Retailer Sues UL for Certifying Defective Heaters

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Personal Injury

6/30/2008
James R. Carroll, Jr., Esquire
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Retailer Sues UL for Certifying Defective Heaters

Platt Electrical Supply, Inc. sold electric in-wall heaters manufactured by Cadet Manufacturing Company. The heaters were tested and certified by Underwriters Laboratories (“UL”), a non-profit corporation that formulates safety standards for consumer products. In 1998, the Consumer Product Safety Commission noticed problems with the heaters, and then initiated a safety recall in 1999.

Platt was required to bear part of the cost of the recall. In addition, Platt was sued in a civil class action which it paid over $1 million to settle. During discovery in the class action, Platt, in 2001, obtained records showing that UL had been aware of defects in the heaters since 1989, but had not taken action to remove the UL certification. In 2003, Platt Sued UL alleging that UL negligently misrepresented that the heaters were safe, and fraudulently concealed information that would have alerted Platt to the defective condition. The District Court (N.D. Calif.) dismissed the negligent misrepresentation claim as time barred, and granted UL’s motion for judgment on the pleadings on the fraudulent concealment claim. Platt appealed.

Under California law, there is a three-year statute of limitations for fraud claims and a two-year limit for negligent misrepresentation. A claim accrues when all of the elements are present and the aggrieved party has discovered it or had reason to discover it (”inquiry notice”). In the instant case, Platt became aware of a problem when the recall was instituted in 1999. The Court of Appeals held that at that point Platt was on inquiry notice of its negligent misrepresentation claim. The limitation for the claim expired in 2001. The appellate court agreed that this claim was time barred.

Similarly, the Court reasoned that once Platt became aware that the heaters were defective, it was on notice that UL’s certification of the heaters was factually false. It was at that time in 1999 that Platt first had a basis to question the validity of UL’s representations about safety. Platt’s argument that the running of the statute was tolled by UL’s fraudulent concealment was rejected–Platt knew enough to have asserted the claim in a timely manner. Platt filed its fraudulent concealment claim well past the three year statute of limitations; accordingly, this claim was also barred.

Lastly, Platt argued that the District Court had abused its discretion when it denied Platt leave to amend its complaint. Platt asserted that it could amend its complaint to reflect that it had received information in 2001 during discovery in the class action that UL had intentionally concealed that the heaters were unsafe. The appellate court however stated that amending the complaint would be futile because the claims accrued in 1999, before discovery in the class action.

The judgment of the District Court dismissing Platt’s claims was affirmed.

See Judicial View for the full story.

Labels: defective products product liability

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