Simantob v. Mullican Flooring, L.P. ( 2013 )

FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
June 14, 2013
TENTH CIRCUIT
Elisabeth A. Shumaker
Clerk of Court
JACK SIMANTOB,
Plaintiff - Appellant,
v. No. 12-4090
(D.C. NO. 2:09-CV-00379-CW)
MULLICAN FLOORING, L.P.; DERR (D. Utah)
FLOORING COMPANY,
Defendants - Appellees.
ORDER AND JUDGMENT*
Before LUCERO, MURPHY, and MATHESON, Circuit Judges.
Jack Simantob, acting as trustee, purchased flooring from J&S Designer Flooring
(“J&S”) on behalf of Paradise Trust for installation at a rug business. Mullican Flooring,
L.P., supplied the flooring to J&S, and Derr Flooring Company distributed it. The
flooring delaminated after installation.
Mr. Simantob did not sue the seller, J&S. He instead sued Mullican Flooring and
Derr Flooring (collectively “Defendants”) for breach of implied warranties, breach of
* This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. It may be cited, however, for its
persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
contract, products liability, negligence, and violations of the Utah Consumer Sales
Practices Act (“UCSPA”) and the Uniform Commercial Code (“UCC”). The district
court dismissed Mr. Simantob’s contract claim for failure to state a claim and granted
summary judgment to the Defendants on all other claims. The court invited Mr.
Simantob to move for leave to file a second amended complaint but later denied his
motion to amend as untimely and futile.
Mr. Simantob appeals the district court’s dismissal of his tort claims on summary
judgment and its denial of his motion to amend. The Defendants move to dismiss this
appeal, arguing that we lack jurisdiction because Mr. Simantob prepared, signed, and
filed his notice of appeal pro se without the district court’s permission, in violation of D.
Utah Civ. R. 83-1.3(d). We deny the Defendants’ motion because the notice of appeal
complies with Fed. R. App. P. 3 and 4.
Exercising jurisdiction under 28 U.S.C. § 1291, we reverse in part, affirm in part,
and remand the case to the district court for further proceedings consistent with this
opinion.
I. BACKGROUND
A. Factual History
Mr. Simantob is trustee of the Paradise Trust, which owns the Simantob Gallery, a
Utah business that sells and cleans rugs. His nieces and nephews are the trust
beneficiaries. Paradise Trust is the lessee for the building that houses Simantob Gallery.
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On June 23, 2008, Mr. Simantob purchased 8,764 square feet of RidgeCrest
flooring from J&S, a New Jersey business owned by a relative of Mr. Simantob.
Mullican Flooring, a Delaware partnership, supplies its RidgeCrest flooring to J&S. Derr
Flooring, a Pennsylvania business, distributes it. Paradise Trust purchased the flooring
with a $29,665 check, which Mr. Simantob signed as the trustee.
In December 2008, the flooring was delivered to the Simantob Gallery. Mr.
Simantob also purchased subflooring from Lone Wolfe Hardwood Flooring, Inc., a Utah
business, and hired Lone Wolfe to install the flooring and subflooring. During
installation, some of the flooring began to delaminate. Upon inspection, Mr. Simantob
discovered installation instructions inside the flooring packaging that the installers appear
to have overlooked.
Mr. Simantob made a formal claim about the delamination to Mullican Flooring.
Mullican determined that site conditions caused the delamination and denied the claim.
This litigation ensued.
B. Procedural History
On March 16, 2009, Mr. Simantob filed suit against Mullican Flooring in Utah
state court, alleging breach of implied warranties, breach of contract, products liability,
and negligence. He sought damages for his lost purchase price, $29,665; costs of
shipping, installation, and removal; damage to the subflooring; and loss of business. He
did not seek any personal injury or property damages other than the damage to his
subflooring.
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Mullican timely removed the case to the United States District Court for the
District of Utah based on diversity jurisdiction. On January 19, 2010, Mr. Simantob filed
his first amended complaint, adding Derr Flooring as a defendant and adding claims
under the UCSPA and the UCC.1 He never included J&S as a defendant.
On February 3, 2010, the Defendants moved under Fed. R. Civ. P. 12(c) to dismiss
the breach of contract claim. The district court granted the motion because the
Defendants were not parties to a contract with Mr. Simantob.
On January 31, 2011, the Defendants moved for summary judgment on the
remaining claims in the first amended complaint: breach of implied warranty, products
liability, negligence, UCSPA violations, UCC violations, and all related punitive
damages. The district court granted summary judgment on all claims. At the summary
judgment hearing, the district court told Mr. Simantob that he could move for leave to file
a second amended complaint.
On August 23, 2011, Mr. Simantob filed a motion for leave to amend. He sought
to allege that the Defendants had violated the UCSPA by providing false information
about the origin of their products. He also sought to add Paradise Trust as a plaintiff.
The district court denied the motion, finding that the change in argument was untimely
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Mr. Simantob also added a separate claim for punitive exemplary damages
related to these claims. The district court determined there is no such separate claim but
that punitive damages might be recoverable if Mr. Simantob were successful on one of
his tort claims. The court therefore allowed Mr. Simantob to proceed with his requests for
punitive damages only on his products liability and negligence claims.
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and the change in parties was futile. Final judgment was entered on May 2, 2012. Mr.
Simantob filed a timely notice of appeal.
II. DISCUSSION
Mr. Simantob challenges the district court’s grant of summary judgment to the
Defendants on the products liability, negligence, and UCSPA claims and the court’s
denial of his motion to amend the parties. He does not challenge the district court’s
dismissal of his breach of contract, breach of implied warranties, or UCC claims.
A. Summary Judgment
“We review the district court’s grant of summary judgment de novo, applying the
same standards that the district court should have applied.” Cohen-Esrey Real Estate
Servs., Inc. v. Twin City Fire Ins. Co., 636 F.3d 1300, 1302 (10th Cir. 2011) (quotations
omitted). Summary judgment shall be granted “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a). Because this is a diversity jurisdiction case, we apply the
substantive law of Utah and federal procedural law, including federal summary judgment
rules. Brown v. Sears, Roebuck & Co., 328 F.3d 1274, 1278 (10th Cir. 2003); see also
Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
Mr. Simantob challenges the summary judgment against him on two fronts. First,
he argues that his products liability and negligence claims should survive summary
judgment because the Defendants owed an independent duty of care to him and because
the flooring caused damage to the subflooring at Simantob Gallery. We disagree with his
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independent-duty argument, but we agree with his subflooring argument. Second, he
argues that the district court improperly failed to consider his false-origin argument in
support of his UCSPA claim. We disagree.
1. Utah’s economic loss rule and Mr. Simantob’s products liability and negligence
claims
In his first amended complaint, Mr. Simantob claimed that he should recover
under a products liability theory because the Defendants “designed, engineered,
marketed, supplied, distributed, and/or sold the wood flooring” that he purchased, and
because the flooring was “defective” and “unreasonably dangerous.” Aplt. Appx. at 59.
He also argued that he should be able to recover for the Defendants’ negligence in
manufacturing and/or supplying the defective flooring. Id. at 60-61. The district court
said Utah’s economic loss rule barred these claims.
Utah’s economic loss rule provides that “an action for defective design or
construction is limited to breach of the contract, whether written or otherwise, including
both express and implied warranties” unless there is “damage to other property or
physical personal injury . . . caused by the defective design or construction.” Utah Code
Ann. § 78B-4-513.
The economic loss rule requires that a contract claim provide the remedy for an
“economic loss.” See SME Indus., Inc. v. Thompson, Ventulett, Stainback & Assocs.,
Inc., 28 P.3d 669, 681 (Utah 2001). Economic losses include “costs of repair and
replacement of the defective product, or consequent loss of profits . . . as well as the
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diminution in the value of the product because it is inferior in quality and does not work
for the general purposes for which it was manufactured and sold.” Am. Towers Owners
Ass’n, Inc. v. CCI Mech., Inc., 930 P.2d 1182, 1189 (Utah 1996) (quotations omitted),
abrogated on other grounds by Davencourt at Pilgrims Landing Homeowners Ass’n v.
Davencourt at Pilgrims Landing, LC, 221 P.3d 234 (Utah 2009). In short, economic
losses are those that arise from breach of contract. SME, 28 P.3d at 681. Accordingly,
these losses can be recovered under a contract claim but generally not an unintentional
tort claim. See Sunridge Dev. Corp. v. RB & G Eng’g, Inc., 230 P.3d 1000, 1006 (Utah
2010).
In this way, the economic loss rule creates a “fundamental boundary between
contract law, which protects expectancy interests created through agreement between the
parties, and tort law, which protects individuals and their property from physical harm by
imposing a duty of reasonable care.” Id. (quotations omitted). The rule therefore
precludes unintentional tort recovery for economic loss from both parties to a contract
and from entities that were not direct parties to a contract, such as intermediaries and
manufacturers, “to prevent the imposition of economic expectations on non-contracting
parties.” Fennell v. Green, 77 P.3d 339, 344 (Utah Ct. App. 2003) (quotations omitted),
abrogated on other grounds by Davencourt, 221 P.3d at 249.
The economic loss rule manifests itself most clearly in the area of products
liability, from which it originates: parties cannot recover for the cost of defective goods
using tort claims because contract law covers such claims. Hermansen v. Tasulis, 48
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P.3d 235, 239 (Utah 2002). If plaintiffs sue in tort and “claim . . . personal injury or
damage to other property”—that is, property other than the property bought and sold
under the contract—then no economic loss is claimed and the case may proceed under
tort law. Am. Towers, 930 P.2d at 1189. As discussed further below, “other property”
includes personal property that is not an “integrated” element of the defective product.
Davencourt, 221 P.3d at 243-44.
The economic loss rule includes one exception: economic losses may be
recovered for unintentional tort claims that are “based on a recognized independent duty
of care.” Hermansen, 48 P.3d at 240. The independent duty of care must be separate
from any “contractual obligations between the parties.” Id. This independent duty
should not be confused with the reasonable duty of care underlying tort claims generally.
“[S]pecial relationships”—such as attorney-client, physician-patient, and insurer-insured
relationships—can “automatically trigger an independent duty of care that supports a tort
action” for economic loss. Town of Alma v. Azco Const., Inc., 10 P.3d 1256, 1263 (Colo.
2000); see also Hermansen, 48 P.3d at 240 (adopting the Colorado Supreme Court’s
interpretation of the economic loss rule). As explained below, the independent duty of
care exception to the economic loss rule does not apply to the Defendants in this case.
Under the economic loss rule, Mr. Simantob faces a difficult challenge. He
primarily seeks to recover economic losses: damages for his lost purchase price,
$29,665; costs of shipping, installation, and removal; and loss of business. Because he
did not sue the seller of the flooring, J&S, and the Defendants were not parties to the
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contract, he cannot recover those economic losses because he has no contract claim. He
therefore can recover his economic losses from the Defendants if he can show that they
had an independent duty to him. His only other hope for any recovery would be for non-
economic damages if the flooring caused him personal injury or harmed other property.
The only non-economic damages Mr. Simantob claims are for the cost of his subflooring,
which was allegedly damaged by the installation and removal of the flooring.
a. Independent duty exception
Mr. Simantob argues that the independent duty exception to the economic loss rule
should apply based on the Utah Products Liability Act and the Second and Third
Restatements of Torts. These provisions establish strict products liability for defective
products, regardless of whether the user or consumer entered a contract with the seller.
Utah Code Ann. § 78b-6-701 to -707; Restatement (Third) of Torts: Products Liability
§§ 1, 14 (1998); Restatement (Second) of Torts § 402A (1965).
Products liability law generally does not create an independent duty of care.
Moreover, these provisions do not provide recovery for economic losses. They establish
the basis for unintentional tort recovery of non-economic losses and require that the
plaintiff show either personal injury or damage to “other property.” C.A. Johnson
Trenching, L.C. v. Vermeer Mfg. Co., No. 20030714-CA, 2005 WL 487881, at *1 (Utah
Ct. App. 2005) (unpublished) (“Mere damage to the product itself is insufficient to
support a products liability claim.”); see also E. River S.S. Corp. v. Transamerica
Delaval, Inc., 476 U.S. 858, 867-68 (1986) (explaining that there is a “distinction
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between warranty and strict products liability” so that recovery under strict products
liability is not available when a “product damages itself” or fails “to function properly”
(quotations omitted)). In fact, the economic loss rule originated as a way of “limiting
damages in products liability cases where there is no physical injury” or damage to “other
property” and where there are only “economic losses.” Hermansen, 48 P.3d at 239.
* * *
In sum, Mr. Simantob cannot recover economic damages for breach of contract
because he has no contract claim against the Defendants. Furthermore, the strict products
liability provisions that he cites do not create an exception based on an independent duty
of care that would allow Mr. Simantob to recover for the cost of the product that was sold
to him; its shipping, installation, or removal; or his subsequent loss of business. Those
provisions allow recovery only for damage to his person or “other property.” Mr.
Simantob argues there was, apart from economic loss, damage to his subflooring. To
evaluate this argument, we must understand what Utah law considers to be “other
property.”
b. Damage to “other property”
In support of his tort claims for damages, Mr. Simantob argues that the defective
flooring caused damage to the subflooring that was installed simultaneously. At the
summary judgment hearing, he contended that this should qualify as damage to “other
property,” which falls outside the economic loss rule. Defendants argued that the
subflooring was not “other property” because it was “an integral part of the [flooring]
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system.” Aplee. Suppl. Appx., Vol. III at 527. Any damage to it, they contended, was
therefore economic loss, which, as we have seen, Mr. Simantob cannot recover because
he has no contract claim and cannot rely on the independent duty exception to allow his
tort claim for economic loss.
The Defendants pointed to cases from the Utah Supreme Court, which held
“construction components integrated into a finished product do not constitute ‘other
property.’” Davencourt, 221 P.3d at 243 (capitalization omitted); see also Am. Towers,
930 P.2d at 1191. They maintained that, because Mr. Simantob installed the RidgeCrest
flooring along with the subflooring as part of a larger construction project, the
subflooring is not “other property.” The Defendants also cited Foremost Farms USA Co-
op v. Performance Process, Inc., 726 N.W.2d 289 (Wis. Ct. App. 2006). In that case, the
Wisconsin Court of Appeals said property that “becomes integrated into a completed
product or system [along with the defective property at issue] . . . ceases to be ‘other
property’ for purposes of the economic loss doctrine.” Id. at 736.
Mr. Simantob argued that, unlike the Wisconsin test, the Utah test requires that the
property be part of the same contract to be considered “integrated.” Aplee. Suppl. Appx.,
Vol. III at 528-29. Because Mr. Simantob purchased the RidgeCrest flooring and the
subflooring from different providers, he argued, the two pieces of property were not part
of the same contract and the subflooring should therefore be “other property.” Id. at 528-
29. The district court rejected this argument, saying “[t]he cases don’t talk about
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integrated into the contract. They talk about it being an integrated product.” Id. at 529.
We disagree.
In a case decided after the summary judgment hearing in this case, the Utah
Supreme Court defined “other property” as “property that is outside the scope of a
contract and unaffected by the contract bargain.” Reighard v. Yates, 285 P.3d 1168, 1177
(Utah 2012). It explained that “when property falls outside of the scope of a contract, the
economic loss rule will not apply and relief may be available in tort.” Id. The Utah cases
cited by the Defendants specifically state that property that is “an integrated unit under
one general contract” will not qualify as “other property.” Davencourt, 221 P.3d at 244
(emphasis added) (quoting Am. Towers, 930 P.2d at 1191). Foremost Farms, the
Wisconsin case, is not controlling authority and would expand the Utah Supreme Court’s
definition of “integrated products.”
In this case, the subflooring was installed with the flooring after each was sold
separately to Mr. Simantob by two independent sellers under two separate contracts. The
subflooring therefore “falls outside of the scope” of his contract for the flooring
manufactured by the Defendants. See Reighard, 285 P.3d at 1177. Under Utah law, he
may therefore bring a tort claim against the Defendants to recover for the damage to his
subflooring.
At summary judgment, the Defendants, as the movants, had the burden of making
a prima facie case that there was “no genuine issue of material fact.” Adler v. Wal-Mart
Stores, Inc., 144 F.3d 664, 670-71 (10th Cir. 1998) (citing Celotex Corp. v. Catrett, 477
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U.S. 317, 322-23 (1986)). They argued that Mr. Simantob provided no evidence to
support the essential “other property” element of his products liability and negligence
claims. Aplee. Suppl. Appx., Vol. I at 194 (citing Adler, 144 F.3d at 670-71). In their
reply memorandum, the Defendants argued that Mr. Simantob had not provided evidence
that the subflooring was “other property.” Aplee. Suppl. Appx., Vol. III at 428-29.
The problem with the Defendants’ arguments is that Mr. Simantob did supply such
evidence. He provided receipts from the purchases of the flooring and the subflooring,
which proved that he purchased the flooring and subflooring from two different sellers in
two separate transactions. Aplee. Suppl. Appx., Vol. II at 342-43, 345-46. The
subflooring is therefore not part of the same contract as the flooring, making it “other
property” under Utah law.
The Defendants would have us rule that property need not be purchased under one
general contract to be considered integrated property. The Utah Supreme Court has said
otherwise. See Reighard, 285 P.3d at 1177. We therefore reverse the district court’s
grant of summary judgment to the Defendants on Mr. Simantob’s products liability and
negligence claims and remand these claims to the district court for further proceedings
consistent with this opinion.
2. Mr. Simantob’s UCSPA claim
In his first amended complaint, Mr. Simantob also claimed that the Defendants
violated the UCSPA when they “intentionally and/or negligently failed to inform [him]
that the wood flooring had a defective and dangerous condition which would cause it to
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delaminate unless installed in a room temperature of 60 degrees and relative humidity of
33-55%” before he purchased the product and “concealed . . . that the sale of wood
flooring . . . involved the exclusions and disclaimer of warranties.” Aplt. Appx. at 62.
In his opposition to the Defendants’ motion for summary judgment, Mr. Simantob
changed his UCSPA claim, arguing that the Defendants misrepresented how and where
their flooring was produced. He stated that (1) on October 22, 2009, in support of its
opposition to Mr. Simantob’s motion for leave to amend, Mullican filed an employee’s
declaration stating that the flooring Mr. Simantob purchased was manufactured by an
Indonesian company; (2) until April 30, 2010, the Mullican website advertised that its
flooring was made in the United States at one of its plants and “inspected by [its]
professional graders and quality control specialists;” and (3) the website was changed
after April 2010 to state that the flooring was “made in partnership with overseas
facilities.” Id. at 105.
The district court granted summary judgment against Mr. Simantob’s UCSPA
claim because his first amended complaint did not allege misrepresentation of origin, the
claim Mr. Simantob attempted to raise at summary judgment. The court said the
complaint provided insufficient notice to the Defendants that Mr. Simantob intended to
bring claims under that theory. Allowing Mr. Simantob to make arguments at the
summary judgment hearing that were not in his complaint would, the court said,
prejudice the Defendants. Mr. Simantob argues on appeal that the district court should
have considered his misrepresentation of origin theory. We disagree.
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It is not enough that Mr. Simantob raised the general issue of implied warranties
of merchantability and fitness for a particular use in his initial complaint. Although the
plaintiff need not plead every relevant fact supporting his legal theory, his pleading must
be sufficient to “‘give the defendant fair notice of what the . . . claim is and the grounds
upon which it rests” to prevent prejudice to the defendant. Zokari v. Gates, 561 F.3d
1076, 1084 (10th Cir. 2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007)). We have warned that reading complaints too broadly to include any possible
theory of recovery “could create injustice” by requiring defendants to infer every
potential argument a plaintiff could later make. Id. (holding that a plaintiff’s Title VII
claim alleging discrimination and retaliation by a government employer was insufficient
to place the defendant on notice that the plaintiff intended to include a claim for unpaid
wages under Department of Labor regulations).
Mr. Simantob failed to allege facts in his complaint that would support the false
origin theory. The district court properly dismissed the claim on summary judgment. We
affirm the district court’s grant of summary judgment to the Defendants on Mr.
Simantob’s UCSPA claim.
B. Motion for Leave To Amend
We do not reach the district court’s denial of Mr. Simantob’s motion for leave to
amend the complaint. The district court’s resolution of Mr. Simantob’s products liability
and negligence claims on remand may affect that issue. We therefore remand to the
district court.
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III. CONCLUSION
We deny Defendants’ motion to dismiss this case for lack of jurisdiction.
We reverse the district court’s grant of summary judgment in favor of the
defendants on Mr. Simantob’s products liability and negligence claims and remand these
claims to the district court. The economic loss rule bars recovery absent a showing of an
independent duty of care, personal injury, or damage to “other property.” Mr. Simantob
failed to show that the Defendants owed an independent duty of care that would create an
exception to Utah’s economic loss rule, nor did he show personal injury. But he did
provide evidence that there was at least a genuine dispute of material fact as to whether
the damaged subflooring qualified as “other property.”
We affirm the district court’s grant of summary judgment on Mr. Simantob’s
UCSPA claim. Mr. Simantob failed to allege facts in his complaint to support his
argument that the Defendants made false statements about the origin of their products.
We do not reach the district court’s denial of Mr. Simantob’s motion for leave to
amend the complaint. Resolution of Mr. Simantob’s negligence and products liability
claims may affect that issue. We therefore remand that issue to the district court along
with the tort claims for further proceedings consistent with this opinion.
ENTERED FOR THE COURT
Scott M. Matheson, Jr.
Circuit Judge
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