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Gonzalez v. Corning

United States Court of Appeals, Third Circuit

March 19, 2018

JAIME GONZALEZ; PATRICIA WRIGHT; KEVIN WEST; GERALD BOEHM; EDWARD MAAG; DIANE MAAG, on behalf of themselves and all others similarly situated, Appellants
v.
OWENS CORNING; OWENS CORNING SALES LLC

          Argued September 6, 2017

         On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. No. 2-13-cv-01378) District Judge: Honorable Joy Flowers Conti

          Robert H. Klonoff [Argued], Charles E. Schaffer, Shanon J. Carson, Lawrence Deutsch, Charles J. LaDuca, Michael A. McShane, Robert K. Shelquist Attorneys for Appellants

          Carter G. Phillips [Argued], Kara L. McCall, T.Robert Scarborough, Tacy F. Flint, Elizabeth M. Chiarello, Arthur H. Stroyd, Jr. Allan P. Ides Simona Grossi Attorneys for Appellees

          Michael J. Quirk Williams Attorneys for Appellants' Amici Curiae

          Before CHAGARES, JORDAN, and HARDIMAN, Circuit Judges.

          OPINION

          HARDIMAN, Circuit Judge.

         This appeal involves a putative class action brought by consumers in four states who alleged that Appellees Owens Corning and Owens Corning Sales, LLC (collectively, Owens Corning) sold defective roof shingles and misrepresented the shingles' expected useful life. Appellants challenge an order of the United States District Court for the Western District of Pennsylvania denying class certification. We will affirm.

         I

         In 2009, Appellants Patricia Wright and Kevin West filed suit in the District Court under Rule 23 of the Federal Rules of Civil Procedure on behalf of a proposed nationwide class of individuals who "owned, own, or acquired" structures on which certain Owens Corning-manufactured roofing shingles "are or have been installed since 1986." Gonzalez v. Owens Corning, 317 F.R.D. 443, 455 (W.D. Pa. 2016). Wright and West claimed that Oakridge shingles-an Owens Corning brand of fiberglass asphalt roofing shingles-are "plagued by design flaws that result in cracking, curling and degranulation" and "will eventually fail, causing property damage, and costing consumers substantial removal and replacement costs." Id. at 455. The District Court entered summary judgment in favor of Owens Corning, finding that Wright and West's claims had been discharged in bankruptcy by the 2006 confirmation of Owens Corning's reorganization plan. We partially reversed, concluding that the claims were not discharged. See Wright v. Owens Corning, 679 F.3d 101, 108-09 (3d Cir. 2012). After the case was remanded to the District Court, Appellants Jaime Gonzalez, Gerald Boehm, and Edward and Diane Maag (together with Wright and West, Plaintiffs) filed three similar suits in district courts in other states, which were then transferred to the Western District of Pennsylvania and consolidated with Wright and West's case.

         Plaintiffs are homeowners from Pennsylvania, Illinois, Texas, and California, on whose roofs Oakridge shingles were installed prior to 2006. They allege that their shingles have not performed as promised because they were manufactured "in accordance with defective design specifications." Gonzalez, 317 F.R.D. at 450. Of the named plaintiffs, three reported property damage and two had their roofs reshingled. The shingles were all subject to warranties of 25 years or more, which Plaintiffs argue amounted to affirmative representations about the shingles' expected useful life. Plaintiffs proposed two classes in the District Court: (1) a class of property owners from their four home states (the Four-State Class), asserting various combinations of state-law causes of action against Owens Corning; and (2) a nationwide class of property owners (the Nationwide Class) seeking a ruling regarding the legal standard governing whether Owens Corning can use a bankruptcy discharge defense to shield itself from liability.

         A

         Plaintiffs proffer the Four-State Class as either a money damages class under Rule 23(b)(3) or an issue class under Rule 23(c)(4). Plaintiffs define the class as follows: "all individuals and entities that own a building or structure physically located in the states of California, Illinois, Pennsylvania, or Texas on which Owens Corning's Oakridge-brand shingles were installed from 1992 through 2012, and where those shingles manifested any cracking, degranulation, fragmentation, or deterioration during the warranty coverage period." 317 F.R.D. at 453.

         During the proposed 20-year class period, Owens Corning manufactured at least 23 kinds of Oakridge shingles at 13 different plants around the country using more than 500 design specifications. Plaintiffs did not dispute that all of these specifications met the applicable industry standard (ASTM D3462), which prescribes minimum measurements for newly manufactured shingles, such as "tear strength, net mass, mat mass, asphalt mass, and mineral matter mass." Id. at 465. Plaintiffs contended that in lieu of industry standards, defectiveness should be judged by the expected useful life of the shingles as represented by the applicable warranty period. According to Plaintiffs, compliance with ASTM D3462 did not consistently yield shingles that would last until the applicable warranty expired. In Plaintiffs' view, Owens Corning's design specifications sometimes yielded shingles vulnerable to "premature deterioration so that they . . . will actually only last 15 to 20 years." App. 247-48.

         Plaintiffs claimed that Oakridge shingles had a propensity to fail before their warranties expired because of one or more of the following design flaws: insufficient asphalt quantity or quality, and insufficient mat mass and tear strength. Based on testing he conducted on 298 shingles, Plaintiffs' expert Dean Rutila opined that "about half" of the Oakridge shingles produced during the proposed 20-year class period fell on the "low end" of Owens Corning's specifications, which meant they were manufactured at or near the ASTM minimums. Id. at 514, 523, 528. Owens Corning challenged the admissibility of Rutila's opinions under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). The District Court ruled that all testimony based on Rutila's testing was inadmissible, but that he could testify to the general effect of various measurements on shingle performance based on his review of Owens Corning's internal documents, including design specifications and internal communications. For example, Rutila could testify that Oakridge design specifications produced shingles with a significant range of measurements, with only the "high-end" shingles capable of lasting for more than 20 years. Gonzalez, 317 F.R.D. at 499. Rutila acknowledged, however, that the "appropriateness of design specification measurements can only be judged in relationship to each other, " id. at 485, and that "a shingle would have to be individually inspected to determine whether it is a nondefective or defective shingle, " id. at 514. As a result, Plaintiffs could not point to "any particular measurement or set of measurements for the individual elements of a shingle that constitute a design defect." Id.

         B

         Plaintiffs propose that the Nationwide Class proceed under Rule 23(b)(1)(B) or Rule 23(b)(2), and that it include "all individuals and entities that own a building or structure physically located in the United States on which Owens Corning's Oakridge-brand shingles are currently installed, where those shingles were purchased on or before September 26, 2006." Id. at 453. Through the Nationwide Class, Plaintiffs seek to mitigate what they perceive is a risk of inconsistent judgments resulting from the procedural history of this case prior to the consolidation of Wright and West's action with those brought by the other named plaintiffs.

         On September 26, 2006 (the cutoff date for the proposed class), the United States Bankruptcy Court for the District of Delaware confirmed a reorganization plan for Owens Corning after nearly six years of bankruptcy proceedings. Pursuant to the order confirming the plan and 11 U.S.C. § 1141, all claims that existed against Owens Corning as of that date were discharged. After Wright and West brought suit but before Plaintiffs' actions were consolidated, Owens Corning moved for summary judgment, arguing that the claims belonging to Wright and West existed prior to September 26, 2006, and were thus discharged when the reorganization plan was confirmed. The District Court granted summary judgment in favor of Owens Corning, citing this Court's decision in JELD-WEN, Inc. v. Van Brunt (In re Grossman's Inc.), 607 F.3d 114 (3d Cir. 2010) (en banc) ("Grossman's"). In that case, we held that for purposes of determining whether a claim is dischargeable in bankruptcy, the claim arises when the claimant is exposed to the debtor's product or conduct, regardless of when an injury is discovered. Grossman's, 607 F.3d at 125. For Wright and West, this meant that their claim arose when they purchased their shingles. Since that was before Owens Corning's reorganization plan was confirmed, the District Court concluded that Wright and West's claims were discharged.

         On appeal to this Court, we declined to apply the Grossman's rule retroactively, citing due process concerns. See Wright, 679 F.3d at 108-09 (3d Cir. 2012). We concluded that bankruptcy cases in which reorganization plans were confirmed prior to the Grossman's decision are governed by the dischargeability standard articulated in the case that Grossman's overruled, namely Avellino & Bienes v. M. Frenville Co. (In re M. Frenville Co.), 744 F.2d 332 (3d Cir. 1984). Wright, 679 F.3d at 109. Since Owens Corning's reorganization plan was confirmed prior to our decision in Grossman's, we held that Frenville governed whether Wright and West's claims were discharged. Id. Under the Frenville standard, a court must look to the underlying state limitations law to determine when a claim arises. Id. at 104 & n.5. Thus, for example, a claim brought under the law of a state in which the discovery rule applies arises when the claimant discovers the injury. We affirmed in part and reversed in part the District Court's summary judgment, agreeing with the Court that Wright and West held "claims" under the Bankruptcy Code, id. at 106-07, but concluding that the Court erred in holding that those claims had been discharged, id. at 109.

         On remand to the District Court, this case was consolidated with the cases brought in other districts by Gonzalez, Boehm, and the Maags. Because no class had been certified at the time of our decision in Wright, that decision did not bind unnamed putative class members. Hence Plaintiffs' desire to certify the Nationwide Class, through which they seek a judgment declaring that Frenville governs the dischargeability of class members' claims-effectively giving our decision in Wright binding classwide effect. Owens Corning concedes that, as we made clear in Wright, Frenville (not Grossman's) applies in determining whether the claims against it have been discharged in bankruptcy, and it has repeatedly-including during oral argument- foresworn any intention of raising a discharge defense against Plaintiffs or future claimants. Plaintiffs nevertheless argue that classwide adjudication of the question we faced in Wright is necessary "[t]o avoid inconsistency and needless litigation for other consumers." Plaintiffs Br. 22.

         C

         Plaintiffs moved for certification of the Four-State and Nationwide Classes. On March 31, 2016, the District Court denied Plaintiffs' motion. With respect to the Four-State Class, the District Court concluded that Plaintiffs had not met their burden under Rule 23(b)(3) to show that "questions of law or fact common to class members predominate over any questions affecting only individual members, " Gonzalez, 317 F.R.D. at 510, nor was it persuaded that certifying a class under Rule 23(c)(4) to decide issues of liability was appropriate.[1] The District Court concluded that the Nationwide Class could not satisfy the commonality ...


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