Kingsbury v. U.S. Greenfiber, LLC

Full title: DANIELLE KINGSBURY, et al. v. U.S. GREENFIBER, LLC, et al

Court: United States District Court, C.D. California

Date published: May 23, 2011

CV 08-00151 AHM (JTLx) (C.D. Cal. May. 23, 2011)

Opinion

CV 08-00151 AHM (JTLx).

May 23, 2011

CIVIL MINUTES — GENERAL

A. HOWARD MATZ, District Judge

Proceedings:

IN CHAMBERS (No Proceedings Held) Before the Court is Plaintiff Emilio Segura's fourth motion¹ to certify a class for causes of action under California's Unfair Competition Law, Cal. Bus. Prof. Code § 17200 ("UCL"). Plaintiff seeks certification under Fed.R.Civ.P. 23(b)(3).² Both sides are familiar with the lengthy and complicated procedural history of this case. As such, the Court does not repeat it here. The Court held a hearing on this Motion on February 7, 2011, in which both sides failed entirely to address the central issues related to certification, and dealt only with the merits of the case. After considering the arguments made at the hearing, as well as the Parties' briefing, the Court GRANTS in part and DENIES in part Plaintiff's Motion.

The Court GRANTS certification as to the following class only:³ "Original purchasers of residential structures built by Pulte and installed with Cocoon insulation in the state of California from January 1, 2003 to the present, who: (1) were not informed that the Cocoon insulation installed in their home would be `wet-blown'; (2) were not informed of the risks of long-term water retention, mold contamination, and a loss of money and property due to moisture damage associated with Cocoon insulation; and (3) suffered damage or experienced mold or other defects or consequences of having wet-blown insulation installed in their home. Original purchasers are those individuals who dealt directly with Pulte in their purchase, and did not purchase the home from any other entity or individual other than Pulte."

3 It is well within the court's authority to redefine Plaintiffs' proposed class. See WRIGHT MILLER, FED. PRAC. PROC. § 1759 at 130-31 (2010) ("if plaintiff's definition of the class is found to be unacceptable, the court may construe the complaint or redefine the class to bring it within the scope of Rule 23.").

This narrow class is certified only as to Defendant Pulte, ⁴ andonly based on the above claims. The Court does not certify any other claims set forth in the complaint. The Court also declines to certify any UCL cause of action based on the new arguments trotted out at the hearing by Plaintiff's counsel.

4 Plaintiff conceded in the February 7, 2011 hearing that he has no claims against Defendant Quality Interiors. Furthermore, the Court denies certification of the claims Plaintiff asserted against Defendant U.S. Greenfiber ("USGF"), including warranty-related claims.

Certification of this class is conditioned on Plaintiff Segura filing proof that he has withdrawn as a party from the San Bernardino Superior Court case of William Kearl, et al., v. Pulte Home, Case No. CIVVS 802612, in which he is a named plaintiff. He must file this proof by not later than March 11, 2011. If Plaintiff fails to do so, he thereby consents to the denial of this motion and the dismissal of this entire action.

I. LEGAL STANDARD FOR CLASS CERTIFICATION

The party seeking class certification bears the burden of establishing that each of the four requirements of Rule 23(a) and at least one requirement of Rule 23(b) have been met. Dukes v. Wal-Mart, Inc., 603 F.3d 571, 580 (9th Cir. 2010) (en banc), cert. granted in part by 131 S.Ct. 795 (Dec. 6, 2010). "[D]istrict courts are not only at liberty to, but must, perform a rigorous analysis to ensure that the prerequisites of Rule 23(a) have been satisfied." Id. at 581 (citing General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 161 (1982)).

In reviewing a motion for class certification, the Court generally is bound to take the substantive allegations of the complaint as true. In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litig., 691 F.2d 1335, 1342 (9th Cir. 1982) (citing Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975)). Nevertheless, the Court may look beyond the pleadings to determine whether the requirements of Rule 23 have been met. Hanon v. Dataproducts Corp., 976 F.2d 497, 509 (9th Cir. 1992) (citation omitted). While this does not mean a "district court must conduct a full-blown trial on the merits prior to certification . . . [the] analysis will often, though not always, require looking behind the pleadings, even to issues overlapping with the merits of the underlying claims." Dukes, 603 F.3d at 581. Ultimately, it is within the district court's broad discretion to determine whether a class should be certified. Id. at 579.

At this point, Plaintiff is attempting to certify a class as to only one cause of action — the UCL.

II. UCL ALLEGATIONS

California's UCL prohibits any "unlawful, unfair, or fraudulent business act or practice." Cal. Bus. Prof. Code § 17200. The UCL is a broad remedial statute that permits individuals to challenge "unfair competition" practices, which, broadly defined, include "any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising." Lozano v. AT T Wireless Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007).

The UCL is "violated where a defendant's act or practice is (1) unlawful, (2) unfair, (3) fraudulent, or (4) in violation of section 17500 (false or misleading advertisements)." Lozano, 504 F.3d at 731. "Each prong of the UCL is a separate and distinct theory of liability." Id.

Plaintiff alleges Pulte violated the fraudulent and false advertising prongs of the UCL when it failed to disclose in its standard purchase agreement that the insulation would be installed wet, and when it failed to disclose that long term water retention was a problem that could cause a substantial risk of mold contamination, monetary loss, and property damage. SAC ¶¶ 74, 76. Conduct violates the fraudulent and false advertising prongs of the UCL if "members of the public are likely to be deceived." Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1152 (9th Cir. 2008).

A. Wet-Blown Insulation

Plaintiff alleges that "Cocoon insulation is defective when incorporated as a building component because it introduces and promotes excessive moisture and poor management of moisture in building and wall cavities" and "also causes moisture, corrosion, and mold to other property found in newly built homes." SAC ¶ 64. Plaintiff further alleges that "Defendants knew but failed to disclose to Plaintiff and consumers who purchased homes installed with Cocoon insulation that . . . Cocoon insulation was installed wet into walls and would significantly increase the risk of mold by remaining wet for extended periods of time due to its highly hygroscopic nature." SAC ¶ 71. "Pulte had not disclosed to Plaintiff prior to Plaintiff signing his purchase agreement and depositing money with Pulte that wet insulation would be installed into wall cavities which would then be closed up." SAC ¶ 76. Plaintiff contends that this representation was made specifically in the standard home purchase agreement. Michael W. Parks (Plaintiff's counsel) Decl. ("Parks Decl."), Dkt. 218, Exh. B (copy of the standard purchase agreement listing the type of insulation as "blown cellulose," not "wet-blown cellulose").

B. Moisture Problems

Plaintiff argues that "Defendants failed to disclose that long term water retention with Cocoon insulation in wall cavities was a problem and a defect that created a substantial risk of mold contamination and a loss of money and property due to repairs." Mot, at 17. See also SAC ¶ 74. Plaintiff maintains Defendants knew about the "perceived moisture problem" well before Pulte built the putative class members' homes. In an August 26, 2001 email from U.S. Greenfiber ("USGF") employee Dan Rizzo, USGF acknowledged, according to Plaintiff, the perceived moisture problem, noting, "I have already been advised by Pulte and Centex that this is a critical issue for them inn [sic] areas beyond TX and CA. . . . We are a perfect target by our competition because we do what some people believe to be contrary to common wisdom — we add moisture to the inside of a wall cavity." Parks Decl., Dkt. 134, Exh. 32. Plaintiff also claims that another major home builder, Centex, banned Cocoon insulation in 2003 "because the Cocoon [i]nsulation in wall assemblies creates a foreseeable risk of harm in a water intrusion event" and that Pulte was aware of this ban, but nevertheless "discounted this concern." Mot., at 18 (citing Parks Decl., Dkt. 132, Exh. E. at 57:11-24).

III. STANDING UNDER THE UCL

"The focus of the UCL is `on the defendant's conduct, rather than the plaintiff's damages, in service of the statute's larger purpose of protecting the general public against unscrupulous business practices.'" Steroid Hormone Product Cases, 181 Cal. App. 4th 145, 154 (2010) (citing In re Tobacco II Cases, 46 Cal. 4th 298, 312 (2009)). A private action for relief under the UCL may be maintained only if the person bringing the action "has suffered injury in fact and has lost money or property as a result of the unfair competition." Cal. Bus. Prof. Code § 17204. The California Supreme Court, in In re Tobacco II, held that standing to bring a UCL action requires actual reliance, but only the named Plaintiff in a class action suit must show actual reliance on deceptive advertising. See In re Tobacco II, 46 Cal. 4th at 306. "Actual reliance" is evaluated "in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions," but where the "plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements." Id. at 306, 328. In addition, "a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material." Id. at 327. A misrepresentation is material if "a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question, and as such materiality is generally a question of fact unless the fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by it." Id. (internal citations and quotation marks omitted).

Here, Plaintiff has satisfied the requirements for UCL standing. The Parties do not dispute that he has alleged sufficient injury in fact. See, e.g., SAC ¶ 12 ("Plaintiff Segura is informed and believes that at least 740 homes in the state of California, including Plaintiff Segura's home, have thus far developed resulting property damage in the form of moisture damage and/or mold damage, to other building components located in these homes, caused by the defective Cocoon insulation building component."). Plaintiff also sufficiently alleges reliance: "Plaintiff and other consumers individually and collectively acted in foreseeable and justifiable reliance, to their detriment, on the warranties and representations of Defendants regarding the superior quality of Cocoon insulation as a selling point for homes and, acted in actual, justifiable and detrimental reliance to purchase a Pulte home incorporating Cocoon insulation." SAC ¶ 88. These representations include Pulte's representation in the standard purchase agreement that the insulation was simply "blown" insulation, not "wet-blown," and the failure to disclose that the insulation would be installed wet. Mot., at 1, 4. Parks Decl., Exh. B (standard purchase agreement listing the type of insulation as "blown cellulose," not "wet-blown cellulose"). Plaintiff claims to have relied on the standard purchase agreement, which also did not include information that the insulation would result in moisture management problems. SAC ¶ 88.

Plaintiff is entitled to a class-wide presumption of reliance here, where his case is one that primarily alleges omissions. See Cole v. Asurion Corp., 267 F.R.D. 322, 329 (C.D. Cal. 2010) (Gutierrez, J.) (finding plaintiff is entitled to a class-wide presumption of reliance for fraudulent omissions and misrepresentation under the UCL, where Plaintiff's case is primarily based on alleged omissions). Plaintiff, therefore, has standing under the UCL to bring this lawsuit.

The Court now turns to the propriety of certification under Federal Rule of Civil Procedure 23(a) and (b).

III. FED R. CIV. P. 23(A)

A. Numerosity

Rule 23(a)(1) requires that the class be "so numerous that joinder of all members is impracticable." Fed.R.Civ.P. 23(a)(1). Dukes, 603 F.3d at 599.

The numerosity requirement is satisfied. Plaintiff alleges that Pulte sold approximately 9,709 homes in California after January 1, 2003 that included Cocoon insulation. SAC ¶ 12. Plaintiff also alleges that at least 740 of these homes have developed property damage in the form of moisture and/or mold damage caused by defective Cocoon insulation. Id. Defendant Pulte does not dispute that Plaintiff has met this requirement.

B. Commonality

Rule 23(a)(2) requires that "there are questions of law or fact common to the class." Fed.R.Civ.P. 23(a)(2). Id. at 1177. As noted in Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998):

Rule 23(a)(2) has been construed permissively. All questions of fact and law need not be common to satisfy the rule. The existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class.

Id. (Citation omitted.). The commonality test is qualitative rather than quantitative — one significant issue common to the class may be sufficient to warrant certification. Id.

The common question of fact in this case arises out of Pulte's use of the standard form purchase agreement, which Plaintiff and other consumers signed, and wherein Pulte stated that its insulation was "blown" (not "wet-blown") and failed to include information regarding the moisture retention issues of which Pulte was aware. Pulte contends Plaintiff nevertheless has failed to meet the commonality requirement because the statements or omissions made in the standard purchase agreements do not preclude the need for an individualized inquiry on the part of the Court as to what representations were made to each purchaser. This argument is unavailing, particularly given the Ninth Circuit's decision in Yokoyama v. Midland Life Ins. Co., 594 F.3d 1087 (9th Cir. 2010). Focusing on whether common or individualized issues predominated the class, the Ninth Circuit noted:

These plaintiffs base their lawsuit only on what [Defendant] Midland did not disclose to them in its forms. The jury will not have to determine whether each plaintiff subjectively relied on the omissions, but will instead have to determine only whether those omissions were likely to deceive a reasonable person . . . The plaintiffs have thus crafted their lawsuit so as to avoid individual variance among the class members. Plaintiffs' case will not require the fact-finder to parse what oral representations each broker made to each plaintiff. Instead, the fact-finder will focus on the standardized written materials given to all plaintiffs and determine whether those materials are "likely to mislead consumers acting reasonably under the circumstances."

Id. (emphasis added). Because the test was objectively measurable — statements made in the defendant's own brochures — and did not require an individualized inquiry, the Ninth Circuit concluded that the district court had erred in holding that individualized reliance issues made the case inappropriate for class certification. Id. Here, as in Yokoyama, the representations were made to Plaintiff in a standard purchase agreement, and thus, Plaintiff has met the commonality requirement.

C. Typicality

Rule 23(a)(3) requires that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed.R.Civ.P. 23(a)(3). "The purpose of the typicality requirement is to assure that the interest of the named representative aligns with the interests of the class." Hanon, 976 F.2d at 508 (9th Cir. 1992) (citation omitted). According to the Ninth Circuit, "[t]ypicality refers to the nature of the claim or defense of the class representative, and not to the specific facts from which it arose or the relief sought." Id. (quotation omitted). "The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." Id. (internal quotation marks omitted). "[C]lass certification is inappropriate where the putative class representative is subject to unique defenses which threaten to become the focus of the litigation." Id. (citing cases). The Ninth Circuit interprets the typicality requirement permissively. Hanlon, 150 F.3d at 1020.

Defendant contends Plaintiff does not meet this requirement, focusing its analysis on Plaintiff's claims involving oral representations and fraudulent or misleading advertising brochures. Pulte Opp., at 15. Those arguments are unavailing. The Court finds Plaintiff has met the typicality requirement here insofar as each class member's claim arises from the same standard form purchase agreement.

D. Adequacy of representation

The remaining prerequisite of Rule 23(a) is that the "representative parties will fairly and adequately protect the interests of the class." Fed.R.Civ.P. 23(a)(4). "Resolution of two questions determines legal adequacy: (1) do the named plaintiffs and their counsel have any conflicts of interest with other class members and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?" Hanlon, 150 F.3d at 1020 (internal quotation marks omitted). Plaintiffs have the initial burden to show facts to support a finding of adequacy. NEWBERG, § 7:24 at 76.

Defendant Pulte does not challenge the adequacy of Plaintiff's counsel, but contests the adequacy of Plaintiff as a representative because of Plaintiff's participation in the Kearl lawsuit in San Bernardino Superior Court. Pulte Opp., at 17. Because the Court has made certification contingent on Plaintiff's withdrawal from that lawsuit, the Court finds that Plaintiff has met the adequacy requirement.

Plaintiff has met the four requirements of Rule 23(a).

IV. FED. R. CIV. P. 23(B)

In addition to meeting the conditions imposed by Rule 23(a), a putative class action plaintiff must also show that the action may be maintained under Fed.R.Civ.P. 23(b)(1), (2), or (3). Amchem Products, Inc. v. Windsor, 521 U.S. 591, 614 (1997). Here, Plaintiffs propose certification pursuant to Rule 23(b)(3). To qualify for certification under this subsection, the class must satisfy two prerequisites: common questions must "predominate over any questions affecting only individual members," and class resolution must be "superior to other available methods for fair and efficient adjudication of the controversy." Fed.R.Civ.P. 23(b)(3). "Subdivision (b)(3) encompasses those cases in which a class action would achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results." Advisory Committee Notes, 39 F.R.D. 69, 102-103.

A. Predominance

Rule 23(b)(3) requires that common issues predominate over individual ones. Rule 23(b)(3)'s predominance requirement is "far more demanding" than the commonality requirement of Rule 23(a). Amchem Prods., 521 U.S. at 623-24 (1997). "Rule 23(b)(3) requires a district court to formulate `some prediction as to how specific issues will play out in order to determine whether common or individual issues predominate in a given case.'" Dukes, 603 F.3d at 593 (citing Brown v. Am. Honda (In re New Motor Vehicles Canadian Export Antitrust Litig)). 522 F.3d 6, 20 (1st Cir. 2008)). "When common questions present a significant aspect of the case and they can be resolved for all members of the class in a single adjudication, there is clear justification for handling the dispute on a representative rather than on an individual basis." Hanlon, 150 F.3d at 1022.

Plaintiff has satisfied the predominance requirement. Plaintiff alleges Defendant omitted material information from a standard purchase agreement allegedly signed by all original purchasers of Pulte Homes. "Plaintiff['s] case will not require the fact-finder to parse what oral representations each broker made to each plaintiff. Instead, the fact-finder will focus on the standardized written materials given to all plaintiffs and determine whether those materials are `likely to mislead consumers acting reasonably under the circumstances.'" See Yokoyama, 594 F.3d at 1092 (finding the district court had erred in holding that individualized reliance issues made the case inappropriate for class certification, where the test was objectively measurable — statements made in the defendant's own brochures — and did not require an individualized inquiry).

Defendant contends Plaintiff's claims resemble those in Kaldenbach v. Mutual of Omaha Life Ins. Co., 178 Cal. App. 4th 830 (2009), in which the court affirmed the dismissal of plaintiff's UCL class action due to the predominance of individualized issues. However, Kaldenbach is distinguishable. In Kaldenbach, plaintiff claimed UCL violations based on statements made in Mutual's insurance policy. Id. at 850. Plaintiff claimed these fraudulent statements were made in uniform, standardized oral presentations made by Mutual's insurance agents. Id. The court disagreed that the presentations were standardized, and found instead that since the policies were sold by individual agents, who were not required to adhere to a scripted sales presentation, "the determination of what business practices were allegedly unfair turns on individualized issues." Id. Here, in contrast, Plaintiff and putative class members were given standard written purchase agreements which they all signed. Plaintiff does not rely on oral representations made by various individuals to establish fraud and false advertising. Rather, class members were presented with one document, a standard document, on which they relied. Plaintiff has therefore satisfied the predominance requirement of Fed.R.Civ.P. 23(b).

B. Superiority

The superiority inquiry requires consideration of whether the objectives of the particular class action procedure will be achieved in the particular case and often entails a comparison of alternative mechanisms of dispute resolution. Hanlon, 150 F.3d at 1023. Rule 23(b)(3) specifies four nonexclusive factors that are "pertinent" to a determination of whether class certification is the superior method. Fed.R.Civ.P. 23(b)(3). They are: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. Id.

Defendant claims Plaintiff has failed to demonstrate the superiority requirement because RORA remains a superior method for class members to pursue claims related to moisture damage or mold. Pulte Opp, at 20. However, the claims before this Court are UCL claims, not RORA claims, and therefore this argument is unavailing. Pulte also notes Plaintiff is a party in the Kearl case, which the Court has dealt with. See above.

The Court finds that Plaintiff has fulfilled the requirements of Fed.R.Civ.P. 23.

V. CONCLUSION

For the foregoing reasons, the Court GRANTS in PART, and DENIES in part Plaintiff's Motion (Dkt. 217), granting certification as to only the following, narrow class: "Original purchasers of residential structures built by Pulte and installed with Cocoon insulation in the state of California from January 1, 2003 to the present, who: (1) were not informed that the Cocoon insulation installed in their home would be `wet-blown'; (2) were not informed of the risks of long-term water retention, mold contamination, and a loss of money and property due to moisture damage associated with Cocoon insulation; and (3) suffered damage or experienced mold or other defects or consequences of having wet-blown insulation installed in their home. Original purchasers are those individuals who dealt directly with Pulte in their purchase, and did not purchase the home from any other entity or individual other than Pulte."

This narrow class is certified only as to Defendant Pulte, andonly based on the above claims. The Court does not certify the UCL cause of action based on any other claims set forth in the complaint, or those set forth in oral argument.

Certification of this class is conditioned on Plaintiff Segura filing proof that he has withdrawn as a party from the San Bernardino Superior Court case of William Kearl, et al., v. Pulte Home, Case No. CIVVS 802612, in which he is a named plaintiff. He must file this proof by not later than May 31, 2011. If Plaintiff fails to do so, he thereby consents to the denial of this motion and the dismissal of this entire action.