The Eleventh Circuit recently issued an important decision related to the application of the Alabama Deceptive Trade Practices Act (“ADTPA”) in class actions brought in federal court. Lisk v. Lumber One Wood Preserving, LLC, 792 F.3d 1331 (2015).
The suit arose from a contract dispute between plaintiff Lisk and a fence installation contractor which called for use of “treated” wood. The contract provided that “All fencing materials shall be warranted only through their respective manufacturers.” The installer bought the wood from Lumber One Wood Preserving, LLC (“Lumber One”) through a distributor. Lumber One warranted that its wood was treated to preserve it from rot, termites and decay, but the wood was defectively manufactured and treated.
Lisk’s fence rotted, and he filed a putative nationwide class action on behalf of all purchasers of Lumber One’s defectively treated wood. Lumber One moved to dismiss on the grounds that the ADTPA does not authorize a private class action and that plaintiff did not adequately plead an express warranty that runs to a remote purchaser. The district court agreed, dismissing the complaint. Lisk appealed.
Rule 23 versus ADTPA
The Eleventh Circuit acknowledged that the ADTPA provides that only the Alabama Attorney General or a district attorney may bring a class action, and a private individual may not. Thus, if the case had been brought in state court, the statute would preclude the ADTPA class action claims.
However, the court held that Federal Rule of Civil Procedure 23 authorizes a different result because it makes no exception for ADTPA cases. The court further held that Rule 23 trumps the ADTPA based on the following rationale: the federal Rules Enabling Act authorizes the U.S. Supreme Court to adopt rules of practice and procedure that apply in cases arising under federal law and under state law, and those rules displace any conflicting state court provision as long as the federal rule does not “abridge, enlarge or modify any substantive right.” See 28 U.S.C. § 2072; Hanna v. Plumer, 380 U.S. 460 (19695).
Thus, a state statute that precludes class actions for certain types of claims conflicts with Rule 23 and is displaced for claims in federal court so long as Rule 23’s application does not “abridge, enlarge or modify any substantive right.” Lisk, 792 F.3d at 1335 (citing Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010)). A substantive right is one that inheres in the rules of decision by which the court will adjudicate the petitioner’s rights. Lisk, 792 F.3d at 1337 (quoting Royalty Network, Inc. v. Harris, 756 F.3d 1351, 1361 (11th Cir. 2014).
Because Rule 23 does not abridge, enlarge or modify Lumber One’s substantive obligation to make accurate representations about its wood, or Lisk’s right to buy wood that complied with those representations, Rule 23 controls.
The Eleventh Circuit also reversed the district court’s dismissal of the express warranty claim. The court noted that in Alabama a manufacturer’s express warranty may run in favor of a third-party beneficiary like Lisk, a remote purchaser whom Lumber One intended to benefit by its warranty that the wood was properly treated. The court determined that Lisk’s pleading sufficiently stated a claim for express warranty to survive Rule 12(b)(6) dismissal. Lisk, 792 F.3d at 1339.