CIVIL PROCEDURE

Class Action • Settlements • Attorney Fees

In re CertainTeed Fiber Cement Siding Lit., PICS Case No. 14-0416 (E.D. Pa. March 20. 2014) O’Neill, J. (57 pages).

Plaintiffs moved for final approval of their class action suit based on the alleged premature failure of Weatherboards Fiber Cement Siding, Lap Siding, Vertical Siding, Shapes, Soffit, Porch Ceiling and 7/16″ Trim manufactured by CertainTeed. Approved.

Plaintiffs asserted that the siding did not meet the standards represented in CertainTeed’s marketing materials, was defectively designed and manufactured and prematurely failed, causing damage to underlying structures. CertainTeed countered that the siding was manufactured to meet all ASTM, industry and CertainTeed standards and that most of the problems with the siding resulted from improper installation or storage.

The class action against CertainTeed was filed on Nov. 30, 2010. After extensive discovery and negotiation, the parties reached a settlement agreement, that was preliminarily approved on Oct. 3, 2013. The settlement provides class members with benefits in addition to those afforded by their existing limited warranties, providing cash payments that include material costs and costs associated with labor and paint. Additionally, unlike the limited warranty, it provided for replacement of an entire wall where more than five percent of the siding on the wall manifested qualifying damage. After the claims submission period ended, the original limited warranty remained in effect and class members could still make claims under the limited warranty.

The settlement agreement provided for a gross, non-reversionary fund of $103.9 million, which included the costs of settlement administration, notice to class members, service awards to named plaintiffs and attorney fees and costs. Qualifying damage was defined and the cash payment for each claimant was based on the amount of siding eligible for replacement, the cost of removing and replacing the damaged siding and the age of the siding being replaced. The plaintiffs moved to have certain named plaintiffs appointed as class representatives and granted a service award and sought to have Analytics appointed as the claims administrator. Plaintiffs asserted that their notification efforts reached approximately 82 percent of likely class members an average of 2.5 times each using U.S. mail, print, Internet and television. Only seven objections to the settlement remained.

The requirements of Rule 23(a) and 23(b)(3) as to numerosity, commonality, typicality and adequacy of representation and predominance were met. The class members’ claims were founded upon common legal theories related to the central issue of law and fact that dominated the litigation – whether the siding was defective or not. Once that issue was determined, the use of an objective class-wide formula in the settlement agreement to allocate the recovery sufficiently addressed and individualized questions related to damages. The class action provided persons with smaller claims the opportunity to assert their rights and promoted judicial economy.

The court found that the settlement agreement was entitled to a presumption of fairness and that it was fair, reasonable and adequate under Rule 23. Approval of the settlement would guarantee a cash payment to class members with qualifying damage. It would eliminate delay and provide immediate benefits to class members. Out of a class of approximately 300,000 members, only seven objections remained and only 21 people opted out of the settlement. Despite some objectors’ objections to the award of prorated compensation, prorating compensation for labor and replacement siding according to the year the siding was installed correlated compensation amounts with actual damages and ensured that some class members did not receive windfall profits to the detriment of other class members. Ultimately, the settlement agreement provided more compensation than class members would have received under CertainTeed’s warranty program. The application of the Girsh factors supported the conclusion that the settlement agreement was fair, reasonable and adequate.

Plaintiffs’ counsels petitioned the court for attorney fees of $18,500,000 or 17.8 percent of the settlement fund. Counsels’ efforts resulted in a substantial recovery on behalf of the class members. The absence of substantial objections to the settlement agreement was evidence that the class was satisfied with the requested fee award. The complexity and duration of the litigation weighed in favor of the requested fees. Counsel spent over 12,656 hours in prosecuting the case and investigating the claims, filing the complaint, litigating a motion to dismiss, consulting with expert witnesses and participating in mediation sessions. The requested fee clearly fell within the range of approved fee amounts in other class actions. While calculating the attorney fees using the lodestar yielded a sum less than the fee requested, the multiplier was approximately 2.6 and the court of appeals recognized that multipliers ranging from one to four are frequently awarded in common cases. Accordingly, the requested fees were approved.

Additionally, the court approved the requested service awards to the named plaintiffs, the appointment of the claims administrator, and the payment of costs.