Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. Ariz.: Class action redhibition, unfair trade practices claims against air conditioner manufacturer go forward, (Sep 8, 2016)

By John W. Scanlan, J.D.

Alleged defects in an air conditioning unit from premature failure of its copper coils were not apparent to the buyer, a federal district court in Arizona ruled in allowing a redhibition claim brought as part of a class action suit by four buyers of air conditioners, air handlers, and air pumps to go forward against the manufacturer. The allegations that the manufacturer knew of these defects but did not disclose this information, misrepresenting instead that the products were free from defects, were sufficient to state a claim for violation of the state’s deceptive and unfair trade practices act (Adelman v. Rheem Manufacturing Co., September 7, 2016, Sedwick, J.).

The buyers filed a putative class action on behalf of purchasers of defective air conditioners, air handlers, and air pumps manufactured by Rheem Manufacturing, alleging violation of Louisiana’s redhibition law, violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), violation of the Magnuson-Moss Warranty Act, breach of express warranty and breach of express warranty under Arizona law, unjust enrichment, and seeking declaratory relief. Rheem moved to dismiss the claims for redhibition, FDUTP, unjust enrichment, and declaratory relief.

Redhibition. The buyer of an air conditioning unit that stopped cooling his home within three years when the copper coil began leaking refrigerant may bring a redhibition claim because the alleged defect was not apparent to him. Although Rheem argued that the buyer should have discovered from a visual inspection or from its website that its product contained a copper coil, the relevant fact was not whether the coils were copper but that copper coils were defective, and this fact was not posted on its website or discoverable from a visual inspection. In addition, while Rheem also argued that the buyer could have discovered that copper coils were susceptible to corrosion due to "industry-wide acknowledgement" of the problems with copper tubing, the company had not shown that a reasonably prudent buyer with common knowledge would know of these problems. Finally, the consumer was not required to prove that he gave Rheem an opportunity to fix the defect prior to litigation. Only good faith sellers must be given this opportunity, but as the manufacturer of the product, Rheem is presumed to be a bad faith seller.

FDUTPA. The FDUTPA claim was not dismissed because it was sufficiently pleaded under Rule 9(b)’s heightened pleading requirements. Rheem argued that the buyers failed to sufficiently allege unfair or deceptive conduct by Rheem and a related state of mind. However, the buyers alleged that from a study Rheem had commissioned that it knew that its copper coils had a tendency to fail prematurely due to corrosion but did not disclose this information to the buyers and instead affirmatively warranted that they were free from defects.

Other claims. The claim for declaratory relief, which was only slightly amended from an earlier claim that had been dismissed, was dismissed because it merely duplicated other claims in the complaint and, thus, served no purpose. Similarly, the unjust enrichment claim was dismissed for the same reasons it was dismissed earlier.

The case is No. 2:15-cv-00190 JWS.

Attorneys: Adam Arthur Edwards (Greg Coleman Law PC) for Craig Adelman. Adam Michael Fowled (Greenberg Tauris LLP) for Rheem Manufacturing Co.

Companies: Rheem Manufacturing Co.

Cases: StateUnfairTradePractices ArizonaNews