United States District Court, E.D. California
JAMES WILSON, an individual, and JACK WHITE, an individual, on behalf of themselves and all others similarly situated, Plaintiffs,
METALS, USA, INC., a Delaware Corporation, and DOES 1-100, inclusive, Defendant.
of homeowners sues a roofing tile manufacturer for allegedly
defective tiles. Defendant Metals USA, Inc.
(“Metals”), the alleged successor to the company
that manufactured the tiles, brings this motion for summary
judgment or, in the alternative, partial summary judgment.
Mot., ECF No. 102. The representatives of the class,
plaintiffs James Wilson and Jack White, oppose the motion.
Opp'n, ECF No. 105. Metals replied. Reply, ECF No. 106.
The court held a hearing on November 18, 2016, at which
Richard Lambert appeared for plaintiffs and Bartholomew
Dalton, Adrian Sawyer and Frank Busch appeared for Metals.
Hr'g Mins., ECF No. 108. As explained below, the court
DENIES the motion.
filed the original complaint on March 5, 2012 against 604471
Ontario, Inc., a Canadian corporation formerly known as
Dura-Loc Roofing Systems Limited (“Dura-Loc”),
and Allan Reid, a principal of Dura-Loc. Compl. at 1-2, ECF
No.1. After Dura-Loc filed for bankruptcy in Canada in April
2012, plaintiffs filed a first amended complaint on May 5,
2012, against Metals, the alleged successor of Dura-Loc, and
Reid. First Am. Compl. (“FAC”) at 9 n.2, ECF No.
11. Metals moved to dismiss for failure to state a claim on
July 9, 2012, and Reid moved to dismiss for lack of personal
jurisdiction on August 18, 2012. ECF Nos. 15, 22. The court
granted Metals's motion, ECF No. 31, and sua
sponte dismissed the complaint for failure to join
604471 Ontario, Inc. as a necessary party, ECF No. 34.
Plaintiffs filed a second amended complaint on May 8, 2013,
against Metals only. Second Am. Compl. (“SAC”),
ECF No. 49. The court denied Metals's motion to dismiss
this complaint. ECF Nos. 50, 57.
filed the operative third amended complaint on June 29, 2015,
asserting four claims against Metals: (1) breach of express
warranties under California Civil Code §§ 1790
et seq.; (2) breach of express warranties under
California Commercial Code §§ 2313 et
seq.; (3) violations of the California Consumer Legal
Remedies Act, California Civil Code §§ 1750 et
seq.; and (4) violations of California Unfair
Competition Law, California Business and Professions Code
§ 17200. Third Am. Compl. (“TAC”)
¶¶ 48-55, ECF No. 78. On July 5, 2016, the court
granted plaintiffs' motion to certify their second
express warranties claim for class treatment. Mot. Class
Cert., ECF No. 81; Cert. Order, ECF No. 93.
September 4, 2016, Metals filed the instant motion for
summary judgment or, in the alternative, partial summary
judgment. See Mot.
parties raise several objections to each other's
proffered statements of undisputed facts. See
Def.'s Statement of Undisputed Facts
(“DSUF”), ECF No. 102-2; Pls.' Response to
DSUF, ECF No. 105-1 (objecting to DSUF 1, 29); Pls.'
Statement of Undisputed Facts (“PSUF”), ECF No.
105-1; Def.'s Objs., ECF No. 106-3 (objecting to PSUF
169, 184). The court does not rely on most of the material a
party finds objectionable and therefore addresses only
relevant objections below, in the course of reviewing the
facts of the case.
considering a motion for summary judgment, the court relies
on whatever facts are undisputed and otherwise considers the
evidentiary record in the light most favorable to the party
opposing the motion. See, e.g., A.G. v. Paradise
Valley Unified Sch. Dist. No. 69, 815 F.3d 1195, 1202
(9th Cir. 2016). The following facts are not disputed unless
details about Dura-Loc and its roofing tiles help set the
stage. Dura-Loc started its business in Ontario, Canada in
1984. TAC Ex. D (“Reid Decl.”) ¶ 15. Between
1985 and 2006, Dura-Loc manufactured part-m, part-stone,
layered roofing tiles. Id.; see also
Stonebarger Decl. Ex. D, at MUSA 003923, ECF No. 81-3. The
tiles' top sides, which were the sides eventually exposed
to the elements, were coated with crushed stone chips,
granules of “Colorquartz Aggregate” manufactured
by 3M. See Dalton Decl. (Class Cert.) Exs. B, D, ECF
No. 82-2. Each tile is just over four feet wide and about
fifteen inches long. Stonebarger Decl. Ex. D, at MUSA 003923.
When installed on a roof, each tile overlaps with adjacent
tiles to protect the structure below. Id.
2006, the year Metals purchased Dura-Loc's assets,
Dura-Loc employed about fifty people, and Allan Reid was
Dura-Loc's president and director. Reid Decl. ¶ 15.
Before the 2006 asset sale, Reid had been a member of
Dura-Loc's board of directors for over ten years and
owned about thirty percent of its voting shares. Id.
Metals's Purchase of Dura-Loc's Assets
2006, Metals purchased a majority of Dura-Loc's assets
for $9.4 million. DSUF 1; see also TAC Ex. H
(“Purchase Agreement”). At the time, the purchase
price was nearly $1.6 million less than Dura-Loc's gross
sales in 2005 and nearly $2.1 million less than
Dura-Loc's projected total sales for 2006. PSUF 122-23.
the Purchase Agreement, Metals and Dura-Loc initially agreed
to jointly administer a warranty program and share certain
defined “Warranty Costs.” DSUF 3. Metals and
Dura-Loc split the Warranty Costs using a sliding scale, with
Dura-Loc agreeing to pay an increasing share of the Warranty
Costs as the total annual claims increased. DSUF 4-5; see
also Purchase Agreement §§ 2.9-2.10. At the
extremes, Metals agreed to pay 100 percent of the total
warranty costs between $0 and $65, 000 in annual claims, and
Dura-Loc agreed to pay 100 percent of the total warranty
costs for total annual claims above $260, 000. Id.
Metals's maximum possible annual warranty cost-sharing
liability was $161, 000. DSUF 4. The parties dispute whether,
aside from the cost-sharing arrangement under the Purchase
Agreement, warranty liability for Dura-Loc tiles rested
solely with Dura-Loc. Compare DSUF 6, with
addition, as part of the Purchase Agreement, Metals paid
$500, 000 into an escrow account to satisfy any future claims
Metals might raise for breaches of the covenants,
representations and warranties in the Purchase Agreement, or
Warranty Costs incurred outside the warranty cost sharing
agreement. PSUF 137. As part of the Purchase Agreement,
Metals also employed Reid, one of Dura-Loc's principals,
whose responsibilities with Metals included investigating
warranty claims. PSUF 138.
executing the Purchase Agreement, Metals reviewed
Dura-Loc's operations and information about the warranty
claims Dura-Loc's purchasers had made. PSUF 140.
Metals's due diligence report reflects the following
number of warranty claims in each year reviewed: 56 claims in
2000; 40 claims in 2001; 43 claims in 2002; 43 claims in
2003; 37 claims in 2004; and 77 claims in 2005. TAC Ex. Q.
Metals also reviewed information regarding seven pending
lawsuits against Dura-Loc, which Metals concluded were
“all . . . related to product quality or
installation.” PSUF 142; TAC Ex. L. In one suit, a
purchaser alleged the granular coating of his tiles was
coming off prematurely due to a manufacturing or materials
defect. PSUF 143; TAC Ex. M.
the asset sale, Dura-Loc ceased manufacturing, marketing and
selling the tiles and changed its name to 604471 Ontario Inc.
PSUF 139; Reid Decl. ¶ 14.
Metals's Claims against Dura-Loc
after the asset sale, conflict arose between Dura-Loc and
Metals. Metals became aware of seventy-four total warranty
claims on the tiles in 2006, nearly all of which were for
granule loss. PSUF 147; TAC Exs. Q, T, K. Metals alleged that
Dura-Loc, Reid and Spriet, another principal of Dura-Loc whom
Metals never employed, all had significantly underrepresented
the extent of customer complaints and warranty claims
regarding Dura-Loc products in breach of their contractual
obligations to Metals under the Purchase Agreement. PSUF 151;
TAC Exs. B, R. Specifically, according to Metals, Dura-Loc
underrepresented the extent of its tile degranulation issues.
June 1, 2007, approximately a year after the Purchase
Agreement was signed and apparently prior to any litigation,
Metals settled with Dura-Loc, Reid and Spriet
(“Settlement Agreement”). DSUF 7. Under the
Settlement Agreement, Dura-Loc paid Metals $450, 000
(CDN) and assumed sole administrative
responsibility for “handling and resolving”
outstanding, pending and future warranty claims. DSUF 8; TAC
Ex. U. Dura-Loc, Reid and Spriet also released Metals from
various obligations in the Purchase Agreement, such as
responsibility for costs associated with warranty
administration, and Metals released Dura-Loc, Reid and Spriet
from liability for certain alleged misrepresentations and
nondisclosures. DSUF 8; TAC Ex. U.
the parties executed the Settlement Agreement, problems with
the performance by Dura-Loc, Reid and Spriet of their ongoing
warranty obligations persisted. On April 26, 2011, Metals
filed a suit in the Ontario (Canada) Superior Court of
Justice claiming damages for lost sales, injury to
Metals's reputation and goodwill and legal costs. DSUF
9-10. Metals's allegations included its dissatisfaction
with Dura-Loc's disclosure of relevant warranty issues.
DSUF 11; TAC Ex. B at 13-15. A little over a month later, the
parties amended their earlier Settlement Agreement
(“Amendment”). DSUF 12. Under the Amendment,
Metals received $845, 055.75 (CDN): $345, 055.75 (CDN) from
the remaining Escrow Amount, $350, 000 (CDN) from Dura-Loc,
and $150, 000 (CDN) from Reid and Spriet. DSUF 12; PSUF 167.
Metals released Reid and Spriet from all liability. DSUF 12;
TAC Ex. Z.
Plaintiffs' Purchase of the Tiles
2004, plaintiff James Wilson purchased Dura-Loc's Flat
Panel m roofing tiles for his single-family home in
Roseville, California. Wilson Decl. ¶ 2, ECF No. 81-10.
The tiles came with a twenty-five year warranty. Id.
Ex. A (“Wilson Warranty”), ECF No. 81-11. In or
about June 2011, Wilson noticed for the first time the tiles
on his roof had deteriorated and lost much of their original
color, coating and texture. Id. ¶¶ 4-5. At
that time, Wilson contacted Metals about the deterioration.
Id. ¶ 4. Metals explained it did not
manufacture the tiles and instructed Wilson to contact
Ontario 604471 as the successor to Dura-Loc. Id. Ex.
C (“Metals Letter”), ECF No. 81-13. Wilson
contacted Ontario 604471, which demanded a $400 deposit
before investigating his claim. Id. Ex. D
(“Ontario 604471 Letter”), ECF No. 81-14. Wilson
refused to pay the deposit. DSUF 47.
Jack White purchased the same style of Dura-Loc tiles in June
2004 for his home in Orangevale, California. White Decl.
¶ 2, ECF No. 81-16. The tiles came with a twenty-five
year warranty. Id. In or about June 2011, White
noticed the tiles had deteriorated, in much the same way as
had Wilson's tiles, having lost their original color,
coating and texture. Id. ¶¶ 4-5. White
recalls receiving a letter asking for $400 to inspect the
roof, DSUF 43, but White did not have his roof inspected,
The Dura-Loc Warranties
case turns on whether plaintiffs can enforce their warranties
against Metals as the alleged successor to Dura-Loc. Wilson
and White, who both purchased the Dura-Loc tiles in 2004,
have substantially similar warranties. See DSUF 28,
29-37. However, many class members who purchased their tiles
earlier have notably different warranties. See Id.
There are three versions of warranty across the class.
See Dalton Decl. Ex. E (“2004-06
Warranty”), ECF No. 102-8; Lambert Decl. Ex. 34
(“2001-03 Warranty”), ECF No. 105-6 at 2-3;
Lambert Decl. Ex. 11 (“1996-2000 Warranty”), ECF
No. 105-4. The court discusses the 2004-06 Warranty
here, and addresses the few relevant differences in the
2001-03 Warranty and the 1996-2000 Warranty, respectively, in
the analysis section of this order.
2004-06 Warranty promises “[t]hat, for a period of 25
years following proper installation, the surface coating of
the Dura-Loc Product shall be UV resistant* and will not
deteriorate as the result of a manufacturing defect to the
extent that the appearance of the roof is substantially
affected.” DSUF 28; 2004-06 Warranty at 1 (asterisk in
original). The asterisk references a “note” that
explains “[a]t the date of installation, the coating
will meet or exceed industry standards when tested to ASTM
4214 - 89 standards given the service life of the
roof.” DSUF 29. The Warranty goes on to say that
“taking all the circumstances into account, Dura-Loc
will, at its sole option, either repair or replace the
affected Product . . . provided in all circumstances that
Dura-Loc's aggregate liability to all persons with
respect to such Product shall be limited to an amount
actually paid.” DSUF 31. Thus, Dura-Loc's promise
is that the roofing tile should have certain characteristics,
and if it does not, its owner will be entitled to the
specified repair, replacement or repayment remedies subject
to the remaining terms of the limited warranty. DSUF 32. To
be covered by the Warranty, the purchaser must register the
Warranty within ninety days of the tile installation; failure
to register within that window reduces the warranty period to
only two years from the installation date. DSUF 30.
2004-06 Warranty has a section entitled “How to Make a
Claim, ” which explains Dura-Loc must be notified of
all warranty claims within thirty days of either acceptance
of the tiles or discovery of the defect. DSUF 34. All
warranty claims must include a copy of the Warranty, proof of
the date of purchase, proof of installation, and a $400
refundable service fee for Dura-Loc to investigate the
complaint. 2004-06 Warranty at 2. Any legal proceeding based
on the Warranty must be brought within one year of
Dura-Loc's corrective action or denial of the owner's