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.