E-Alert Case Updates

Maryland District Court Dismissed Class Action Complaint Against Wardflex Manufacturer for Lack of Standing and Preclusion Under the Economic Loss Doctrine

Hasley v. Ward Mfg., LLC
2014 WL 3368050 (D. Md. July 8, 2014)
by Morgan N. Gough Summer Associate,
Semmes, Bowen & Semmes (www.semmes.com)

Available at http://www.mdd.uscourts.gov/Opinions/Opinions/
Final%20Mem.%20Op.%20MTD%20Hasley%20et%20al%20v%20Ward%20Manufacturing
%20Combined%20Final.pdf

In Hasley v. Ward Manufacturing, LLC, the United States District Court for the District of Maryland dismissed with prejudice a class action suit against the maker and installer of Wardflex, an allegedly dangerous piping found in residential and commercial structures. The Class Action Complaint (Complaint) asserted three counts against Defendant: strict liability, negligence for design defect, and negligence for failure to warn. Defendant filed a Motion to Dismiss for lack of standing and, in the alternative, failure to state a claim upon which relief could be granted. Judge Richard D. Bennett authored the opinion in favor of Defendant for the court.

Plaintiff alleged that the presence of Wardflex, installed in his home in 2008, was highly dangerous; more specifically, Plaintiff asserted that the thin walls are “susceptible to perforation by an electrical arc generated by a lightning strike, which can cause and has caused fires, damage to and destruction of residential structures, and creates a substantial and unreasonable risk of death or personal injury.” First developed as an alternative to black iron pipe, Wardflex is an ultrathin, flexible piping comprised of corrugated stainless steel tubing that is used to transport natural gas, commonly referred to as CSST. CSST is found in over five million homes, yet only 141 fires were claimed to have occurred due to problems associated with CSST. Plaintiff alleged that Wardflex was defective, and therefore must be removed and replaced; that Defendant knowingly placed the defective product in homes and failed to warn of the defect; and that Defendant failed to perform adequate safety tests on Wardflex.

Defendant’s primary claim was a Motion to Dismiss for lack of standing pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure (FRCP); in the alternative, Defendant sought dismissal under FRCP 12(b)(6) for failure to state a claim. In comparing these two (2) approaches to dismissing a case, the court explained that a challenge for lack of subject matter jurisdiction under FRCP 12(b)(1) may proceed as either a “facial challenge, asserting that the allegations in the complaint are insufficient to establish subject matter jurisdiction, or a factual challenge, asserting that the jurisdictional allegations of the complaint are not true.” Plaintiffs who assert facial challenges are afforded the same procedural safeguards as though they had brought a motion under FRCP 12(b)(6). When the challenge is factual, though, the court may look beyond the pleadings and may further decide disputes of fact regarding subject matter jurisdiction. Here, since Defendant’s 12(b)(1) motion argued that the Complaint was insufficient to establish the court’s jurisdiction, Defendant brought a facial challenge; therefore, the court examined whether the allegations in the Complaint, taken as true, could establish standing under FRCP 12(b)(6) and in accordance with the pleadings requirements jurisprudence in Ashcroft v. Iqbal and Atlantic Corp. v. Twombly. 556 U.S. 662 (2009); 550 U.S. 544 (2007).

Of the three (3) requisite elements of standing—injury-in-fact, causation, and redressability, Defendant primarily argued that Plaintiff’s Complaint lacked concrete and actual or imminent harm, thereby failing to establish an injury-in-fact. In order for Plaintiff’s injury to occur, lightning must strike near the Plaintiff’s property and cause a puncture in the tubing wall of the Wardflex, and then the puncture must ignite the natural gas in the tubing, which then must cause the surrounding materials to ignite, thus causing a fire. The court noted the fact that only 141 fires have ever been reported, none of which in Maryland, and agreed with Defendant that the threat of harm was not imminent and the harm was not cognizable. Thus, the court lacked standing to adjudicate the claim.

The court then addressed Defendant’s alternative claim that the court should dismiss Plaintiff’s Complaint based on Maryland’s economic loss rule. Generally, a plaintiff alleging economic loss is barred from bringing their claim under product liability or any other tort theory. As Plaintiff’s did not allege any damage to persons or other property, the allegations are barred by the economic loss rule. Plaintiffs unsuccessfully argued that their claim should survive based on the public safety exception to the economic loss rule. The two-part test for this exception looks to the nature of the threatened harm and the probability that said harm will occur. The two (2) factors taken together must present a clear and unreasonable risk of death or personal injury; a mere possibility of injury is not enough.

Plaintiff argued that their case was comparable to Council of Co-Owners Atlantis Condo., Inc. v. Whiting-Turner Contr. Co., a seminal case expounding this exception. The court classified Whiting-Turner as a case in which a substantial risk of death threatened the lives of many residents in a twenty-one story residential building that failed to adhere to fire codes. Conversely, the court noted that Wardflex had been approved by numerous codes and standards. Furthermore, the occurrence of the chain of unlikely events upon which a fire is predicated rendered the probability of damage extremely remote. In turn, Plaintiff’s failure to plead facts establishing a substantial risk of death precluded application of the public safety exception. In addition to lacking standing, the court dismissed the case with prejudice for failure to state a claim upon which relief could be granted.