Eleventh Circuit Finds Third-Party Beneficiary Claim Adequately Stated in Alabama Lumber Class Action

In Lisk v. Lumber One Wood Preserving, 792 F.3d 1331 (11th Cir. 2015), the Eleventh Circuit held that the Federal Rule of Civil Procedure 23 (Rule 23) controls in a procedural conflict with the Alabama Deceptive Trade Practices Act (ADTPA). The court also held that the plaintiff adequately stated a claim for relief because Alabama law allows a consumer to recover for breach of an express warranty even in the absence of privity.

The plaintiff entered into a contract with Clean Cut Fence Company (the Company) to build a fence out of treated wood at his home. The Company purchased the wood for the fence from a distributor who obtained the wood from the defendant manufacturer, Lumber One Wood Preserving, LLC (Lumber One). Lumber One’s website, advertising, and product labeling all stated its wood was treated with MCA technology, keeping the wood from rotting for fifteen years. Within three years of instillation, however, the plaintiff’s fence posts had rotted. The Company informed the plaintiff that other customers experienced similar problems with Lumber One’s wood, and the plaintiff filed a complaint seeking to represent a nationwide class of purchasers of Lumber One’s defective wood. Lumber One moved to dismiss the complaint, alleging lack of federal jurisdiction and failure to state a claim on which relief can be granted. The district court granted the motion to dismiss, and the plaintiff appealed.

The court first addressed the conflict between Rule 23 and the ADTPA, finding Rule 23, as a federal procedural rule, controls in federal court. The ADTPA is in direct conflict with Rule 23 because under the ADTPA, a private individual cannot bring a class action; only the Alabama Attorney General or a district attorney may do so. Ala. Code § 8-19-10(f)(1975). To resolve this conflict, the court turned to the Supreme Court’s decision in Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010), where the Supreme Court held that Rule 23 controlled when it conflicted with a New York state statute prohibiting certain kinds of class actions. The Court held that under the Rules Enabling Act, 28 U.S.C. § 2072 (2012) a federal practice or procedure controls over a conflicting state practice or procedure as long as the federal rule does “not abridge, enlarge or modify any substantive right.” The Eleventh Circuit found that the central question in Lisk to be answered: the ADTPA only prohibits certain people from filing class actions, and the Supreme Court held in Shady Grove that Rule 23 did not abridge, enlarge, or modify a substantive right under the New York statute precluding class actions altogether. The court declined to further determine the effect of the plurality opinion in Shady Grove, reasoning that the majority in Shady Grove determined statutes restricting class actions, like the Alabama and New York statutes, do not apply in federal court, and instead Rule 23 controls.

The court then found the plaintiff adequately stated a claim for relief as a third-party beneficiary because he explicitly alleged each of the three necessary elements of the claim in his complaint. The court found that the plaintiff met the pleading standard by alleging facts allowing the court to infer the allegations were plausible. The court acknowledged Lumber One might be able to discredit the claim, but found the allegation that a lumber manufacturer would intend to warrant their product to the end user was not implausible. Thus, the plaintiff did adequately state his express-warranty claim. In light of these findings, the court reversed the district court’s decision and remanded the case.

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