William Harbison v. Louisiana Pacific Corp , 602 F. App'x 884 ( 2015 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 14-1863
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WILLIAM HARBISON,
individually and on behalf of all others similarly situated,
Appellant
v.
LOUISIANA-PACIFIC CORPORATION
____________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(W.D. Pa. No. 2-13-cv-00814)
(District Judge: Arthur J. Schwab)
____________
Submitted Pursuant to Third Circuit LAR 34.1(a)
January 20, 2015
Before: FISHER, JORDAN and GREENAWAY, Jr., Circuit Judges.
(Filed: February 18, 2015)
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OPINION*
____________
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
FISHER, Circuit Judge.
William Harbison installed TrimBoard, a non-structural trim lumber, on his house
in 2003. The TrimBoard came with a ten-year warranty in which the manufacturer,
Louisiana-Pacific Corp., agreed to compensate the owner for repair and replacement up
to twice the original purchase price of the affected trim. In 2010, the TrimBoard failed.
Harbison sued Louisiana-Pacific, claiming that Louisiana-Pacific breached the warranty
and that the damages limitation was unconscionable. The District Court dismissed
Harbison’s unconscionability claim, denied him leave to amend his complaint, and
granted summary judgment to Louisiana-Pacific on the breach of warranty claim. We
will affirm.
I.
We write principally for the parties, who are familiar with the factual context and
legal history of this case. Therefore, we will set forth only those facts that are necessary
to our analysis.
In 2003, Harbison hired contractors and subcontractors to install trim on his
garage. His contractor purchased TrimBoard, made by Louisiana-Pacific. The TrimBoard
came with the following warranty:
Should the product fail within ten years of the date of installation,
[the manufacturer] after investigation and verification, will replace
the defective trim on the following basis: [the manufacturer] will
compensate the owner for repair and replacement of the affected
2
trim no more than twice the original purchase price of the affected
trim if failure occurs within ten years.1
In 2010, Harbison discovered that the TrimBoard had begun to rot, leading to water
damage to the TrimBoard and possibly other parts of his home.
Harbison made a claim to Louisiana-Pacific under the warranty. In 2011, an
inspector for Louisiana-Pacific inspected the TrimBoard. Louisiana-Pacific offered
Harbison $2,780.08. Louisiana-Pacific calculated this offer by measuring the amount of
TrimBoard affected, increasing that amount by twenty percent to account for material
wasted during the installation, then applying the original purchase price and sales tax, for
a total price of $1,390.04 for the TrimBoard installed. Louisiana-Pacific then doubled this
amount to reach its offer under the warranty. Harbison declined the offer.
In June 2013, Harbison filed a purported class-action complaint against Louisiana-
Pacific. In December 2013, he filed an amended purported class-action complaint for
breach of warranty and declaratory judgment. Harbison claimed that the damages
limitation in the ten-year warranty was unconscionable and should be stricken and that
once the limitation was stricken, Louisiana-Pacific breached the express warranty.
Louisiana-Pacific moved to dismiss the amended complaint. The District Court
granted the motion in part and denied it in part. The District Court found that Harbison
could claim the benefit of the express warranty under the Pennsylvania Commercial Code
but that Harbison could not claim that the damages limitation was unconscionable.
1
J.A. 115.
3
Accordingly, the District Court denied Harbison’s claims to the extent he requested the
court strike the allegedly unconscionable damages limitation from the warranty. Harbison
moved for leave to file a second amended complaint to reiterate his claim that the
damages limitation was unconscionable. The District Court denied the motion because
the amendments would be futile. Louisiana-Pacific then moved for summary judgment on
the basis that it had complied with the express warranty and its damages limitation. The
District Court granted Louisiana-Pacific’s motion and terminated the case. Harbison filed
a timely appeal.
II.
The District Court had jurisdiction over this action under 28 U.S.C. § 1332, and
we have appellate jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over
the District Court’s orders on the motion to dismiss and on the motion for summary
judgment.2 We may affirm on any basis supported by the record.3 We review a denial of a
motion for leave to amend for abuse of discretion.4
III.
A.
We begin with the District Court’s decision to dismiss Harbison’s
unconscionability claim. A complaint states a claim upon which relief can be granted,
2
Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 265 (3d Cir. 2014); Rea v.
Federated Investors, 627 F.3d 937, 940 (3d Cir. 2010).
3
Blunt, 767 F.3d at 265.
4
Hudson United Bank v. LiTenda Mortg. Corp., 142 F.3d 151, 160 (3d Cir. 1998).
4
and survives a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), when it
contains a short, plain statement of facts that allows the court to draw a reasonable
inference that the defendant is liable for the misconduct alleged.5
Under Pennsylvania law, a court may decline to enforce a contract clause “[i]f the
court as a matter of law finds” that the clause was “unconscionable at the time it was
made.”6 To prove a contract clause was unconscionable, a plaintiff must show that the
clause was both procedurally and substantively unconscionable.7 “In examining these two
prongs, the Pennsylvania Supreme Court has indicated that it might be appropriate to use
a ‘sliding-scale approach’ so that ‘where the procedural unconscionability is very high, a
lesser degree of substantive unconscionability may be required’ and presumably, vice-
versa.”8
Procedural unconscionability exists “where there was a lack of meaningful choice
in the acceptance of the challenged provision.”9 Contracts of adhesion, such as the
warranty included with the TrimBoard here, are generally considered to satisfy the
5
Thompson v. Real Estate Mortg. Network, 748 F.3d 142, 147 (3d Cir. 2014).
6
13 Pa. Cons. Stat. § 2302(a). Contractual limitations on damages—such as the
one at issue here—are permissible under Pennsylvania law, but they must not be
unconscionable. Id. § 2719 & cmt. 1.
7
Quilloin v. Tenet HealthSystem Phila., Inc., 673 F.3d 221, 230 (3d Cir. 2012)
(applying Pennsylvania law).
8
Id. (quoting Salley v. Option One Mortg. Corp., 925 A.2d 115, 125 n.12 (Pa.
2007)).
9
Salley, 925 A.2d at 119.
5
procedural unconscionability requirement.10 However, the degree of procedural
unconscionability is low because the warranty was provided to Harbison with the
TrimBoard, and the warranty at issue is featured in the first paragraph and not in fine
print.11
Substantive unconscionability, on the other hand, involves “contractual terms that
are unreasonably or grossly favorable to one side and to which the disfavored party does
not assent.”12 Louisiana-Pacific chose to offer a ten-year warranty to consumers. It did
not have to offer this benefit. The damages limitation contained in the warranty was the
condition on which it was willing to extend the benefit of the warranty.
If Louisiana-Pacific had not offered the ten-year warranty, it does not appear that
Harbison would have any remedy under the contract for the failure of the TrimBoard
seven years after it was installed.13 But because the company did offer the ten-year
warranty as written, Harbison has the opportunity to recover twice the value of the
TrimBoard that was affected. So the warranty included with the TrimBoard is actually
somewhat favorable to Harbison because, even if it does not provide him with all the
10
McNulty v. H&R Block, Inc., 843 A.2d 1267, 1273 & n.6 (Pa. 2004).
11
J.A. 96; J.A. 115.
12
Harris v. Green Tree Fin. Corp., 183 F.3d 173, 181 (3d Cir. 1999).
13
Harbison would not be able to claim the benefit of the implied warranties of
merchantability and fitness for a particular purpose because the four-year statute of
limitations for breach of warranty under the Pennsylvania Commercial Code began to run
on the date of tender. 13 Pa. Cons. Stat. § 2725; see also Rufo v. Bastian-Blessing Co.,
207 A.2d 823, 825-26 (Pa. 1965) (the statute of limitations for breaches of the implied
warranties began to run on the date of tender of the goods even though the defect was not
discovered until one year after tender).
6
relief he wants, it provides him with more relief than nothing. Therefore, because the
warranty was prominently featured within the contract and because the warranty as a
whole provides Harbison with a benefit he would not otherwise have, the damages
limitation was not unconscionable.
Harbison relies on two cases to argue that we should strike the damages limitation
in the warranty as unconscionable while keeping the ten-year warranty itself, but these
cases are distinguishable. In Antz v. GAF Materials Corp., the Pennsylvania Superior
Court struck a damages limitation as unconscionable from an express thirty-year
warranty for house shingles where the warranty was not provided to the homeowner and
the damages limitation barred recovering labor costs of repair for defective shingles.14
And in Moscatiello v. Pittsburgh Contractors Equipment Co., the Superior Court struck a
damages limitation as unconscionable from a contract for the sale of a paving machine
where the limitation was printed in “fine print on the reverse side of the contract,” unseen
by the buyer, and the limitation barred recovering consequential damages for a breach of
the contract and warranties.15
Although the Superior Court found both damages limitations unconscionable, both
cases concerned significant levels of procedural unconscionability. In Moscatiello, the
limitation was hidden in fine print, and in Antz, the warranty was not even given to the
homeowner, so he had no way of knowing it existed. Thus, the fact that the damages
14
719 A.2d 758, 761-63 (Pa. Super. Ct. 1998).
15
595 A.2d 1190, 1195-97 (Pa. Super. Ct. 1991).
7
limitations were hidden from the buyers justified severing the damages limitations from
the warranties and declaring them unconscionable. In contrast, here the procedural
unconscionability is low. Harbison admits that he was given the warranty, and the
damages limitation for the ten-year warranty was prominently placed in the first
paragraph of the one-page warranty sheet. Therefore, this particular damages limitation
was not unconscionable.
Finally, Harbison says that under 13 Pa. Cons. Stat. § 2302(b), he should have
been afforded an opportunity to provide evidence in support of his claim of
unconscionability. However, that provision only requires a “reasonable opportunity” to
present evidence “to aid the court.”16 Here, the District Court assumed Harbison’s
allegations about the sale and the warranty to be true. And based on those allegations, the
District Court concluded that the provision was not unconscionable. This satisfies the
requirements of § 2302(b), and no further evidence is needed.
For these reasons, the District Court’s decision to dismiss Harbison’s
unconscionability claim will be affirmed.
B.
Having determined that the damages limitation was not unconscionable, we find
that the District Court did not abuse its discretion in denying Harbison leave to amend his
complaint. The amendments would have been futile.
16
13 Pa. Cons. Stat. § 2302(b).
8
Moreover, because the limitation was not unconscionable, the District Court
properly granted summary judgment to Louisiana-Pacific on the remaining claims. There
was no genuine dispute that Louisiana-Pacific accurately measured the TrimBoard used
on Harbison’s garage and accurately calculated its value. Additionally, there was no
genuine dispute that twice that value, which Louisiana-Pacific offered, was Louisiana-
Pacific’s maximum liability under the warranty, including the damages limitation. So
there was no genuine dispute as to a material fact, and Louisiana-Pacific was entitled to
judgment as a matter of law.17
IV.
For the reasons set forth above, we will affirm the District Court’s judgment.
17
See Fed. R. Civ. P. 56(a).
9