By Leah S. Poniatowski, J.D.
Risk-of-harm test applies only if damages are sought for damage to the product itself—not when damages involve other property or personal injury.
A faucet manufacturer may be liable to a condominium association in a proposed class-action lawsuit premised on claims under the Washington Product Liability Act because the damages concerned other property and not the faucets, the U.S. Court of Appeals for the Seventh Circuit ruled, reversing the lower court after determining that the risk-of-harm test had been misapplied. However, the appellate court affirmed the dismissal of the breach of express warranty and unjust enrichment claims because they had been waived (Duncan Place Owners Association v. Danze, Inc., June 19, 2019, Sykes, D.).
Duncan Place Owners Association (the association) sought a proposed class-action product liability-based lawsuit against Danze, Inc., alleging that the Danze faucets installed in all 63 condominium units were defective. The association asserted that the defective faucets damaged the units and common areas of the building and also cost the association replacement costs. The association asserted breach of express warranty, unjust enrichment, negligence, and strict product liability claims. The lower court allowed only one claim to proceed, dismissing the rest, and later entered summary judgment on the only remaining claim. The association filed the present appeal to reinstate the breach of express warranty, unjust enrichment, negligence, and strict liability claims. The latter two claims were construed as one cause of action under Washington’s state product liability law.
Breach of express warranty. The Seventh Circuit held that the association waived the breach of express warranty claim. The association had asserted a claim for breach of express warranty in its initial complaint, which the lower court dismissed on the ground that it was not supported because the association did not allege that the unit owners had knowledge of the manufacturer’s warranty at the time of purchase, a requirement under Washington law. The lower court had raised the knowledge issue sua sponte, and warned the association that the claim would be dismissed if it could not demonstrate in good faith that the owners had the required knowledge. The association filed three position statements, none of which revealed that the unit owners knew about the warranty or challenged the application of the knowledge requirement. The association did not raise the application of the requirement issue until appeal.
In general, claims not raised in the proceedings before a final judgment cannot be considered before an appellate court, unless the issue had been raised sua sponte by the lower court. However, this exception is limited to when the appellate brief is the first chance a party can discuss the issue. Because the association had several opportunities to challenge the issue before the court and did not do so, it waived the claim.
Unjust enrichment. Relatedly, the association’s failure to raise additional arguments vis-a-vis reinstatement of the unjust enrichment claim caused it to be waived. The initial unjust enrichment claim had been premised on fraud, but because the association had failed to meet that higher pleading standard, the lower court dismissed the claim. In its appellate brief, the association conceded that its claim did not meet the heightened pleading standard, contending that the lower court should have considered it under the non-fraud-based standard. Despite case law supporting the association, the precedent had not been presented to the lower court in that context. Therefore, the dismissal of the claim was affirmed.
Product liability. The Seventh Circuit held that the lower court incorrectly resolved the product liability claim. The appellate court clarified the analysis for economic loss claims arising under the Washington Product Liability Act (WPLA) when damages for other property caused by a defective product are at issue. First, the type of damages sought must be distinguished between those associated with damage to the product itself and those associated with damage to other property (or personal injury). In the case of the first type of damage, the risk-of-harm test—as outlined by state supreme court precedent—must be applied in order to discern if the injury is recognized under the WPLA. No additional analysis is necessary if the damage falls into the latter type. The lower court erred when it applied the risk-of-harm test because the association sought to recover for damage to the condominium building resulting from the allegedly defective faucets; thus, the association sought damages for "other property" injury. Consequently, the product liability claim was remanded.
However, the appellate court stated that there was an important limitation with respect to the scope of the claim. The association had received assignments of rights from 41 condominium owners and, thus, the association’s product liability claim was limited to the other property damages of those 41 units. The lower court should also allow factual development concerning damage to the general areas of the condominium building. But the association could not assert the rights of unit owners who had not assigned their rights, nor did the association have a viable claim for prospective relief. Therefore, the product liability claim dismissal was reversed and the matter remanded to the lower court
The case is No. 17-3474.
Attorneys: Katrina Carroll (Lite DePalma Greenberg LLC) for Duncan Place Owners Association. Howard L. Lieber (Grotefeld Hoffmann Schleiter Gordon Ochoa & Evinger, LLP) for Danze, Inc. Howard L. Lieber (See Above For Addess) for Globe Union Group, Inc.
Companies: Danze, Inc.; Globe Union Group, Inc
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