Duncan Place Owners Association v. Danze, Inc.

          Argued April 4, 2018

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 15 C 01662 - Edmond E. Chang, Judge.

          Before Wood, Chief Judge, and Bauer and Sykes, Circuit Judges.

          SYKES, CIRCUIT JUDGE.

         In 2009 faucets manufactured by Illinois-based Danze, Inc., were installed in all 63 units of a new condominium building in Seattle, Washington. In the years that followed, some of the faucets failed, causing damage to the building and replacement costs. The condominium association, Duncan Place Owners Association, filed a proposed class-action suit against Danze raising multiple claims for relief, including breach of express warranty, unjust enrichment, negligence, and strict product liability. The district judge dismissed all but one of the claims and later entered summary judgment on the sole remaining claim.

         Duncan Place appeals, seeking reinstatement of the claims that were dismissed on the pleadings. We affirm, with one narrow exception. The Washington Product Liability Act ("WPLA" or "the Act") subsumes all common-law product-liability claims, so we construe Duncan Place's negligence and strict-liability claims as one cause of action under the Act. In a suit for damages caused by a defective product, Washington's "independent duty doctrine" (formerly known as the "economic loss doctrine") generally bars recovery in tort for direct and consequential economic losses stemming from the product's failure-that is, damages associated with the "injury" to the product itself. But the doctrine does not bar recovery for damage to other property caused by the defective product. See Eastwood v. Horse Harbor Found., Inc., 241 P.3d 1256, 1265 (Wash. 2010) (en banc). Duncan Place alleges in general terms that the defective faucets caused damage to other condominium property. To that limited extent, the WPLA claim is not blocked by the independent-duty doctrine and should have been allowed to proceed.

         Duncan Place's arguments for reinstatement of its warranty and unjust-enrichment claims are new on appeal. Arguments not raised in the district court are waived, so we affirm the dismissal of the warranty and unjust-enrichment claims.

         I. Background

         We take the following factual allegations from Duncan Place's second amended complaint, accepting them as true for present purposes. When the Duncan Place condominium complex was built in 2009, the developers installed Danze faucets in the bathrooms of each of the 63 units. The water hoses in Danze's faucets are made from an inferior low nickel stainless-steel alloy that makes them vulnerable to corrosion and cracking when put to normal use. As a result several of the faucets failed causing "extensive property damage" and replacement costs.

         Danze's "limited lifetime warranty" guarantees the quality of its faucets and promises to replace any parts that prove defective. Nonetheless, Danze refused to repair or replace the faucets.

         The Duncan Place Owners Association filed this lawsuit in federal court in the Northern District of Illinois on behalf of itself, the condominium's 63 unit owners, and a proposed nationwide class of original consumer end-users of Danze faucets with a steel-braided supply hose. The suit asserted claims under Washington law, including breach of express warranty, unjust enrichment, negligence, and strict product liability, as well as other state-law claims that have since dropped out of the case.

         Danze moved to dismiss on the ground that Duncan Place lacked associational standing to assert the rights of the unit owners. The judge agreed and dismissed the claims brought on their behalf. Duncan Place then amended its complaint to reflect that it had obtained assignments from 41 of the 63 unit owners, eliminating the need for associational standing to support its assertion of their rights.

         Danze again moved to dismiss. The judge granted the motion for the most part. He held that Washington's independent-duty doctrine barred the claims of negligence and strict product liability and dismissed them. The judge also dismissed the unjust-enrichment claim because it was premised on fraud but did not satisfy the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure.

         In the same order, the judge explained that to prevail on a claim for breach of an express warranty under Washington law, a plaintiff must show that he was aware of the warranty. Allegations of that sort did not appear in the amended complaint, so the judge gave Duncan Place an opportunity to investigate whether it had a good-faith basis to allege that any of the 41 unit owners knew of the warranty. After several months of investigation, Duncan Place was unable to make those allegations in ...