Crossing at Eagle Pond Apartments, LLC v. Lubrizol Corp. et al
Filing
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ORDER Granting Defendants' Motion for Summary Judgment 17 . Signed by District Judge Denise Page Hood. (LSau)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
THE CROSSING AT EAGLE
POND, LLC,
Plaintiff,
Civil Action No. 16-13432
v.
HONORABLE DENISE PAGE HOOD
LUBRIZOL CORP. and
LUBRIZOL ADVANCED
MATERIALS, INC.,
Defendants.
______________________________/
OPINION AND ORDER GRANTING DEFENDANTS’
MOTION FOR SUMMARY JUDGMENT [#17]
I.
BACKGROUND
A. Procedural Background
On September 19, 2016, Plaintiff The Crossing at Eagle Pond, LLC (“Eagle
Pond”) brought this products liability action against Defendants Lubrizol Corp. and
its subsidiary Lubrizol Advanced Materials, Inc. (“LZAM”) (collectively,
“Defendants”) in the Sixth Judicial Circuit Court for Oakland County, Michigan,
alleging Defendants were negligent in designing and selling a defective compound
that contributed to leaks that occurred within the plumbing system of an apartment
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building owned by Eagle Pond.1 (Doc # 1) On September 22, 2016, Defendants
removed this action to the United States Court for the Eastern District of Michigan,
based on diversity. (Id.)
This matter is before the Court on Defendants’ Motion for Summary
Judgment, filed on October 31, 2017. (Doc # 17) Pursuant to a Stipulation and
Order (Doc # 19), Eagle Pond filed a Response on January 3, 2018. (Doc # 20)
Defendants filed a Reply on January 25, 2018. (Doc # 21) Defendants argue that:
(1) Lubrizol Corp. should be dismissed;
(2) Eagle Pond lacks standing to bring this products liability action;
(3) Michigan’s Economic Loss Doctrine limits Eagle Pond to damages under
the Uniform Commercial Code (UCC) and bars Eagle Pond from seeking
damages in tort;
(4) if the Economic Loss Doctrine applies, the four year Statute of Repose
contained in Michigan’s UCC bars Eagle Pond from pursuing this action;
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Plaintiff’s products liability claim is based on the following theories: (1) “Failure to
manufacture, distribute and sell the material in a condition reasonably safe for use and free of
defects”; (2) “Failure to properly warn potential users of the dangers and defective condition of
the materials”; (3) Failing to design, manufacture and sell the materials without intrinsic and
latent defects that would cause them to result in piping failures upon normal and foreseeable use,
and”; (4) “Failing to design, manufacture and sell the materials so that they would not cause the
piping to structurally fail upon normal and foreseeable use.” (Doc # 1, Pg. 14-15, ¶ 18(a)-(d))
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(5) if the Economic Loss Doctrine does not apply, the three year statute of
limitations for products liability claims in Michigan bars Eagle Pond from
pursuing this action; and
(6) Eagle Pond’s purchase of the Eagle Pond Apartments with knowledge of
the leaks in the plumbing system forecloses this products liability action.
For the reasons that follow, Defendants’ Motion for Summary Judgment is
GRANTED.
B. Factual Background
The Crossing at Eagle Pond, LLC (“Eagle Pond”) is the owner of an
apartment complex in Walled Lake, Michigan known as The Crossing at Eagle
Pond Apartments (the “Eagle Pond Apartments”). Eagle Pond was established by
Bleznak Real Estate Investment Group (“BRI Group”), a commercial holding
company. In October 2011, the BRI Group purchased the Eagle Pond Apartments
from Walled Lake Granite, LLC through five separate, but related, BRI Group
owned entities: BRI-W #1, LLC; BRI-W #2, LLC; BRI-W #3, LLC; BRI-W #5,
LLC; BRI-W #6, LLC (collectively, the “Five LLCs”). (Doc # 20, Pg. 5) While
under the ownership of the Five LLCs, the Eagle Pond Apartments’ plumbing
system experienced leaks on October 26, 2011; April 15, 2012; March 31, 2013;
and June 14, 2013. (Id.) The Five LLCs subsequently hired Delta Mechanical to
re-pipe the entire Eagle Pond Apartments plumbing system. (Id.) Eagle Pond
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acquired the Eagle Pond Apartments from the Five LLCs in January 2016. (Id.)
Eagle Pond is owned by the same owners of the Five LLCs. The Five LLC owners
retained the same ownership percentages in the Eagle Pond Apartments each held
respectively before the acquisition. Eagle Pond and the Five LLCs are Michigan
companies.
Defendant LZAM, a subsidiary of Lubrizol Corp., is the manufacturer of a
chemical compound commercially known as FlowGuard Gold. (Doc # 17, Pg. 12)
LZAM sells the compound to manufacturers of chlorinated polyvinyl chloride
(CPVC) plumbing pipes and fittings. (Id.) Lubrizol Corp. is an Ohio corporation
with its principal place of business in Ohio. LZAM is a Delaware corporation with
its principal place of business in Ohio. (Doc # 1, Pg. 4)
Samples of the failed Eagle Pond Apartment pipes were submitted to Kent
Engineering for forensic analysis. (Doc # 1, Pg. 14) The tests performed by Kent
Engineering revealed: (1) that the subject CPVC pipe and fittings contained
defective materials causing embrittlement; (2) the embrittlement was detrimental to
the operation and maintenance of the plumbing system; (3) and the embrittlement
was caused by faulty component materials manufactured and provided to the piping
manufactured by LZAM. (Id.) Neither party contests these facts.
II.
ANALYSIS
A. Standard of Review
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The Court will grant summary judgment 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); Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
250-57 (1986). A fact is material if it could affect the outcome of the case based on
the governing substantive law. Id. at 248. A dispute about a material fact is genuine
if, on review of the evidence, a reasonable jury could find in favor of the nonmoving
party. Id.
The moving party bears the initial burden to demonstrate the absence of a
genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
If the movant meets this burden, the nonmoving party must “go beyond the pleadings
and … designate specific facts showing that there is a genuine issue for trial.” Id. at
324. The Court may grant a motion for summary judgment if the nonmoving party
who has the burden of proof at trial fails to make a showing sufficient to establish
the existence of an element that is essential to that party’s case. See Muncie Power
Prods., Inc. v. United Tech. Auto., Inc., 328 F.3d 870, 873 (6th Cir. 2003). “The
mere existence of a scintilla of evidence in support of the plaintiff’s position will be
insufficient; there must be evidence on which the jury could reasonably find for the
plaintiff.” Anderson, 477 U.S. at 252. “Conclusory allegations do not create a
genuine issue of material fact which precludes summary judgment.” Johari v. Big
Easy Restaurants, Inc., 78 F. App’x 546, 548 (6th Cir. 2003).
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When reviewing a summary judgment motion, the Court must view the
evidence and all inferences drawn from it in the light most favorable to the
nonmoving party. Kochins v. Linden-Alimak, Inc., 799 F.2d 1128, 1133 (6th Cir.
1986). The Court “need consider only the cited materials, but it may consider other
materials in the record.” Fed. R. Civ. P. 56(c)(3). The Court’s function at the
summary judgment stage “is not to weigh the evidence and determine the truth of
the matter but to determine whether there is a genuine issue for trial.” Anderson,
477 U.S. at 249.
B. Applicable Law
Defendants removed this case based on diversity of citizenship. (Doc # 1) In
a diversity case, federal courts apply federal procedural law and substantive state
law. State Farm Fire & Cas. Co. v. Stone, No. 16-12831, 2017 WL 3017538, at *2
(E.D. Mich. July 17, 2017) (citing Erie R. Co. v. Tompkins, 304 U.S. 64, 92 (1938)).
“‘In applying state law, we anticipate how the relevant state’s highest court would
rule in the case and are bound by controlling decisions of that court.’” Appalachian
Railcar Servs. v. Boatright Enters., Inc., 2008 WL 828112, *14 (W.D.Mich.2008)
(quoting NUFIC of Pittsburgh, Pa. v. Alticor, Inc., 472 F.3d 436, 438 (6th Cir.2007)
(citation omitted)). If the state’s highest court has not decided the issue in question,
“the federal court must ascertain the state law from ‘all relevant data.’” Garden City
Osteopathic Hosp. v. HBE Corp., 55 F.3d 1126, 1130 (6th Cir. 1995) (quoting Bailey
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v. V & O Press Co., 770 F.2d 601, 604 (6th Cir. 1985)). Michigan law applies to
this case. Vella v. Hyatt Corp., 166 F. Supp. 2d 1193, 1197 (E.D. Mich. 2001)
(“Generally, a federal court sitting in diversity applies the substantive law of the
forum state.”).
C. Standing
Defendants argue that Eagle Pond does not have standing to bring this claim
because Eagle Pond has not suffered an injury in connection with the piping at the
Eagle Pond Apartments. (Doc # 17, Pg. 21) Eagle Pond argues that it is essentially
the successor of the Five LLCs, and received an assignment of the Five LLCs
interest in the Eagle Pond Apartments. Eagle Pond adds that this case should be
remanded to state court if Eagle Pond lacks standing. The Court finds that Eagle
Pond has standing.
A plaintiff must have standing to sue for a federal court to exercise
jurisdiction over the matter. Zurich Ins. Co. v. Logitrans, Inc., 297 F.3d 528, 531
(6th Cir. 2002). Plaintiff must have suffered (1) an injury in fact that is concrete
and particularized, and actual or imminent; (2) fairly traceable to the challenged
actions of the defendant; and (3) likely to be redressed by a favorable decision of
the court. Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992). Plaintiff bears the
burden of establishing the three elements. Id. At the summary judgment stage, a
plaintiff must provide specific facts to establish standing. Id.
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Defendants argue that Eagle Pond cannot meet the injury requirement to
establish standing because Eagle Pond did not own the Eagle Pond Apartments
when the plumbing issues were remedied in June 2013. Defendants base their
argument on the deposition testimony of Adam Bleznak (“Bleznak”), one of the
owners of the BRI Group, one of the Five LLCs, and Eagle Pond. Bleznak testified
that the Five LLCs owned the Eagle Pond Apartments when the plumbing leaks
were remedied. (Doc # 20-2, Pg. 128:15-24) Bleznak also testified that Eagle Pond
acquired the Eagle Pond Apartments in January 2016. (Doc 20-2; Pg. 58:1-8)
Bleznak further testified that there have not been any leaks in the Eagle Pond
Apartments piping since the remediation was complete in June 2013. (Doc # 20,
Pg. 128:1-14)
Defendants do not challenge the other two (causation and
redressability) elements of standing, as they would be satisfied if Eagle Pond meets
the injury-in-fact requirement. The Court’s analysis focuses only on the injury-infact element. See Storey v. Attends Healthcare Prod., Inc., No. 15-CV-13577, 2016
WL 3125210, at *3 (E.D. Mich. June 3, 2016) (focusing only on the injury-in-fact
element where the other two elements of the standing inquiry were clearly satisfied).
Eagle Pond argues that it is the successor of the Five LLCs, and received an
assignment of interests in the Eagle Pond Apartments held by the Five LLCs. Eagle
Pond asserts that the conveyance of the Eagle Pond Apartments from the Five LLCs
to Eagle Pond was merely a name change for tax purposes. (Doc # 20, Pg. 11)
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To support its theory, Eagle Pond directs the Court to aspects of the property
conveyance between the Five LLCs and Eagle Pond.
First, the Eagle Pond
Operating Agreement states that the Five LLC owners retained the same ownership
interests in the Eagle Pond Apartments that they had prior to the conveyance.
Second, no consideration was passed between the Five LLCs and Eagle Pond
because the entities have common ownership.
Eagle Pond cites MCL §
211.27a(7)(m), a Michigan taxation of real and personal property statute, which
states in part: “Transfer of ownership does not include . . . [a] transfer of real
property or other ownership interests among . . . limited liability companies . . . or
other legal entities if the entities involved are commonly controlled.”
Eagle Pond’s theory of common ownership is incorrect. Bleznak’s testimony
does not support Eagle Pond’s position. Bleznak testified that he is only an owner
of one of the Five LLCs, and that the LLCs are owned by different members of the
BRI Group. (Doc # 20-2, Pg. 57:1-11) While it is true that the owners of the Five
LLCs retained the same ownership interests in the Eagle Pond Apartments
following the conveyance to Eagle Pond, the property was transferred from five
separate and distinct entities with separate, uncommon ownership, to a single entity
with common ownership. It is a well-established principle of law that corporate
form must be respected. Seasword v. Hilti, Inc., 449 Mich. 542, 547, 537 N.W.2d
221, 224 (1995). Contrary to Eagle Pond’s assertions, there was not a transfer of
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property between commonly controlled entities. The Five LLCs currently exist
separate, and with different ownership respectively, from Eagle Pond.
Eagle Pond alternatively argues that, even if the Five LLCs and Eagle Pond
are not commonly controlled, Eagle Pond still has an injury because the Bill of Sale
Eagle Pond obtained from the Five LLCs—dated January 1, 2016—assigns the
personal property of the Eagle Pond Apartments to Eagle Pond. (Doc # 20, Pg. 13)
The Bill of Sale states the Five LLCs were “Grantors” and “Assignors.” (Doc # 202, Pg. 136) The document also states that the Five LLCs “assign, transfer, convey
and set over unto [Eagle Pond] . . . the other personal property owned by [the Five
LLCs] located at [the Eagle Pond Apartments] and used in connection with the
ownership and operation thereof.” (Id.) Under Michigan law, an assignee “stands
in the same shoes of the assignor and acquires the same rights as the assignor
possessed.” Prof’l Rehab. Assocs. v. State Farm Mut. Auto. Ins. Co., 228 Mich.
App. 167, 177, 577 N.W.2d 909, 914 (1998).
Eagle Pond is essentially arguing that this cause of action must be prosecuted
by Eagle Pond because it is the “real party in interest,” pursuant to Fed. R. Civ. P.
17(a). “The ‘real party in interest’ is the person who possesses the right or interest
to be enforced through litigation, and the purpose of this procedural rule is to protect
the defendant against a subsequent action by the party actually entitled to recover.”
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RK Co. v. See, 622 F.3d 846, 850 (7th Cir. 2010). The Court agrees with Eagle
Pond.
“Personal property” is “any moveable or intangible thing that is subject to
ownership and not classified as real property.” Black’s Law Dictionary 1233 (7th
ed. 1999). A cause of action is a “piece” of intangible property called a “chose in
action.” Herr v. U.S. Forest Serv., 803 F.3d 809, 821 (6th Cir. 2015). The Sixth
Circuit has held that “[c]hoses of action to enforce property rights do not, as a
general matter, automatically transfer when the underlying property changes
hands.” Id. (citing Peters v. Bowman, 98 U.S. 56, 58-59, 25 L.Ed. 91 (1878) (right
to enforce covenant does not run with land); Ginsberg v. Austin, 968 F.2d 1198,
1201 (Fed.Cir.1992) (right to recover outstanding rent payments does not run with
land); In re Nucorp Energy Sec. Litig., 772 F.2d 1486, 1490 (9th Cir.1985) (right
of action under Rule 10b–5 does not automatically transfer when security is sold));
see also Restatement (Second) of Contracts § 317 (1981); Restatement (First) of
Property § 552 (1944). A party may assign a chose of action to another party by
manifesting an intention to transfer the right. Id. In other words, a right to sue may
be assigned if a party manifests an intention to transfer the right to another party.
Eagle Pond is the real party at interest in this case. The Bill of Sale explicitly
states that the Five LLCs intended to “assign, transfer, convey” all rights and
interests in the personal property attached to the Eagle Pond Apartments, to Eagle
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Pond. (Doc #20-2, Pg. 136) While the Bill of Sale does not explicitly mention any
legal claims or a cause of action, it assigns the rights attached to the personal
property to Eagle Pond.
Eagle Pond has established an injury sufficient to satisfy the Article III
standing requirement. Eagle Pond was assigned all the rights attached to the
personal property connected to the Eagle Pond Apartments. The personal property
included the cause of action for injuries suffered due to the allegedly defective
piping. The right to bring this lawsuit is solely in the possession of Eagle Pond.
While the pipes containing LZAM’s CPVC compound were removed and replaced
by the time Eagle Pond became the owner of the Eagle Pond Apartments, the
alleged injury suffered by the Five LLCs, resulting from the defective CPVC
compound in the pipes, satisfies the injury requirement. Under Michigan law, a
plaintiff has standing whenever there exist a legal cause of action. Lansing Sch.
Educ. Ass’n v. Lansing Bd. of Educ., 487 Mich. 349, 372, 792 N.W.2d 686, 699
(2010). Eagle Pond has standing to pursue this action.
D. Claims Against Lubrizol Corp.
Defendants argue that Lubrizol Corp. should be dismissed from this products
liability action because Lubrizol Corp. does not manufacture CPVC compounds or
any other components that were used in the Eagle Pond Apartments plumbing
system. (Doc # 17, Pg. 21) Defendants assert Lubrizol Corp. does not manufacture
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any components used in plumbing systems, and LZAM, a separate entity,
manufactures CPVC compounds. (Id.) Eagle Pond argues the Court should allow
Eagle Pond to obtain evidence to show that the Court should pierce the corporate
veil to subject Lubrizol Corp. to potential liability. (Doc # 20, Pg. 7-8) Eagle Pond
will stipulate to Lubrizol Corp.’s dismissal if it cannot provide facts sufficient to
support piercing the corporate veil. (Id.)
In a products liability case, the plaintiff is obligated to produce evidence
reasonably leading to the conclusion that the defendant supplied a defective product
and that the defect caused the plaintiff’s injury. See Piercefield v. Remington Arms
Co., 375 Mich. 85, 99, 133 N.W.2d 129, 135 (1965) (“[P]laintiff relying upon the
rule must prove a defect attributable to the manufacturer and causal connection
between that defect and the injury or damage of which he complains.”). Eagle Pond
has not provided any facts to show that Lubrizol Corp. designed, manufactured, or
sold the allegedly defective CPVC compound that caused the failure in the Eagle
Pond Apartments plumbing system.
Under Michigan law, absent abuse of the corporate form, parent and
subsidiary corporations are separate and distinct entities. Helzer v. F. Joseph Lamb
Co., 171 Mich.App. 6, 9, 429 N.W.2d 835 (1988). The presumption is referred to
as the “corporate veil,” and it may only be pierced where an otherwise separate
corporate entity is used to subvert justice or cause a result contrary to an established
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overriding principal of public policy. Id. Eagle Pond has not attempted to provide
any facts which point to an injustice, nor identified any public policy to allow a
piercing of the corporate veil to hold Lubrizol Corp. liable. Lubrizol Corp. is
dismissed from this case.
E. Claims Against LZAM
1. Economic Loss Doctrine
Defendants argue Eagle Pond’s products liability claims are barred by
Michigan’s Economic Loss Doctrine. (Doc # 17, Pg. 23) Eagle Pond contends that
the Economic Loss Doctrine does not apply to this case because Eagle Pond and
Defendants were not involved, directly or indirectly, in a transaction for goods.
(Doc # 20, Pg. 15) The Court finds that the Economic Loss Doctrine applies.
The Michigan Supreme Court formally adopted the Economic Loss Doctrine
in Neibarger v. Universal Cooperatives, Inc., 439 Mich. 512 (1992), stating:
Where, as here, the claims arise from a commercial
transaction in goods and the plaintiff suffers only economic loss, our
answer is “no”—such claims are barred by the economic loss doctrine.
The economic loss doctrine, simply stated, provides that
“‘[w]here a purchaser’s expectations in a sale are frustrated because the
product is not working properly, his remedy is said to be in contract
alone, for he has suffered only “economic” losses’”. This doctrine
hinges on a distinction drawn between transactions involving the sale
of goods for commercial purposes where economic expectations are
protected by commercial and contract law, and those involving the sale
of defective products to individual consumers who are injured in a
manner which has traditionally been remedied by resort to the law of
torts.
Id. at 521 (emphasis added).
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The Neibarger court held, where a plaintiff attempts to recover for economic
loss caused by a defective product purchased for commercial purposes, the remedy
is provided exclusively by the UCC. Id. at 527–28. This limitation includes the
statute of limitations. Id. In Michigan, the Economic Loss Doctrine may be applied
when a plaintiff is seeking to recover for damage to property other than the defective
product. See id. at 533-34 (construing the property damages alleged by plaintiff as
economic loss). The court explained its policy rationale:
A contrary holding would not only serve to blur the distinction
between tort and contract, but would undermine the purpose of the
legislature in adopting the UCC. The code represents a carefully
considered approach to governing “the economic relations between
suppliers and consumers of goods.” If a commercial purchaser were
allowed to sue in tort to recover economic loss, the UCC provisions
designed to govern such disputes, which allow limitation or elimination
of warranties and consequential damages, require notice to the seller,
and limit the time in which a suit must be filed, could be entirely
avoided. In that event, Article 2 would be rendered meaningless and,
as stated by the Supreme Court in East River [Steamship Corp. v.
Transamerica Delaval Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d
865 (1986)], “contract law would drown in a sea of tort.”
Rejection of the economic loss doctrine would, in effect, create
a remedy not contemplated by the legislature when it adopted the UCC
by permitting a potentially large recovery in tort for what may be a
minor defect in quality. On the other hand, adoption of the economic
loss doctrine will allow sellers to predict with greater certainty their
potential liability for product failure and to incorporate those
predictions into the price or terms of the sale.
Id. at 528.
Eagle Pond argues that the Economic Loss Doctrine should not apply in the
absence of privity of contract between Eagle Pond and the Defendants. Eagle
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Pond’s contention rests on the fact that neither Eagle Pond nor the Five LLCs were
in a position to negotiate the sale of the CPVC compound with LZAM. The original
owners of the Eagle Pond Apartments constructed the apartments, including the
CPVC plumbing system, in 1998 or 1999. (Doc # 20, Pg. 22) The Five LLCs did
not become the owners of the Eagle Pond Apartments until October 2011. The right
to sue assigned to Eagle Pond was not transferred from a party with privity of
contract with the Defendants.
Eagle Pond’s privity of contract argument is incorrect.
The Michigan
Economic Loss Doctrine can apply where there is no privity of contract. Citizens
Ins. Co. v. Osmose Wood Preserving, Inc., 231 Mich. App. 40, 45, 585 N.W.2d 314,
316 (1998). In addition, the cases cited by Eagle Pond are unpersuasive.
Eagle Pond cites two cases to support the privity of contract theory. The first
case, Quest Diagnostics, Inc. v. MCI WorldCom, Inc., 254 Mich. App. 372, 377-78
(2002), involved a defendant contractor who damaged a water main while working
on behalf of his co-defendant. Id. The transaction at issue was for services, not
goods. The court held that the plaintiff did not have a remedy in contract or
commercial law because there was no underlying sale of goods, transaction, or
contract between the parties.
Quest Diagnostics is unpersuasive because the present case involves the sale
of goods. LZAM sold its CPVC compound product for the manufacturing of the
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pipes that were subsequently used to construct the Eagle Pond Apartments’
plumbing system. See Citizens Ins. Co. v. Osmose Wood Preserving, Inc., 231
Mich. App. 40, 46, 585 N.W.2d 314, 316 (1998) (finding a sale of goods where
defendant provided only a chemical product). In addition, Defendants are being
sued only as the manufacturers of the CPVC compound. Id.
The second case, River House at Bridgewater Place Condo Association v.
Bridgewater Condos, L.C., No. 14-03282-NZB, 2014 Mich. Cir. Lexis 157, at *17 (Kent Cir. Dec. 12, 2014), involved products liability claims brought by individual
condominium owners and their insurers against the defendant plumbing company
and defendant piping manufacturer for installing defective piping containing a
CPVC compound. Id. The court held that the Economic Loss Doctrine did not
apply because none of the individual condominium owners nor their insurers were
involved in the contract negotiations with the defendant, and the condominium
owner’s expectations could not be satisfied by contractual remedies. Id.
River House is unpersuasive because it involves claims brought by individual
owners of property that had no knowledge or reason to believe that the plumbing in
their condominiums was defective. The present case involves claims brought by a
commercial real estate development company that acquired an apartment building.
A subsequent commercial purchaser of an apartment building is not comparable to
an individual owner of a single condominium.
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Under Michigan law, a court must consider the “underlying policies of tort
and contract law as well as the nature of the damages.” Neibarger, 439 Mich. at
531. “Application of the economic loss doctrine should not pivot on the type of
damage suffered by the plaintiff (e.g. personal injury v. property damage), but rather
should turn on considerations such as [1] the use of the product (e.g. commercial v.
residential), [2] characteristics of plaintiff (e.g. manufacturer v. private consumer)
and [3] policies implicated in the case (e.g. contract law v. tort law).” Republic Ins.
Co. v. Broan Mfg. Co., 960 F. Supp. 1247, 1252 (E.D. Mich. 1997).
Eagle Pond has brought this products liability action against Defendants for
damages resulting from the costs of replacing the piping throughout the Eagle Pond
Apartments complex. The allegedly defective product, CPVC compound, was used
for manufacturing pipes that were subsequently used to construct the Eagle Pond
Apartments plumbing system. Eagle Pond is a commercial real estate development
company, not a private consumer. Finally, “transactions involving the sale of goods
for commercial purposes . . . are protected by commercial and contract law, and
those involving the sale of defective products to individual consumers who are
injured in a manner which has traditionally been remedied by resort to the law of
torts.” Neibarger, 439 Mich. At 521. No individual consumers are involved in this
action. The Economic Loss Doctrine applies. This action is governed solely by the
UCC.
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2. UCC’s Statute of Repose
Article 2 of the UCC provides that a plaintiff must bring an action to recover
for economic loss and incidental and consequential damages within four years of
tender of delivery of the goods, irrespective of the discovery of the breach. MCL §
440.2725(1)-(2); Home Ins. Co. v. Detroit Fire Extinguisher Co., 212 Mich. App.
522, 525, 538 N.W.2d 424, 426 (1995). Bleznak stated that the Eagle Pond
Apartments were built in 1998 or 1999. (Doc # 20-2, Pg. 114:19-23) Under the
UCC, the latest Eagle Pond could have brought any claim related to the LZAM
CPVC compounds was 2003. Eagle Pond does not dispute that this case should be
dismissed if the Economic Loss Doctrine applies. This case is therefore dismissed.
3. Statute of Limitations for Products Liability Actions
Defendants argue that Eagle Pond’s claims are barred by Michigan’s threeyear statute of limitations for products liability actions even if the Economic Loss
Doctrine and the UCC do not apply to this action. (Doc # 17, Pg. 28) Eagle Pond
contends that the Complaint was filed prior to the running of the statute of
limitations. (Doc # 20, Pg. 22) Neither party disputes that Eagle Pond filed a
complaint on March 28, 2016. On June 2, 2016, Eagle Pond and Defendants entered
into a tolling agreement, which states that any claims that were barred by March 28,
2016 could not be revived. (Doc #17-5, Pg. 3) Eagle Pond then dismissed the first
lawsuit and filed the Complaint in the present action on September 19, 2016. (Doc
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# 1) Eagle Pond contends that March 28, 2016 is at least three days prior to the
running of the statute of limitations. (Doc # 20, Pg. 22) This Court finds that Eagle
Pond’s claims are barred by Michigan’s statute of limitations for products liability
claims.
Michigan law provides a three-year statute of limitations for products liability
actions. MCL § 600.5805(13). In general, a claim accrues “at the time the wrong
upon which the claim is based was done . . . .” MCL § 600.5827. “Wrong” under
MCL § 600.5827 is “the date on which the defendant’s breach harmed the plaintiff,
as opposed to the date on which the defendant breached his duty.” Frank v. Linkner,
500 Mich. 133, 894 N.W.2d 574, 582 (2017) (quoting Moll v. Abbott Laboratories,
444 Mich. 1, 12, 506 N.W.2d 816 (1993)).
Following Moll, Michigan has a “possible cause of action” standard for
determining when the statutory period starts to run. Id. at 828. “Once a claimant is
aware of an injury and its possible cause, the plaintiff is aware of a possible cause
of action.” Id. (“We see no need to further protect the rights of the plaintiff to
pursue a claim, because the plaintiff at this point is equipped with sufficient
information to protect the claim.”). A plaintiff does not need to know the evidence
to establish his cause of action, it is enough that he knows an action exists. Id. A
plaintiff has the responsibility to bring or preserve her claim. Kroll v. Vanden Berg,
336 Mich. 306, 311, 57 N.W.2d 897 (1953).
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Leaks occurred in the Eagle Pond Apartments plumbing system on October
26, 2011; April 15, 2012; March 31, 2013; and June 14, 2013. Bleznak testified
that he knew of the plumbing leaks when the Eagle Pond Apartments were
transferred to the Five LLCs in October 2011. (Doc # 20-2, Pg. 59:18-24) Based
on Michigan’s “possible cause of action” standard, Bleznak was aware of the harm
caused by Defendants’ alleged breach by October 26, 2011. Eagle Pond’s ability
to bring a products liability action against defendants expired in October of 2014.2
Eagle Pond argues that despite being made aware of plumbing leaks, the
leaks that occurred on October 26, 2011, and April 15, 2012 were “common
occurrence[s] in the apartment management business.” (Doc # 20, Pg. 24) Eagle
Pond contends that those leaks were not “the product liability ‘harm’ that Eagle
Pond suffered” and that the Eagle Pond Apartments were “perfectly able to continue
with business as usual.” (Id.) Eagle Pond adds that the repair of the October 26,
2011 and April 15, 2012 leaks was completed quickly and at a lower cost than the
repairs for the subsequent leaks. (Doc # 20, Pg. 25)
According to Eagle Pond, the ruptured pipes at the Eagle Pond Apartments
that occurred on March 31, 2013, and June 14, 2014, constitute the “harm” suffered
and caused by the alleged product defect because they were larger, more damaging,
2
Eagle Pond was assigned the rights and interest in this cause of action by the Five LLCs when
it acquired the Eagle Pond Apartments. See Section II.D.
21
and more expensive to repair. (Doc # 20, Pg. 27) Eagle Pond contends that the
“harms” suffered from the two sets of leaks are not the same because smaller
pipes—the pipes involved in the October 26, 2011 and April 15, 2012 leaks—failed
regardless of their manufacture or composition, and were quickly and inexpensively
repaired. (Id.) In contrast, thicker pipe failures—the pipes involved in the March
31, 2013 and June 14, 2013 leaks—evidence a product defect. (Id.) The Court
disagrees.
First, Eagle Pond’s contention that its first harm was the March 31, 2013
leak is unsupported by the Complaint. Paragraph 4 of the Complaint states, “The
cause of action that is the subject of this complaint arises out of damages suffered
by Eagle Pond arising out of piping failures at the apartment complex (the “piping
failures”).” (Doc # 1, Pg. 13, ¶ 4) Paragraph 6 states, “Eagle Pond experienced a
number of piping failures that caused water damage to the premises.” (Id. at ¶ 6)
Paragraph 7 highlights the damage caused by the June 14, 2013 piping failure. (Id.
at ¶ 7) The Complaint refers generally to “piping failures,” and makes no distinction
between the different leaks.
Second, Eagle Pond’s harm theory is contrary to Michigan law. Eagle Pond
does not dispute that Bleznak was aware of plumbing leaks when the Five LLCs
acquired the Eagle Pond Apartments. The October 26, 2011 leak, in addition to the
awareness of plumbing leaks at the apartments, means that the statutory period on
22
Eagle Pond’s claim began to run on that date. Eagle Pond argues that the March
31, 2013 leak was the first evidence of a product defect, however, a plaintiff does
not need to know the details regarding evidence to support a products liability claim.
The Five LLCs began experiencing leaks, and first suffered injury, on October 26,
2011. The cause of action giving rise to this claim began on that date. While the
March 31, 2013 and June 14, 2013 leaks might have caused more damage, “the
statute of limitations begins to run when the first harm caused by the last act of
defendant[] occurred.” Brooks v. Willow Tree Vill., No. 294544, 2011 WL 711136,
at *4 (Mich. Ct. App. Mar. 1, 2011). Based on undisputed facts, the first harm
caused by the allegedly defective CPVC compound sold by LZAM occurred no
later than October 26, 2011. There is no genuine dispute of material fact regarding
this issue. Eagle Pond’s products liability claims are time-barred.
In addition, Defendants argue that Eagle Pond cannot bring this products
liability action under a negligence theory because the Five LLCs had actual
knowledge of the product defect when they acquired the Eagle Pond Apartments.
Eagle Pond argues that Defendants assertion that the Five LLCs had actual
knowledge of the product defect is erroneous. Viewing the facts in the light most
favorable to Eagle Pond, there are genuine issues of material fact regarding this
issue. Because Eagle Pond’s claims are time-barred, either under the UCC or
Michigan’s products liability statute, the Court need not address this issue.
23
III. CONCLUSION
Defendants Lubrizol Corp. and LZAM’s Motion for Summary Judgment
(Doc # 17) is GRANTED.
Plaintiff Eagle Pond’s claims against the Defendants are DISMISSED.
S/Denise Page Hood
Denise Page Hood
Chief Judge, United States District Court
Dated: September 28, 2018
I hereby certify that a copy of the foregoing document was served upon counsel of
record on September 28, 2018, by electronic and/or ordinary mail.
S/LaShawn R. Saulsberry
Case Manager
24
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