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La Crosse County v. Trinity Industries, Inc.

United States District Court, W.D. Wisconsin

March 31, 2016

LA CROSSE COUNTY, individually, and on behalf of all others similarly situated, Plaintiff,
v.
TRINITY INDUSTRIES, INC. and TRINITY HIGHWAY PRODUCTS, LLC, Defendants.

OPINION & ORDER

JAMES D. PETERSON, District Judge.

Defendants Trinity Industries, Inc. and Trinity Highway Products, LLC design and manufacture highway safety equipment, including a guardrail end terminal system known as the ET Plus. In 2000, the Federal Highway Administration (FHWA) approved the ET Plus, which is now in widespread use on highways throughout the country. But in the years that followed, Trinity Industries and Trinity Highway Products changed the design of the ET Plus without informing the FHWA. The changes made the system less safe, and when they finally came to light in 2012, Trinity Industries and Trinity Highway Products found themselves on the wrong end of a qui tam suit in federal court. A jury ultimately returned a substantial verdict against them, but that award compensated the United States government and not other entities that had purchased ET Plus units. Plaintiff La Crosse County filed this class action lawsuit on behalf of state and local highway departments that purchased ET Plus end terminals. La Crosse County asserts claims for declaratory judgment, design defect, deceptive trade practices, false advertising, breach of contract, breach of warranty, and unjust enrichment.

Trinity Industries and Trinity Highway Products have moved to dismiss La Crosse County’s amended complaint, contending that the court lacks subject matter jurisdiction and that La Crosse County has failed to state claims upon which relief can be granted. The court will grant the motion to dismiss in part. La Crosse County’s claims for breach of warranty will survive, as will its claims for deceptive trade practices and false advertising. And La Crosse County’s claim in the alternative for unjust enrichment will proceed for now. But the court will dismiss the remaining claims in the amended complaint. The court will also decline to stay this case pending an appeal in the qui tam suit.

ALLEGATIONS OF FACT

The court draws the following facts from the allegations in La Crosse County’s amended complaint, Dkt. 32, accepting them as true for purposes of reviewing the motion to dismiss. Bonte v. U.S. Bank, N.A., 624 F.3d 461, 463 (7th Cir. 2010). The parties also refer to documents discussed in the amended complaint and to judicially noticeable materials from the records of other lawsuits. The court can consider these materials without converting the motion to dismiss into a motion for summary judgment. Brownmark Films, LLC v. Comedy Partners, 682 F.3d 687, 690 (7th Cir. 2012).

Trinity Industries is a Delaware corporation with its principal place of business in Dallas, Texas. Trinity Highway Products is a Delaware limited liability company (La Crosse County has not identified the company’s members or their citizenships). The court will refer to both of these defendants, collectively, as “Trinity.”

Trinity manufactures and sells highway safety equipment. This case is about Trinity’s ET-Plus system, which is a patented guardrail end terminal for which Trinity holds the exclusive license to manufacture. The ET Plus is designed to reduce damage or injury that could occur when a vehicle crashes into the end of a guardrail. The system has four basic sections: (1) an impact plate; (2) a deflector; (3) an extruder throat or extruder chamber; and (4) a feeder chute or feeder channel. The system attaches to the end of a standard “W beam” style guardrail, as depicted below and in La Crosse County’s amended complaint:

(IMAGE OMITTED)

Dkt. 32, figure 1 (depicting an ET Plus unit installed on the left side of a road).

When a vehicle collides with the impact plate, the entire assembly is designed to move with the car along the guardrail. The guardrail passes through the feeder channel, flattening out of its W shape and curling into a ribbon away from the vehicle. This sliding design absorbs the vehicle’s energy without causing a severe impact that could injure the vehicle’s occupants. Most important, it prevents the guardrail from impaling the vehicle. The FHWA, an agency within the United States Department of Transportation, approved the ET Plus system in 2000. The Wisconsin Department of Transportation approved the ET Plus system as well, once Trinity submitted proof that the FHWA had approved it. This approval meant that the ET Plus system could be used on Wisconsin roadways.

Between 2002 and 2005, Trinity modified the ET Plus system. Among other changes, the new design narrowed the feeder channel from five inches to four inches. That change saved Trinity $2.00 per unit, with an estimated total savings of $250, 000 over five years. But the changes also made the product more dangerous. The narrower (and also shorter) feeder channel would sometimes prevent the guardrail from feeding through properly. This resulted in “throat lock, ” meaning that the impact plate would get stuck as it slid down the guardrail. Rather than absorbing the impact of a wayward vehicle, a locked-up system would cause the guardrail to double over on itself or spear through the vehicle and endanger its occupants.

Trinity did not seek the FHWA’s approval for this design modification, nor did Trinity include the change in a 2005 submission to the FHWA that disclosed eight other changes. Yet Trinity continued to certify to its customers that the ET Plus system had been tested and approved according to the FHWA’s standards. The company has sold thousands of modified units since 2005.

The FHWA learned of Trinity’s modifications in January 2012, and the agency scheduled a meeting with Trinity for February 14, 2012. During the meeting, Trinity admitted that it had narrowed the feeder channel to four inches, indicating that the change was a “detail inadvertently omitted” from earlier submissions to the FHWA. Id. ¶ 55. But Trinity affirmatively represented that the four-inch design had passed crash tests in 2005. Based on these representations-which La Crosse County alleges were false-the FHWA issued a memorandum in June 2014, indicating that the ET Plus system had an “unbroken chain of eligibility” since 2005. Id.

In March 2012, Joshua Harman (who is not a party to this suit) filed a qui tam action alleging that Trinity had defrauded the federal government by not disclosing its design changes.[1] The case proceeded to trial, and a jury found that Trinity made false claims to the government regarding the safety of the ET Plus system. The court entered final judgment in favor of the United States and Harman, and Trinity appealed. Since the jury’s verdict, 42 states and the province of Quebec have banned installations of the ET Plus system on their roadways. Wisconsin did so in November 2014, but is now considering whether to re-add the ET Plus system to its approval list. The FHWA also investigated and re-tested the system. But the agency concluded that the four-inch design met the appropriate safety criteria and was eligible for federal-aid reimbursement. See Federal Highway Administration, FHWA Review of ET-Plus, https://www.fhwa.dot.gov/guardrailsafety/index.cfm (last updated Jan. 6, 2016).

Entities that purchased the modified ET Plus system, like La Crosse County, did not recover damages as part of the qui tam action. Thus, on February 25, 2015, La Crosse County filed a products liability suit in this court alleging claims individually and on behalf of both a statewide class and a nationwide class. After Trinity moved to dismiss the initial complaint, La Crosse County filed an amended complaint. Dkt. 32. Trinity has now moved to dismiss the amended complaint. Dkt. 36.

The court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332(d). La Crosse County has not properly pleaded Trinity Highway Products’s citizenship. But Trinity Industries and at least one member of the proposed plaintiff class are citizens of different states, and the amount in controversy exceeds $5, 000, 000. At this point, there is no reason to decline to exercise jurisdiction under § 1332(d)(3) or (d)(4).

ANALYSIS

La Crosse County’s amended complaint alleges eight claims against Trinity:

1. Declaratory relief under 28 U.S.C. § 2201 et seq., on behalf of a nationwide class;
2. Strict liability design defect, on behalf of a nationwide class;
3. Breach of contract, on behalf of a statewide class;
4. Violations of the Wisconsin Deceptive Trade Practices Act (DTPA), Wis.Stat. § 100.18, on behalf of a statewide class;
5. False advertising, on behalf of a statewide class;
6. Breach of express warranty, on behalf of a statewide class;
7. Breach of implied warranties of merchantability and fitness for a particular purpose, on behalf of a statewide class; and
8. In the alternative, unjust enrichment, on behalf of nationwide and statewide classes.

Trinity has moved to dismiss each of these claims, invoking Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Trinity contends that La Crosse County lacks standing to pursue class claims on behalf of a nationwide class and that the court therefore lacks subject matter jurisdiction over Claims 1, 2, and 8. On the merits, Trinity contends that La Crosse County has failed to state any claim upon which relief can be granted and that the court should therefore dismiss the entire amended complaint. As an alternative to dismissal, Trinity moves the court to stay this case pending its appeal in Harman. Dkt. 38.

After reviewing the amended complaint and the parties’ submissions, the court will grant Trinity’s motion to dismiss in part. Trinity’s challenge to subject matter jurisdiction is not persuasive. But La Crosse County has failed to allege facts that would entitle it to relief on any but its breach of warranty claims and DTPA and false advertising claims. La Crosse County has not formally sought leave to amend its pleadings, but the court would not be inclined to give the county a third opportunity to plead its claims. As for Trinity’s motion to stay, there is no reason to keep this case on hold during the appeal in Harman, and so the court will deny the motion.

A. Standing

Trinity challenges whether the court has subject matter jurisdiction over the nationwide class claims, which La Crosse County proposes to bring on behalf of “[a]ll persons or entities who purchased one or more defective ET-Plus guardrail system[s] (as defined herein) in the United States.” Dkt. 32, ¶ 87. Trinity contends that La Crosse County lacks standing to represent a nationwide class because it is a Wisconsin entity alleging violations of Wisconsin law that led to damages suffered in Wisconsin. Thus, according to Trinity, the court should dismiss the amended complaint for lack of subject matter jurisdiction.

“Standing” is a misnomer because Trinity is not challenging La Crosse County’s standing in the Article III sense. Instead, Trinity is trying to preempt class certification-a Rule 23 issue-by arguing that La Crosse County is not a suitable plaintiff to represent a nationwide class. The point is well-taken, given the Seventh Circuit’s conclusion that “products-liability suits may not proceed as nationwide classes.” In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1015 (7th Cir. 2002). But the fact “[t]hat a plaintiff’s claim under his preferred legal theory fails has nothing to do with subject-matter jurisdiction.” Morrison v. YTB Int’l, Inc., 649 F.3d 533, 536 (7th Cir. 2011) (citations and internal quotation marks omitted). Indeed, “the inherent problem with the idea of ‘standing to bring a class action’ is that it ‘conflates the standing inquiry ...


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