The “Speed” of Technology Leads to Litigation

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According to the National Conference of State Legislatures, 46 States now prohibit all drivers from text messaging while driving. See full list.  Unfortunately, technology often advances at a rate faster than legislation can respond, leading to increased lawsuits while parties attempt to allocate liability.  Now that legislatures have tackled texting, young adults and teens have transitioned to communicating via other mobile applications, including Snapchat.  Earlier this month, two plaintiffs filed an action for personal injuries and damages in Georgia State Court arising from a car crash that occurred when a teen driver’s vehicle collided with another car while she was using Snapchat’s “speed” filter. The Complaint names both Snapchat, Inc. and the teen as defendants. See Complaint.

Snapchat is an image messaging application software product that allows users to share “snaps” with one another. According to the Complaint, prior to September 2015, Snapchat launched a feature on its application that allowed users to track and document the speed they are traveling by taking a picture or video and applying the “speed” filter.  Snapchat awards users “trophies” for sending snaps for different in-app activities.  One of the available trophies is for using one or two filters, including the speed filter.

Plaintiffs’ Complaint alleges defendant was “motivated to drive at an excessive speed in order to obtain recognition through Snapchat by means of a Snapchat ‘trophy.’” Compl. at ¶ 27.  While the teen was driving, she was allegedly distracted by her use of the Snapchat app on her mobile phone.  According to the Complaint, the defendant’s car was traveling at approximately 107 mph at the time of impact. Id. at ¶ 35. As a result of the collision, Plaintiff suffered permanent brain damage. Id. at ¶ 36.

As of this writing, Snapchat’s “community guidelines” and “safety tips” do not provide warnings against snapping while driving. See Community Guidelines and Safety Tips.  However, Plaintiffs’ complaint does not allege a failure to warn, but instead claims negligence and loss of consortium. See Compl. at 7 – 8.

If the lawsuit gains traction—or copycat lawsuits—it could raise questions about the liability exposure for technology companies and other product manufacturers that offer alleged driver distractions, even where warnings against such dangerous behavior are provided. We will continue to monitor the case as it develops and whether other Plaintiffs name Snapchat as a defendant for users’ actions taken while using its application.

8th Circuit Agrees Failure to Show Actual Reliance Bars Plaintiff’s Consumer Fraud Claims

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I’m back this month reporting on another circuit court opinion affirming the dismissal of consumer fraud allegations in a putative class action complaint. This time, we leave the colorful world of cosmetics in California for the less glitzy land of exterior building materials in Iowa, home of one of the putative class actions filed against Louisiana-Pacific over its TrimBoard exterior siding product. See Brown v. Lousiana-Pacific Corp., No. 15-1830, 2016 WL 1425824 (8th Cir. April 12, 2016).

When constructing his new home in 2003, plaintiff Alan Todd Brown allegedly sought a siding-and-trim product that would not give him the rotting and buckling problems he experienced on his prior house. The contractor hired to construct Brown’s house, Bryan Clark, consulted with Brown and selected and installed TrimBoard, an exterior building component intended for use as a trim in housing construction.  TrimBoard was manufactured by ABT Building Products Corporation, a former subsidiary of defendant Louisiana-Pacific Corporation (“LP”).  The TrimBoard came with a ten-year limited warranty that provided for compensation for repair and replacement of trim that failed within ten years, subject to certain conditions, of no more than twice the original purchase price of the affected trim. Id. at *1.

Brown moved into his new home in August 2004, and by 2010, noticed damage to certain pieces of the installed TrimBoard. Clark advised Brown of the ten-year limited warranty on the TrimBoard, and Brown filed a warranty claim.  In response, LP sent a warranty representative to inspect the damaged TrimBoard and offered Brown $197.67 in compensation, which Brown rejected.  In January 2011, Brown hired a local contractor to replace various pieces of TrimBoard on his house at a total cost of $1,700 (although Brown admitted that only some of the TrimBoard had failed and needed to be replaced by this time). Id.

Brown filed a putative class action alleging claims for negligence, fraudulent misrepresentation, breach of warranty, and unfair or deceptive practices seeking declaratory relief and monetary damages. The district court dismissed Brown’s negligence claim, and LP moved for summary judgment on the remaining claims.  In opposing the motion, Brown relied on an affidavit of his builder, Clark, which indicated that Clark purchased all of the materials for installation on Brown’s residence, including TrimBoard, and attached various advertisements for TrimBoard.  The advertisements stated, among other things, that the material was “[m]oisture resistant/decay resistant,” “moisture and weather resistant,” and “[r]esists warping, cupping.” Id. at *2.  Per Clark’s affidavit, “[t]he LP advertising accurately portray[ed] what I believed I was purchasing for my customers”—namely—“a quality product similar to wood trim but with the benefits described in the advertisements.”  The affidavit further stated that had Clark known that TrimBoard was not a quality product as represented and warranted, he would not have purchased it for use on Brown’s house. Id. at *2.

Iowa’s six-pronged test for establishing a fraudulent misrepresentation claim includes an element of justifiable reliance, on which the court focused its analysis. Brown argued that the district court erroneously dismissed this claim after finding that Brown failed to submit evidence that he or Clark, as his builder, relied on specific advertisements or brochures in deciding to purchase TrimBoard.  The fact that Brown himself did not see any of LP’s representations regarding TrimBoard was not fatal to his claim, because under the “indirect-recipient doctrine” that has been adopted by the Iowa Supreme Court, a person who fraudulently misrepresents the truth can be held liable to third parties if he has reason to expect the misrepresentation will be communicated to third parties. Id. at *4.  However, Brown could not overcome the fact that Clark also could not state which, if any, LP materials he actually viewed. Id. at *5.  On appeal, Brown attempted to skirt this problem by changing course and characterizing the claim as an omission instead of affirmative misrepresentation, an argument the court dismissed in a footnote. Id. at *5 n. 3.

Brown also argued, to no avail, that the materiality of LP’s alleged misrepresentations created an inference of causation that satisfied the factual causation requirement of the Iowa Private Right Act. That statute provides that any “consumer who suffers an ascertainable loss of money or property as the result of a prohibited practice or act in violation of this chapter may bring an action at law to recover actual damages.” Iowa Code Ann. § 714H.5(1).  The court rejected the theory that causation could be proven through entirely “objective standards” without the need to show actual reliance.  Id. at *6.  Therefore, similar to his fraudulent misrepresentation claim, Brown failed as a matter of law to establish but-for causation under the Private Right Act because he was unable to “show that Clark received a representation that LP made.” Id. at *7.

Finally, the court agreed with the district court’s conclusion that LP did not breach its limited warranty by inadequately compensating Brown for the repair and replacement of the faulty TrimBoard. Brown argued both that the remedy provided to him failed of its essential purpose, because the defect was latent and could not have been discovered, and that the limited remedy was unconscionable.  With respect to the first argument, the court acknowledged that there was mixed authority on whether a latent defect causes an exclusive contractual remedy to fail of its essential purpose, but concluded that the majority rule holds that it does not. Id. at *10.  Diverging from a Northern District of Ohio opinion that examined the same warranty under Ohio law, the court emphasized that the mere fact that a limited warranty does not compensate the buyer for the entirety of his damages does not mean it fails of its essential purpose. Id. at *11.  On the issue of unconscionability, the court discussed and adopted the analysis of two prior opinions, one by the Fourth Circuit and one by the Third Circuit, examining LP’s same limited warranty and holding that it did not meet the high threshold to establish a claim for either procedural or substantive unconscionability. Id. at *12-14.

While not at first glance the most momentous of circuit court opinions, this case provides an interesting example of the application of different state laws to very similar consumer class action lawsuits filed in multiple jurisdictions. The court did not hesitate to depart in some instances and borrow in others from the analyses of other circuits examining the very same issues under their respective laws.  Particularly as to the subjective reliance element of plaintiff’s fraudulent misrepresentation claim and the causation element of his Private Right Act claim, Iowa law was construed soundly here to bar plaintiff’s claims.  Plaintiff could not avoid the fact that neither he nor his builder had actually viewed any of the allegedly fraudulent representations regarding TrimBoard, and the court rightfully found this fact to be debilitating.  To accept plaintiff’s argument, vague at best, that it was sufficient that LP’s representations were “consistent” with his or his builder’s understanding of how the product would perform would potentially open the door to a slew of ill-supported false advertising claims.

First Circuit Declines Review of Class Certification Denial in Common Defect Case

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Earlier this month, the First Circuit denied Plaintiffs’ motion for leave to appeal a Massachusetts District Court’s refusal to certify a putative class alleging a common defect in their Oasis brand decks.  In doing so, the First Circuit emphasized that the requirements for interlocutory review of class action determinations are “stringent” and had not been met.  The District Court’s decision, which was issued back in September, highlights a number of potential arguments that defense attorneys should consider in defending against class certification motions pursuant to Federal Rule 23.

The putative class sued Mastic Home Exteriors, Inc. and Deceuninck North America, LLC (“DNA”).  DNA designed and manufactured the Oasis decks, and Mastic was the exclusive distributor.  DNA had licensed a patented composite formula and manufacturing process from Strandex, who recommended that DNA use a particular brand of a composite mixture.  DNA, however, used a different formula than what was recommended, which allegedly affected the performance of the boards, resulting in increased water absorption.  As a result, Plaintiffs alleged that Oasis suffered from the common defect of excessive water absorption that resulted in swelling and cracking of the product.  Plaintiffs attempted to certify a class of all owners of homes or buildings in a number of states where Oasis was installed.  Specifically, Plaintiffs asserted claims for breach of warranty, unjust enrichment, as well as violations of state consumer protection laws.

After addressing a number of Daubert motions, the Court assessed Rule 23’s  requirements for class certification.  Although finding ascertainability and numerosity met, the Court concluded that the commonality requirement was not satisfied.  The Court emphasized that to satisfy commonality, Plaintiffs must show that the proposed common questions will lead to answers “apt to drive the resolution of the litigation,” meaning that they “will resolve an issue that is central to the validity of each one of the claims in one stroke.”

As to the express warranty claims, Plaintiffs alleged two theories of liability.  First, that Mastic breached an express warranty arising out of statements made in the course of marketing the product’s durability, and second, that Mastic breached the limited warranty it offered by suggesting that Oasis decks would last for ten to twenty-five years.  The Court concluded that Plaintiffs failed to offer a common question that would drive the resolution of the litigation with respect to either theory.  Specifically, the Court emphasized that determining which, if any, representations became the basis of the bargain between Mastic and an individual Plaintiff would be driven by individualized proof, especially since Mastic did not sell directly to homeowners.  In addition, the Court found that even if it could establish which representations made to intermediaries, contractors, or consumers were part of the basis of the bargain, whether the goods conformed to these representations was still subject to individualized proof, defeating the commonality requirement under Rule 23.

The Court concluded that commonality was similarly not satisfied with respect to the implied warranty claims because some consumers had no performance problems with their Oasis decks.  Thus, the Court found that the question of whether a particular deck failed ordinary expectations was not a common question susceptible to class wide proof.  Likewise, to resolve Plaintiffs’ unjust enrichment claims, individual Plaintiffs would need to show that due to the condition of their decks, and notwithstanding any warranty payments offered, Plaintiffs conveyed a benefit on Defendants that would be unjust for Defendants to retain.  Finally, with respect to Plaintiffs’ consumer protection claims, the Court found that questions of injury and causation were not suitable to common resolution because the record raised individualized questions of proof as to whether an Oasis owner actually suffered an injury, whether that injury was already remedied by the Oasis warranty program, and whether a particular representation or action by Defendants caused that owner’s damages.

The Court then analyzed the typicality requirement, concluding that Plaintiffs were not typical of the class.  First, because Plaintiffs presented a replacement cost theory of damages, the Court found that owners of decks that did not require replacement because they performed consistent with their warranties did not suffer a common injury with those owners who had allegedly damaged decks.  In addition, the Court concluded that the named Plaintiffs were atypical of the class because they did not accept the warranty payments offered to them, whereas most class members who submitted claims did.  Those class members who did accept warranty payments received redress for their injuries and therefore, did not suffer the same injury as the named Plaintiffs.  Lastly, the Court noted that the breadth of the proposed class presented further problems for plaintiffs because, for example, it included transferee owners who purchased a building that already had Oasis installed.  The named Plaintiffs were all direct purchasers and their theory of liability would clearly differ from those transferee owners who did not view any representations by Mastic about Oasis decks.

We will continue to monitor and report on decisions that highlight potential arguments for companies defending against putative class actions.

 

 

No Clarity on Comment K in Massachusetts

Comment K to Section 402A of the Restatement (Second) of Torts has caused confusion in prescription drug litigation for years, as courts across the country have taken a variety of stances regarding the viability of negligent design claims related to prescription drugs. Just last month, it looked like clarity on this issue would be provided forRead the full article →