Adams Pointe I LP v. Tru-Flex Metal Hose Corp

• Court: Court of Appeals for the Third Circuit
• Decided: August 16, 2021
• Docket: 20-3528
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________

No. 20-3528 _____________

ADAMS POINTE I, L.P.; ADAMS POINTE II, L.P.; BAYBERRY NORTH ASSOCIATES L.P.; BETTERS REAL ESTATE HOLDINGS, L.P.; JBCO; ADAMS POINTE III, L.P.; ADAMS POINTE NORTH CONDOMINIUM ASSOCIATION; ADAMS POINTE MASTER ASSOCIATION, L.P.; COULTER & GRAHAM, L.P.; MICHAEL AND KATHLEEN BICHLER; and JOHN EVANS, individually and on behalf of those similarly situated, Appellants, v.

TRU-FLEX METAL HOSE CORP.; TRU-FLEX, LLC; and PRO-FLEX LLC,

*****

TRU-FLEX METAL HOSE CORP., TRU-FLEX, LLC, and PRO-FLEX LLC, Third-Party Plaintiffs, v.

RIDGE DEVELOPMENT CORP.; RIDGE MANAGEMENT & DEVELOPMENT CORP.: ADAMS POINTE CONSTRUCTION CORP.; ADAMS POINTE SOUTH VILLAGE OWNERS ASSOCIATION, L.P.; ADAMS POINTE CONDOMINIUM ASSOCIATION; WARD CONDOMINIUM ASSOCIATION; WARD MANUFACTURING, LLC d/b/a WARDFLEX; UNIQUE INDUSTRIAL PRODUCT COMPANY; PRO-FLEX HOLDINGS, LLC (OF TEXAS), Third-Party Defendants _______________________

On Appeal from the United States District Court for the Western District of Pennsylvania (District Court No. 2-16-cv-00750) District Court Judge: Cathy Bissoon

Argued on July 8, 2021 (Filed: August 16, 2021)

Before: SHWARTZ, KRAUSE, and RENDELL, Circuit Judges.

Rebecca Bell-Stanton [Argued] Nathan S. Carpenter Carpenter & Schumacher 2500 Dallas Parkway Suite 495 Plano, TX 75093 Counsel for Appellants

Daniel R. Bentz, I Thomas Pie, Jr. [Argued] Marks O’Neill O’Brien Doherty & Kelly 707 Grant Street 2600 Gulf Tower Pittsburgh, PA 15219 Counsel for Appellees, Tru-Flex, LLC, and Tru-Flex Metal Hose Corp.

Adam L. Frankel [Argued] Thomas A. Gamache Daniel J. Offenbach Leahy Eisenber Fraenkel 33 West Monroe Street Suite 1100 Chicago, IL 60603

Gina M. Zumpella Walsh Barnes & Zumpella 2100 Corporate Drive Suite 300 Wexford, PA 15090 Counsel for Appellee, Pro-Flex, LLC

John J. Hare Shane Haselbarth Marshall Dennehey Warner Coleman & Goggin 2000 Market Street Suite 2300 Philadelphia, PA 19103 Counsel for Third-Party Defendant/Appellee Unique Industrial Product, L.P.

2 OPINION*

RENDELL, Circuit Judge.

A putative class of property owners (“Plaintiffs”) appeals the denial of class

certification for claims brought against Defendants Tru-flex Metal Hose Corp., Tru-Flex,

LLC (collectively, “Tru-Flex”) and Pro-Flex LLC (collectively, “Defendants”), for

damages sustained from allegedly defective yellow-jacketed corrugated stainless-steel

tubing (“Pro-Flex® CSST” or “CSST”). For the reasons discussed below, we will affirm.

I.

Defendants market Pro-Flex® CSST as a safer and more installer-friendly gas

delivery mechanism than traditional black iron pipe gas systems. The product consists of

a stainless-steel pipe encased in an insulative outer yellow jacket. Plaintiffs allege that

power surges from nearby lightning, or potentially a household electrical current, can

cause a structure to be electrically energized such that the energy creates a hole in the

CSST and can result in fire. Whereas traditional black iron pipes can withstand an

energy surge by distributing the charge, yellow-jacketed CSST cannot. Plaintiffs allege

that Defendants have actual knowledge that yellow-jacketed CSST is insufficiently

insulated to prevent combustion following an electrical surge, but they nonetheless

continue to manufacture and distribute it nationwide.

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. 3 A class action was brought in 2004 against other manufacturers of yellow-jacketed

CSST, in which the plaintiffs alleged that the manufacturers knew that yellow-jacketed

CSST was defectively designed and was susceptible to combustion. As a part of the class

settlement, the manufacturers represented that bonding and grounding “might mitigate

the imminent harm.” Pls.’ First Am. Compl. ¶ 28. Bonding refers to tying all metal

points in the gas system together so that they conduct at the same electrical potential

level, thereby preventing an arc between different areas of electrical potential.

Grounding involves providing stray electrical current with a path toward the ground.

Plaintiffs allege that, following the 2004 class settlement, bonding and grounding

guidelines were included in industry-wide design and installation manuals provided to

certified installers for new installations of yellow-jacketed CSST. Plaintiffs allege that

these guidelines were included without validating whether bonding and grounding

sufficiently mitigated the risk of combustion, and without providing a remedy for prior

legacy installations. Plaintiffs claim that Defendants rely on the bonding and grounding

instruction manual to mitigate any design defect, but that bonding and grounding do not

remedy the defective Pro-Flex® CSST in existing structures nor do they remove the

inherent danger of yellow-jacketed CSST. Although other manufacturers have modified

the design of their CSST products to incorporate arc-resistant jackets, Defendants have

not made any modifications and continue to market and distribute the yellow-jacketed

CSST.

According to Plaintiffs, Defendants concede that industry practice requires yellow-

jacketed CSST to be sold to and installed by a qualified plumbing professional, in

4 accordance with applicable plumbing codes. However, Plaintiffs allege that Defendants

continue to sell Pro-Flex® CSST to “do-it-yourself installers.” Pls.’ First Am. Compl. ¶

58.

Plaintiffs own residences in Pennsylvania that are allegedly affected by Pro-Flex®

CSST. Plaintiffs claim that they have incurred costs as a result of physical damage, loss

in property value, and mitigation efforts. Following a nearby lightning strike in 2015, a

condominium unit in the Adams Pointe Community caught fire and experienced

significant property damage. According to a third-party fire investigation, Pro-Flex®

CSST installed in the condominium unit failed, causing natural gas to release into the unit

and ignite. Plaintiffs allege that the Pro-Flex® CSST was inspected and approved by

local code officials before the fire.

Plaintiffs include the owners of properties in the Adams Pointe Community, the

condominium associations responsible for exterior repairs at Adams Pointe, and the

owners of other residential properties in which yellow-jacketed CSST was previously

installed but has since been replaced. Plaintiffs allege that the presence of yellow-

jacketed CSST has damaged the value of their properties and their ability to sell because

home inspectors list the yellow-jacketed CSST as a material defect. Plaintiffs seek a

variety of remedies including monetary damages for property damage, replacement pipes,

inspection costs, additional safety measures, the diminution in value of their property,

and increased insurance costs. They additionally seek injunctive relief to prevent

Defendants from selling, marketing, and distributing Pro-Flex® CSST unless they

remedy its defect.

5 Plaintiffs sought to certify a class defined as follows:

Any and all persons and/or entities who own real property in the United States in which yellow-jacket Pro-Flex® CSST manufactured, designed, marketed, or distributed by the named Defendants was installed.

Plaintiffs sought nationwide class certification under Federal Rule of Civil Procedure

23(b)(3) for their claims of (1) breach of implied warranty of merchantability and fitness;

(2) strict products liability; and (3) negligence for marketing defect and failure to warn.1

Plaintiffs also sought certification of a subclass for their claims under the Pennsylvania

Unfair Trade Practices and Consumer Protection Law. In the alternative, Plaintiffs argue

that they have met the standards for class certification under Rule 23(b)(2) for injunctive

relief and class certification under Rule 23(c)(4) for a liability-only class.

Magistrate Judge Cynthia Reed Eddy filed a Report and Recommendation, which

concluded that Plaintiffs failed to satisfy the elements of class certification. The District

Court adopted the Report and Recommendation as the Opinion of the Court and denied

Plaintiffs’ motion for class certification.

1 On appeal, Plaintiffs assert that they sought nationwide certification only for the strict products liability and implied warranty claims. In the First Amended Complaint and the Memorandum in Support of Motion for Class Certification, they sought nationwide certification for the negligence claim as well, so we will consider it as a claim for both the nationwide class and the Pennsylvania-only class. 6 II.

The District Court had jurisdiction under 28 U.S.C. § 1332(d). We have appellate

jurisdiction over this interlocutory appeal under 28 U.S.C. § 1292(e) and Federal Rule of

Civil Procedure 23(f).2

“We review a class certification order for abuse of discretion, which occurs if the

district court’s decision rests upon a clearly erroneous finding of fact, an errant

conclusion of law or an improper application of law to fact.” Hayes v. Wal-Mart Stores,

Inc., 725 F.3d 349, 354 (3d Cir. 2013) (internal quotation marks omitted). We review de

novo whether the District Court applied the correct legal standard. See id.

III.

Plaintiffs argue that the District Court abused its discretion by concluding that they

failed to satisfy any element of Rule 23. Every putative class must satisfy the four

requirements of Rule 23(a):

(1) the class must be “so numerous that joinder of all members is impracticable” (numerosity); (2) there must be “questions of law or fact common to the class” (commonality); (3) “the claims or defenses of the representative parties” must be “typical of the claims or defenses of the class” (typicality); and (4) the named plaintiffs must “fairly and adequately protect the interests of the class” (adequacy of representation, or simply adequacy).

2 A class action meets the Article III standing requirements so long as at least one named plaintiff has standing. Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353, 364 (3d Cir. 2015). Plaintiffs have made the requisite showing here because they allege that they suffered damages in the form of property damages from fire, remediation efforts, property value loss and/or increased insurance premiums.

7 In re Cmty. Bank of N. Va., 622 F.3d 275, 291 (3d Cir. 2010). The party seeking

certification bears the burden of establishing each element of Rule 23 by a preponderance

of the evidence. See Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 591 (3d Cir. 2012).

Plaintiffs seek certification of a nationwide class or multi-state subclasses under

Rule 23(b)(3) or, in the alternative, certification under Rule 23(b)(2) for injunctive relief

or Rule 23(c)(4) as a liability-only class. We will address each proposed class in turn.

A.

We note at the outset that the District Court held that Plaintiffs could not satisfy

any of the Rule 23(a) and (b) requirements, and that the class was also not ascertainable.

We will not address each of these requirements, however, because we conclude that

Plaintiffs’ class claims fail due to their lack of commonality and Plaintiffs’ inability to

satisfy the Rule 23(b)(3) requirement that “questions of law or fact common to class

members predominate over any questions affecting only individual members.” Fed. R.

Civ. P. 23(b)(3). Plaintiffs argue that the District Court abused its discretion by ignoring

the common issues that they identified and by focusing the predominance inquiry on

variations in state law. “It is often appropriate to discuss commonality and predominance

together because the commonality inquiry is subsumed into the predominance inquiry.”

Reyes v. Netdeposit, LLC, 802 F.3d 469, 486 (3d Cir. 2015). We will do so here.

Federal Rule of Civil Procedure 23(a)(2) requires “questions of law or fact

common to the class.” This means “the named plaintiffs share at least one question of

fact or law with the grievances of the prospective class.” Baby Neal v. Casey, 43 F.3d

48, 56 (3d Cir. 1994). Although this bar “is not a high one,” we have found commonality

8 lacking where there was no common practice or common harm. See Rodriguez v. Nat’l

City Bank, 726 F.3d 372, 382-85 (3d Cir. 2013).

Predominance “tests whether proposed classes are sufficiently cohesive to warrant

adjudication by representation, a standard far more demanding than the commonality

requirement of Rule 23(a), requiring more than a common claim.” In re Hydrogen

Peroxide Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2008), as amended (Jan. 16, 2009)

(cleaned up). Notably, “the presence of individual questions does not per se rule out a

finding of predominance.” In re Prudential Ins. Co. Am. Sales Practice Litig. Agent

Actions, 148 F.3d 283, 315 (3d Cir. 1998). Predominance also “does not require that

common questions will be answered, on the merits, in favor of the class,” Neale v. Volvo

Cars of N. Am., LLC, 794 F.3d 353, 371 (3d Cir. 2015) (citation omitted), but it does

require that the common issues will generate common answers, Wal-Mart Stores, Inc. v.

Dukes, 564 U.S. 338, 350 (2011). The district court “must determine whether the

essential elements of the claims brought by a putative class are ‘capable of proof at trial

through evidence that is common to the class rather than individual to its members.’”

Gonzalez v. Corning, 885 F.3d 186, 195 (3d Cir. 2018) (quoting In re Hydrogen

Peroxide, 552 F.3d at 311-12). “If proof of the essential elements of the cause of action

requires individual treatment, then class certification is unsuitable.” Id. (quoting Newton

v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 172 (3d Cir. 2001)).

Accordingly, we “examine each element of a legal claim through the prism of Rule

23(b)(3).” Marcus, 687 F.3d at 600 (internal quotation marks omitted).

9 Plaintiffs urge that both commonality and predominance are met here based on the

common product and Defendants’ common course of conduct in continuing to

manufacture, market, and sell the CSST. Plaintiffs identify “susceptibility to

perforation,” “availability of alternative designs,” Defendants’ knowledge of alternative

designs, and the design’s safety for intended use as common issues. Pls.’ Reply Br. 15.

But this is not a case where the same conduct has given rise to the same harm. Some

plaintiffs have experienced physical damage, whereas others allege an economic injury

from the diminution in value of their home, repair costs, or increased insurance costs.

Some may have no injury or their injury may depend on the condition of the pipes and

manner of installation. Each claim will require individualized property assessments and

will raise different causation issues. Even plaintiffs with physical damages will need to

make different showings of damage based on the particular conditions of their property

and the circumstances surrounding the damaging event.

Plaintiffs urge that the efficacy of bonding and grounding and other installation

questions are common because if they are ineffective, they will remove possible defenses

across the class. But Plaintiffs have not shown that the effectiveness of proper

installation can be resolved with “evidence that is common to the class.” In re Hydrogen

Peroxide, 552 F.3d at 311. Instead, installation questions will rely on individualized

assessments such as the product placement at each property, the conduct of each installer,

and the effect of local codes. And even if the effectiveness of bonding and grounding is a

common question, it certainly does not predominate over these individualized

assessments. In sum, Plaintiffs have not shown how the design issues will rely on

10 common evidence that will resolve any of the essential elements of their claims. See

Gonzalez, 885 F.3d at 195. Certainly common fact issues do not predominate.

Plaintiffs additionally contend that the District Court erred in finding a lack of

predominance based on variances in state law. They argue that they submitted a “trial

plan” which “outlin[es] divisibility based on multi-state similarities” and provides a

comparison of relevant state laws and jury instructions. Pls.’ Reply Br. 23. But the

exhibits Plaintiffs reference consist only of a chart listing the type of law in each state and

patterned jury instructions for the various claims in all fifty states. They do not set forth a

“trial plan.”

The District Court concluded that “Plaintiffs have not even attempted to identify

the common elements of each of their causes of action, let alone attempt to explain how

those elements can be met by common proof.” Adams Pointe I, L.P. v. Tru-Flex Metal

Hose Corp., No. 2:16-CV-00750-CB, 2020 U.S. Dist. LEXIS 128055 at *9 (W.D. Pa.

July 17, 2020). While Plaintiffs claim that all fifty states have adopted the Uniform

Commercial Code (“UCC”) § 2-314’s implied warranty of merchantability provision, the

District Court explained that states vary widely in their application of the provision.

States also have varying statutes of limitations and privity requirements for implied

warranty claims. The District Court also noted that strict products liability and

negligence causes of action differ among states.

We agree with the District Court that Plaintiffs have failed to show how the Court

could “navigate the significant variations in state law.” Id. at *10. Plaintiffs may

overcome predominance obstacles in a nationwide class action where they have shown

11 that the applicable state laws are substantially similar such that they can be grouped

together and applied as a unit at trial. See In re Prudential, 148 F.3d at 315. We have

recognized that a grouping proposal was manageable where the plaintiffs provided a

“series of charts setting forth comprehensive analyses of the various states’ laws

potentially applicable to their common law claims.” Id. Conversely, where plaintiffs

“failed to provide a sufficient, or virtually any, analysis describing how the grouped state

laws might apply to the facts” of their case, we affirmed the district court’s ruling that

plaintiffs had failed to meet their predominance burden. Grandalski v. Quest Diagnostics

Inc., 767 F.3d 175, 184 (3d Cir. 2014). Here, Plaintiffs have not shown how various

“elements of these common law claims are substantially similar and [that] any differences

fall into a limited number of predictable patterns.” See In re Prudential, 148 F.3d at 315.

Their “comparison” sets forth the type of law of each jurisdiction, but provides no

analysis of how the elements of the various causes of action in the different jurisdictions

compare to each other or could be grouped so as to be manageable at trial. And the

patterned jury instructions they provided for the fifty states fail to show how a “jury

could be charged in some coherent manner,” by reference to these instructions. See

Grandalski, 767 F.3d at 183. As in Grandalski, this exhibit is, at best, a “generic

assessment” of state laws that is insufficient to meet their burden of showing that

grouping is workable. Id. at 184.

Accordingly, we agree with the District Court that Plaintiffs have failed to satisfy

their predominance burden. The District Court did not abuse its discretion in denying

certification for the nationwide class under Rule 23(b)(3).

12 B.

Plaintiffs urge that the Court disregarded their proposal for multi-state subclasses

or a Pennsylvania-only class under Rule 23(b)(3). They argued at the class certification

hearing that subclasses could be based on the states that have adopted the UCC without

modification and the states that have adopted the Restatement (Second) of Torts §402A

(Am. L. Inst. 1995). Plaintiffs further aver that they met their burden for a Pennsylvania-

only class because they identified the various elements of their Pennsylvania law claims.

Plaintiffs’ recitation of the applicable laws of either the multi-state subclasses or the

Pennsylvania-only class does not address their burden of showing that they will prove the

elements of their claims through common evidence. See In re Hydrogen Peroxide, 552

F.3d at 311. These proposed subclasses will also suffer from the individual causation and

damages issues discussed above. We will therefore affirm the District Court’s denial of

certification for these subclasses.

C.

Plaintiffs argue that the District Court also abused its discretion in denying

certification under Rule 23(b)(2) for injunctive relief or Rule 23(c)(4) for a liability-only

class. For similar reasons as discussed above, we conclude that the District Court did not

abuse its discretion.

Rule 23(b)(2) “does not authorize class certification when each class member

would be entitled to an individualized award of monetary damages.” Gates v. Rohm &

Haas Co., 655 F.3d 255, 264 (3d Cir. 2011) (quoting Wal-Mart Stores, Inc., 564 U.S. at

360-61). “The key to the (b)(2) class is the indivisible nature of the injunctive or

13 declaratory remedy warranted—the notion that the conduct is such that it can be enjoined

or declared unlawful only as to all of the class members or as to none of them.” See Wal-

Mart Stores, Inc., 564 U.S. at 360 (internal quotation marks omitted). Plaintiffs seek

primarily individualized monetary relief here. They have not shown how their proposed

injunctive relief of enjoining the selling and marketing of Pro-Flex® CSST will remedy

their alleged physical and economic injuries. We agree with the District Court that

certification under Rule 23(b)(2) is inappropriate.

Plaintiffs additionally contend that even if certification under Rule 23(b)(3) is

inappropriate due to a predominance issue, certification under Rule 23(c)(4) is warranted

because they have shown common liability issues that will advance the case. We have

enumerated several non-exhaustive factors relevant to assessing whether

certification under Rule 23(c)(4) is appropriate. These factors include “the type of

claim(s) and issue(s) in question,” “the efficiencies to be gained by granting partial

certification in light of realistic procedural alternatives,” “the substantive law underlying

the claim(s),” and the “the kind of evidence presented on the issue(s) certified and

potentially presented on the remaining issues.” Gates, 655 F.3d at 273. We have

recognized that “certifying a Rule 23(c)(4) class is analytically independent from the

predominance inquiry under Rule 23(b)(3), [but] a case may present concerns relevant to

both.” Gonzalez, 885 F.3d at 202. That is the case here. For the same reasons that

Plaintiffs failed to satisfy predominance under Rule 23(b)(3), Plaintiffs have failed to

allege a theory of liability for which class-wide treatment is appropriate.

14 IV.

For the foregoing reasons, we will affirm the District Court’s ruling.