Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Cal. App.: Award to class over defective marine shower upheld, (Feb 5, 2015)

By Pamela C. Maloney, J.D.

The distribution and sale of a defectively designed marine shower system qualified as both an unlawful and unfair business practice in violation of California’s unfair competition law, a California appellate court decided, in an opinion not certified for publication. The court also determined that the trial court did not abuse its discretion in certifying as a class all owners of ski boats equipped with the shower system and that the class representative had standing to enforce the UCL. The trial court had awarded restitution damages of $300 (the cost to add the shower system) to each member of the class (Boren v. Correct Craft, Inc. February 5, 2015, Mauro, L.).

Background. The class representative, Jayne Boren, purchased a ski boat manufactured equipped with a hot- and cold-water marine shower system that dispensed hot water created by the boat’s running engine. In her class action complaint against the manufacturer and distributor, the purchaser alleged that these showers were dangerous when used as designed because, in order to access continuous hot water, users had to stand on the swim platform while the boat’s engine was idling, which exposed them to highly toxic carbon monoxide fumes from the engine’s exhaust. The trial court certified a class of all present owners of Correct Craft, Inc. ski boards with marine shower systems installed. Following a bench trial, the trial court determined that the manufacturer and distributor had violated the UCL and awarded restitution of $300 to each class member—the amount each member paid for the shower system.

Defective design as unlawful business practice. In finding that the sale and distribution of defectively designed products was both an unlawful and an unfair business practice, the trial court acknowledged that published California decisions were not uniform about how tort claims fit under the UCL. The manufacturer and distributor claimed that the trial court got it wrong, arguing that selling a defectively designed product did not give rise to a UCL violation unless there was evidence of intentional conduct. On appeal, the court distinguished the case cited in support of that argument because it involved the accidental distribution of a defective product. Although there was no evidence that either the manufacturer or the distributor engaged in intentional misconduct, their practices were not accidental. The evidence showed that these companies sold boats with showers that enticed users to shower next to a running engine and the companies’ response to danger posed by possible carbon monoxide poisoning did not involve a recall effort similar to the one undertaken in the cited case. This evidence was sufficient to support the trial court’s determination that the business practices were unlawful.

Having concluded that substantial evidence supported the trial court’s finding that these companies engaged in an unlawful business practice under the UCL, the appellate court opined that it was not necessary to address the argument that the trial court applied the wrong analysis in concluding that they had engaged in an unfair business practice. The trial court had applied the risk benefit test applicable to design defect cases rather than the test set out in section 5 of the Federal Trade Commission Act.

Standing. The appellate court rejected the challenge to the class representative’s standing to file a claim under the UCL, finding that her alleged economic injury was sufficient to confer standing. Paying more than a buyer would have paid because of an unfair business practice causes an economic injury at the moment of purchase. The benefit for which the class representative bargained and paid was a shower system that would safely direct warm water to the swim platform; however, that was not what she, or the other class members, received. The evidence supported the finding that neither the class representative nor the class members would have purchased the $300 shower system had they known about the risk of carbon monoxide poisoning and that the shower’s defective design was the legal cause of the economic injury.

Class certification. Challenges to class certification were also rejected. The manufacturer and distributor argued that the class representative’s claim was not typical of the class because the various purchase dates would give rise to different statute of limitations defenses The UCL statute of limitations is four years and the period was tolled until a reasonable plaintiff would have discovered the factual basis for the claim. There was no evidence that purchasers of the ski boat would have had knowledge of the danger until the Coast Guard issued a carbon monoxide safety alert. Thus, the statute of limitations began running at the same time for all claims. In addition, the appellate court found that each class member had paid $300 for a dangerously defective product which was sufficient evidence of economic injury to establish a well-defined community of interest.

The case is No. C071080.

Attorneys: Richard Dale McCune (McCune & Wright, LLP) for Jaynie Boren. Ralph W. Robinson (Wilson, Elser, Moskowitz, Edelman & Dicker LLP) for Correct Craft, Inc.

Companies: Correct Craft, Inc.

Cases: StateUnfairTradePractices CaliforniaNews