Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00109/USCOURTS-caed-2_04-cv-00109-4/pdf.json

Nature of Suit Code: 365
Nature of Suit: Personal Injury - Product Liability
Cause of Action: 28:1332 Diversity-Personal Injury

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1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

ROBERT KURT SCHERER, 

Plaintiff,

v.

HOME DEPOT U.S.A., INC.,

KRAUSE, INC., and DOES 1-100,

Defendants. 

CIV-S-04-0109 DFL GGH

MEMORANDUM OF OPINION

AND ORDER

Defendant Home Depot U.S.A., Inc. (“Home Depot”) moves for

summary adjudication of plaintiff Robert Scherer’s fraud by

concealment and fraud by misrepresentation claims and his request

for punitive damages. Defendant Krause, Inc. (“Krause”) moves

for summary judgment on all claims. For the reasons stated

below, Home Depot’s motion is GRANTED and Krause’s motion is

GRANTED in part and DENIED in part.

I.

Plaintiff alleges that on November 26, 2001, he was injured

when the ladder on which he was standing collapsed. (FAC ¶ 11.) 

He asserts that the ladder was manufactured by Krause and sold by

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 Although the parties do not address it, there is a choice 1

of law issue as to each of the claims because the injury occurred

in Texas and the plaintiff is a California resident. Federal

courts located in California use its choice of law rules. 

Ledesma v. Jack Stewart Produce Inc., 816 F.2d 482, 484 (9th Cir.

1987). California employs the “governmental interest” test to

determine which state’s law governs an individual claim. The

court addresses the choice of law issue for each claim in the

discussion that follows. 

2

Home Depot. (Id. ¶¶ 12-13.) Plaintiff seeks to recover

compensatory and punitive damages from defendants. 

Plaintiff asserts the following eight claims in the first

amended complaint: (1) design/manufacturing defect; (2) failure

to warn; (3) negligence; (4) breach of implied warranty; (5)

breach of express warranty; (6) fraud by concealment; (7) fraud

by misrepresentation; and (8) violation of the Consumer Product

Safety Act (“CASA”). Home Depot moves for summary adjudication

on the fraud by concealment and fraud by misrepresentation claims

as well as the prayer for punitive damages. Krause moves for

summary judgment on all claims. 

II. Home Depot’s Motion1

Home Depot moves for summary judgment on plaintiff’s fraud

claims and prayer for punitive damages. Because the law

governing fraud claims is the same in California and Texas, the

choice of law analysis need go no further. See Marketing West,

Inc. v. Sanyo Fischer (USA) Corp., 6 Cal.App.4th 603, 612-613

(1992) (discussing elements of fraud by concealment); In re

Siegel, __ S.W.2d __, 2006 WL 358257, at *5 (Tex. App. 2006)

(same); Anderson v. Deloitte & Touche, 56 Cal.App.4th 1468, 1474

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 To succeed on a fraudulent concealment claim, plaintiff 2

must show that: (1) Home Depot knowingly made a material

misrepresentation by concealing a material fact; (2) Home Depot

was under a duty to disclose the material fact; (3) Home Depot

intentionally withheld this information to induce plaintiff to

act; (4) plaintiff relied on the fraud; and (5) was injured as a

result. Reynolds v. Murphy, __ S.W.3d __, 2006 WL 300597, at *12

(Tex. App. 2006). To succeed on his fraud by misrepresentation

claim, plaintiff must demonstrate that: (1) Home Depot made a

false representation of a material fact; (2) Home Depot knew that

the fact was false when it made the representation; (3) Home

Depot intended to induce reliance on the false fact; (4)

plaintiff justifiably relied on the false fact; and (5)

plaintiff’s reliance caused his injury. Beal Bank, 124 S.W.3d at

647.

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(discussing elements of fraud by misrepresentation); Beal Bank v.

Schleider, 124 S.W.3d 640, 647 (Tex. App. 2003) (same). 

2

Home Depot argues that summary judgment is appropriate

because plaintiff Scherer has failed to allege, and has no

evidence, that any Home Depot employee concealed or

misrepresented material facts about the ladder. (HD Mot. at 5-6.) 

In response, as to the concealment claim, plaintiff seems to

argue that Home Depot intentionally concealed design defects in

Krause ladders from the public as a whole and from the Consumer

Products Safety Commission (“CPSC”). (HD Opp’n at 3-4.) He

alleges that Home Depot has instituted a corporate policy to

withhold information about the defects in Krause ladders from its

sales force and the public. (HD Opp’n at 4.) As evidence, he

provides transcripts from the depositions of two former Home

Depot merchandise buyers who were deposed by other lawyers in

other cases involving Home Depot and Krause “multimatic” ladders. 

These employees state that Home Depot did not have a policy of

informing them if Home Depot received a complaint from a customer

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26 The witness does not state about what he is qualified to 3

testify, and most of his declaration consists of legal

conclusions rather than expert opinion.

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regarding a Krause ladder and, in fact, did not inform them that

Home Depot had received such complaints. (Englehart Dep. 22:14 -

26:15; Hovis Dep. 58:9 - 61:24.) 

Plaintiff also provides a declaration from an individual who

claims to be an expert witness. (Darnell Decl. ¶ 1.) This 3

witness declares that Home Depot knew that the ladders were

defective because one Michael Kauffman wrote a letter in 1995 in

which he reported that the Krause Mutimatic ladder deviated from

ANSI standards. (Id. ¶ 8.) The witness concludes that Home

Depot “knew or should have known” about the letter because it

“was published in the Heui Mei and other cases.” (Id.)

As to the misrepresentation claim, plaintiff asserts that

Home Depot made fraudulent misrepresentations in its general

advertising, specific advertising, and product labeling. (HD

Opp’n at 10.) However, plaintiff provides no evidence to support

this assertion. Instead, plaintiff alleges that Krause made

knowing misrepresentations by labeling its ladders as meeting

ANSI standards when they did not. (Id.) The only reference to

Home Depot is an unsupported accusation that “Home Depot on

multiple occasions supported [the statements by Krause]” and knew

that the ladders did not meet ANSI standards. (Id.) 

Plaintiff’s showing is not sufficient to meet his burden of

proof on either fraud claim. Plaintiff does not provide evidence

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 In a subsequent section of his brief, plaintiff asserts 4

that “Failure to Report Accidents to CPSC is Actionable

Concealment Fraud.” (HD Opp’n at 6.) Plaintiff cites no law to

support this allegation. Moreover, he fails to adduce evidence

from which a reasonable jury could find that the Home Depot

failed to report accidents to CPSC. As a result, assuming that

this is a cognizable theory of fraud, plaintiff cannot succeed on

it at trial.

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that any Home Depot employee made a material misrepresentation to

him or withheld from him material information which the employee

was under a duty to disclose. Scherer also fails to show that

any agent of Home Depot acted with the intent to defraud. 

Finally, plaintiff does not show that he relied on any

representations from Home Depot. His naked assertions,

unsupported by admissible evidence, to the effect that Home Depot

had a corporate policy of concealment or misrepresentation are

not adequate at this stage of the case to survive summary

judgment. Accordingly, Home Depot’s motion for summary judgment

is GRANTED on the claims of fraud by misrepresentation and fraud

by concealment.4

Home Depot also moves for summary judgment on Scherer’s

prayer for punitive damages. Plaintiff asserts that punitive

damages are warranted because: (1) Home Depot violated the

regulatory provisions of the Consumer Product Safety Act

(“CPSA”); (2) “punitive damages are essential to provide an

example to retailers”; and (3) “punitive damages are essential to

fund a full recall of Krause ladders.” (HD Opp’n at 5, 6, 13.)

To succeed on his claim for punitive damages, plaintiff must

prove that Home Depot’s conduct was malicious, fraudulent, or

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26 The statute of limitations for a breach of express 5

warranty claims under Texas law is four years. Tex. Bus. & Com.

Code Ann. § 2.725.

6

grossly negligent. See Transp. Ins. Co. v. Moriel, 879 S.W.2d

10, 18 (Tex. 1994); Cal Civ. Code § 3294. Plaintiff presents no

evidence indicating that Home Depot acted maliciously,

fraudulently, or with gross negligence. Moreover, the court has

found no law authorizing punitive damages for violations of the

CPSA and plaintiff has cited none. Plaintiff has failed to

demonstrate that it is possible for him to succeed on a claim for

punitive damages at trial. As a result, Home Depot’s motion for

summary judgment on the request for punitive damages is GRANTED.

III. Krause’s Motion for Summary Judgment

A. Statute of Limitations

Krause asserts that all of plaintiff’s claims except his

claim for express breach of warranty are barred by Texas’s twoyear statute of limitations on personal injury actions. (Krause 5

Mot. at 4.) Plaintiff argues that the complaint was timely

because the discovery rule tolled the accrual of his cause of

action until February 2002. (Krause Opp’n at 3.) 

As discussed in a previous order, Texas law governs the

limitations period in this action. (Order of 7/19/2004 at 4.) 

In Texas, “a defendant moving for summary judgment on the

affirmative defense of limitations has the burden to conclusively

establish that defense.” KPMG Peat Marwick v. Harrison County

Hous. Fin., 988 S.W.2d 746, 748 (Tex. 1999). “Thus, the

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defendant must (1) conclusively prove when the cause of action

accrued, and (2) negate the discovery rule, if it applies and has

been pleaded or otherwise raised, by proving as a matter of law

that there is no genuine issue of material fact about when the

plaintiff discovered, or in the exercise of reasonable diligence

should have discovered, the nature of its injury.” Id. “If the

movant establishes that the statute of limitations bars the

action, the nonmovant must then adduce summary judgment proof

raising a fact issue in avoidance of the statute of limitations.” 

Id. 

In Texas, tort actions accrue “when the legal wrong is

completed and the plaintiff becomes entitled to commence her

suit.” Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 402

(5th Cir. 1998). The statute of limitations for personal injury

actions in Texas is two years. Tex. Civ. Prac. & Rem. Code §

16.003. Because plaintiff filed the complaint on January 15,

2004, well over two years after the 2001 accident, Krause argues

that all of the claims are time-barred except the breach of

express warranty claim. (Krause Mot. at 4.)

Plaintiff argues that the discovery rule applies in this

case to toll the statute. (Krause Opp’n at 3.) Consequently,

Krause must negate tolling to succeed on summary judgment. Under

the discovery rule, “the statute of limitations is tolled until

the plaintiff discovers, or through the exercise of reasonable

care and diligence should have discovered, the nature of her

injury.” Winters, 149 F.3d at 403. However, the discovery rule

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“is not activated unless the plaintiff’s injury is inherently

undiscoverable.” Siebert v. Gen. Motors Corp., 853 S.W.2d 773,

776 (Tex. App. 1993). In particular, “[b]ecause it addresses

only the discovery of the injury, the discovery rule is not

applied to toll the statute of limitations until the time that a

plaintiff discovers all the elements of his cause of action.” 

Id.

To negate the discovery rule, Krause cites the complaint and

plaintiff’s deposition testimony to prove that plaintiff

discovered his injury on November 26, 2001, the date of the

accident. (Krause Mot. at 4.) This is sufficient to shift the

burden to plaintiff to show that tolling is appropriate in the

circumstances.

Plaintiff fails to meet his burden. He does not even

attempt to raise an issue of fact regarding the statute of

limitations defense. Instead, he asserts that the discovery rule

applies because he did not discover that there was a design

defect in the ladder until well after the incident. (Krause

Opp’n at 4.) Plaintiff misapprehends the discovery rule. It is

the delayed discovery of the injury that triggers tolling in

Texas, not the delayed discovery of the culpability of the

manufacturer or the mechanism of injury. For this reason,

plaintiff’s cause of action accrued on November 26, 2001. 

It is undisputed that plaintiff filed the complaint more

than two years after the cause of action accrued. Therefore,

Krause’s motion for summary judgment is GRANTED on the following

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claims: (1) design/manufacturing defect; (2) failure to warn; (3)

negligence; (4) fraud by concealment; (5) fraud by

misrepresentation; and (6) violation of the Consumer Product

Safety Act (“CPSA”). 

However, summary judgment is not warranted on limitations

grounds for the breach of the implied warranty of merchantability

claim. Texas law provides a four year statute of limitations for

this type of claim. Garcia v. Texas Instruments, Inc., 610

S.W.2d 456, 465 (Tex. 1980). It is undisputed that plaintiff

filed the complaint less than four years after his cause of

action accrued. As a result, the breach of implied warranty

claim is not time-barred. 

B. Breach of Express and Implied Warranties

Krause asserts that plaintiff cannot succeed on the warranty

claims because he is not in privity of contract with Krause and

did not give notice to Krause. (Krause Mot. at 4.) 

1. Express Warranty Claim

Although neither party discusses whether California or Texas

law should govern the breach of express warranty claim, there is

no need to reach the second step of the choice of law analysis

because the laws of both states require the plaintiff to be in

privity of contract with the defendant in order to assert this

claim. Keith v. Stoelting, Inc., 915 F.2d 996, 999 (5th Cir.

1990); Lujan v. Tampo Manuf. Co., 825 S.W.2d 505, 511 (Tex. App.

1992); see also Note, Is Privity Still Required in a Breach of

Express Warranty Cause of Action for Personal Injury Damages?, 43

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 Plaintiff argues that he was in privity of contract with 6

Krause because he purchased a different Krause ladder prior to

the injury, even though the Krause ladder he purchased was not

involved in the accident. (Krause Opp’n at 4.) Plaintiff cites

no law to support this nonsensical contention. 

10

Baylor L. Rev. 551 (1991); All West Electronics, Inc. v. M-B-W,

Inc., 64 Cal.App.4th 717, 725 (1998) (citing Burr v. Sherwin

Williams Co., 42 Cal.2d 682, 695-96 (1954)). 

“Privity” is defined as a mutual or successive relationship

to the same rights of property. Black’s Law Dictionary (1990). 

Plaintiff was not in a “successive relationship” because he only

borrowed the ladder. As a result, he cannot maintain an action

for express breach of warranty under the laws of Texas or

California. Krause’s motion for summary judgment on this claim 6

is GRANTED.

2. Implied Warranty Claim

California requires privity of contract between plaintiff

and defendant to support a claim for breach of an implied

warranty. Windham at Carmel Mountain Ranch Assoc. v. Super. Ct.,

109 Cal.App.4th 1162, 1169 (2003). Texas has no such

requirement. Garcia, 610 S.W.2d at 465. Therefore, California

and Texas law conflict on this claim. 

The next step in the governmental interest test is to assess

whether each state has an interest in applying its law. Ledesma,

816 F.2d at 484. If only one state has an interest, than its law

governs. Id. If both states have an interest, then the law that

governs is that of the state whose interest would be most

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impaired if its law were not applied. Id.

California has an interest in having its law apply because

plaintiff is from California and the case is being tried in

California. Texas has an interest in having its law apply

because the events that gave rise to this litigation occurred

there. Therefore, the court finds that both states are

interested in having their law govern this claim. 

The final step in California’s choice of law analysis is

determining which state’s interest would be more impaired by

applying the other state’s law. The court finds that Texas’s

interest would be more impaired if California law applied than

California’s would be if Texas law applied because: (1) this

breach of warranty claim arises out of a contract that was

entered into in Texas between a Texas citizen and a company doing

business in Texas; and (2) applying California law would deprive

its own citizen of a claim against Krause because plaintiff lacks

privity. Because Krause is not a California corporation,

California will suffer no impairment by applying Texas law. 

However, Texas’s ability to define the extent of liability faced

by sellers of consumer products within its borders would be

impaired if California law applied. Because it appears that

applying Texas law will further the interests of both states, the

court will apply the law of Texas to this claim. 

As discussed above, under Texas law, privity of contract is

not a required element of a breach of the implied warranty of

merchantability claim. Therefore, the lack of privity does not

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bar plaintiff’s claim.

Krause argues that plaintiff’s implied warranty claim still

fails because he did not provide Krause with reasonable notice. 

(Krause Mot. at 9.) Section 2.607(c)(1) of the Texas Business and

Commerce Code provides “the buyer must within a reasonable time

after he discovers or should have discovered any breach notify

the seller of breach or be barred from any remedy[.]” The

purpose of this statute is “to give the seller an opportunity to

inspect the product to determine whether it was defective and to

allow the seller an opportunity to cure the breach.” Wilcox v.

Hillcrest Mem’l Park of Dallas, 696 S.W.2d 423, 424 (Tex. App.

1985). Therefore, if plaintiff failed to give Krause timely

notice, his claim cannot proceed.

Plaintiff asserts that he provided timely notice to Home

Depot, which constituted constructive notice to Krause because

Home Depot has a policy of “forwarding complaints it received to

Krause within a few days.” (Krause Opp’n at 6.) Plaintiff

contends that there is evidence that Krause received timely

notice because a Krause representative “came to look at the

ladder.” (Id.) Finally, at oral argument, plaintiff indicated

that Krause, Inc. no longer existed as an entity at the time of

the accident. Hence, there was no manufacturer to whom he could

give notice.

Whether Krause received timely notice of the breach is a

question of fact for the jury. U.S. Tire-Tech, Inc. v. Boeran,

110 S.W.3d 194, 200 (Tex. App. 2003). Plaintiff has provided

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evidence that plaintiff’s counsel notified Paul Junius, the owner

of Ladder Management Service, Inc. (“LMS”). (Dove Decl. ¶ 8.) 

Krause’s insurance carrier hired LMS to handle all claims against

Krause. (Junius Decl. ¶ 2.) Although plaintiff fails to state

when he notified LMS, Krause does not deny that LMS received

notice on or after December 5, 2003. (Junius Decl. ¶ 6.) A

reasonable jury could conclude that notice in December 2003 was

timely, especially since Krause was no longer a going concern at

the time of the injury. As a result, Krause’s motion for summary

judgment on this claim is DENIED.

IV.

For the reasons stated above, Home Depot’s motion is

GRANTED. Krause’s motion is GRANTED on the following claims: (1)

design/manufacturing defect; (2) failure to warn; (3) negligence;

(4) fraud by concealment; (5) fraud by misrepresentation; (6)

breach of express warranty; and (7) violation of the Consumer

Product Safety Act (“CPSA”). Krause’s motion is DENIED on the

breach of implied warranty claim. 

IT IS SO ORDERED.

Dated: April 11, 2006

/s/ David F. Levi 

DAVID F. LEVI

United States District Judge 

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