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Adelman v. Rheem Manufacturing Co.

United States District Court, D. Arizona

September 7, 2016

Craig Adelman, et al., Plaintiffs,
v.
Rheem Manufacturing Company, Defendant.

          AND OPINION [RE: MOTION AT DOCKET 64]

          JOHN W. SEDWICK, SENIOR JUDGE, UNITED STATES DISTRICT COURT

         I. MOTION PRESENTED

         At docket 64 defendant Rheem Manufacturing Company (“Rheem”) moves pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss certain counts of the Second Amended Complaint (“SAC”) filed by plaintiffs Craig Adelman (“Adelman”), Jason McGee (“McGee), Ronald Plucinski (“Plucinski”), Kenneth Holdeman (“Holdeman”), and Paul Sklar (“Sklar”) (collectively, “Plaintiffs”). Plaintiffs oppose at docket 32. Rheem replies at docket 38. Oral argument was not requested and would not assist the court.

         II. BACKGROUND

         This case is a putative class action brought by consumers of allegedly defective air conditioners, air handlers, and heat pumps manufactured by Rheem. Plaintiffs allege that the copper evaporator and condenser coils in these products are defective because they leak refrigerant. The SAC contains the following seven causes of action: (1) declaratory relief; (2) breach of Rheem's express warranties; (3) violation of the Magnuson-Moss Warranty Act (“MMWA”); (4) unjust enrichment; (5) breach of Rheem's express warranties under Arizona law; (6) violation of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”);[1] and (7) violation of Louisiana's Redhibition Law.[2]Rheem's present motion attacks Counts 1, 4, 6, and 7.

         III. STANDARD OF REVIEW

         Rule 12(b)(6) tests the legal sufficiency of a plaintiff's claims. In reviewing such a motion, “[a]ll allegations of material fact in the complaint are taken as true and construed in the light most favorable to the nonmoving party.”[3] To be assumed true, the allegations “may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.”[4] Dismissal for failure to state a claim can be based on either “the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.”[5] “Conclusory allegations of law . . . are insufficient to defeat a motion to dismiss.”[6]

         To avoid dismissal, a plaintiff must plead facts sufficient to “‘state a claim to relief that is plausible on its face.'”[7] “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[8] “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.”[9] “Where a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.'”[10] “In sum, for a complaint to survive a motion to dismiss, the non-conclusory ‘factual content, ' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”[11]

         IV. DISCUSSION

         A. Redhibition

         The SAC alleges that Sklar is a Louisiana resident who purchased an air conditioning unit manufactured by Rheem.[12] Within three years the unit had stopped cooling his home because its copper coil was leaking refrigerant. Sklar claims that he would not have purchased the unit if he had known that Rheem's copper coils were defective and were known to fail prematurely.

         Sklar alleges a redhibition cause of action under Louisiana law.[13] Under Louisiana law, a buyer has a warranty against “redhibitory defects, or vices, in the thing sold.”[14] A defect is redhibitory if it (a) “renders the thing useless, or its use so inconvenient that it must be presumed that a buyer would not have bought the thing had he known of the defect” or (b) “diminishes [the thing's] usefulness or its value so that it must be presumed that a buyer would still have bought it but for a lesser price.”[15]If a seller is found to have violated this warranty, the buyer is entitled to various statutory remedies.

         Rheem challenges this cause of action on two grounds: (1) the alleged defect cannot be redhibitory because it was apparent to Sklar; and (2) even if the defect is redhibitory, Sklar does not allege that Rheem was given an opportunity to repair the alleged defect and failed to do so.[16] As discussed below, neither challenge has merit.

         1. Whether the defect was apparent to Sklar

         Not all defects are redhibitory. “Apparent defects, which the buyer can discover through a simple inspection, are excluded from the seller's legal warranty.”[17]Redhibitory defects are limited to those that (a) were not known to the buyer and (b) would not have been discovered by a reasonably prudent buyer.[18]

         Rheem argues that the SAC fails to state a redhibition claim because the defect would have been discovered by a reasonably prudent buyer for two reasons. First, Rheem argues that Sklar should have discovered that his Rheem product contained a copper coil from a simple visual inspection, or from visiting Rheem's website.[19] But this argument misses the point. The pertinent fact is not that the coil was copper, but rather, that copper coils are defective. Rheem does not contend that this fact is posted on its website, or can be ascertained from a visual inspection. This argument fails.

         Second, Rheem points out that Plaintiffs allege “industry-wide acknowledgment” of the problems with copper tubing and that numerous complaints have been posted on the internet about Rheem's copper coils.[20] This shows that Sklar “could have discovered, upon reasonable inspection and through publicly available information, ” that copper coils are susceptible to corrosion.[21] Again, Rheem misstates the relevant question. The question is not whether it was possible for Sklar to have learned that copper coils corrode prematurely-it is whether a reasonably prudent buyer without special knowledge would know this.[22] According to the Louisiana Supreme Court, a court must presume that a reasonably prudent buyer's “simple inspection” of the property is informed by knowledge of commonly-understood facts. For example, real estate buyers who live in New Orleans are presumed to know that old buildings in New Orleans are prone to termite infestations.[23] But here, Rheem has not shown that it is a matter of common knowledge that copper coils are prone to premature corrosion. Rheem's argument fails.

         2. Sklar need not prove that he gave Rheem an opportunity to fix the defect

         A seller's liability for a redhibitory defect depends on whether he acted in good faith or bad; in other words, whether he knew of the defect at the time of sale.[24] Out of concerns for fairness and judicial economy, [25] Louisiana law provides good faith sellers with “an opportunity to repair the thing before a redhibitory action can be brought.”[26] It provides bad faith sellers no corresponding right.[27] If the seller also manufactured the product, the law presumes that the seller acted in bad faith.[28]

         Rheem argues that Sklar fails to state a claim for redhibition because he does not allege that he gave Rheem an opportunity to fix the defect before litigation. This argument fails because Rheem manufactured the allegedly defective product. As the manufacturer, Rheem is presumed to be a bad faith seller, and Sklar is not required to prove that he gave Rheem a chance to correct the defect before litigation.

         B. FDUTPA

         Citing district court opinions from Florida that hold that Rule 9(b) applies to FDUTPA claims, [29] Rheem argues that Plaintiffs' FDUTPA claim should be dismissed because it fails to satisfy Rule 9(b)'s heightened pleading requirements. Plaintiffs argue that Rule 9(b) does not apply to FDUTPA claims, and they support this argument with different Florida district court cases.[30] Alternatively, Plaintiffs argue that even if Rule 9(b) applies their FDUTPA cause of action is stated with sufficient particularity.

         Although the court acknowledges the split of authority among Florida district courts regarding whether Rule 9(b) applies to FDUTPA claims, this court is bound to apply Ninth Circuit precedent.[31] The Ninth Circuit has made clear that Rule 9(b) applies to all averments that “sound in fraud, ” even where the cause of action does not require proof of all of the elements of fraud[32] and where the plaintiff challenges other, non-fraudulent conduct within the same cause of action.[33] Because Plaintiffs concede that their FDUTPA claim avers fraudulent conduct, Rule 9(b) applies.

         Rule 9(b) requires that “a party must state with particularity the circumstances constituting fraud.”[34] “Averments of fraud must be accompanied by ‘the who, what, when, where, and how' of the misconduct charged.”[35] The plaintiff must include enough detail to put the defendant on notice of the particular misconduct alleged “‘so that they can defend against the charge and not just deny that they have done anything wrong.'”[36]

         In order to state a claim for damages under the FDUTPA, Plaintiffs must show “‘(1) a deceptive act or unfair practice; (2) causation; and (3) actual damages.'”[37]Rheem argues that Plaintiffs' FDUTPA count, which seeks damages for Rheem's unspecified “misrepresentations and omissions” that Plucinski and Holdeman were “exposed to, ”[38] fails to state a ...


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