Gwen Hart v. Louisiana-Pacific Corporation , 641 F. App'x 222 ( 2016 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2375
GWEN HART, on behalf of herself and all others similarly
situated; LUCILLE DRUTHER; JOSEPH DRUTHER; EDWARD WUELLNER;
JENNIFER WUELLNER,
Plaintiffs - Appellants,
v.
LOUISIANA-PACIFIC CORPORATION,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Elizabeth City. Terrence W.
Boyle, District Judge. (2:08-cv-00047-BO)
Argued: September 16, 2015 Decided: March 10, 2016
Before SHEDD and THACKER, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
ARGUED: Gary Edward Mason, WHITFIELD, BRYSON & MASON, LLP,
Washington, D.C., for Appellants. Richard Thell Boyette,
CRANFILL SUMNER & HARTZOG LLP, Raleigh, North Carolina, for
Appellee. ON BRIEF: Daniel K. Bryson, Scott C. Harris, Raleigh,
North Carolina, Nicholas A. Migliaccio, WHITFIELD, BRYSON &
MASON, LLP, Washington, D.C.; Joel R. Rhine, Jean S. Martin,
RHINE MARTIN LAW FIRM, P.C., Wilmington, North Carolina; Auley
M. Crouch, III, Christopher K. Behm, BLOCK, CROUCH, KEETER, BEHM
& SAYED, LLP, Wilmington, North Carolina; Charles A. Schneider,
Martha B. Schneider, SCHNEIDER & SCHNEIDER, Washington, D.C.,
for Appellants. Meghan N. Knight, CRANFILL SUMNER & HARTZOG
LLP, Raleigh, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Gwen Hart, Lucille and Joseph Druther, and Edward and
Jennifer Wuellner (collectively “Appellants”) own homes that
were built using TrimBoard, a construction material manufactured
by Louisiana-Pacific Corporation (“Appellee”). TrimBoard was
sold with an express, ten-year warranty (the “Warranty”) that
provided a specific and limited remedy if the product failed to
live up to expectations. Over time, Appellants grew
dissatisfied with their TrimBoard, and filed a class action
asserting claims for breach of the Warranty. They also claimed
the limited remedy was unconscionable and sought compensatory
damages not contemplated in the Warranty.
The district court certified the class initially, but
later concluded that some class members’ claims -- including
Appellants’ claims -- were barred by an applicable statute of
repose. The district court granted summary judgment to Appellee
on the time-barred claims and opted to decertify the class.
We affirm, but for slightly different reasons. In our
view, Appellee is entitled to summary judgment because the
Warranty’s limited remedy is not unconscionable. As a result,
we do not consider the district court’s conclusion about the
timeliness of Appellants’ claims. We also affirm the district
court’s decision to decertify the class.
3
I.
A.
Appellants are North Carolina homeowners. Gwen Hart
completed construction of her home in Dare County, North
Carolina, in 1999. The Druthers and the Wuellners live in Apex,
North Carolina, in houses that were completed in 2000 and 2001,
respectively.
Each home was built using TrimBoard, a composite
building material sold by Appellee through its subsidiary,
ABTco. TrimBoard was marketed for use as exterior trim,
“perfect for all trim applications, including corner board,
fascia, window and door trim.” J.A. 274. 1 It was sold with an
express, limited, ten-year warranty that guaranteed TrimBoard’s
“substrate” 2 against “delamination, checking, splitting, cracking
and chipping . . . for a period of ten years” from the date of
installation, as long as it had been “properly stored,
installed, maintained, and protected.” Id. at 247; see also id.
at 344 (“[TrimBoard] substrate will not delaminate, check,
split, crack, or chip for a period of ten years from the date of
1
Citations to the “J.A.” refer to the Joint Appendix
filed by the parties in this appeal.
2
TrimBoard consists of a composite base to which a
laminate finish is applied. The substrate is the base of the
product, as opposed to the finish applied to it.
4
installation under normal conditions of use and exposure,
provided the trim is properly stored, installed, maintained, and
protected . . . .”).
The Warranty also provided an exclusive, limited
remedy. Before 2005, Appellee promised to “compensate the owner
for repair and replacement of the affected trim no more than
twice the original purchase price,” if TrimBoard failed within
the ten-year period. J.A. 358. After 2005, Appellee offered to
“pay an amount equal to the cost . . . of replacing any such
failed [TrimBoard] if failure occur[red] within ten years after
the [TrimBoard] was installed.” Id. at 364. Both versions of
the Warranty disclaimed all other warranties, including the
implied warranty of merchantability, and specifically barred the
recovery of “any other damages or losses, including” incidental
and consequential damages. Id. at 358, 364.
B.
Over time, the TrimBoard on Appellants’ homes began
splitting and cracking, absorbing moisture, and rotting and
degrading. Hart, for example, was told by a contractor that all
of the TrimBoard on her home was damaged and would need to be
replaced at an estimated cost of close to $5,000. She made a
claim under the Warranty in 2008. Appellee offered Hart
$3,772.32, but she rejected that offer because it was roughly
$1,300 less than the estimate she previously received. The
5
Druthers and Wuellners submitted claims under the Warranty in
2009. Appellee made offers to them as well, for $1,429.62 and
$820.95, respectively. Presumably, both offers were not
accepted.
After rejecting Appellee’s offer, Hart filed a
putative class action complaint in Dare County Superior Court on
October 22, 2008. Appellee removed the case to the District
Court for the Eastern District of North Carolina, after which
Appellants filed their operative amended complaint on September
21, 2009. That pleading was the first to include the Druthers
and Wuellners as named plaintiffs.
The amended complaint charged Appellee with “breach of
express warranty,” alleging TrimBoard “prematurely deteriorates,
rots, swells, buckles, delaminates, absorbs water, warps and/or
bulges under normal conditions,” resulting in “water and
structural damages[,] . . . growth of mold mildew, fungi, and
insect infestation in the structures in which it is installed.”
J.A. 141, 153. Appellants claimed the Warranty’s limited remedy
provision was unconscionable because Appellee allegedly knew
that TrimBoard was defective but sold it anyway. They
maintained they were, therefore, entitled to recover damages
otherwise excluded by the Warranty, such as compensatory
damages. Alternatively, Appellants alleged that Appellee
breached the Warranty by failing to “pay for 100% of the costs
6
associated with the removal of the defective [TrimBoard].” Id.
at 155. As a remedy for that alternative theory of breach, they
asked for “specific performance” of the “terms of [the
Warranty]” as originally drafted -- that is, an amount equal to
the cost of replacing defective TrimBoard. 3
On appeal, however, we consider only whether
Appellants are entitled to recover compensatory damages if they
succeed in proving that the Warranty’s limited remedy provision
is unconscionable. Appellants’ counsel made clear at oral
argument that Appellants were definitively abandoning any effort
to recoup the remedy provided under the terms of the Warranty as
written:
COURT: Are the plaintiffs still seeking to
press their claim to enforce the warranty as
written?
APPELLANTS’ COUNSEL: No, not as written,
Your Honor.
. . . .
COURT: [Y]ou’re not going to proceed on the
warranty as-written claim?
3The amended complaint identifies the cost of replacing
defective TrimBoard as the “sole remedy available for breach of
th[e] [W]arranty.” J.A. 155. As discussed above, however, the
limited remedy available under the Warranty varied over time.
The version of the Warranty in effect in 1999 when Hart’s home
was completed offered purchasers twice the purchase price for
failed TrimBoard.
7
APPELLANTS’ COUNSEL: That’s correct. Our
claim is that there’s a breach of warranty
in that the limitations of the warranty
limiting us to two times . . . the cost of
repair is unconscionable given the
circumstances and facts of this case.
See Oral Argument at 00:27-01:20, Hart v. Louisiana-Pacific
Corp., (2015) (No. 13-2375), http://www.ca4.uscourts.gov/oral-
argument/listen-to-oral-arguments.
C.
The parties vigorously litigated the question of
unconscionability in the district court. On July 18, 2011, the
district court granted Appellants’ motion to certify a Rule
23(b)(3) class consisting of “[a]ll persons in the State of
North Carolina who own a home, office or other building in which
[TrimBoard] has been installed in the past 10 years.” J.A.
1027-35. In doing so, the court reasoned that the case
presented several common questions of law and fact relevant to
the unconscionability issue, including: whether TrimBoard was
defective; whether Appellee knew TrimBoard was defective;
whether the Warranty’s limited remedies were unconscionable;
whether the Warranty failed of its essential purpose; and
whether the class members were entitled to remedies beyond those
provided by the Warranty.
Appellee thereafter filed two motions for summary
judgment. The first argued that the Warranty was not
8
unconscionable, but the district court disagreed. In the
district court’s view, “[a] manufacturer’s prior knowledge of an
inherent or latent defect” could support a finding “that a
contract or contract clause is both procedurally and
substantively unconscionable.” J.A. 2698. As a result, because
there was a genuine dispute of fact about whether Appellee knew
TrimBoard was defective when it issued the Warranty, the
district court reasoned it was too soon to decide whether the
Warranty was unconscionable.
Shortly before trial, Appellee again moved for summary
judgment, arguing Appellants’ claims were barred by a six-year
statute of repose. This time the district court agreed,
granting Appellee summary judgment because it was “undisputed
that this suit was filed beyond the six-year statute of repose
applicable to the claims of the named plaintiffs.” J.A. 3246.
The district court then elected to decertify the class, because,
in its view, determining which class members’ claims were
subject to the statute of repose “would necessarily require an
individualized determination” that would “destroy typicality,
. . . predominance, [and] otherwise foreclose class
certification.” Id. at 3247. Appellants timely noted this
appeal, challenging both the grant of summary judgment and the
district court’s decision to dissolve the class.
9
II.
We consider first whether the district court properly
awarded summary judgment to Appellee. In doing so, we review
the district court’s legal conclusions de novo, Liberty Univ.,
Inc. v. Citizens Ins. Co. of Am., 792 F.3d 520, 523 (4th Cir.
2015), accepting Appellants’ evidence as true and drawing all
justifiable inferences in their favor, Tolan v. Cotton, 134 S.
Ct. 1861, 1863 (2014) (per curiam). We next review the district
court’s decision to decertify the class for abuse of discretion.
See EQT Prod. Co. v. Adair, 764 F.3d 347, 357 (4th Cir. 2014).
And we may, of course, affirm on alternate grounds apparent in
the record. See Ellis v. Louisiana-Pacific Corp., 699 F.3d 778,
786-87 (4th Cir. 2012).
III.
A.
The district court held Appellants’ claims were barred
by article 5, section 1-50(a)(5) of the North Carolina General
Statutes, which provides:
No action to recover damages based upon or
arising out of the defective or unsafe
condition of an improvement to real property
shall be brought more than six years from
the later of the specific last act or
omission of the defendant giving rise to the
cause of action or substantial completion of
the improvement.
10
N.C. Gen. Stat. § 1-50(a)(5). It is undisputed that Hart
finished building her home in 1999, but did not file the initial
class action complaint in this matter until 2008, placing her
claims well outside the repose period. The same is true for the
Druthers and Wuellners, whose homes were completed in 2000 and
2001, respectively. On the other hand, it is equally plain that
Appellants did file their claims within the Warranty period;
that is, within ten years of the TrimBoard being installed on
their properties. The case thus presents a knotty issue: If
goods are under warranty when the repose period runs out, may a
buyer still seek redress through a claim for breach of the
warranty?
As it happens, the North Carolina courts issued two
opinions analyzing that very question while this litigation was
unfolding. In Christie v. Hartley Construction, Inc. (“Christie
I”), 745 S.E.2d 60 (N.C. Ct. App. 2013), homeowners sued
Grailcoat WorldWide, LLC (“Grailcoat”), the manufacturer of a
waterproofing sealant called SuperFlex, seeking damages for
breach of warranty. Id. at 61. In response, Grailcoat moved
for summary judgment, arguing that the plaintiffs’ claims were
barred by a six-year statute of repose despite the fact that
SuperFlex was “fully warranted” for twenty years. See id. at
61, 63. The Court of Appeals of North Carolina agreed with
Grailcoat, holding, “a plaintiff whose action is not filed
11
within the time set forth in the statute of repose has no cause
of action for damages,” despite the existence of an extended
warranty. Id. at 63.
The district court in this case diligently applied
Christie I, and concluded Appellants’ claims were likewise
untimely. But while this appeal was pending, a parallel appeal
of Christie I was working its way up the ladder in state court.
And, on December 19, 2014, the North Carolina Supreme Court
reversed Christie I, holding, “by contracting for a warranty
term that exceed[s] the repose period, [a seller] waive[s] the
protections provided by that statute and is bound by its
agreement.” Christie v. Hartley Constr., Inc. (“Christie II”),
766 S.E.2d 283, 284 (N.C. 2014).
The parties disagree sharply over the proper
interpretation of Christie II and its implications for this
case. Appellee concedes it is bound by the Warranty, but
maintains it agreed to extend its liability beyond the repose
period only on the limited basis set forth therein. Thus,
Appellee argues, if Appellants seek “relief beyond that to which
[Appellee] has agreed” and do so “outside the statute of repose,
. . . the rationale for the [Christie II] exception does not
apply, and the statute of repose bars the claim.” Appellee’s
Supp. Br. 9.
12
In contrast, Appellants argue that the statute of
repose loses all force if a claim for breach of warranty is made
within the Warranty period. See Appellants’ Supp. Br. 7
(“[Appellee] . . . willingly agreed to waive the six year
statute of repose and [Christie II] makes clear that the statute
of repose is inapplicable -- for all purposes and with respect
to all provisions.”). In their view, the entirety of the
Warranty is fair game; if Appellee is entitled to enforce the
limited remedy provision, then Appellants argue they should be
entitled to attack its conscionability and, if successful,
invalidate it.
We do not need to resolve the parties’ conflicting
interpretations of Christie II in this case, however, because
even assuming Appellants are entitled to litigate the question
of unconscionability after the statute of repose has elapsed, we
conclude the Warranty at issue here is not unconscionable.
A court may refuse to enforce a contract for the sale
of goods, or any clause therein, if it finds the agreement was
unconscionable as a matter of law when it was made. See N.C.
Gen. Stat. § 25-2-302. In North Carolina, a party asserting
unconscionability must demonstrate that the contract or term is
both procedurally and substantively unconscionable. See Rite
Color Chem. Co. v. Velvet Textile Co., 411 S.E.2d 645, 648-49
(N.C. Ct. App. 1992) (discussing unconscionability under § 25-2-
13
302); see also Tillman v. Commercial Credit Loans, Inc., 655
S.E.2d 362, 370 (N.C. 2008) (discussing unconscionability
generally). “[P]rocedural unconscionability involves
‘bargaining naughtiness’ in the form of unfair surprise, lack of
meaningful choice, and an inequality of bargaining power.”
Tillman, 655 S.E.2d at 370 (quoting Rite Color). “Substantive
unconscionability . . . refers to harsh, one-sided, and
oppressive contract terms.” Id. Ultimately, the question,
after considering “all the facts and circumstances of a
particular case,” is whether the contract is “so one-sided that
the contracting party is denied any opportunity for a meaningful
choice” and whether the “terms are so oppressive that no
reasonable person would make them on the one hand, and no honest
and fair person would accept them on the other.” Brenner v.
Little Red Sch. House Ltd., 274 S.E.2d 206, 210 (N.C. 1981).
Appellants argued, and the district court agreed, that
the unconscionability question turned on whether and to what
extent Appellee knew that TrimBoard was defective before
offering it for sale under the terms of the Warranty. Citing
our decision in Carlson v. General Motors Corp., 883 F.2d 287,
296 (4th Cir. 1989), the district court reasoned “[a]
manufacturer’s prior knowledge of an inherent or latent defect
can serve as a basis upon which to find that a contract or
contract clause is both procedurally and substantively
14
unconscionable.” J.A. 2698. As a result, because Appellants
“proffered evidence that TrimBoard . . . is an unsuitable
material for use as exterior siding[, and that it] . . . fails
within its expected service life,” the district court found
summary judgment in Appellee’s favor inappropriate.
We assume without deciding that Appellee’s alleged
knowledge of TrimBoard’s ineffectiveness may be evidence of the
kind of disparity in bargaining power and unfair surprise often
indicative of procedural unconscionability. See Carlson, 883
F.2d at 296 (“When a manufacturer is aware that its product is
inherently defective, but the buyer has no notice of [or]
ability to detect the problem, there is perforce a substantial
disparity in the parties’ relative bargaining power.”
(alteration in the original; internal quotation marks omitted)).
But we fail to see, at least under these circumstances, how
advanced knowledge could have established substantive
unconscionability.
In Carlson, we found advanced knowledge of a latent
defect probative on the issue of substantive unconscionability
because it was alleged that the seller abused its superior
knowledge to unfairly limit the duration of an implied warranty
of merchantability. See Carlson, 883 F.2d at 295-96. As we
explained, “Evidence of the knowledge of [a] stronger party that
the weaker party will be unable to receive substantial benefits
15
from the contract . . . should in most cases contribute to a
finding of unconscionability.” Id. at 296 (internal quotation
marks omitted). The relevant question, in other words, was
whether one party used its superior knowledge to impose a
contractual term that was harsh, one-sided, or oppressive. And
because the plaintiffs in that case discovered latent defects
only after the duration of the defendant’s limited warranty had
elapsed, we held that the facts construed in the light most
favorable to the plaintiffs could withstand a motion to dismiss.
See Carlson, 883 F.2d at 296 (“[T]he district court erred by
dismissing the claims of those named plaintiffs who alleged that
they first encountered substantial difficulties with their . . .
cars only after the purported expiration of all express and
implied warranties.”).
But we think, for several reasons, that Carlson
provides scant support for the proposition that the limited
remedy in this case is substantively unconscionable. First, the
case is plainly distinguishable on its facts. There, consumers
alleged that a manufacturer concealed knowledge of a latent
defect, imposed a durational limitation on its warranty, and
that the defect only manifested itself after the limitation had
lapsed, effectively leaving the consumers with no remedy at all.
Here, by contrast, Appellants’ evidence tends to show that
Appellee knew TrimBoard would, on average, fail within nine
16
years, yet still warranted the product for ten years and offered
twice the purchase price or, after 2005, the cost of replacement
as a remedy. Indeed, each of the Appellants in this case
discovered the alleged defect in their TrimBoard within the
Warranty period, made a claim, and received an offer of
compensation from Appellee.
Moreover, we also do not read Carlson for the broad
proposition that the terms of a warranty are necessarily
substantively unconscionable solely because one party conceals
certain information during the bargaining process. Ample
authority supports this common-sense distinction. See, e.g.,
McCabe v. Daimler AG, 948 F. Supp. 2d 1347, 1358 (N.D. Ga. 2013)
(“Plaintiffs have failed to identify any authority from the
relevant jurisdictions supporting their position that a
warranty’s time and mileage limitations may be rendered
unconscionable simply because a manufacturer knowingly sells a
defective product. Instead, the cases upon which they rely show
that additional allegations are necessary to support their
theory of unconscionability.” (discussing Georgia, California,
Florida, Illinois, and Virginia versions of § 2-302 of the
Uniform Commercial Code)); Weske v. Samsung Elecs., Am., Inc.,
934 F. Supp. 2d 698, 705-06 (D.N.J. 2013) (“[F]ailing to
disclose a known defect does not, by itself, make a warranty
unconscionable.” (construing Minnesota law)); Liparoto Const.,
17
Inc. v. Gen. Shale Brick, Inc., 772 N.W.2d 801, 805-06 (Mich.
Ct. App. 2009) (“Plaintiff also failed to establish that the
one-year limitations provision was substantively unconscionable
because the defect was not detectable for several months. The
record reveals that the bricks were shipped in December 2004 and
installed in early 2005. The record also shows that plaintiff
became aware of the problem by summer 2005. Consequently, there
is no support for plaintiff’s argument that the alleged defect
remained undetectable until it was too late to bring an action
for relief. Under these circumstances, plaintiff has not shown
that the one-year limitations provision shocks the
conscience.”).
Instead, like Carlson, cases finding substantive
unconscionability based on an inherent defect in a warranted
product require some link between the defect and the objective
unfairness of the warranty terms. See, e.g., DJ Coleman, Inc.
v. Nufarm Americas, Inc., 693 F. Supp. 2d 1055, 1073 (D.N.D.
2010) (“The clause at issue here would limit DJ Coleman’s remedy
for a breach of an express warranty to the purchase price of
Assert® or the replacement of the product. The Court finds that
the limitation of remedies provision is substantively
unconscionable. [T]he farmer is required to expend large sums
of money before any defect [ ] is noticeable, and once a defect
is found an entire year’s crop might be worthless. Once the
18
crop has failed, the farmer’s only recourse is monetary
compensation to cover his lost profit and expenditures;
replacement and repair are not viable options.” (internal
quotation marks omitted; alterations in the original)); Lennar
Homes, Inc. v. Masonite Corp., 32 F. Supp. 2d 396, 401 (E.D. La.
1998) (“The Court agrees that shipping a product with a known
latent defect may infect a limitation with unconscionability.
This limitation is not prima facie unconscionable, but Lennar
has sufficiently raised material issues of fact regarding
Masonite’s knowledge of defects to preclude summary judgment.”
(citation omitted; emphasis supplied)); Majors v. Kalo Labs.,
Inc., 407 F. Supp. 20, 22-23 (M.D. Ala. 1975) (“In summary, the
situation presented here is one of an alleged latent defect in a
product whose effectiveness was known by its manufacturer to be
questionable and an exclusion which has the effect of
foreclosing any recovery by a farmer for large and foreseeable
consequential damages for crop failure. This is, therefore, a
proper case for a determination that the attempted exclusion is
unconscionable, and such is the opinion of this Court.”).
Bussian v. DaimlerChrysler Corp., 411 F. Supp. 2d 614
(M.D.N.C. 2006), another case on which Appellants principally
rely, illustrates the difference. There, as in Carlson,
plaintiffs challenged a durational limitation in a warranty,
alleging that the manufacturer concealed information about a
19
latent defect. The court acknowledged the “broad, nearly
universally accepted proposition that a latent vehicle defect
known to the manufacturer at the time of sale that does not
manifest itself until after expiration of the express warranty
does not, in and of itself, give rise to a breach of express
warranty claim.” Id. at 621. But, critically, the plaintiff in
Bussian, as in Carlson, alleged “that the limits of the express
warranty [were] unconscionable because” the latent defect only
manifested itself after the warranty had lapsed, leaving the
plaintiff with no warranty remedy at all. See id. at 617-18,
621-22. As the Appellants’ own experience demonstrates, that is
not the factual scenario we are confronted with here.
Even if we read Carlson as broadly as Appellants would
like, we would not be bound by it because Carlson did not
interpret North Carolina law which, as a federal court sitting
in diversity, we must apply. In this case, Appellants allege
that Appellee knew TrimBoard was likely to fail within nine
years, yet still agreed to cover its product for ten years. And
although the Warranty disclaimed consequential damages, Appellee
nevertheless offered to pay to replace defective TrimBoard or
refund twice the purchase price paid for TrimBoard that failed
within ten years of purchase. Our task, then, is to assess
whether North Carolina courts would consider those terms
substantively unconscionable because they are “so oppressive
20
that no reasonable person would make them on the one hand, and
no honest and fair person would accept them on the other.”
Wilner v. Cedars of Chapel Hill, LLC, 773 S.E.2d 333, 337 (N.C.
Ct. App. 2015) (quoting Brenner, 274 S.E.2d at 210). We predict
that North Carolina courts would not reach that conclusion.
To begin with, contractual provisions disclaiming
consequential damages for economic loss are authorized under
state law and not presumptively unconscionable. See N.C. Gen.
Stat. § 25-2-719(3). And a disclaimer of consequential damages
can be valid even if a warranty’s limited remedy proves less
than ideal. See Stutts v. Green Ford, Inc., 267 S.E.2d 919, 926
(N.C. Ct. App. 1980) (upholding a limitation on consequential
damages even though plaintiff was entitled to recover cover
damages for a vehicle that could not adequately be repaired, as
contemplated by the warranty). State law also permits remedies,
similar to the ones at issue here, that limit a buyer’s recovery
to the purchase of replacement goods or the repayment of the
purchase price, see id. § 25-2-719(1)(a), and such remedies have
been upheld in cases where the consumer suffers only economic
harms. See, e.g., Byrd Motor Lines, Inc. v. Dunlop Tire &
Rubber Corp., 304 S.E.2d 773, 776-77 (N.C. Ct. App. 1983)
(limited warranty providing for purchase of replacement tires
was not unconscionable, even though tire failure was alleged to
have caused accidents resulting in damage to plaintiff’s
21
trucks); Billings v. Joseph Harris Co., 220 S.E.2d 361, 366
(N.C. Ct. App. 1975) (limited warranty remedy consisting of
return of the purchase price of seeds valid despite farmer’s
loss of crops “given the inherent element of risk present in all
agricultural enterprises”).
If the terms of the limited remedy are not per se or
categorically unconscionable, our next task is to measure their
fairness in the context of this case. To do so it is useful to
consider the default remedies that would otherwise have been
available to Appellant in the absence of the Warranty’s
limitations. The standard measure of damages for breach of
warranty in North Carolina is “the difference at the time and
place of acceptance between the value of the goods accepted and
the value they would have had if they had been as warranted,”
N.C. Gen. Stat. Ann. § 25-2-714, plus incidental and
consequential damages “[i]n a proper case,” id. § 25-2-714(3)
and -715. And when calculating damages under § 25-2-714, “[t]he
purchase price is strong evidence of the value of the goods as
warranted.” Riley v. Ken Wilson Ford, Inc., 173, 426 S.E.2d
717, 723 (N.C. Ct. App. 1993).
So here, assuming the value of the defective TrimBoard
is zero, Appellants’ damages (the difference between the value
of the goods as warranted and the value of the defective goods
accepted) would have been equal to the TrimBoard’s original
22
purchase price. The Warranty remedy applicable to Appellants’
TrimBoard, by comparison, provides twice that amount. And even
if we further assume in the absence of the Warranty’s
limitations that Appellants could have recovered some
consequential and incidental damages, such as “expenses or
commissions in connection with effecting cover” or “injury to
. . . property proximately resulting from [the] breach,” id.
§ 25-2-715(1) and (2)(b), we still cannot say that North
Carolina courts would find the Warranty oppressively one-sided
in every case. Hart, for example, received an offer under the
Warranty equal to roughly 75% of the lone estimate she obtained.
That disparity is a far cry from the circumstances in which
other courts have found limited remedies unconscionable. See,
e.g., Kalo Labs., Inc., 407 F. Supp. at 22-23 (holding that
remedy limited to return of purchase price was unconscionable
where seed manufacturer allegedly knew of defect in seed that
caused farmer to lose his entire crop, the purchase price remedy
was 30 cents an acre, and the farmer’s losses were between $90
and $100 per acre).
Finally, by offering a ten-year warranty, Appellee
granted Appellants a limited remedy in years seven through ten
that would otherwise have been extinguished after the expiration
of the repose period. If Appellee had not offered a ten-year
warranty, purchasers like Appellants who filed suit beyond the
23
six-year repose period would have had no remedy at all.
Instead, under the terms of the Warranty, Appellants had the
chance (before they abandoned it) to recover twice what they
paid for the defective TrimBoard. That may not be the remedy
Appellants want, but it is substantially more valuable than
nothing at all. And that additional benefit must be considered
in measuring the Warranty’s overall fairness.
In sum, assuming the truth of Appellants’ evidence,
Appellee knew TrimBoard was likely to fail within nine years,
but nevertheless agreed to warrant the product for ten years and
offered purchasers twice their money back or the cost of
replacement if and when their TrimBoard did fail. The Warranty
also extended that remedy beyond the point that Appellee’s
liability would otherwise have been extinguished by the statute
of repose. We doubt that North Carolina courts would find that
bargain harsh, oppressive, or one-sided. See Harbison v.
Louisiana-Pacific Corp., 602 F. App’x 884, 887 (3d Cir. 2015)
(holding, in a similar case involving TrimBoard, “because the
warranty . . . provides [consumers] with a benefit [they] would
not otherwise have, the damages limitation [is] not
unconscionable”). As a result, Appellee’s alleged advanced
knowledge about TrimBoard’s ineffectiveness alone will not
sustain a finding under North Carolina law that the Warranty’s
limited remedy is unconscionable. Cf. Rite Color, 411 S.E.2d at
24
649-50 (contract not substantively unconscionable where price
charged was higher than price available from other sellers,
making it irrelevant that the trial court did not assess
allegations of fraud bearing on potential procedural
unconscionability).
Accordingly, in light of the fact that Appellants have
abandoned any attempts to recover the limited remedy provided by
the Warranty as written and proceed only on the theory that the
Warranty is unconscionable, we affirm the district court’s grant
of summary judgment.
B.
We now consider the district court’s decision to
decertify the class. Class actions are “an exception to the
usual rule that litigation is conducted by and on behalf of the
individual named parties only.” Wal-Mart Stores, Inc. v. Dukes,
131 S. Ct. 2541, 2550 (2011) (internal quotation marks omitted).
To obtain class certification, plaintiffs bear the burden of
showing
(1) the class is so numerous that joinder of
all members is impracticable; (2) there are
questions of law or fact common to the
class; (3) the claims or defenses of the
representative parties are typical of the
claims or defenses of the class; and (4) the
representative parties will fairly and
adequately protect the interests of the
class.
25
Fed. R. Civ. P. 23(a). In addition to meeting those
requirements of numerosity, commonality, typicality, and
adequacy, the proposed class must also satisfy at least one of
the requirements of Rule 23(b).
Here, Appellants sought class certification pursuant
to Rule 23(b)(3), which requires a showing that “(1) common
questions of law or fact . . . predominate over any questions
affecting only individual class members; and (2) proceeding as a
class [is] superior to other available methods of litigation.”
EQT Prod. Co. v. Adair, 764 F.3d 347, 357 (4th Cir. 2014); see
also Fed. R. Civ. P. 23(b). The district court initially
certified a class consisting of “[a]ll persons in the State of
North Carolina who own a home, office or other building in which
[TrimBoard] has been installed in the past ten years.” J.A.
1036. But the district court later concluded decertification
was appropriate because the statute of repose issue undercut
typicality, among other things. We find no abuse of discretion
in that decision, particularly in light of our decision
concerning the issue of unconscionability.
As noted, Rule 23(b)(3) requires common questions of
law or fact to predominate over any questions affecting only
individual class members. Almost all of the predominate
questions identified by the district court centered on the issue
of unconscionability, including “[w]hether Trimboard is
26
defective[,] . . . [w]hether [Appellee] knew or should have
known of the defect[,] . . . [w]hether [Appellee’s] limitations
on the express warranty [we]re unconscionable[,] [w]hether the
express warranty fail[ed] of its essential purpose,” and whether
Appellants were entitled to compensatory damages beyond the
Warranty’s limited remedy. J.A. 1032. Our conclusion that the
Warranty’s limited remedy provisions are not unconscionable,
therefore, calls into serious doubt the central attributes of
the class initially certified by the district court.
That aside, Rule 23(a)(3) requires “the claims . . .
of the representative parties” to be “typical of the
claims . . . of the class.” As noted, Appellee provided
different versions of the Warranty with different remedy
provisions for TrimBoard sold before and after 2005. The class
originally certified by the district court took no account of
this distinction and, although the problem may ultimately be
addressed by the creation of subclasses, this multiplicity of
warranties undermines typicality. As we have previously
observed, “plaintiffs simply cannot advance a single collective
breach of contract action on the basis of multiple different
contracts.” Broussard v. Meineke Disc. Muffler Shops, Inc., 155
F.3d 331, 340 (4th Cir. 1998). The same logic holds in this
context and provides additional support for the decertification
order.
27
Accordingly, we affirm the district court’s decision
to decertify the class.
IV.
For the foregoing reasons, the judgment of the
district court is
AFFIRMED.
28