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In re Hardieplank Fiber Cement Siding Litigation

United States District Court, D. Minnesota

January 2, 2018


          Robert K. Shelquist, Karen Hanson Riebel, and Scott Moriarity, Lockridge Grindal Nauen, PLLP, Plaintiffs' Lead Counsel, and Charles J. LaDuca, Cuneo Gilbert & LaDuca, LLP; Charles E. Schaffer, Levin, Fishbein, Sedran & Berman; Clayton D. Halunen, Melissa Wolchansky, Amy E. Boyle, and Christopher J. Moreland, Halunen Law; Michael McShane, Audet & Partners, LLP; Nicholas J. Drakulich, The Drakulich Firm; D. Michael Campbell, Campbell Law; Lawrence Deutsch, Shannon J. Carson, Robin Switzenbaum, and Jake Polakoff, Berger & Montague PC; and Frances Baillon and Shawn J. Wanta, Baillon Thome Jozwiak & Wanta LLP, Plaintiffs' Executive Committee.

          Christopher M. Murphy, Peter B. Allport, and Daniel Campbell, McDermott Will & Emery LLP; and Aron J. Frakes and Rachna B. Sullivan, Fredrikson & Byron, PA; Counsel for Defendant James Hardie Building Products Inc.


          Michael J. Davis Judge


         This matter is before the Court on Plaintiffs' Motion for Class Certification [Docket No. 229] and Defendant's Motion to Exclude Plaintiffs' Experts' Testimony [Docket No. 244]. The Court heard oral argument on December 15 and 16, 2016.

         The Court grants Defendant's Motion to Exclude Plaintiffs' Experts' Testimony because the expert's methodology is fundamentally flawed and untrustworthy and his opinions are unhelpful and unreliable. The Court denies Plaintiffs' Motion for Class Certification. Any common issues of law and fact will be overwhelmed by a myriad of individualized fact questions and a variety of applicable state laws with material differences. In particular, causation issues will require individualized mini-trials for each class member.


         A. Factual Background

         1. Overview of the Hardieplank Product

         Defendant James Hardie Building Products Inc. (“Hardie”) originated in Australia in 1888, but now sells fiber-cement products around the world. ([Docket No. 260] Moriarity Decl., Ex. B, Exponent Report at 6.) Fiber-cement is a composite material made of sand, cement, and cellulose fibers. (Id.) Hardie first began selling its exterior fiber-cement siding, Hardieplank, in the United States in 1987. (Id.) Since that time, Hardie has made at least seven major changes to Hardieplank, including changing formula additives, design changes (such as altering the shape of the planks to improve water shedding), and manufacturing method improvements. (Id. at 18-20.) Some Hardieplank versions are sold with Hardie's factory-coated paints, while other versions are sold as primed-only products, which can be painted either in a factory or in the field. (Id. at 14-16.)

         2. The Hardieplank Warranty

         Until 2009, Hardie provided a 50-year prorated limited warranty with Hardieplank. Since 2009, it has provided a 30-year non-prorated limited warranty. (Exponent Report at 6.) Both warranties are referred to as Hardie's Limited Warranty. The Limited Warranty warrants that Hardieplank complies with ASTM C1186, the American Society for Testing and Materials standard, when manufactured and “is free from defects in material and workmanship” / “is free from defects in material and manufacture.” ([Docket No. 273] Allport Decl., Ex. 3, 30-Year Limited Warranty § 1; Allport Decl., Ex. 4, 50-Year Limited Warranty § 1.) With regard to freeze-thaw resistance in exterior fiber-cement products, ASTM C1186 provides:

The specimens, when tested in accordance with Test Method C1185 [], for 50 [freeze-thaw] cycles, shall not show visible cracks or structural alteration such as to affect their performance in use. The ratio of retained strength as calculated from the [flexural strength] test results shall be at least 80%.

([Docket No. 273] Allport Decl., Ex. 6, ASTM C1186 § S.7.)

         The 50-Year Limited Warranty also states that, when “properly installed and maintained according to Hardie's published installation instructions, the Product for a period of 50 years from the date of purchase . . . will not crack, rot or delaminate.” (50-Year Limited Warranty § 1.)

         The Limited Warranty extends to the first retail purchaser of the siding, the first owner of the structure to which the siding is applied, and the first transferee of the structure. (30 Year Limited Warranty § 1; 50-Year Limited Warranty § 1.) The Limited Warranty excludes coverage for performance of any third-party paints, stains, or coatings applied to Hardieplank. (30-Year Limited Warranty § 4; 50-Year Limited Warranty § 3.) The Limited Warranty also excludes from coverage damage or defects resulting from “any cause other than manufacturing defects attributable to Hardie.” (Id.)

         As for a remedy, the 50-Year Limited Warranty provides:

If during the Warranty period, any Product proves to be defective, Hardie, in its sole discretion, shall replace the defective Product before it is installed, or, during the first year, reimburse the covered person for resulting losses up to twice the retail cost of the defective portion of the Product. During the 2nd through the 50th year, the warranty payment shall be reduced by 2% each year such that after the 50th year no warranty shall be applicable. If the original retail cost cannot be established by the covered person, the cost shall be determined by Hardie in its sole and reasonable discretion. Hardie's replacement of the defective Product or granting of a refund pursuant to Section 1 of this Warranty SHALL BE THE SOLE EXCLUSIVE REMEDY available to the covered person with respect to any defect. Hardie will not refund or pay any costs in connection with labor or accessory materials.

(50-Year Limited Warranty § 1.)

         The 30-Year Limited Warranty provides that, during the 30-year period, if the siding is

defective in material or workmanship, Hardie will, in its sole discretion, either repair or replace the defective portion of the Product, or, during the first (1st) through the thirtieth (30th) year, reimburse the Covered Person for up to twice the original retail cost of the defective portion of the Product. . . . Hardie's repair, replacement, or refund of the defective portion of the Product or reimbursement pursuant to Section 2 of this Limited Warranty is the exclusive remedy for the Covered Person for any defect in materials or workmanship. HARDIE WILL NOT REFUND OR PAY ANY COSTS IN CONNECTION WITH LABOR OR ACCESSORY MATERIALS.

(30-Year Limited Warranty § 2.)

         3. Alleged Defects in Hardieplank Siding

         Hardieplank is manufactured using the Hatschek process, in which a roller applies multiple fiber-cement layers or “laminas.” (Exponent Report at 7-8.) When the laminas in the substrate separate, the board “delaminates.”

         According to Plaintiffs, Hardieplank has a common defect of low interlaminar bond (“ILB”) strength, which makes it easier for moisture to invade the substrate and push the laminas apart, causing delamination and coating adhesion problems. (Exponent Report at 2-3.) Thus, Hardieplank fails prematurely before its expected life. (Id.)

         According to Plaintiffs' expert's testing, newly manufactured Hardieplank has an average ILB of 0.82 Megapascals (“MPa”). (Exponent Report at 68.) Plaintiffs assert that CertainTeed, a Hardie competitor, manufactures its fiber-cement siding with an average ILB of 1.97 MPa. ([Docket No. 273] Allport Decl., Ex. 7, Wolf Dep. 331. See also Moriarity Decl., Sealed Ex. 5 at 8.) Plaintiffs' experts did not conduct their own tests of any non-Hardieplank fiber-cement siding; the CertainTeed estimate is based on an internal Hardie test of two CertainTeed boards.

         Plaintiffs' expert, Joel Wolf, conducted 50- and 150-cycle freeze-thaw tests on 5 samples of new Hardieplank and 6 samples of used Hardieplank taken from Plaintiffs' structures. (Exponent Report at 66-70.) Of the 5 new samples, 3 showed some decrease in ILB after 50 freeze-thaw cycles and 3 showed some decrease in ILB as compared to original ILB after 150 freeze-thaw cycles. (Id. 69.) Of the 2 used samples tested for 50 cycles, one increased in ILB and one decreased. (Id.) Of the 3 used samples tested for 150 cycles, all three decreased in ILB. (Id.) The sixth sample appeared to end up with an ILB of 0. (Id.)

         Wolf opines that Hardie

fiber-cement products have a common defect - low inter-laminar bond strength. This common defect and high water absorption results in the propensity for delamination and coating adhesion problems due to extended exposure to climactic variables, including freeze-thaw cycling, snow, and precipitation. This common defect also results in the propensity for delamination when the siding is subject to mechanical stresses from installation and handling, including nailing and saw cutting of the siding.

(Exponent Report at 2.)

         Freeze-thaw cycling occurs when water enters the pores in the material, freezes, and expands; then the expansion creates new pores; the ice melts and water fills the new pores; and the process repeats until the material breaks down. ([Docket No. 273] Allport Decl., Ex. 31, RDH Building Science Laboratories (“BSL”) Report at 7-10.) However, this process does not occur unless the material reaches the “critical degree of saturation, ” such that there is enough water to freeze and expand and distort the porous material. (Id. at 9.) If the material is not at the critical degree of saturation, freeze-thaw cycling can occur indefinitely without causing damage. (Id. at 9-10.)

         According to Hardie's expert, Hardieplank only reaches the critical degree of saturation if it is continuously submerged in water. (BSL Report at 36-37.) Plaintiffs' expert admits that Hardieplank delamination is typically limited to boards closest to the ground or on a second floor wall close to the intersecting roof where the siding is likely to come into contact with accumulated snow or a “path of flowing water.” (Exponent Report at 62, 82.) Hardie asserts that the only boards on Plaintiffs' houses that show delamination were in these locations and were installed in violation of Hardie's installation instructions with insufficient clearance, so that they were exposed to standing water. ([Docket No. 273] Allport Decl., Ex. 16, Tsongas Report at 119.) Thus, Hardie asserts that installation error caused all delamination.

         Plaintiffs' experts admit that a certain amount of gapping, up to 1/16th of an inch, is normal ([Docket No. 273] Allport Decl., Ex. 7, Wolf Dep. 269-70), that a larger gap is not a problem if the builder installed flashing behind the gap (id. 270), that gapping could also be the result of installation error (Allport Decl., Ex. 34, Davis Dep. 128), and that the only way to know if a gap was caused by excessive shrinkage of Hardieplank is to measure the boards on both sides of the gap (id. 159-60).

         One of Hardie's experts reported that when he removed the allegedly “warped” siding from Plaintiffs' walls, he found that the sheathing underneath was warped, causing the flexible Hardieplank board to appear warped. ([Docket No. 273] Allport Decl., Ex. 16, Tsongas Report at 2-3, 43-44, 94-95.) Plaintiffs' expert agreed that, when the allegedly warped siding was removed from the wall and placed on the ground, it no longer appeared warped and lay flat. ([Docket No. 273] Allport Decl., Ex. 34, Davis Dep. 126.)

         Hardie's expert found 29 cracks out of 10, 000 Hardieplank boards inspected on Plaintiffs' houses. ([Docket No. 273] Allport Decl., Ex. 16, Tsongas Report at 2.) The cracks typically occurred at a bottom corner of a plank around a nail head where the nails were improperly installed too close to the edges of the board. (Id.) Failing to comply with Hardie installation instructions to install nails ¾ to 1 inch away from the edge of the siding causes cracks to form, as seen on Plaintiffs' houses. (Id. at 26; [Docket No. 273] Allport Decl., Ex. 32, 2004 Hardie Installation Instructions; Allport Decl., Ex. 45, Exponent Report Appendix Excerpts, at ¶ 13-40.)

         As for discoloration and fading, Plaintiffs' expert concluded that the degradation of the coatings on the six Plaintiffs who complained of it was normal for the age of Plaintiffs' homes. (Exponent Report at 100.) Plaintiffs' coatings expert also concluded “that there is nothing defective about the coatings.” ([Docket No. 273] Allport Decl., Ex. 37, Guyer Dep. 146.)

         4. Warranty Claims

         From 2001 through 2015, Hardie sold billions of square feet of Hardieplank in the United States and received warranty claims on a very small percentage of the siding sold. ([Docket No. 273] Allport Decl., Ex. 8, Sealed Priest Report at 20.)

         Plaintiffs' experts opined that, based on warranty claims, delamination was the primary cause of Hardieplank failure and that such failures occurred more often in cold, wet conditions. (Exponent Report at 48, 57; Moriarity Decl., Ex. 13, Steffey Dep. 71.) The warranty claim data shows that most warranty claims were made within 6 years of installation, with almost all claims occurring within 15 years. (Exponent Report at 54.)

         5. Hardie's Advertising

         In 2000, Hardie was reaching 32 million consumers through its advertising. (Moriarity Decl., Ex. 23, 2000 HardiAdvantage Alliance Training Manual at 649.) In 2000 and 2002, Hardie advertised in several major home-living magazines, in newspapers, on the radio, and on television; it also conducted one-on-one presentations with marketing and management teams for dealers and builders throughout the United States. (Id.; Moriarity Decl., Ex. 24, 2002 Sweet's Catalog Hardie Advertisement at 95.) Hardie's marketing strategy used intermediaries to transmit its representations about Hardieplank to consumers through cooperative marketing. (See Moriarity Decl., Ex. 27, 2004 Hardie Factory Build Housing Handbook at 790-91.)

         A 1997 Hardie advertisement stated that Hardieplank is “low maintenance, ” “resists moisture damage, ” “won't crack, rot or delaminate, ” and “offer[s] a lifetime of low maintenance backed by a 50-year product warranty” (Moriarity Decl., Ex. 28, 1997 Hardiplank Hardipanel Brochure at 514-15.) In 2000-2004, it advertised that Hardieplank was “backed with a 50-year limited transferable warranty” and asserted that Hardieplank is “low maintenance, ” “resists moisture damage, ” “won't crack, rot or delaminate, ” or other similar statements. (See, e.g., Moriarity Decl., Ex. 29, 2000 Hardie Siding Brochure; Moriarity Decl., Ex. 30, 2001 Hardie Advertisement; Moriarity Decl., Ex. 31, 2001 Hardie Brochure; Moriarity Decl., Ex. 32, 2002 Hardie Brochure; Moriarity Decl., Ex. 34, 2003 Sweets Catalog Hardie Advertisement; Moriarity Decl., Ex. 35, 2004 Sweets Catalog Hardie Advertisement.) A 2008 brochure stated: “James Hardie siding is tough. Remarkably so. And to prove it, most of our products come with a 50-year transferable warranty. Rain. Hail. Impact. Wind. Fire. Fluctuations in humidity. Even hurricanes. None of its stands a chance against James Hardie.” (Moriarity Decl., Ex. 39, 2008 Hardie “A Siding for All Seasons” at 549.)

         Wolf opined that, if a customer sees a 50-year warranty, the customer expects the siding to last 50 years. (Moriarity Ex. 6, Wolf Dep. 203.) Plaintiffs also point to a 1993 article from the Journal of Consumer Research, in which the authors note the theory that manufacturers might use the warranty as a “signal” of the durability of their goods, and attempt to test whether consumers do view the length of a warranty as a signal of durability. (Moriarity Decl., Ex. 43, William Boulding and Amna Kirmani, A Consumer-Side Experimental Examination of Signaling Theory: Do Consumers Perceive Warranties as Signals of Quality?, 20 J. Consumer Research 111 (1993).) The study's authors opined that their laboratory experiment showed that, if a firm has high credibility, consumers are more likely to see a long warranty as a signal of quality, but that this is not true for a low credibility firm. (Id. at 119.) They further explained that their research was limited to one laboratory experiment with one fictional company that made personal computers, so generalizations could not be made. (Id. 119-22.)

         6. Overview of Named Plaintiffs

         There are eleven Plaintiffs named in the First Amended Consolidated Complaint and two more sets of Plaintiffs who filed separate complaints. They live in 10 different states. Each Plaintiff's specific facts are set forth in detail in the order addressing the individual summary judgment motion directed at that Plaintiff's claims. Some Plaintiffs chose and purchased Hardieplank, while other purchased used homes that already had Hardieplank installed. Some of those who purchased used homes knew that Hardieplank was installed on the home, while others did not. Some who purchased used homes were informed of problems with the siding before purchasing the house. Some Plaintiffs viewed Hardie marketing or advertising materials before purchasing the siding or house. Others received information about Hardieplank only from third parties. Still others recall no particular information about Hardieplank that they received before making their purchase.

         Plaintiffs allege various different problems with their Hardieplank: delamination, gapping, warping, cracking, peeling/loss of coating, and fading or discoloration.

         B. Procedural History

         In March 2011, Plaintiff Heidi Picht sued Hardie in Minnesota state court and the matter was removed to this Court. Hardie moved for summary judgment and to dismiss. (Civil File No. 11-958 [Docket No. 25]) The motion was stayed until the remainder of the MDL cases were also at the summary judgment stage.

         After their individual cases were consolidated in this Court as a Multidistrict Litigation, eleven Plaintiffs from eight states filed a Consolidated Complaint. [MDL Docket No. 33] On July 15, 2013, this Court denied in part and granted in part Defendant's motion to dismiss the Consolidated Complaint. [MDL Docket No. 60] On August 9, 2013, Plaintiffs filed the First Amended Consolidated Complaint, which names the following as named Plaintiffs: Heidi Picht (Minnesota), Jonathan Bowers (Minnesota), Hugh Fenwick (Nevada), Michael Swiencki (Georgia), the Susan S. Buchanan Personal Residence Trust through its trustee Susan Buchanan (Florida), James Dillingham (California), John Brown (Illinois), Mark Kostos (Illinois), Richard Treece (Illinois), Masoud Kavianpour (Virginia), and Brian Bethel (Ohio). [MDL Docket No. 63]

         On June 30, 2014, the Court granted in part and denied in part Defendant's motion to dismiss the Complaint in a tag-along action filed by Wisconsin Plaintiff Steven Schindler. [MDL Docket No. 116] Schindler has since left the litigation and has been replaced with Wisconsin Plaintiffs David and Sharon Angelici (Civil File No. 14-285 [Docket Nos. 33-1, 36].)

         On April 27, 2015, the Court granted in part and denied in part Defendant's motion to dismiss the Complaint in a tag-along action (Civil File No. 14-4655) filed by Colorado Plaintiff John Hernandez. [MDL Docket No. 135]

         Based on the First Amended Consolidated Complaint [MDL Docket No. 63], the Angelicis' Complaint, and Hernandez's Complaint, remaining before the Court are 1) breach of express warranties by all Plaintiffs except Illinois Plaintiffs Treece and Kostos, 2) breach of implied warranties by Minnesota Plaintiff Picht and Colorado Plaintiff Hernandez; 3) a negligence claim by Picht; 4) declaratory and injunctive relief claims for all Plaintiffs; 5) statutory consumer protection claims by all Plaintiffs; 5) an unjust enrichment claim by Wisconsin Plaintiffs the Angelicis; and 6) a failure of essential purpose claim by Hernandez.


         A. Opinion of Plaintiff Expert Joel Wolf

         Plaintiffs' expert Joel Wolf is an engineer for Exponent Failure Analysis Associates (“Exponent”). ([Docket No. 260] Moriarity Decl., Ex. A, Wolf CV.) Wolf is a licensed professional civil engineer with a bachelor's and master's degree in civil engineering from the University of Wisconsin. (Id.)

         Wolf issued an expert report on July 7, 2015. ([Docket No. 260] Moriarity Decl., Ex. B, Exponent Report.) He reviewed Hardie's formulas for Hardieplank from 1998 through 2014. (Id. at 9-10, 18-20.) He opined that many of Hardie's improvements to the Hardieplank formula were caused by Hardie's concern about the siding's freeze-thaw performance and to improve ILB. (Id. at 23.)

         Based on Wolf's review of Hardie documents produced in this lawsuit, he opined that Hardieplank had concerns with delamination or separation of the lamina, moisture intrusion in the substrate, coating issues, shrinkage or expansion of the substrate, and ILB strength. (Exponent Report at 24-31.) The most common warranty claim received by Hardie involved delamination. (Id. at 47-48.)

         Based on academic studies, Wolf opined that there are general concerns about the ability of fiber-cement siding to tolerate moisture intrusion, especially in freeze-thaw climates, and that Hardie's Hatschek process made the fiber-cement siding particular susceptible to moisture intrusion and freeze-thaw issues. (Exponent Report at 117-18.)

         Wolf and other Exponent employees visited Plaintiffs' homes and visually inspected the Hardieplank on their structures. (Exponent Report at 59-60.) Wolf visually inspected more than 1, 000 specimens of Hardieplank that Hardie had received from warranty claimants. (Id. at 108-13.)

         Wolf performed a laboratory freeze-thaw analysis with 6 new planks supplied by Hardie and 6 planks taken from Plaintiffs' structures, testing for ILB, flexural strength, and moisture absorption. (Exponent Report at 66-75.) Wolf also employed a consultant to perform a compositional analysis. (Id.)

         When testing for ILB, Wolf tested 5 unused planks and 6 used planks. (Exponent Report at 69.) Wolf found that the average ILB for unused Hardieplank was 0.82 MPa, and the average ILB for used Hardieplank from Plaintiffs' houses was 0.56 MPa. (Id. at 68.) Wolf's laboratory testing of 5 unused Hardieplank planks showed that exposure to 50 freeze-thaw cycles, the ASTM industry standard, resulted in a 2.8% increase in average ILB strength (id. at 68); the ILB strength of 40% of the 5 unused samples increased after exposure to 150 freeze-thaw cycles (id. at 69); the ILB strength of the 2 samples from Plaintiffs' houses exposed to 50 freeze-thaw cycles increased in 1 sample and decreased in the other (id.); and the ILB strength of the used samples that were exposed to 150 freeze-thaw cycles all decreased (id.).

         Based on these tests, Wolf opined that freeze-thaw exposure reduced Hardieplank's ILB, making it more vulnerable to moisture intrusion and delamination. (Id. at 70.)

         Based on Wolf's statistical analysis of Hardieplank warranty claim data, he concluded that there was a statistically significant association between Hardieplank failures and exposure to moisture through rain, snowfall, and freeze-thaw cycles. (Exponent Report at 56-57.)

         Based on Exponent's analysis, Wolf opined that coatings were not a contributor to Hardieplank failures. (Exponent Report at 104-05.)

         Overall, Wolf opined that all Hardieplank had a fundamental intrinsic defect: low ILB, which made the siding vulnerable to moisture intrusion and premature deterioration, which caused delamination and reduced coating adhesion. (Exponent Report at 2.) Wolf also opined that Hardieplank should, but would not, last 50 years. (Id. 3, 114-16.) Finally, he provided a formula that purports to calculate damages on a classwide basis by assuming that all houses are 3, 000 square feet, two-story houses, ...

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