Judge v. Knauf Gips KG

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

FORT MYERS DIVISION

JOHN JUDGE,

Plaintiff,

v. Case No: 2:21-cv-889-JES-DAB

KNAUF GIPS KG, KNAUF

PLASTERBOARD TIANJIN CO.

LTD., and KNAUF NEW BUILDING

SYSTEM (TIANJIN) CO. LTD.,

Defendants.

OPINION AND ORDER

This matter comes before the Court on defendants' Motion for

Partial Summary Judgment on Issues Specific to This Case (Doc.

#78) filed on January 12, 2024. Plaintiff filed an Opposition

(Doc. #80) on January 26, 2024, and defendants filed a Reply (Doc.

#84) on February 9, 2024. For the reasons set forth below, the

motion is granted in part and denied in part.

Both Plaintiff and Defendants agree that Plaintiff is pursing

recovery on only two legal claims: negligence and strict liability.

All parties agree that all other claims have been dismissed or are

being withdrawn. (Doc. #80, p. 10; Doc. #84, p. 3.)1 The Court

agrees that these are the only two remaining claims.

1 The parties will be required to file a stipulated dismissal

pursuant to Fed. R. Civ. P. 41(a)(1)(A)(ii) as to Counts II, IV,

V, VI, VII, VIII.

As to the two remaining claims, Defendants argue that

Plaintiff has not suffered any personal injuries associated with

the Chinese-manufactured drywall and therefore Plaintiff’s

recovery, if any, should be limited by the Florida economic loss

rule to damage to “other property,” i.e., to the cost of replacing

certain home appliances, computers, and other electronics. While

Plaintiff does not contest the absence of personal injury, he

responds that he should be permitted to seek full economic and

noneconomic damages at trial.

I. Florida Economic Loss Rule

The Florida Supreme Court adopted a products liability

economic loss rule in 1987. Florida Power & Light Co. v.

Westinghouse Elec. Corp., 510 So. 2d 899 (Fla. 1987). “[T]he

economic loss rule is a judicially created doctrine that sets forth

the circumstances under which a tort action is prohibited if the

only damages suffered are economic losses.” Tiara Condo. Ass'n,

Inc. v. Marsh & McLennan Companies, Inc., 110 So. 3d 399, 401 (Fla.

2013) (citing Indem. Ins. Co. of N. Am. v. Am. Aviation, Inc., 891

So. 2d 532, 536 (Fla. 2004)). The economic loss rule “was

introduced to address attempts to apply tort remedies to

traditional contract law damages” and was “the fundamental

boundary between contract law, which is designed to enforce the

expectancy interests of the parties, and tort law, which imposes

a duty of reasonable care and thereby encourages citizens to avoid

causing physical harm to others.” Casa Clara Condominium Ass'n,

Inc. v. Charley Toppino and Sons, Inc., 620 So. 2d 1244, 1246 (Fla.

1993). In 2013, the Florida Supreme Court re-affirmed its

economic loss rule but confined it to products liability cases,

receding from its prior expansion of the rule. Tiara Condo., 110

So. 3d at 407 (“[W]e . . . hold that the economic loss rule applies

only in the products liability context. We thus recede from our

prior rulings to the extent that they have applied the economic

loss rule to cases other than products liability.”)

The “economic losses” which may not be pursued in a tort claim

are defined as “damages for inadequate value, costs of repair and

replacement of the defective product, or consequent loss of

profits,” and include “the 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.” Casa Clara, 620

So. 2d at 1246 (citation omitted). These “disappointed economic

expectations” are protected by contract law, rather than tort law.

Id. On the other hand, a claim for personal injury or damage to

“other property” is not barred by the economic loss rule. Id. As

the Eleventh Circuit summarized:

The economic loss rule prohibits tort recovery

when a product damages itself, causing

economic loss, but does not cause personal

injury or damage to any property other than

itself. [] Economic loss includes damages for

inadequate value, costs of repair and

replacement of the defective product, or

consequent loss of profits—without any claim

of personal injury or damage to other

property. [] The rationale underlying the

economic loss rule is that parties should

protect against the risk of economic loss

during contract negotiations through warranty

provisions and price adjustments rather than

attempt to recover under tort law after the

loss occurs.

Pulte Home Corp. v. Osmose Wood Preserving, Inc., 60 F.3d 734,

739–40 (11th Cir. 1995) (internal quotation marks and citations

omitted).

In cases where the economic loss rule applies, the Court must

distinguish between damages to the defective product itself

(recovery for which is barred in tort) and damages to “other

property” (recovery for which is permitted in tort.)2 Id. at 741.

In Casa Clara, the Florida Supreme Court held that the

economic loss rule barred homeowners' negligence claims against a

subcontractor who supplied faulty concrete used in their homes.

The Supreme Court rejected the homeowners' assertion that “other

property” damage had occurred when steel reinforcement rods rusted

due to the unusually high salt content of the concrete. Casa

Clara, 670 So. 2d at 1247. The Court explained: “The character

of a loss determines the appropriate remedies, and, to determine

the character of a loss, one must look to the product purchased by

2 There is no suggestion that any individual has been

physically injured as a result of the Chinese drywall in the

Property, so the Court need not discuss that aspect of the economic

loss rule.

the plaintiff, not the product sold by the defendant.” Id. (citing

King v. Hilton-Davis, 855 F.2d 1047 (3d Cir. 1988)). Because the

concrete was “an integral part of the finished product” —the house

the buyers had bargained for— the “other property” exception did

not apply. (Id.)

In Pulte Home Corp., Pulte asserted a negligence claim against

a defendant who sold it treated plywood which could not be used in

attic environments. Pulte asserted that if it had been warned

that the treated plywood was inferior in quality and would not

work for the general purposes for which it was manufactured and

sold, Pulte would not have bought the product. The Eleventh

Circuit found that Pulte’s negligence claim presented precisely

the type of “disappointed economic expectation” claim that

Florida's strict interpretation of the economic loss rule

foreclosed. Pulte Home Corp., 60 F.3d at 741.

The Eleventh Circuit then discussed whether Pulte had

established that its case fell within the “other property”

exception to the economic loss rule by showing damage to property

aside from the plywood. The facts established that:

Pulte incorporated the FRT plywood into its

townhouses, such that the deterioration of the

plywood destroyed the structural integrity of

the roof. As a result, Pulte was forced to

remove and replace the FRT plywood. In doing

so, Pulte also had to remove and replace other

portions of the roof, including untreated

plywood and shingles. These other roof

components form the basis of Pulte's “other

property” argument.

Id. The Eleventh Circuit found that Pulte had not established

that there was damage to “other property.”

Under the Casa Clara definition, the product

bargained for and purchased by Pulte was the

Osmose-treated FRT plywood. Based on the

evidence offered at trial, the FRT plywood

itself was the only property damaged. Although

Pulte did replace roof components other than

the FRT plywood, these components were not

replaced because they were damaged. Rather,

replacing the shingles and other materials was

merely a consequence of replacing the damaged

FRT plywood. Casa Clara specifically stated

that economic loss includes the costs of

replacing the defective product. [] These

costs simply do not trigger the other property

exception. As such, the other property damage

Pulte complains of is nothing more than pure

economic loss for which Pulte cannot recover

in tort.

Id. at 741–42 (internal citation omitted).

More recently, in 2711 Hollywood Beach Condo. Ass'n, Inc. v.

TRG Holiday, Ltd., 307 So. 3d 869, 870 (Fla. 3d DCA 2020), a

condominium association purchased the condominium building from

the developer. The building included a fire suppression system

(FSS) which had been installed during construction. The

association noticed leaks in the system and filed suit seeking

damages for future repairs and replacement of the system. A

defendant moved for partial summary judgment on the association's

negligence and strict liability claims based on the economic loss

rule, relying on Casa Clara. Summary judgment was granted, and

plaintiff appealed.

The Florida appellate court affirmed, stating:

In Casa Clara, the Florida Supreme Court held

that to the extent a products liability claim

arises in the context of real estate, the

economic loss rule applies. 620 So. 2d at

1247–48. The court applied the “object of the

bargain” rule—in order “to determine the

character of a loss, one must look to the

product purchased by the plaintiff, not the

product sold by the defendant.” Id. at 1247

(citing King v. Hilton–Davis, 855 F.2d 1047

(3d Cir. 1988)). The allegedly defective

material in Casa Clara, the concrete, was an

“integral part of the finished product,” and,

as such, the injury it caused was not

considered damage to “other” property. Id.

The Association bargained for, purchased and

received a building; Nibco's fittings were

only a component of the FSS, incorporated into

the building. Applying the rule set forth in

Casa Clara, the Association purchased a

completed building from the developer. Nibco's

fittings were “an integral part of the

finished product and, thus, did not injure

‘other’ property.” Id.; see also Saratoga

Fishing Co. v. J.M. Martinac & Co., 520 U.S.

875, 883, 117 S. Ct. 1783, 138 L. Ed. 2d 76

(1997) (stating that parts and fittings that

become integral components of something else

“constitute a single product for purposes of

the economic loss doctrine” because “all but

the very simplest machines have component

parts” and any other holding “would require a

finding of ‘property damage’ in virtually

every case where a product damages itself.”

(quoting Va. Sur. Co. v. Am. Eurocopter Corp.,

955 F. Supp. 1213, 1216 (D. Haw. 1996); E.

River S.S. Corp. v. Transamerica Delaval,

Inc., 476 U.S. 858, 867, 106 S. Ct. 2295, 90

L. Ed. 2d 865 (1986)). Injury to the building

itself is not injury to “other” property

because the product purchased by the

Association was the building. See Casa Clara,

620 So. 2d at 1247. The economic loss rule

therefore bars the Association's recovery as

to Nibco to the extent that it sought damages

to replace the FSS and repair damage to the

building.

On appeal, the Association again concedes that

Casa Clara is good law but argues that this

Court should refrain from applying it here for

policy reasons. We decline that invitation. In

the over thirty years the economic loss rule

has been applied by Florida courts, the

Florida Supreme Court has carved out several

exceptions. This case, however, falls squarely

within the parameters of the rule.

2711 Hollywood Beach Condo. Ass'n, Inc., 307 So. 3d at 870–71.

II. Application of Economic Loss Rule

Here, it is undisputed that Plaintiff purchased a home in

which the builder had installed Chinese drywall. The product

purchased by Plaintiff was the home, and the drywall had been made

an integral part of the home. As in 2711 Hollywood Beach Condo.

Ass'n, Inc. and Casa Clara, injury to the home is not injury to

“other property” because the product purchased by Plaintiff was

the home. 2711 Hollywood Beach Condo. Ass'n, Inc., 307 So. 3d at

870-71; Casa Clara, 620 So. 2d at 1247. Therefore, Plaintiff

cannot pursue the economic damages he seeks. Id.

Most of the damages Plaintiff seeks qualify as economic

damages which are not recoverable in product liability tort claims.

The Complaint describes the damages sought by Plaintiff:

These damages include, but are not limited to,

costs of inspection; costs and expenses

necessary to fully remediate or abate their

home; cost of alternative living arrangements;

cost to replace other personal property that

has been damaged; lost value or devaluation of

their homes; stigma damages; and, loss of use

and enjoyment of their home and property.

(Doc. #1, ¶ 21.) Of these, only damages to personal property may

be recoverable as “other property.” Plaintiff may offer evidence

as to damages to such “other property.”

III. Prior MDL Opinion

Plaintiff argues that the Court is forbidden from making this

determination because it is inconsistent with a 2010 decision by

the MDL-2047 district judge which denied motions to dismiss based

on the Florida economic loss rule. (Doc. #80, pp. 7-9.)

According to Plaintiff, this prior decision is the “law of the

case” which cannot now be changed by a transferor district court.

(Id.) The Court concludes that the prior decision is not the “law

of the case” as to the issues now before the Court.

In re Chinese Manufactured Drywall Products Liab. Litig., 680

F. Supp. 2d 780 (E.D. La. 2010), involved motions to dismiss tort

claims of plaintiffs who purchased homes already containing

Chinese drywall. Id. at 785, 791. The motions to dismiss argued

that the Florida economic loss rule limited tort recovery in such

circumstances to personal injury and/or damage to “other

property,” but barred any recovery for economic damages such as

injury to the product, repair costs, inspection costs, relocation

costs, and diminution in value.

The MDL Judge refused to dismiss the claims, holding that the

Florida economic loss rule did not bar tort claims by plaintiffs

who had purchased a home already containing Chinese drywall. The

MDL Judge recognized that Casa Clara Condo. Ass'n, Inc. v. Charley

Toppino & Sons, Inc., 620 So.2d 1244, 1247 (Fla. 1993) had

concluded that when homeowners purchase finished homes already

containing a defective product, the finished homes constituted the

“product.” Id., 680 F. Supp. 2d at 791. The MDL Judge engaged

in a lengthy discussion of the history of the economic loss rule,

including Pulte Home Corp. v. Osmose Wood Preserving, Inc., 60

F.3d 734, 741–42 (11th Cir. 1995). Id. at 794-95. The MDL Judge

distinguished these Florida cases, however, holding that they

involved structurally inferior components, while the Chinese

drywall was not structurally inferior and had not failed to serve

its intended structural purpose. Instead, “its defects go beyond

disappointed economic expectations, causing harm which justifies

access to tort remedies.” Id. at 793. The MDL Judge also found

the drywall “involves a potential hazard to health and property”

and plaintiffs had “alleged actual physical injury as a result of

the Chinese drywall in their homes, thus the rationale in Casa

Clara is not applicable.” Id. The Court was also concerned that

Casa Clara was a 4-3 decision with strong dissents, and later

Florida Supreme Court decisions “have cast doubts on” it. Id. at

793-94.

Plaintiff argues that the discussion of the Florida economic

loss rule is the law of the case which must be followed in all

subsequent stages of the case. The Court disagrees.

The typical formulation of the law of the case doctrine

provides:

A decision of a legal issue or issues by an

appellate court . . . must be followed in all

subsequent proceedings in the same case in the

trial court or on a later appeal in the

appellate court, unless (1) the evidence on a

subsequent trial as substantially different,

(2) controlling authority has since made a

contrary decision of the law applicable to

such issues, or (3) the decision was clearly

erroneous and would work a manifest injustice.

Baumer v. United States, 685 F.2d 1318, 1320 (11th Cir. 1982)

(quoting White v. Murtha, 377 F.2d 428, 431–32 (5th Cir. 1967)).

See also Cambridge Univ. Press v. Albert, 906 F.3d 1290, 1299 (11th

Cir. 2018) (findings and fact and conclusions by an appellate court

are generally binding in all subsequent proceedings in the same

case); United States v. Williams, 728 F.2d 1402, 1405–06 (11th

Cir. 1984) (citing Baumer). “The doctrine is based upon the sound

policy that litigation should come to an end. It protects against

the agitation of settled issues and assures obedience of lower

courts to the decisions of appellate courts.” Williams, 728 F.2d

at 1406 (citation omitted). Here, of course, there is no appellate

decision at issue, so the normal law of the case doctrine simply

does not apply.

The Eleventh Circuit has discussed the concept, however, in

the context of trial-level decisions.

At the trial court level, the doctrine of the

law of the case has been described as “little

more than a management practice to permit

logical progression toward judgment.” [] It is

recognized that when cases are transferred

from one judge to another judge in the same

court, the transfer should not be treated as

an opportunity to relitigate all the questions

decided by the first judge. [] However, the

subsequent judge should never be bound by an

erroneous ruling of law.

Williams, 728 F.2d at 1406 (internal citations omitted). These

principles do not bar the Court from following the Florida economic

loss rule at trial in the manner set forth above.

At least one circuit, however, has applied the law of the

case doctrine in the context of an MDL proceeding. In re Ford

Motor Co., 591 F.3d 406, 411 (5th Cir. 2009) (“The better view is

. . . that transferor courts should use the law of the case doctrine

to determine whether to revisit a transferee court's decision.”)

“The law of the case doctrine requires that courts not revisit the

determinations of an earlier court unless “(i) the evidence on a

subsequent trial was substantially different, (ii) controlling

authority has since made a contrary decision of the law applicable

to such issues, or (iii) the decision was clearly erroneous and

would work . . . manifest injustice.” Id. at 411–12.

Even assuming the law of the case doctrine articulated in In Re

Ford Motor Co. applies, it is not being violated here. The Court

is not re-addressing the motions to dismiss decided by the MDL

Judge. Rather, the Court is addressing new issues of how the

Florida economic loss rule impacts the admissibility of evidence

at trial and expert opinion testimony at trial. Furthermore, the

MDL Judge relied on the allegation there was personal injury, but

there is no such assertion in this case. While the Court’s

analysis of the impact of Florida case law differs from the MDL

Judge, the more recent Florida decision in 2711 Hollywood Beach

Condo. Ass'n, Inc. confirms that Casa Clara remains good law, that

the structural-soundness distinction does not make a difference,

and that concerns about the continued viability of Casa Clara in

the products liability context were not borne out.

To the extent plaintiff seeks economic losses in a products

liability context, such damages are barred by the economic loss

rule. Plaintiff’s Fact Sheet itemizes personal property damages,

including a computer, cellular telephone, ceiling fans, and

appliances. Defendants argue that personal property damages

should be limited to $6,773, because the air conditioner/handler

and replacement of copper pipes are fully integrated into the home.

While this may prove correct, the Court declines to parse through

this list on summary judgment.

Accordingly, it is hereby

ORDERED :

1. The parties shall file a stipulation of dismissal pursuant

to Fed. R. Civ. P. 41(a) (1) (A) (ii) as to the counts other

than negligence and strict liability.

2. Defendants' Motion for Partial Summary Judgment on Issues

Specific to This Case (Doc. #78) is GRANTED IN PART AND

DENIED IN PART as set forth above.

DONE and ORDERED at Fort Myers, Florida, this 28th day

of February 2024.

& AKL Be.

JGHH E. STEELE

SHNIOR UNITED STATES DISTRICT JUDGE

Copies:

Counsel of Record