Ellis v. Louisiana-Pacific Corporation, No. 11-2319

Decided: November 2, 2012

Appellants appealed the district court’s order dismissing their class action complaint in which they claimed that Louisiana-Pacific Corporation (LP) negligently designed and manufactured a composite building product, Trimboard, designed and marketed for use as trim around exterior windows and door. They also alleged that LP violated North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA). Appellants also sought a declaratory judgment that Trimboard is “defective, prematurely deteriorates, and that its warranty is unconscionable.”

The district court dismissed appellants’ negligence claim as barred by North Carolina’s economic loss rule, which “prohibits the purchaser of a defective product from bringing a negligence action against the manufacturer or seller of that product to recover purely economic losses sustained as result of that product’s failure to perform as expected.”  The Court of Appeals noted the rationale behind the economic loss rule: the sale of goods is accomplished by contract, and the parties are free to include or exclude provisions regarding the parties’ rights and remedies; a remedy in tort for damage to the product itself as a result of a defect would permit one party to ignore the contract. Since the appellants have a contractual basis for recovery in warranty, which they are pursuing in a separate action (the Hart action), the Court affirmed dismissal of the negligence claim.

The district court also dismissed the UDTPA claim as barred by the economic loss rule. The Court of Appeals affirmed dismissal on a separate ground, finding that the complaint failed to state a UDTPA claim. The complaint did not contain allegations of substantial aggravating circumstances sufficient to state a UDTPA claim, as opposed to a rephrased version of the breach of warranty claim discussed above. As such, the Court of Appeals affirmed dismissal of the UDTPA claim.

Finally, the district court dismissed the declaratory judgment claim since the appellants are pursuing a breach of warranty claim in the Hart action, and could have raised the allegations at issue in that suit. The Court of Appeals agreed with the lower court that it would be inappropriate to consider the claims addressed by the declaratory judgment claim in a venue separate from that in which the Hart action is pending. Thus, the Court of Appeals affirmed dismissal of the declaratory judgment claim.

In summary, the Court of Appeals affirmed the lower court’s dismissal of the negligence claim as barred by North Carolina’s economic loss rule. It affirmed dismissal of the UDTPA claim on the separate ground that the complaint failed to state a UDTPA claim. Finally, it affirmed dismissal of the declaratory judgment claim, finding that the issues addressed by that claim should be addressed by the breach of warranty litigation pending in separate venue.

Full Opinion

-Kassandra Moore

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