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Benson Tower Condominium Owners Association v. Victaulic Co.

United States District Court, D. Oregon

May 27, 2014

BENSON TOWER CONDOMINIUM OWNERS ASSOCIATION, an Oregon nonprofit corporation, Plaintiff,
v.
VICTAULIC COMPANY, a foreign corporation, Defendant

Page 1127

For Plaintiff: Michelle K. McClure and Stuart K. Cohen, LANDYE BENNETT BLUMSTEIN, LLP, Portland, OR; Jennifer L. Snodgrass and Richard N. Sieving, THE SIEVING LAW FIRM, P.C., Sacramento, CA.

For Defendant: Anne Cohen and Sharlei C. Hsu, SMITH FREED & EBERHARD, Portland, OR.

OPINION

Page 1128

OPINION AND ORDER

Michael H. Simon, United States District Judge.

Plaintiff, Benson Tower Condominium Owners Association (" Plaintiff" or " Association" ), brings this action against Defendant, Victaulic Company (" Defendant" or " Victaulic" ), as the manufacturer of allegedly defective plumbing products installed in the Benson Tower Condominium. Plaintiff's First Amended Complaint (" FAC" ) (Dkt. 52) alleges the following six claims: (1) strict products liability; (2) negligence; (3) breach of express warranty; (4) violation of Oregon's Unlawful Trade Practices Act (" UTPA" ); (5) fraud; and (6) negligent misrepresentation. Before the Court is Defendant's motion to dismiss Plaintiff's fraud, negligent misrepresentation,

Page 1129

and UTPA claims and also to strike Plaintiff's request for punitive damages under its fraud claim. (Dkt. 58.)

STANDARDS

A motion to dismiss for failure to state a claim may be granted only when there is no cognizable legal theory to support the claim or when the complaint lacks sufficient factual allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint's factual allegations, the court must accept as true all well-pleaded material facts alleged in the complaint and construe them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012); Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). To be entitled to a presumption of truth, allegations in a complaint " may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). All reasonable inferences from the factual allegations must be drawn in favor of the plaintiff. Newcal Indus. v. Ikon Office Solution, 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). The court need not, however, credit the plaintiff's legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678-79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

A complaint must contain sufficient factual allegations to " plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation." Starr, 652 F.3d at 1216. " A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 663 (citing Bell A. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

BACKGROUND

Plaintiff is a condominium association organized under the Oregon Condominium Act, Or. Rev. Stat. § 100.005, et seq., and is the governing body of the Benson Tower Condominium (" Benson Tower" ). FAC ¶ ¶ 6-7. Benson Tower was completed in approximately 2008 and includes 143 separate living units. FAC ¶ 6. Each individual owner of a separate living unit in Benson Tower owns the interior of his or her respective unit, and each is a member of Plaintiff. FAC ¶ 8. All of the individual owners (collectively, the " Owners" ) own in common the general common elements of Benson Tower (the " General Common Elements" ). FAC ¶ 7. The General Common Elements include, but are not limited to, the pipes, ducts, flues, conduits, wires, and other utility installations to their respective outlets in each individual living unit. FAC ¶ 7. Except for certain items not relevant here, Plaintiff is responsible for the maintenance, repair, and replacement of the General Common Elements in Benson Tower. FAC ¶ 7. Although Plaintiff arranges and pays for the cost of that work, Plaintiff then assesses and apportions those costs to the individual unit owners. FAC ¶ 7.

Defendant, Victaulic, is a New Jersey corporation that makes, markets, and supplies valves, pipe coupling, flanges, and gaskets for piping systems. FAC ¶ 9. Defendant distributes these components to suppliers and installers, including those doing business in Oregon. FAC ¶ 9. Certain products made by Defendant, including, but not limited to, butterfly valves,

Page 1130

pipe coupling, flanges, and gaskets contain ethylene propylene diene monomer (" EPDM" ) rubber (the " Victaulic Products" ). FAC ¶ 9.

The Victaulic Products were installed in the potable water piping system at Benson Tower. FAC ¶ 9. Plaintiff alleges that " [t]he potable water piping system installed throughout [Benson Tower] includes Victaulic Products that have prematurely deteriorated and failed or otherwise failed to properly perform." FAC ¶ 37. This deterioration " has resulted in damage to the Victaulic Products and in pipe-joint seal failings, which have caused property damage to components of [Benson Tower's] General Common Elements (other than the Victaulic Products themselves) to the potable water itself, and the interiors of the units." FAC ¶ 37.

Although not alleged by Plaintiff in its FAC, Defendant explains in its memorandum in support of its motion to dismiss (Dkt. 59) that Benson Tower was constructed by ITC Construction Group (" ITC" or the " General Contractor" ) as general contractor on behalf of the developer, Benson Tower, LLC (the " Developer" ). Presumably, each individual owner purchased his or her respective unit either from the Developer or from a prior unit owner whose ownership interest ultimately traces back to the Developer. Defendant also explains that ITC, as the General Contractor, contracted with JRT Mechanical, Inc. (" JRT" ) to install the plumbing systems in Benson Tower. Defendant further explains that JRT purchased the Victaulic components, including the Victaulic Products alleged by Plaintiff, from F& S Distributors, Inc., a third-party distributor that purchased the Victaulic Products from Victaulic. As discussed more fully below, if Plaintiff agrees with these assertions by Defendant, they (or similar allegations) need to be expressly alleged, for at least some of Plaintiff's claims, including fraud.

Plaintiff alleges that " [s]ince the early 1990s, Victaulic was aware that its Victaulic Products were susceptible to failure when exposed to chloramines or other approved and recommended applications and that the failure of the Victaulic Products caused damage to the systems and buildings into which they were installed." FAC ¶ 78. Specifically, " [b]efore construction of [Benson Tower], Victaulic knew that the Victaulic Products would fail when exposed to temperatures far less than 230° Fahrenheit, even though Victaulic represented and approved that the Victaulic Products were acceptable and recommended for use up to 230° F. Vicatulic failed to disclose this fact to its consumers, including Plaintiff." FAC ¶ 79. Further, " Victaulic knew that the Victaulic Products would fail when exposed to chloramines, yet Victaulic recommended and approved the use of the Victaulic Products in systems where chloramines were used as a disinfecting agent. Victaulic failed to disclose this fact to its consumers, including Plaintiff." FAC ¶ 80.

Plaintiff also alleges that the Victaulic Products installed in Benson Tower's piping systems contain EPDM designated by Victaulic as " Grade E" and that Victaulic expressly represented that Grade E gaskets are recommended for both cold and hot potable water service up to 230° Fahrenheit. FAC ¶ 12. Plaintiff further alleges that beginning in the early 2000s, Victaulic became aware that the Grade E EPDM used in the Victaulic Products was defective and exhibited severe degradation, deterioration, and disintegration. FAC ¶ ¶ 19-20. By 2008, Victaulic was aware that its Grade E EPDM degraded when exposed to chloramines. FAC ¶ 21. In addition, before the construction of Benson Tower, Victaulic " knew of claims of black particles and sludge in potable

Page 1131

water as a result of its defective Victaulic Products." FAC ΒΆ 26. In sum, Plaintiff alleges that, before Benson Tower was constructed, Victaulic was aware of significant defects in the Victaulic Products, misrepresented the qualities and capabilities of those products, and failed to disclose material information about those products and their ...


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