Court Opinion

ID: 2779959
Source: CourtListenerOpinion
Date Created: 2015-02-18 18:00:32.90888+00
Date Added: 2024-06-11T10:56:01.138473
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ____________

                                       No. 14-1863
                                      ____________

                                WILLIAM HARBISON,
                individually and on behalf of all others similarly situated,
                                                          Appellant

                                             v.

                        LOUISIANA-PACIFIC CORPORATION
                                 ____________

                     On Appeal from the United States District Court
                        for the Western District of Pennsylvania
                             (W.D. Pa. No. 2-13-cv-00814)
                           (District Judge: Arthur J. Schwab)
                                      ____________

                    Submitted Pursuant to Third Circuit LAR 34.1(a)
                                   January 20, 2015

           Before: FISHER, JORDAN and GREENAWAY, Jr., Circuit Judges.

                                (Filed: February 18, 2015)
                                      ____________

                                        OPINION*
                                      ____________

       *
        This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
FISHER, Circuit Judge.

       William Harbison installed TrimBoard, a non-structural trim lumber, on his house

in 2003. The TrimBoard came with a ten-year warranty in which the manufacturer,

Louisiana-Pacific Corp., agreed to compensate the owner for repair and replacement up

to twice the original purchase price of the affected trim. In 2010, the TrimBoard failed.

Harbison sued Louisiana-Pacific, claiming that Louisiana-Pacific breached the warranty

and that the damages limitation was unconscionable. The District Court dismissed

Harbison’s unconscionability claim, denied him leave to amend his complaint, and

granted summary judgment to Louisiana-Pacific on the breach of warranty claim. We

will affirm.

                                              I.

       We write principally for the parties, who are familiar with the factual context and

legal history of this case. Therefore, we will set forth only those facts that are necessary

to our analysis.

       In 2003, Harbison hired contractors and subcontractors to install trim on his

garage. His contractor purchased TrimBoard, made by Louisiana-Pacific. The TrimBoard

came with the following warranty:

               Should the product fail within ten years of the date of installation,
               [the manufacturer] after investigation and verification, will replace
               the defective trim on the following basis: [the manufacturer] will
               compensate the owner for repair and replacement of the affected

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                trim no more than twice the original purchase price of the affected
                trim if failure occurs within ten years.1

In 2010, Harbison discovered that the TrimBoard had begun to rot, leading to water

damage to the TrimBoard and possibly other parts of his home.

       Harbison made a claim to Louisiana-Pacific under the warranty. In 2011, an

inspector for Louisiana-Pacific inspected the TrimBoard. Louisiana-Pacific offered

Harbison $2,780.08. Louisiana-Pacific calculated this offer by measuring the amount of

TrimBoard affected, increasing that amount by twenty percent to account for material

wasted during the installation, then applying the original purchase price and sales tax, for

a total price of $1,390.04 for the TrimBoard installed. Louisiana-Pacific then doubled this

amount to reach its offer under the warranty. Harbison declined the offer.

       In June 2013, Harbison filed a purported class-action complaint against Louisiana-

Pacific. In December 2013, he filed an amended purported class-action complaint for

breach of warranty and declaratory judgment. Harbison claimed that the damages

limitation in the ten-year warranty was unconscionable and should be stricken and that

once the limitation was stricken, Louisiana-Pacific breached the express warranty.

       Louisiana-Pacific moved to dismiss the amended complaint. The District Court

granted the motion in part and denied it in part. The District Court found that Harbison

could claim the benefit of the express warranty under the Pennsylvania Commercial Code

but that Harbison could not claim that the damages limitation was unconscionable.

       1
           J.A. 115.

                                              3
Accordingly, the District Court denied Harbison’s claims to the extent he requested the

court strike the allegedly unconscionable damages limitation from the warranty. Harbison

moved for leave to file a second amended complaint to reiterate his claim that the

damages limitation was unconscionable. The District Court denied the motion because

the amendments would be futile. Louisiana-Pacific then moved for summary judgment on

the basis that it had complied with the express warranty and its damages limitation. The

District Court granted Louisiana-Pacific’s motion and terminated the case. Harbison filed

a timely appeal.

                                            II.

      The District Court had jurisdiction over this action under 28 U.S.C. § 1332, and

we have appellate jurisdiction under 28 U.S.C. § 1291. We exercise plenary review over

the District Court’s orders on the motion to dismiss and on the motion for summary

judgment.2 We may affirm on any basis supported by the record.3 We review a denial of a

motion for leave to amend for abuse of discretion.4

                                           III.

                                            A.

      We begin with the District Court’s decision to dismiss Harbison’s

unconscionability claim. A complaint states a claim upon which relief can be granted,

      2
        Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 265 (3d Cir. 2014); Rea v.
Federated Investors, 627 F.3d 937, 940 (3d Cir. 2010).
      3
        Blunt, 767 F.3d at 265.
      4
        Hudson United Bank v. LiTenda Mortg. Corp., 142 F.3d 151, 160 (3d Cir. 1998).

                                            4
and survives a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), when it

contains a short, plain statement of facts that allows the court to draw a reasonable

inference that the defendant is liable for the misconduct alleged.5

       Under Pennsylvania law, a court may decline to enforce a contract clause “[i]f the

court as a matter of law finds” that the clause was “unconscionable at the time it was

made.”6 To prove a contract clause was unconscionable, a plaintiff must show that the

clause was both procedurally and substantively unconscionable.7 “In examining these two

prongs, the Pennsylvania Supreme Court has indicated that it might be appropriate to use

a ‘sliding-scale approach’ so that ‘where the procedural unconscionability is very high, a

lesser degree of substantive unconscionability may be required’ and presumably, vice-

versa.”8

       Procedural unconscionability exists “where there was a lack of meaningful choice

in the acceptance of the challenged provision.”9 Contracts of adhesion, such as the

warranty included with the TrimBoard here, are generally considered to satisfy the

       5
         Thompson v. Real Estate Mortg. Network, 748 F.3d 142, 147 (3d Cir. 2014).
       6
         13 Pa. Cons. Stat. § 2302(a). Contractual limitations on damages—such as the
one at issue here—are permissible under Pennsylvania law, but they must not be
unconscionable. Id. § 2719 & cmt. 1.
       7
         Quilloin v. Tenet HealthSystem Phila., Inc., 673 F.3d 221, 230 (3d Cir. 2012)
(applying Pennsylvania law).
       8
         Id. (quoting Salley v. Option One Mortg. Corp., 925 A.2d 115, 125 n.12 (Pa.
2007)).
       9
         Salley, 925 A.2d at 119.

                                             5
procedural unconscionability requirement.10 However, the degree of procedural

unconscionability is low because the warranty was provided to Harbison with the

TrimBoard, and the warranty at issue is featured in the first paragraph and not in fine

print.11

       Substantive unconscionability, on the other hand, involves “contractual terms that

are unreasonably or grossly favorable to one side and to which the disfavored party does

not assent.”12 Louisiana-Pacific chose to offer a ten-year warranty to consumers. It did

not have to offer this benefit. The damages limitation contained in the warranty was the

condition on which it was willing to extend the benefit of the warranty.

       If Louisiana-Pacific had not offered the ten-year warranty, it does not appear that

Harbison would have any remedy under the contract for the failure of the TrimBoard

seven years after it was installed.13 But because the company did offer the ten-year

warranty as written, Harbison has the opportunity to recover twice the value of the

TrimBoard that was affected. So the warranty included with the TrimBoard is actually

somewhat favorable to Harbison because, even if it does not provide him with all the

       10
           McNulty v. H&R Block, Inc., 843 A.2d 1267, 1273 & n.6 (Pa. 2004).
       11
           J.A. 96; J.A. 115.
        12
           Harris v. Green Tree Fin. Corp., 183 F.3d 173, 181 (3d Cir. 1999).
        13
           Harbison would not be able to claim the benefit of the implied warranties of
merchantability and fitness for a particular purpose because the four-year statute of
limitations for breach of warranty under the Pennsylvania Commercial Code began to run
on the date of tender. 13 Pa. Cons. Stat. § 2725; see also Rufo v. Bastian-Blessing Co.,
207 A.2d 823, 825-26 (Pa. 1965) (the statute of limitations for breaches of the implied
warranties began to run on the date of tender of the goods even though the defect was not
discovered until one year after tender).

                                             6
relief he wants, it provides him with more relief than nothing. Therefore, because the

warranty was prominently featured within the contract and because the warranty as a

whole provides Harbison with a benefit he would not otherwise have, the damages

limitation was not unconscionable.

       Harbison relies on two cases to argue that we should strike the damages limitation

in the warranty as unconscionable while keeping the ten-year warranty itself, but these

cases are distinguishable. In Antz v. GAF Materials Corp., the Pennsylvania Superior

Court struck a damages limitation as unconscionable from an express thirty-year

warranty for house shingles where the warranty was not provided to the homeowner and

the damages limitation barred recovering labor costs of repair for defective shingles.14

And in Moscatiello v. Pittsburgh Contractors Equipment Co., the Superior Court struck a

damages limitation as unconscionable from a contract for the sale of a paving machine

where the limitation was printed in “fine print on the reverse side of the contract,” unseen

by the buyer, and the limitation barred recovering consequential damages for a breach of

the contract and warranties.15

       Although the Superior Court found both damages limitations unconscionable, both

cases concerned significant levels of procedural unconscionability. In Moscatiello, the

limitation was hidden in fine print, and in Antz, the warranty was not even given to the

homeowner, so he had no way of knowing it existed. Thus, the fact that the damages

       14
            719 A.2d 758, 761-63 (Pa. Super. Ct. 1998).
       15
            595 A.2d 1190, 1195-97 (Pa. Super. Ct. 1991).

                                             7
limitations were hidden from the buyers justified severing the damages limitations from

the warranties and declaring them unconscionable. In contrast, here the procedural

unconscionability is low. Harbison admits that he was given the warranty, and the

damages limitation for the ten-year warranty was prominently placed in the first

paragraph of the one-page warranty sheet. Therefore, this particular damages limitation

was not unconscionable.

       Finally, Harbison says that under 13 Pa. Cons. Stat. § 2302(b), he should have

been afforded an opportunity to provide evidence in support of his claim of

unconscionability. However, that provision only requires a “reasonable opportunity” to

present evidence “to aid the court.”16 Here, the District Court assumed Harbison’s

allegations about the sale and the warranty to be true. And based on those allegations, the

District Court concluded that the provision was not unconscionable. This satisfies the

requirements of § 2302(b), and no further evidence is needed.

       For these reasons, the District Court’s decision to dismiss Harbison’s

unconscionability claim will be affirmed.

                                            B.

       Having determined that the damages limitation was not unconscionable, we find

that the District Court did not abuse its discretion in denying Harbison leave to amend his

complaint. The amendments would have been futile.

       16
            13 Pa. Cons. Stat. § 2302(b).

                                             8
       Moreover, because the limitation was not unconscionable, the District Court

properly granted summary judgment to Louisiana-Pacific on the remaining claims. There

was no genuine dispute that Louisiana-Pacific accurately measured the TrimBoard used

on Harbison’s garage and accurately calculated its value. Additionally, there was no

genuine dispute that twice that value, which Louisiana-Pacific offered, was Louisiana-

Pacific’s maximum liability under the warranty, including the damages limitation. So

there was no genuine dispute as to a material fact, and Louisiana-Pacific was entitled to

judgment as a matter of law.17

                                            IV.

       For the reasons set forth above, we will affirm the District Court’s judgment.

       17
            See Fed. R. Civ. P. 56(a).

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