the products in the houses sold to the Plaintiffs. As far as the Plaintiffs are concerned, NIBCO was only the manufacturer of the products in their homes.
In this situation, the Plaintiffs must show that they were in privity of contract with NIBCO to state a breach of implied warranty claim against the company. See Rhodes , 621 So. 2d at 947 ("There is no right of action on an implied warranty theory against a manufacturer for property damage without privity of contract.... Similarly, ... without privity of contract, there is no right of action against a manufacturer for direct economic loss.") (emphasis in original) (internal citations and quotations omitted). Under Alabama law, third-party beneficiaries of a contract can stand in privity of contract with a seller and maintain a breach of implied warranty claim against the seller. See Morris Concrete, Inc. v. Warrick , 868 So. 2d 429, 435 (Ala. Civ. App. 2003) ("[T]he implied warranties of merchantability and fitness for a particular purpose were available to [a third-party beneficiary]."); Chandler v. Hunter , 340 So. 2d 818, 822 (Ala. Civ. App. 1976) (finding that the plaintiff stood in privity to a contract for sale because she was a third-party beneficiary of the contract and could thus recover economic damages on her breach of implied warranty claim against the seller); Naef v. Masonite Corp. , 923 F. Supp. 1504, 1508 (S.D. Ala. 1996) ("[T]he Court finds that a reasonable Alabama jurist could find that Plaintiffs were third party beneficiaries to the contract between the Alabama dealers and the builders/contractors, and, under Chandler , Plaintiffs have a cause of action [for breach of implied warranty] against the Alabama dealers."). As the Court discussed above, the record construed in the light most favorable to the Plaintiffs supports a reasonable inference that they were third-party beneficiaries of the contract between their homebuilders and NIBCO. Therefore, the Plaintiffs stand in privity with NIBCO and can maintain a breach of implied warranty claim against the company.
Also, though most of the Plaintiffs did not notify NIBCO of a breach of implied warranty claim before bringing suit, Alabama law, as the Court discussed above, does not require third-party beneficiaries to give notice of a breach of warranty before bringing suit. Simmons , 368 So. 2d at 513. The rule applies to implied warranty claims just as it does to express warranty claims. See id. at 513–16. So the Plaintiffs’ breach of implied warranty claims do not fail for lack of notice.
For the reasons stated above, the Plaintiffs have alleged facially plausible claims for breach of implied warranties by alleging that NIBCO's PEX products were not fit for their ordinary purposes. Those claims do not fail as a matter of law for lack of privity or lack of notice. Therefore, neither dismissal nor summary judgment is appropriate as to any breach of implied warranty claims.
B. Count V – AEMLD
Finally, NIBCO has moved for summary judgment as to the Plaintiffs’ AEMLD claims, arguing again that the PEX products were so integrated into the Plaintiffs’ houses such that Alabama's economic loss rule precludes the Plaintiffs from recovering any of their claimed damages. (Doc. 75, pp. 14–18). The Court disagrees. Though AEMLD claims are distinct from related common law tort claims, the economic loss rule applies equally to both. The rule "prevents tort recovery when a product damages itself, causing economic loss, but does not cause personal injury or damage to any property other than itself," and limits an AEMLD claim "to a contractual recovery when the evidence shows that the defect caused injury to only the product and to no other property." Vesta , 901 So. 2d at 106–07. So, just as the economic loss rule does not, for the several reasons discussed above, bar the Plaintiffs from recovering most of their claimed damages from their tort claims, the economic loss rule does not bar the Plaintiffs from recovering those same damages from their AEMLD claims. And NIBCO offers no other argument for why the Court should enter summary judgment in its favor as to the AEMLD claims. Therefore, the Court will enter summary judgment in NIBCO's favor as to Count V only to the extent that Plaintiffs seek to recover the same damages that they cannot recover under Counts I, II, and III.
V. CONCLUSION
Based on the foregoing, NIBCO's motion to dismiss is GRANTED IN PART and DENIED IN PART . (Doc. 59). The motion is GRANTED with respect to (1) all claims asserted by Charles Kennedy and Diane Imken; (2) Counts I, II, and III to the extent those claims seek recovery of the costs to repair and replace the allegedly defective PEX products; and (3) Counts I, II, and III to the extent those claims seek recovery for mental anguish and emotional distress under a negligence theory. Those claims are dismissed, and Charles Kennedy and Diane Imken are dismissed as plaintiffs from this case. The motion to dismiss is DENIED in all other respects. Counts I, II, and III will proceed to the extent that they seek recoverable damages consistent with this memorandum opinion.
NIBCO's motion for partial summary judgment is GRANTED IN PART and DENIED IN PART . (Doc. 75). The motion is GRANTED with respect to (1) the breach of express warranty claims brought by all of the Plaintiffs except for Joe and Sandra Garcia; (2) the AEMLD claims to the extent they seek recovery of the costs to repair and replace the allegedly defective PEX products; and (3) the AEMLD claims to the extent they seek recovery for emotional distress and mental anguish without showing circumstances of insult or contumely. The Court enters summary judgment in NIBCO's favor on those claims. The motion for partial summary judgment is DENIED in all other respects. Joe and Sandra Garcia's breach of express warranty claims, all of the Plaintiffs’ claims for breach of implied warranty, and all of the Plaintiffs’ AEMLD claims, to the extent that they seek recoverable damages consistent with this memorandum opinion, will proceed.
DONE and ORDERED September 24, 2020.