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Settlement of a nationwide class action in another state prevents an individual’s filing of a similar suit in New Jersey, even if the defendant’s tactical ploy misled the plaintiff, a unanimous state Supreme Court held on Aug. 18. The Court said that by dint of the Constitution’s Full Faith and Credit Clause, the plaintiff cannot sue in N.J. under the state Consumer Fraud Act unless he obtains a ruling from a Tennessee court that he is not bound by a settlement there. However, the justices chided the defendant in the case, Simmermon v. Dryvit Systems Inc., A-55-07, finding it violated a court rule by failing to inform the plaintiff about the Tennessee action while the clock ran out on the time for class members to opt out. Justice Barry Albin called the defendant’s behavior “inexcusable” and said it would have to pay the plaintiff’s legal fees in the Tennessee court plus much of the cost of the New Jersey case. James Simmermon, of Woolwich, sued Dryvit Systems Inc. in Gloucester County on Sept. 17, 2001, alleging it fraudulently misrepresented the quality of its synthetic stucco. He said he applied the product to the exterior of his home and later found it was bubbling and peeling. When Dryvit, of Warwick, R.I., filed its answer on March 15, 2002, it made no mention of a class action asserting the same claims filed the previous year in Tennessee Circuit Court, despite Rule 4:5-1(b)(2), which requires that the court be informed of related litigation. The Tennessee case, Posey v. Dryvit Systems Inc., was originally filed on behalf of homeowners there, but three weeks after the answer in New Jersey, on April 8, 2002, it was converted to a nationwide class action. The Tennessee court preliminarily approved a settlement that would bind class members who did not opt out. They would receive property inspections, three-year limited warranties and repair-cost reimbursement. Notice was mailed to class members in June 2002. The opt-out period ended on Sept. 3, 2002, and the Tennessee court approved the settlement in January 2003. Implementation was stayed to allow homebuilders to intervene. Dryvit did not inform Simmermon of the class action until six months after the opt-out deadline and two months after final approval. In a letter sent March 25, 2003, Dryvit’s counsel advised Simmermon’s lawyer, Scott McKinley, that he was barred from proceeding because he had not opted out. In May 2003, Dryvit’s lawyers also informed the judge, Martin Herman. Discovery in New Jersey moved along, but in 2004 Dryvit sought a stay pending resolution of the class action. Despite being informed that the class settlement had been stayed, Simmermon made no effort to obtain relief in that case. But he filed an affidavit in New Jersey stating he would have opted out of the class if given timely notice. Herman denied a stay, finding Dryvit deliberately waited until after the opt-out time expired and that Simmermon showed his desire to be excluded from the class by suing in New Jersey. After the class case was resolved, Dryvit moved to amend its answer to add an affirmative defense of res judicata based on the class settlement. Judge David Morgan, assigned to the matter after Herman retired, dismissed in January 2006, holding the Full Faith Credit Clause precluded the suit. An appeals panel reversed because of Dryvit’s failure to comply with R. 4:5-1(b)(2), but the Supreme Court said Morgan got it right. “Once a New Jersey court determines that the class action notice procedures complied with due process, absent exceptional circumstances, a Tennessee court is the proper forum to address whether plaintiff received sufficient notice of the class action and whether prosecuting an individual suit in New Jersey constituted an effective opt-out of the class action,” Albin wrote. Due process was satisfied by a first-class mailing to class members, backed by publication of notice in national publications, said the Court. Though Simmermon denied receiving notice, records showed it was mailed and was not returned as undeliverable. Albin also noted that courts are reluctant to second-guess other state courts due to the “very real concern that permitting broad collateral review of nationwide class actions” would undermine their efficacy and waste judicial resources. The Court rejected arguments that Simmermon effectively opted out by pursuing his claims in New Jersey and that he should be allowed to go forward on account of Dryvit’s rule violation. It agreed that the violation appeared to be a tactical decision, pointing out that Dryvit’s lawyers had earlier filed an appropriate certification in a separate case. But the Court found no irreparable prejudice that would allow it to ignore the dictates of the Full Faith and Credit Clause, because Simmermon took no steps to intervene and seek relief in Tennessee during the two-year stay of the settlement. Simmermon’s sole recourse is to seek relief in Tennessee and Dryvit must pay the costs, including legal fees, as a penalty for its rule violation. If the Tennessee court deems him a class member, unable to sue individually, Dryvit must pay all the New Jersey litigation expenses from the date it filed its answer. Alternatively, if Simmermon is treated as having opted out, he can go forward in New Jersey and Dryvit must pay for the appeals, which would not have been necessary but for its rule violation. In that event, the trial court can also impose other litigation expenses attributable to the breach. Simmermon’s lawyer, McKinley, of Hoffman DiMuzio in Turnersville, says the ruling makes clear “the risk you run” by ignoring the rule and running out the clock on the right to opt out. Dryvit’s lawyers, Andrew Fishkin and David Cohen of Edwards Angell Palmer & Dodge, did not return a call.

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