Adams Pointe I, L.P. v. Tru-Flex Metal Hose Corp.

          REPORT AND RECOMMENDATION

          CYNTHIA REED EDDY, UNITED STATES MAGISTRATE JUDGE

         RECOMMENDATION

         Presently before the court for disposition are the following:

(1) A motion to dismiss and strike Third Party Plaintiffs Tru-Flex Metal Hose Corp., Tru-Flex LLC and Pro-Flex LLC's Third Party Complaints for failure to effect formal service and failure to state a claim by Third Party Defendants Ridge Management & Development Corp., Adams Pointe South Village Owners Association, L.P., and Adams Pointe Condominium Association (collectively “Adams Pointe Management”) [ECF No. 138]; and

(2) A motion to dismiss and strike Third Party Plaintiffs Tru-Flex Metal Hose Corp., Tru-Flex LLC, and Pro-Flex, LLC's Third Party Complaints for failure to effect formal service and failure to state a claim by Third Party Defendants Ridge Development Corp. and Adams Pointe Construction Corp. (collectively “Adams Pointe Contractors”) [ECF No. 140].

         The motions are fully briefed and ripe for disposition. See ECF Nos. 161, 162, 164, 165, 166, 182, 183. For the reasons that follow, it is respectfully recommended as follows:

         Adams Pointe Management's motion to dismiss the Third Party Complaint [ECF No. 138] be GRANTED in part and DENIED in part; and Adams Pointe Contractors' motion to dismiss the Third Party Complaint [ECF No. 140] be GRANTED in part and DENIED in part.

         It is specifically respectfully recommended that the motions be granted with respect to Pro-Flex and Tru-Flex's claim for indemnification and that claim be dismissed with prejudice and that the motions be denied in all other respects.

         REPORT

         I. Background

         Because the discussion of the underlying complaint is necessary for resolution of the pending motions to dismiss the Third-Party Complaints, the court will discuss the facts of the original complaint before discussing the allegations set forth in the Third-Party Complaints.

         a. Amended Complaint

         Named Plaintiffs are a group of putative class members who initiated the present products liability suit against Defendants Tru-Flex Metal Hose Corp., Tru-Flex, LLC (collectively referred to as “Tru-Flex”) and Pro-Flex, LLC (“Pro-Flex”) in connection with the alleged defective design, manufacture and sale of Corrugated Stainless Steel Tubing (“CSST”) for use in residences and in other structures owned or otherwise occupied by Named Plaintiffs. The court will only discuss facts of the original complaint which are necessary to decide the pending motions to dismiss the Third Party Complaints.

         i. Yellow-Jacketed CSST

         CSST consists of continuous, 300 series flexible stainless-steel pipe encased in an insulative outer yellow jacket. Am. Compl. [ECF No. 186] at ¶ 1. The yellow jacket material has the thickness of approximately four sheets of paper. Id. CSST is marketed as a superior option for natural gas delivery to residences and more installer-friendly and safer than traditional black iron pipe gas delivery systems. Id. at ¶ 2. According to Named Plaintiffs, there is internal industry recognition that yellow-jacketed CSST products are prone to catastrophic failure when exposed to electrical energy, and despite knowing this, Tru-Flex and Pro-Flex continued to manufacture, market and distribute their yellow-jacketed CSST product, Pro-Flex® CSST and marketed their product through retail stores to “do-it yourself” consumers and untrained workers. Id. at ¶ 3. The thin walls of the yellow-jacketed CSST are penetrable by the heat of an electrical event and causes the piping to melt and the natural gas inside escapes which causes a gas-fueled fire. Id. at ¶ 32. Named Plaintiffs allege that even a nearby lightning strike that does not directly strike a structure can cause the structure to be electrically energized and this power surge can potentially puncture a hole in the CSST and cause a fire. Id. at ¶ 33. Electrical energy will travel through any conductive path, such as gas piping, until it is able to reach the ground. Id. While traditional black iron pipes are able to withstand this energy, Named Plaintiffs claim that yellow-jacketed CSST cannot. Id. Named Plaintiffs allege that if a direct or indirect lightning strike energizes CSST, the insulative materials will not be able to carry the charge, which will look to jump to a less resistant pathway by “arcing.” Id. at ¶ 35. CSST has no conductive value, meaning it does not distribute the electric charge. Id. at ¶ 36. Instead, CSST focuses the energy from an arc into the weakest points of the yellow-jacketing which disintegrates those points first and exposes the metal tubing to further energy, causing holes or perforations in the gas lines. Id. CSST is exposed to electric current frequently during electrical storms, lightning strikes and often in ordinary household circumstances where nearby sources of electricity, i.e., electric wiring or appliances, cause a “flashover” or an electric “arc.” Id. at ¶ 37.

         Previous manufacturers of yellow-jacketed CSST ceased distribution of this product even to qualified plumbing professionals, while Tru-Flex and Pro-Flex increased their sales of these allegedly defective products to consumers. Id. at ¶ 4. Named Plaintiffs allege that Tru-Flex and Pro-Flex possess actual knowledge that the Pro-Flex® CSST does not have sufficient thickness to protect against combustion after a lightning strike or potentially even a household electrical current, but continue to manufacture and distribute their product to “do-it-yourself” installers and professional installers in the Commonwealth of Pennsylvania and nationwide. Id. at ¶ 5.

         Pro-Flex® CSST has been installed in real property owned by Named Plaintiffs and is the alleged cause of property-damaging fires, loss of value to the structures, costs for inspection and repair, retrofitting costs, loss of sales through disclosure and/or financing restrictions, and increased insurance coverage costs. Id. at ¶ 6. Named Plaintiffs seek redress for the harm caused by Tru-Flex and Pro-Flex in the design, manufacture and ongoing marketing and sales of the allegedly defective Pro-Flex® CSST. Id.

         ii. History of Yellow-Jacketed Litigation and Mitigation by Bonding and Grounding

         Tru-Flex Metal Hose Corp began manufacturing and distributing a yellow-jacketed CSST product in the 1990's. Id. at ¶ 27. In the early 2000's, Tru-Flex Metal Hose Corp. changed the brand name of its yellow-jacketed CSST product and began to distribute under the branded Pro-Flex® mark, which was owned by Tru-Flex Metal Hose Corp. Id. In 2004, a class action lawsuit was brought against certain manufacturers of yellow-jacketed CSST alleging that these manufacturers possessed knowledge that yellow-jacketed CSST possessed insufficient thickness to protect against combustion, and yet continued to manufacture, market and distribute the same. Id. at ¶ 28 n. 4 (referring to Lovelis, et al. v. Titeflex, et al., Case No. Civ-2004-211, Clark County, Arkansas). The Lovelis class further alleged that the manufacturers failed to warn consumers about the inherent defect of yellow-jacketed CSST that rendered it unreasonably dangerous when used for its designed purpose. Id. The class action ultimately settled and as part of the settlement, the major manufacturers of CSST represented that bonding and grounding the CSST system might mitigate the harm posed by electrical imposition on the jacketing material. Id. “Bonding” attempts to connect or tie all metal points in the gas system together so that they conduct at the same electrical potential level, theoretically preventing an “arc” between areas of different electrical potential. Id. at ¶ 40. “Grounding” attempts to provide stray electrical current with a path to the earth (ground). Id. at ¶ 41. This is accomplished by attaching a larger wire (a ground wire or other ground mechanism) to the tubing to “remove” the electrical charge. Id. The charge transfers to the ground wire or other “ground” to direct the electric charge away from the tubing.” Id.

         Named Plaintiffs allege that without first validating whether the risk of using yellow-jacketed CSST was sufficiently mitigated by bonding and grounding future installations, and without regard for any prior legacy installation, bonding and grounding guidelines were included in industry-wide revised Design and Installation Manuals provided to certified installers (not the ultimate homeowner) for purposes of new installations of yellow-jacketed CSST. Id. at ¶ 42. Industry regulators allegedly questioned the propriety of the bonding and grounding “safety fix” and noted the absence of sufficient validation of the representations of bonding and grounding as a safety solution. Id. Pro-Flex and Tru-Flex both tout “bonding and grounding” as a mitigation effort for their Pro-Flex® CSST product in installation guides, but do not provide any remedies or relief for legacy installations. Id. at ¶¶ 44-49. Unlike other manufacturers, Tru-Flex and Pro-Flex did not modify the design of its CSST product to one with an arc-resistant jacket and continue to use the insulative yellow-jacket and rely solely on the instruction for future installations to include bonding and grounding. Id. at ¶ 49. According to Named Plaintiffs, “bonding and grounding” fails to remedy the Pro-Flex® CSST in existing structures and is not sufficient to remedy the inherent danger of yellow-jacketed CSST because yellow-jacketed CSST focuses electrical energy onto the surface of the CSST. Id. at ¶¶ 51-52. Further, Named Plaintiffs allege that even if Pro-Flex® CSST is properly bonded, it still poses a risk of a lightning-related fire and risks from ordinary household current, and although Tru-Flex and Pro-Flex are aware of these dangers and the availability of safer alternative designs, they continue to market and distribute the yellow-jacketed CSST. Id. at ¶ 53.

         iii. Third Parties and Mitigation Efforts

         Industry practices require yellow-jacketed CSST to be installed by a qualified plumbing professional and in accordance with the Manufacturer's Design and Installation (“D&I”) Guide and all applicable plumbing codes. Id. at ¶ 55. For installations that came after the 2004 class action settlement “bonding and grounding” mitigation, additional bonding of the CSST must be performed by licensed electricians. Id. According to Named Plaintiffs, the Defendants claim that their product is safe enough when installed as directed and take the position that third-parties assume the role of ensuring the safety of the Pro-Flex® CSST product regardless of the industrywide admission that the yellow-jacketed product is inherently dangerous and Defendants' responsibility ends upon the realized sale because third-party entities have assumed the responsibility to meet industry-accepted guidelines. Id. at ¶ 56. Further, Named Plaintiffs point out that although industry practices require CSST to be installed by a qualified plumbing professional, and bonding to be performed by licensed professionals, the Defendants disregard these regulations by distributing and selling Pro-Flex® CSST to “do-it-yourself” installers at hardware and home supply stores where the only “training” provided is an installation manual that is often sold separately. Id. at ¶ 58. As Named Plaintiffs allege, Defendants maintain that the down-stream seller, including independent hardware stores, large “box store” retailers, third-party catalogue sales and online outlets, assume the responsibility for ensuring the purchaser of the Pro-Flex® CSST product is qualified by appropriate regulations and is further trained in the installation of the Pro-Flex® CSST. Id. at ¶ 59. Named Plaintiffs allege that while Defendants seek to mitigate the dangers of Pro-Flex® CSST by employing third-parties, the responsibility remains with Defendants. Id. at ¶ 60.

         iv. Damage to Named Plaintiffs^[1]

         The Named Plaintiffs own residences affected by the allegedly defective Pro-Flex® CSST and own multiple condominiums, quad duplexes, carriage homes and townhomes in Pennsylvania for personal possession, leasing and sale. Id. at ¶ 61.

         On June 14, 2015, a nearby lightning activity caused a fire at 220 Adams Pointe Boulevard, Mars, Pennsylvania and caused significant property damage to the properties. Id. at ¶¶ 62, 64. After a fire investigation by third parties, it was determined that the Pro-Flex® CSST installed in the condominium unit failed as a result of electrical insult, releasing natural gas into the unit, which was ignited and caused significant property damage to the contents and structure of the apartment unit with the CSST and neighboring condominium units. Id. Prior to the fire, the structure that had experienced the fire had been inspected by local code officials and was reported to be in compliance with the Construction Code Act and Uniform Construction Code, and building code officials issued the requisite certificate of occupancy for each of the structures owned by Adams Pointe I, II and III. Id. at ¶ 63. Named Plaintiffs allege that this signifies that installation had occurred in accordance with applicable standards and codes. Id. It also was difficult for the owners of Adams Pointe I, II and III structures to sell their interests in the property, as inspectors became aware of the risks of yellow-jacketed CSST and included notes in the home inspections of the material defect and danger posed by the product. Id. at ¶ 65. This impacted the sales and ultimate value of such residences. Id.

         Named Plaintiffs filed an Amended Complaint on December 4, 2017 identifying a proposed class of the following:

Any and all persons and/or entities who own real property in the United States in which yellow-jacketed Pro-Flex® CSST manufactured, designed, marketed, or distributed ...