[00:00:01] Speaker 02: Morning, may it please the court Michael Ram for plaintiffs and appellants and here with me at Council table is my colleague Mary Beth Lipsmith if the court, please I'd like to reserve five minutes for rebuttal. [00:00:17] Speaker 04: All right. Keep your eye on the clock, but I'll try to help you out. [00:00:20] Speaker 02: Yes, sure Three topics first. What is this case about? [00:00:27] Speaker 02: Second The motion for judgment on the pleadings with respect to the express warranty claim. And third, sanctions. First, what is this case about? [00:00:40] Speaker 02: Simpson Strong Tie Company told builders that its interior dry environments are the least corrosive to its safety ties, while the outdoor environments are the more corrosive. [00:00:58] Speaker 01: Maybe I hate to interrupt you because I don't want you to get away from that argument, but I have a real problem about whether you have any standing here. [00:01:10] Speaker 01: I read your third-party complaint. It alleges that the defendant's products have prematurely failed, will prematurely fail, or are reasonably certain to prematurely fail. [00:01:27] Speaker 01: And then I read it says these connectors are not supposed to experience wear and tear that materially degrades them during the lifetime. [00:01:36] Speaker 01: And then it says the products are substantially certain to result in failures, not that they have failed. [00:01:46] Speaker 01: Why are these allegations not conclusory? [00:01:50] Speaker 02: They're not conclusory because, among other things, we say, Your Honor, that they have failed thousands of times. [00:01:59] Speaker 01: Now, just a minute. Which homes have experienced damage? [00:02:04] Speaker 02: In our first amended complaint. [00:02:07] Speaker 01: I'm not going to go back to the first. That was the subject of the sanctions order, Your Honor. Well, I understand. I'll talk about the sanctions order when I get there. I'm trying to see if you have any standing to bring this third amended complaint. In the record... [00:02:21] Speaker 01: I mean, which homes have already been experienced damage? [00:02:25] Speaker 01: What damage occurred? [00:02:27] Speaker 02: I understand, Your Honor. We allege that we've all been damaged because as homeowners, we paid more and got less. [00:02:38] Speaker 01: Are you going to go to the benefit of the bargain then? That is one of the arguments. Well, that's the one you've given thus far. What else do you have? Because I can go to benefit of the bargain. My worry was I went to the third amended complaint and I tried to find a place where I could find where you would have standing. [00:02:58] Speaker 01: Which homes were already damaged? [00:03:01] Speaker 01: What damage occurred? When did it occur? What repairs were needed? That's generally in a complaint, and it's not there. Even in your reply briefing, you talk about the defects having manifested in other homes, not those of your clients. Never that you, your clients, suffered the damage or already paid to fix them. [00:03:27] Speaker 01: My book is, There's No Standing. [00:03:30] Speaker 02: Well, Your Honor, please remember, this is a product that's embedded in the foundation of the home so that if there's an earthquake... I know where it's embedded. [00:03:40] Speaker 01: I'm just trying to get you to tell me what the pandemic is. [00:03:43] Speaker 04: Yes, Your Honor. I think I'm struggling with the same issue. I understand your response that these products were embedded. Now, it may be difficult to show that they've already corroded, but showing that they've already corroded would be necessary to establish standing. Do you dispute that? [00:03:59] Speaker 02: I dispute that, Your Honor. [00:04:02] Speaker 04: But you don't need to allege that there's been corrosion in order to go forward with the complaint, in order to establish standing? [00:04:09] Speaker 02: Yes, Your Honor. Let me please quote the district court, for example. The district court found UCL standing with respect to the third amended complaint saying plaintiffs have established standing [00:04:23] Speaker 04: Well, let's set aside what the district court did. As I understand it, you do have to allege that there's been corrosion in order to establish a standing. I don't see that you've alleged that in the complaint. [00:04:38] Speaker 02: I'd also add that we were not allowed leave to amend. It's outside the record that our experts have done testing. [00:04:46] Speaker 02: And as part of the class certification record, they've done testing. There is corrosion. That's not in the complaint. I agree it's not in the complaint. If we are allowed to amend, which we should have been, we can say that. [00:04:58] Speaker 01: You were allowed to amend three times. [00:05:00] Speaker 02: That's not accurate, Your Honor. [00:05:03] Speaker 01: Oh, okay. [00:05:05] Speaker 02: I thought three times. [00:05:07] Speaker 01: May I address that point, Your Honor? All I'm trying to do is get where do I look in your complaint to find what I need. Let's go to your benefit of the bargain damages. [00:05:18] Speaker 01: Where do you allege benefit of the bargain damages in your third amended complaint? [00:05:23] Speaker 02: In the third amended complaint, we say that these safety ties in our home are are going to fail before the end of the useful life. This is paragraphs 26, 33, 39, 46, and 53. [00:05:42] Speaker 01: It's five excerpts of record, 901 through... Well, frankly, the reason I worried about this is the builders were the ones making the bargain. [00:05:55] Speaker 01: Your clients weren't. Well, our clients paid for... If someone didn't get a benefit... The builders didn't get it. Your allegations simply talk about avoiding buying the homes from ones from whom you purchased them. That's what your argument is. And to me, just to be fair, that doesn't allege a benefit of the bargain. [00:06:23] Speaker 02: We are the third party... [00:06:26] Speaker 02: beneficiary of the express warranty. The district court found that. We allege that. But we're talking about the bargain here. [00:06:36] Speaker 01: The builders made a bargain. [00:06:39] Speaker 01: You bought from the builders. [00:06:42] Speaker 01: And all your allegations simply say is that you could avoid buying the homes from the builders from whom you purchased them. That's the best benefit of the bargain damage you've got. [00:06:56] Speaker 02: Well, Your Honor, a lot of manufacturers sell their products through intermediaries. Almost all manufacturers have wholesalers, distributors, retailers, and that's what happened here. We did not, as homeowners, buy directly from Simpson, but we bought homes, the most important asset in many people's lives. [00:07:22] Speaker 01: And paid our money. All of that I agree with. I just wanted to get your best argument that you would make about whether you had any standing at all, and especially on the benefit of the bargain damages. So you can go on with your other argument if that's the best you have. [00:07:38] Speaker 00: Okay, well, I would – Can I actually – can I ask this? I thought one of your arguments in reliance using Hicks was that you are establishing standing because there's an inherent design defect, and so there's something inherently defective about the structural ties right now. [00:07:58] Speaker 02: Yes, Your Honor. [00:07:59] Speaker 00: Under Hicks – Which is not a benefit of the – well, I don't know. Can you explain how you establish standing on those things? [00:08:05] Speaker 02: Thank you, Your Honor. Under Hicks – First of all, we properly allege that a foundation should reasonably last the life of the home. That's Hicks, 89 Caleb, 4th at 923, where the California court says a foundation's useful life is indefinite. But then more directly to the court's point, Hicks, and this is what we allege, says if the defect of substantially certain to result in malfunction during the useful life of the product, that suffices. [00:08:43] Speaker 02: And the California court, and of course we're here on diversity, the California court goes on to say, if plaintiffs prove their foundations contain an inherent defect, which is substantially certain to result in malfunction during the useful life of the product, they have established a breach of express and implied warranties. And here, that's exactly what we've alleged, Your Honor. [00:09:08] Speaker 00: But can you, just to be more specific, since we have to apply Article III standing principles in federal court, what is it about an inherently defective foundational product that gives you concrete and immediate injury or imminent harm. In other words, your friends on the other side point to TransUnion as why you don't have standing in federal court. Why are they wrong? [00:09:35] Speaker 02: Well, TransUnion, if the bad guys never see the disinformation, that's not a problem for you here. Right now, we are at risk. If there is a... [00:09:48] Speaker 02: an earthquake or when we had Florida in the case in the first-minute complaint, a hurricane, we're at risk right now. We have diminished value right now, and that is what the district court found, 1ER16, that there's economic loss from property damage and diminution in the home value. Now, when the district court found Article 3 standing in the second-minute complaint, the district court said contains products with inherent defects substantially certain to result in failures during the product's useful life. [00:10:25] Speaker 02: Were we to sell the home now, we would have to disclose that there is a safety risk now because there is a defective product and it's a safety defect. And so that is the Article 3 standing, and it dovetails with HICS, as your honor is pointing out. [00:10:46] Speaker 01: When you move to breach of warranty... Yes, Your Honor. [00:10:51] Speaker 01: Where in your complaint is it alleged that the products were installed in conformance with the interior dry-use spec as used in the catalog? [00:11:04] Speaker 01: Because you've alleged stuff, but we're really talking about the warranty that the defendant gave to you. [00:11:15] Speaker 01: Where does it allege that the products were installed in conformance with the interior dry use spec? And I read interior dry use spec because that comes right from the warranty. [00:11:30] Speaker 02: Your Honor, we allege that we complied with the installation instructions in paragraphs 36 and 41, and that's volume 12. [00:11:40] Speaker 01: I'm talking about where do you allege they did something wrong by failing to install our products in conformance with the interior dry use spec, because that's what they warrant. [00:11:56] Speaker 01: That's what they warranted in the catalog. So I looked all over in your complaint to say, well, if you don't make that warranty, how are you going to get anything for breach of warranty? [00:12:08] Speaker 01: And I never found it. [00:12:10] Speaker 02: We're not alleging that the builders did anything wrong, Your Honor. They're builders of following the instructions of Simpson. Simpson says that this application... where you have these safety ties that are connecting the foundation to the home so it doesn't fly off if there's an earthquake or a hurricane, or a, quote, interior dry environment so you can use the least galvanization product, which is their G90 product, which has the zinc, which is half the size of a human hair, which our experts, and this is in the record, say it's insufficient because the way these products are made installed, and this is in our complaint and in the AOB, I think it's at page seven, they're installed into the concrete at an angle, 45 degree angle. [00:13:06] Speaker 02: So the deepest part, you have sufficient concrete cover. But as it goes up to zero, where it comes out of the concrete, You have diminishing concrete cover so it's exposed to the chloride and the air, and it fails, and it has failed thousands of times. And Simpson knows that it has failed thousands of times. And that is a defective design. It's not the builder's fault, Your Honor. [00:13:32] Speaker 01: I'm not saying it was the builder's fault. All I'm trying to do is I'm trying to say they said how it should be installed. [00:13:41] Speaker 01: They said how it should be done. You say what you say, and you never say that they were installed according to what they warranted. And that makes it pretty hard to get a warranty. And that's all I'm after. If that's your argument, I'm glad to have it. Let's go on one further. Where do you allege that while properly installed, the deterioration was not the result of environmental damage? [00:14:13] Speaker 02: We have alleged various... I didn't see anything in there. We have alleged that even when it's properly installed, that it is... [00:14:25] Speaker 01: I mean, still going to fail. You've got to suggest that the deterioration is not the result of environmental damage or it's out of the warranty. And I didn't find it in your complaint. And that was the worry. [00:14:43] Speaker 02: The language that Your Honor is picking up on applies to outdoor applications. For example, in sanctioning us at page one of the excerpts of records, Page 32, the district court says metal connectors, anchors, and fasteners will corrode and may lose load carrying capacity when installed in corrosive environments. [00:15:17] Speaker 02: And it mentions ocean salt there and other environments. And then it says especially in outdoor applications. I see I've got my five minutes buzzers up. Right. By definition, it's not an interior dry environment. [00:15:29] Speaker 04: The warranty, though, does exclude deterioration due to environmental reasons. damage. I take it that's where your question is coming from. [00:15:37] Speaker 02: In every application in the class, it's inside concrete, Your Honor. They never say inside concrete is an issue. They say if it's outside, if it's salt there, but then they define our installation in the concrete as interior dry, and that is how it was involved. [00:16:01] Speaker 01: And I'm sorry to take over your time, but on the UCL, here's another situation which I worried about in your complaint. [00:16:11] Speaker 01: Why shouldn't this claim not be dismissed because your allegations don't articulate a specific theory of unfairness under the UCL? [00:16:23] Speaker 01: What we cite the elements of a balancing test. You cite the elements of a Camacho test. But I can't tell what conduct forms the basis of your claim. Therefore, it would be hard for me if I were a defendant to even say how to defend this claim. [00:16:43] Speaker 01: Because Doe versus CVS Pharmacy says you've got to tell them what is the basis of your claim. And I didn't find the specific theory of unfairness. [00:16:59] Speaker 02: We allege that Simpson knew. that inadequate concrete cover poses, quote, an elevator risk of corrosion to metal embedded in concrete. That's at paragraph 113. [00:17:12] Speaker 02: We allege that Simpson knew of the defect and continued marketing, selling, and warranting. [00:17:19] Speaker 01: We allege that Simpson knew and continued recommending the low... So are you making these allegations as it relates to the balancing test? [00:17:31] Speaker 01: The tethering test, the Camacho test, that's the UCL. And Doe says that the district court should deny your UCL claim where there's just a conclusory recitation of a legal standard, but you don't clarify what conduct the plaintiffs claimed was unfair. So that's why I'm trying to get you to focus in on one of those tests. [00:17:56] Speaker 02: Yes, we satisfy all three tests, Your Honor. One, it is tethered to the warranty. [00:18:02] Speaker 02: Two, under Camacho, there is a substantial injury. [00:18:05] Speaker 04: Well, I think the problem is just the very conclusory nature of the allegations. But you're down to a couple of minutes, and I know you wanted to save time for rebuttal. [00:18:14] Speaker 02: There's one last point may I make before I sit down, Your Honor? Sure. [00:18:19] Speaker 02: The district court concluded, based on one sentence... in a 193-page catalog meant for builders that Simpson does not provide a warranty for the life of the home. And this is at 8 ER 1846. [00:18:38] Speaker 02: focused on, both the orders focused on the first sentence that Simpson says they can't estimate. And both district courts ignore the third sentence that says, as long as Simpson's recommendations are followed, Simpson stands behind his product performance and our standard warranty. Simpson ignored that third sentence in its briefing, and both district courts ignored it. And Simpson made up this phrase called Corrosion warnings. [00:19:10] Speaker 02: It does not exist in any of the Simpson materials. They made it up, they put in their briefs, and the courts adopted it. [00:19:18] Speaker 02: And that phrase that is not in their materials, 32 times in the sanctions order. [00:19:26] Speaker 02: 32 times the district court says warnings. And I just, before I sit down, I need to please say, we take this extremely seriously. [00:19:34] Speaker 02: To be sanctioned. That, like you, we feel like this is a calling. We're office of the court. We're extremely serious about the sanctions. [00:19:44] Speaker 02: And we believe that we have a meritorious case for homeowners who were cheated. Thank you. Thank you, counsel. My 30 seconds. [00:19:53] Speaker 04: I'll put a couple of minutes back on the clock for rebuttal. [00:19:55] Speaker 02: Thank you. [00:20:03] Speaker 03: Good morning, Your Honor. Sheridan Caldwell of Horvitz and Levy on behalf of Simpson. May I proceed? [00:20:08] Speaker 04: Yes, please. [00:20:09] Speaker 03: I'll go ahead and jump right in on standing since the court seems interested in that. As Judge Smith pointed out, plaintiff's allegations of injury are entirely conclusory. [00:20:21] Speaker 03: At this point in the case, it's the third amended complaint. [00:20:27] Speaker 03: As this court is aware, this case already went up, has already been up to this court. [00:20:32] Speaker 03: That was on class certification. Plaintiffs got a lot of discovery in order to bring that class certification motion. [00:20:40] Speaker 04: Council today referenced some expert analyses that didn't get included. I take it on the leave to amend question. You're saying too little too late? [00:20:49] Speaker 03: Yes, Your Honor. That was information that they had before they filed the third amended complaint, which they didn't file until the case was remanded back down to the trial court after it came up. [00:21:01] Speaker 03: And Leave to amend would be futile, both because plaintiffs had the information that they now claim they could have added to the complaint. They chose not to do so. [00:21:11] Speaker 00: Ms. Colwood, can I ask, what about the theory of something that's inherently defective? [00:21:18] Speaker 00: Let's say, I was trying to think of what might be analogous to this. Let's say someone was sold a home with a cracked foundation. [00:21:26] Speaker 00: Is that a future harm where someone wouldn't have standing because they have to go and repair it at some point in the future, even if it might not fail immediately? Or is that a concrete and immediate injury now? [00:21:40] Speaker 03: It sounds to me if on its face all it is is the bare possibility that the product will fail in the future, that is a mere risk of future harm under TransUnion. [00:21:50] Speaker 00: Even with a concrete – I mean because TransUnion, you had these credit reports that never saw the light of day. [00:21:56] Speaker 00: But if you are sold a home with a cracked foundation, you have to do something about it, right? You're not going to sit around and hope that an earthquake or something else doesn't strike and decimate your house. [00:22:11] Speaker 00: Why isn't this in the same boat as that in order to establish standing? Now, whether they can prove up their case is a completely different matter. But for standing purposes, why aren't those equivalent? [00:22:25] Speaker 03: Right, Your Honor. Well, first of all, and I think it's already been established that plaintiffs have not actually alleged that there has been any damage to their homes. But even assuming that there were, as in many of the cases that plaintiffs cited in their reply brief on standing, all of which were pre-transunion cases, so... to the extent that they suggest the future harm is enough, that aspect of the opinion has been overruled. But even for kind of a current loss of value or overpayment theory, the plaintiffs in all of those cases alleged far more than the plaintiffs here. [00:22:58] Speaker 03: They alleged that there was a history of failure of the products, that they received less, or that they would not be able to sell their products, resell the products for as much as based on that information. [00:23:08] Speaker 04: Well, council's arguing precisely that, that there have been numerous failures and, in fact, multiple lawsuits filed against Simpson and other home developers. How do you respond to that? [00:23:20] Speaker 03: I respectfully disagree that they've alleged that there have been any failures, Your Honor. They've identified corrosion in products in other homes. [00:23:27] Speaker 04: Well, they're arguing that Simpson's really unnoticed because of failures in other cases, and they point to other lawsuits that have been filed. [00:23:36] Speaker 03: Even by pointing to those other lawsuits, plaintiffs haven't actually identified any home where the product has failed. And by failed, plaintiffs agree the definition here is that the products are no longer able to carry their load capacity in high wind or earthquakes events. Corrosion does not equal failure. And that's explicitly stated in Simpson's catalog, which is incorporated into the complaint. [00:24:01] Speaker 00: Well, I think Simpson says corrosion does not necessarily equal failure. I mean, I think Simpson does acknowledge if something corrodes enough. It'll fail. It won't bear the load that it's meant to bear, right? So I guess it's a matter of degree. If these products are – if I understand plaintiff's case, they're saying that because of this low galvanized coverage, because of this not insufficient concrete cover, these are inherently defective even if they were installed internally – in the way that Simpson recommends. [00:24:35] Speaker 00: And that is what makes these things to prematurely fail. That's the inherent defect behind them. [00:24:42] Speaker 03: Right. Well, I think your honor's question, first of all, hints at an important detail, which is if they were installed correctly, which plaintiffs do not allege actually that they were installed in compliance. [00:24:54] Speaker 00: I mean, I wanted to ask about that. The third amended complaint talks about plaintiffs allege for each plaintiff home that the products were embedded in the concrete foundation, nailed to structural members, and covered with house wrap and exterior cladding in original construction pursuant to Simpson's installation requirements for its applicable interior dry service specifications. and that they actually do meet the specifications for interior application, why isn't that on a Rule 8 basis sufficient to allege that they were installed according to specifications under the warranty? [00:25:29] Speaker 03: Because, Your Honor, as alluded to by Judge Smith and Wynn already, the warranty includes far more specifications than just that they were installed in an interior dry setting. There are four things that plaintiffs should have alleged. First, that the products were properly specified based on the conditions of the home and the local environment of the home. They have not done that. Second, that the products were properly specified. [00:25:55] Speaker 00: What is that? I mean, I sort of see this as matters of triable proof. And I take counsel's point that this is called corrosion information proof. and the company is indicating that there are many variables involved in what might lead to corrosion. But when I read this warning, the very first sentence says, metal connectors, anchors, and fasteners will corrode and may lose load carrying capacity when installed in corrosive environments or exposed to corrosive materials. [00:26:29] Speaker 00: So the entire framing of that warning is corrosive environments, corrosive materials. What plaintiffs are alleging is we're complying with Simpson's interior installation specifications, meaning a non-corrosive environment, and we installed things in this particular way. Now, again, whether they can prove up their case or not is a different question, but it seems as if for Rule 8 purposes, they adequately inform defendants the nature of their claims and what they intend to try to prove at trial. [00:27:00] Speaker 00: Why is that insufficient for Rule 8 purposes? [00:27:03] Speaker 03: Because, Your Honor, in order to plead a warranty claim, plaintiffs were required to show that the conditions of the warranty were met, that the warranty even applies here. And even just taking—even if we focus in on plaintiffs' allegation of interior dry— For example, and we look at page 1846 of the record, which is part of the catalog incorporated into the complaint. [00:27:26] Speaker 03: And again, that's actually reproduced in the complaint at paragraph 91. That has a handy little chart that shows which settings permit which type of fasteners. And here, the fasteners that issue are the low galvanization G90. So if we look at the chart... There is a row for interior dry, but if we look at the columns, only two types of wood can even be used in order for it to qualify for the low galvanization. And plaintiffs here don't even allege what type of wood was used in their home even to show that. [00:27:59] Speaker 00: So we're talking about something that hasn't – and I take your point. Maybe class action discovery might change my mind about it, but this is pre-discovery. These are at the pleading stage. [00:28:10] Speaker 00: And there are, I guess, further matters of proof as to what happened in these particular homes, what kind of wood was applied or anything else. Your view is that the allegations that they've made for interior dry use, that for each of these plaintiffs, which reflect these interior dry use specifications, that that's not sufficient, that you would have to get into the type of treated wood that the builder used for each and every home. [00:28:40] Speaker 00: That seems a little bit more than what Rule 8 would require in my view. That seems like you're getting more into Rule 9 fraudulent allegations or something, that you need something more specific. [00:28:51] Speaker 03: Respectfully your honor plaintiffs have had discovery on this issue So the fact that there are not more specific allegations about their homes at this point should be assumed to be Intentional most likely for purposes of class certification so that there's less obvious differences between the homes but even if we go look past the issue about whether the conditions of the warranty were met plaintiffs also haven't alleged that the warranties been breached and They haven't shown that, going back to my discussion with Judge, when there has not been any identification of any products that have failed in any home, plaintiffs make conclusory allegations that the products have failed in homes. [00:29:31] Speaker 03: But even in doing so, they point only to pictures of corrosion. [00:29:34] Speaker 00: What about the Hicks case? [00:29:38] Speaker 03: Just whether the Hicks case applies. [00:29:42] Speaker 00: For properly alleging a breach of the express warranty. Why isn't an inherently defective product that it's substantially likely to fail over its useful life sufficient to allege a breach in that circumstance? [00:29:56] Speaker 03: That's, first of all, not the test that California courts have applied when actually looking to what a plaintiff needs to show on the merits. But even under Hicks, plaintiffs have not identified either an inherent defect because they haven't connected the dots between corrosion and definite failure. Even the documents incorporated into the complaint show that it is possible to stop corrosion. Exhibit 3 discusses mitigation of corrosion and how that can be stopped or reversed. [00:30:26] Speaker 03: So corrosion does not necessarily equal failure, so there's no defect. And then plaintiffs also can't show, even if there was a defect, that it's substantially certain to manifest in their home, which is what HICS requires. Because, again, if these products are installed in thousands of homes and we have no insight or identification of any of them, much less a high number of them, that have failed, certainly none of the products and plaintiffs' own homes have failed, then there's no indication that for each of these plaintiffs it is substantially certain that they will fail in the future. [00:30:58] Speaker 00: In your view, pointing to the other cases in Hawaii or California, these other ones that are also pending, would not be enough to show, at least for plausibility purposes, that failures have been happening on a mass level? [00:31:13] Speaker 03: Right, Your Honor, certainly not in terms of a failure of the product itself. Most of those other lawsuits are actually against the builders of the home. alleging that the products were not properly installed. And that's both an issue for Article 3 and for plaintiffs pleading of both of their claims is a traceability problem because plaintiffs haven't alleged that the products were properly installed in their homes under the correct conditions. [00:31:39] Speaker 04: But the district court had pointed out that the vast majority of those other lawsuits were against developers and builders for improper installations. Does that mean that there were no inherent design defect claims against Simpson in those other cases? [00:31:52] Speaker 03: I'm not aware of the specific allegations in those cases, but my understanding is that they were focused on misinstallation. And that's really actually more of what the record points to here. [00:32:05] Speaker 04: Improper installation. In the Gentry case, which is the one out of Hawaii, there was a question of fact determination as to the design defect question. Was that ever settled in that other case, one way or the other? [00:32:18] Speaker 03: I apologize, Your Honor. I don't know the answer to that question. [00:32:22] Speaker 03: But certainly here, plaintiffs could have, if there were favorable conclusions drawn in that case, those could have been included in the third amended complaint. They weren't. [00:32:33] Speaker 03: Plaintiffs, again, if anything, have pointed to allegations that suggest that if there was corrosion, it was due to [00:32:42] Speaker 00: Can I turn you to the Rule 11 sanctions issue? I was having difficulty trying to understand what about the first amended complaint was sanctionable versus the allegations in the third amended complaint. And so I was looking very carefully at this corrosion information description, which seems to be a large part of the basis behind it. [00:33:06] Speaker 00: And I had read that first sentence to you before. It seems to me that the magistrate judge was dipping into what might be a more triable question as to whether plaintiffs are adequately alleging if something corrodes in a corrosive environment, whether that should extend to a non-corrosive installation. In other words... [00:33:33] Speaker 00: It's not necessarily – plaintiff's allegations are not necessarily inconsistent with this corrosion information that even if you follow Simpson's instructions for internal dry use installation – Their claim is that because this galvanization coating is too thin, it's going to prematurely corrode and cause more failures. [00:33:58] Speaker 00: Even when you're installing in a non-corrosive environment. [00:34:03] Speaker 00: This warning doesn't seem to speak to that question, much less make it baseless. Why was it appropriate to sanction plaintiffs for those allegations? [00:34:13] Speaker 03: Plaintiffs did make statements that were flatly contradictory to the catalog information. [00:34:19] Speaker 00: Like what, for example? [00:34:20] Speaker 03: For example, the fact said that the warranty led homeowners to believe the products were, quote, capable of resisting corrosion for the entire life of the home. When, in fact, the catalog says it is common to see some corrosion on connectors. The presence of some corrosion does not mean that load capacity has necessarily been affected or that a failure will occur. [00:34:42] Speaker 00: But I take your point. At the same time, plaintiffs are also talking about a difference between interior versus exterior. And plaintiffs make this point that if these things are being installed at the foundation, concrete is poured over, and then they put up drywall, you're not inspecting them again. You're not maintaining. There's no expectation that you're going to replace them. [00:35:07] Speaker 00: And so it's just stuck there. And so plaintiff's argument is that's basically coextensive with the foundation itself. Why is it baseless to argue that that would mean that the warranty extends to the life of the foundation? [00:35:24] Speaker 00: Even though I take Simpson's point that, no, it's not. We said we can't predict the useful life of this product. Why is that a basis for a sanctions order as opposed to disputed questions of fact? [00:35:38] Speaker 03: Respectfully, Your Honor, under the abuse of discretion standard, the trial court did identify a number of issues with the complaint. [00:35:47] Speaker 03: If the court is concerned more about whether plaintiffs have connected the dots between corrosion and failure, I'd be much more interested in exploring that on the merits rather than the sanctions question. [00:35:58] Speaker 00: Well, but only – I mean the only reason why – we see all the time inadequate pleadings. You file a – people have a complaint. It's not good enough. The court allows it to amend, and in this case it was amended three times. It's unusual to me to see – a sanctions order over an earlier complaint when what I see in a later complaint are not too dissimilar allegations to what they were ostensibly sanctioned for. [00:36:29] Speaker 00: So I'm just scratching my head as to why the court decided to sanction someone for what may not have been the best written complaint in the first place. [00:36:39] Speaker 00: And why isn't that an abuse of discretion? [00:36:41] Speaker 01: I don't want you to miss answering this question, but... [00:36:46] Speaker 01: The thing that worried me a little bit about this district court order is that the award was based on the declaration of defense counsel. [00:36:58] Speaker 01: And then the court reduced the award by half. So I think it's quite important to answer this question because, really, the award only came because there was a declaration of defense counsel. Now, I'm not sure you were the defense counsel, but whoever that defense counsel was made, if you will, the declaration, the... [00:37:23] Speaker 01: Magistrate court reviewed it reduces by half. That's why I think this question is important and I was prepared to ask you the same question for your honor. [00:37:35] Speaker 03: Both of your honors, the first man complaint again, although it does echo similar themes to what are now in the third amended complaint, the third amended complaint is still deficient on most of the same points, but the first amended complaint didn't even include any information about, for example, which products were installed in plaintiff's home, what the definition of the products at issue were. It, I believe, included a hyperlink to the catalog, but it did not actually quote or acknowledge the warranty claims itself. [00:38:07] Speaker 03: So there were a number of reasons that the complaint was factually baseless. But again, I'd be much more interested in discussing why those are still present in the current version of the third amended complaint. And those are insufficient, both for standing purposes and for purposes of plaintiffs claims. [00:38:25] Speaker 03: If the court found that the. [00:38:28] Speaker 03: Declaration was insufficient, even under this deferential standard of review. We would understand, but on the merits plaintiffs still have not shown that even though now they've said they have looked and they said they can see these products are in their home. [00:38:43] Speaker 03: They have not done any testing to identify or. [00:38:46] Speaker 03: If there was testing, they intentionally have not included it in the complaint at this point about whether there was any corrosion on their own homes, whether there's any environmental factors that affected those homes, and whether that can be traceable actually to Simpson's actions. [00:39:04] Speaker 00: Can I ask you one last question? Can you just briefly tell me what was in the nature of the class action, the class discovery? Like what kind of information was disclosed during that discovery process? [00:39:17] Speaker 03: There was actually testing done of plaintiffs' homes, and this is in the record of actually the last appeal, obviously, because that was up on class certification. There was testing of plaintiffs' homes. I think the court can draw its own conclusions about why those were not included in the third amended complaint later. There was also expert evaluations of the sites of the homes, and I believe also whether we would expect that these products would fail Moving into the future. [00:39:47] Speaker 03: So in conclusion, we respectfully request the court of firm. Thank you. [00:39:52] Speaker 02: Thank You counsel Very quickly your honors At paragraph 123 of the complaint We say that this product has failed in the same way in thousands of homes for well more than the last decade. [00:40:26] Speaker 02: In paragraph 127, when we talk about the Gentry case, my co-counsel were in the Gentry case. We say they sued Simpson. [00:40:38] Speaker 02: That was the focus of that case, a design defect. [00:40:41] Speaker 04: You're talking about the Hawaii case? [00:40:43] Speaker 02: Yes, Your Honor. [00:40:44] Speaker 04: So at one point there was a trial question, a fact on the design defect question. Was that issue ever settled in that case? [00:40:50] Speaker 02: No, the case was settled, Your Honor. [00:40:52] Speaker 04: Simpson settled, but concerned the same... So that would be no, there's no finding that there was in fact an inherent design defect? [00:40:59] Speaker 02: No finding, Your Honor, but it shows the knowledge which goes, among other things, to the unfairness. [00:41:10] Speaker 02: Our expert, Paul Brown, did find damage at each of the plaintiffs' homes. This is seven excerpts of record at 1421, eight excerpts. This is outside the complaint? It is outside the complaint, Your Honor. And under Keegan, the court should take after acquired evidence. [00:41:40] Speaker 02: into consideration in looking at the sanctions. We're in a very unusual posture here where the district court who sanctioned us for the first amended complaint allowed us to proceed with our claims for express warranty and UCL unfairness in the second amended complaint. And then in the third amended complaint, all we did was change some plaintiffs because some of them were frankly chilled by the sanctions order. [00:42:16] Speaker 02: The third amended complaint and then another district court decided we hadn't stated a claim. Makes no sense, Your Honor. Respectfully makes no sense. And we would urge the court to please reverse or at the very least allow us to amend because we did not have four bites at the apple, Your Honor. We filed an amended complaint before there was ever a motion in this mess. [00:42:38] Speaker 02: And then in the second amended complaint, our claims were upheld. And then the third amended complaint, the same claims were thrown out. So in fairness, we should have been allowed leave to amend. Thank you very much for your time. We appreciate it. [00:42:53] Speaker 04: Thank you very much for both of your arguments this morning. It's been very helpful. [00:42:58] Speaker 04: The case is submitted, and we are in recess until tomorrow morning at 9.