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Class Actions

Construction Company Class Actions

Power in Numbers: Class Actions and Mass Actions

Often repetitive building mistakes cause problems for large numbers of homeowners. Those identical errors may similarly damage every home in a development or state-or even across an entire region of the country. Manufacturers sometimes market new construction products without adequately testing them. When those products fail, their consequences are felt over wide areas, even nationally. When many homeowners suffer damages from the same construction defect, their claims may be brought in one large lawsuit instead of many individual cases.

Class Actions

Class actions are lawsuits where a person, or a group of people, makes claims not only for themselves but also as representatives of all others who have similar claims. Examples include the artificial stucco product litigation in North Carolina and elsewhere, where many people whose homes were damaged from a defective product benefited from a settlement of all claims. In Florida, several dozen homeowners recently filed a lawsuit against a large tract builder. They claim the builder improperly applied traditional stucco to the walls of hundreds of new houses, causing water to leak inside their homes. In these cases the plaintiffs are not only protecting their personal interests: they also must represent the "class" of homeowners whose situations are similar. The purpose of a class action is to benefit the entire class of plaintiffs.

Class actions are important for several reasons. First, they let folks, whose individual claims may not be worth the cost of pursuing, act collectively to protect their rights. Second, they create a force-"strength in numbers"-where the class can force a wealthy and powerful defendant to make right what it has done wrong. Third, it is more efficient for the court system to try similar claims all together, instead of piecemeal. Finally, class actions often can obtain better results for the class than individual plaintiffs might achieve in separate lawsuits.

However, class actions are not always the best approach. For example, homeowners with different types of construction defects would probably not present the overriding "common" issues necessary to bring class claims. Still, where homeowners are victims of one or more discrete construction defects, a class action may be the most advisable course. Over 700 homeowners in the Indianapolis area settled a construction dispute with Beazer Homes for over $29 million.

In most construction class action lawsuits, the class is defined in the papers which initiate the law suit. The court, or arbitration panel, decides whether the case should be "certified" as a class action, or if the individual plaintiffs must proceed separately. The court looks at several factors to decide certification:

are there many plaintiffs?
are the factual and legal issues common to all class members?
will the class plaintiffs adequately represent the other people who have claims?
is it more efficient to determine the claims on a class basis?
are the lawyers involved experienced and qualified?

When these criteria are met, the class may be certified.

Once a class is certified, there is a "notice" period. The notice is accomplished by a method designed to reach as many potential class members as practical. It may be direct mail, if the class is relatively small and all members can be easily identified. It may be by regional or national newspaper advertisement, for large and disperse groups. The notice will include instructions on how to make claims. The only "duty" a class member has is to submit a claim and provide the information required to process the claim. Recently, the internet has become the medium of choice for administering claims for certified class actions.

Class members don't have to participate in the lawsuit. If they don't submit a claim in the way and during the time specified in the notice, though, they will receive no benefit from the class. In most cases, they can elect not to participate. The class notice will have instructions on how to "opt out" of the class and pursue individual lawsuits. In rare cases, usually involving defendants who are bankrupt or out of business, the only relief available is through the class. In these cases, no one can "opt out". This is to prevent other lawsuits from depleting the limited funds available to pay claims.

Most lawyers representing plaintiffs in class action lawsuits get paid on a contingency fee basis. In other words, the lawyers are not paid unless the class receives some significant benefit. The amount of fees paid to lawyers in class actions is approved and awarded by the court based on the result of the lawsuit. The fees are paid from the money recovered from the defendants. No class member or representative pays the fee. Class action litigation is very risky for lawyers because a lot of work and expense must go into investigating a case and trying to get it certified as a class action. Class certification is complicated; therefore, only experienced and competent attorneys should be retained by class members to bring their claims. Even when a case is a strong one, there is considerable risk to the lawyers and the class that it may not get certified as a class action. When that happens, then each class member is forced to hire and pay his or her own lawyers if they want to continue with their claim.

Mass Actions

Sometimes lawsuits are filed with many plaintiffs. For example, when thousands of workers in different trades were exposed to asbestos-containing materials, many lawsuits were filed naming dozens of individuals as plaintiffs. Class treatment may not be appropriate for these individuals, because their injuries are different, or because the products they worked with were different, or because they worked in different trades or in different places. As another example of collective (but non-class) lawsuits, when a dozen hotel guests become ill because of mold in the air conditioning system, one lawsuit may be filed naming all twelve as plaintiffs. These lawsuits are sometimes called "mass torts".

Mass actions may seek class certification. If certification is denied, each of the plaintiffs named in the lawsuit still has an individual claim against the defendant. Many of the advantages of class actions also benefit plaintiffs in mass actions. They can aggregate their expenses; they can present their claims more efficiently; and they can leverage the number of claims against more powerful and wealthy defendants.

Certified Construction Defect Class Actions

Many classes have been certified in construction defect cases. Below is a short list of internet sites set up to administer claims in some of those cases.

Dryvit Systems Inc. (artificial stucco siding): www.stuccosettlement.com

Senergy/Thorowall (artificial stucco siding) www.kinsella.com/eifs

Louisiana Pacific (engineered wood siding): www.lpsidingclaims.com

Polybutylene plumbing (burst water pipes): www.pbpipe.com
www.spencerclass.com

Masonite hardboard siding:
www.masoniteclaims.com