Litigation with Class—Class Action That Is

As a window and door manufacturer, distributor or dealer you have undoubtedly seen disagreements over product warranty issues escalate into serious court claims. As a result, when faced with the next dispute, it can be hard to fight the inclination to “give” (as in “I give” when dealing with the playground bully) in order to avoid even the potential for a court claim. Visions of depositions, document requests, legal fees, unruly juries and uncomfortable courtroom furniture are enough to make you forget the facts and pay to settle.

Such is the reality of the leverage created by the costs and uncertainty inherent in the American civil justice system. It takes discipline to methodically evaluate and dispose of claims. We have spoken before about setting guidelines for making principled decisions in the face of controversy, the new reality of dealing with product claims in the era of self-insured retention, etc. Those subjects will be addressed again, but not today. Today, we consider what is perceived to be the ultimate nightmare for window and door manufacturers: the class action.

Recently, we were able to assist a manufacturer in the effort to stop a claimant from turning an otherwise straightforward case into a large class action. If you want first-hand experience with serious concerns of costs, limitations on insurance coverage, the magnitude of possible loss and bad press to boot, then the experience of class action litigation defense is for you. Several significant class action claims regarding windows and doors are pending today. There is little gained by identifying the parties, but our thoughts should be with them.

CLASS ACTION BASICS

But, what makes a “class action?” We will review class action basics and venture to relate those elements to windows and doors. The point, as always, is to educate you so you can make better decisions.

For our purposes, a class action is a procedural device that can bring into one case a multitude of claims on behalf of potentially countless individuals who own a window or door alleged to have a common problem. The rationale sounds fair enough; if all the plaintiffs have the same problem, there should be a way to handle the issue without thousands of lawsuits. Indeed, if there had been a truly widespread product failure, under the right circumstances the manufacturer/seller would attempt to consolidate the problem into one case by bringing a “defensive class action.”

A class action claim is first alleged in the pleadings (the easy part) and then the class must be “certified” by the court (the hard part).Without certification, there is no class action. But, until the certification is denied, you remain uncertain of your fate.

For most class actions, the party seeking class status must show:

• Numerosity, the proposed class has so many members that joining each of them is impracticable
• Commonality, the class is comprised of members that all have at least one common issue of law or fact in relation to the defendant
• Typicality, the named class representatives possess the claims typical to the class; and
• Adequacy, the named representatives must have no conflicts of interest with respect to the interests of the class and the counsel for the class must be qualified.

A class action can seek relief in which the court is requested either to issue a legal declaration that the defendant is legally obligated to take some action (as in upholding a warranty obligation) or to do or refrain from doing something, as in the case of an injunction.

The more notorious class actions seek an award of big money. To successfully pursue a class action for money damages, the claimant must prove that:

• Questions of law or fact common to the members of the class predominate over questions affecting only individual members of the class (predominance) and
• The class action is the best method for a fair and efficient adjudication of the controversy (superiority).

Settlements of class actions must be approved by the court. The agreement of the attorneys representing the class normally provide for the attorneys to be paid out of the proceeds that become available to the class. This way, the defendant pays the attorneys representing the class. Notwithstanding the requirement for court approval of class action settlements, settlements often provide for multi-million dollar awards of fees and a modest allocation of damages to individual class members.

POTENTIAL FOR WINDOW INDUSTRY

So, what about windows and doors? To me, the litigation issues facing this industry generally break down into two segments:

• The traditional product claim (water infiltration) necessarily involving consequential damage to property other than the window or door; an
• Claims regarding only the failure of a product to perform according to the warranties and representations made, that do not require damage to persons or property. Such claims may simply be for economic loss.

Many window and door companies have been hit by the tidal wave of litigation alleging water infiltration, including dry rot, mold and other consequential damage. Admittedly, some manufacturers may have experienced problems with consistency of quality that have led to water infiltration damage in some applications. But that’s just it, even if a common deficiency exists, the defect causes damage only in some applications. Without the damage, there is no claim.

LACK OF COMMONALITY

Moreover, the list of variables that affect the presence of damage includes installation methods, installation materials, adequacy of the moisture barrier, overall site exposure, individual exposure of each window opening, etc. Class action claims that depend on the existence of physical damage lack commonality. A court would have no idea as to the commonality within the class because no one knows how many or which instances of damage actually exist and of the cases where damage does exist no one knows how many are due to the alleged product defect. Similarly, if damages can be attributed to the window or door, questions of varying state law regarding statues of limitation and mitigation of damages may may eviscerate the concept of a common “class.”

Here, a good argument can be made for the wisdom of the traditional system of individual claims being asserted by owners that actually experience damage attributable to a window/door product over the class action, even if each instance of individual damage was caused by a common defect. If the claim is based upon damage, I cannot see any benefit to a class action over individual lawsuits, even if a manufacturing defect had been repeated many times. The threshold requirement of experiencing damage before bringing a claim should be proved individually and the class action does not constitute a superior method of adjudication.

FAILURE TO MEET STATED CLAIMS

A tougher “class action” to defend may exist in a claim that a window or door fails to meet its warranty in a way that does not require proof of physical damage. A prime example could be a failure to meet stated representations with respect to energy performance criteria. This claim would be in the nature of breach of warranty and may not require damage to property. Without the damage requirement, such claims can more easily meet the “commonality” requirement for class action status. A widespread failure would unfortunately appear to meet the numerosity requirement.

With sales being driven by comparisons of higher tech properties of windows and doors, the hypothetical is not unrealistic. As the tools become readily available to industry to measure the performance of windows and doors with respect to the energy and sound-related properties of our products, so too will those tools become available to plaintiffs’ attorneys and their experts. A deviation in performance when measured against the representations made to the market could easily become ammunition for a class action.

Sales based upon an intangible from the standpoint of the user, something which normally cannot be seen or touched ultimately by the consumer, present a significantly greater risk than a product “failure” that may be repeated over an extended period of time, due to the lack of prompt feedback from the marketplace. That this type of defect could be the basis for a class action should represent more than sufficient reinforcement to establish programs to assure that energyrelated performance standards are met, not just at testing but throughout day-to-day production. Take this “heads up” to heart and steer clear of class action litigation.

Paul R. Gary is principal of PR Gary & Associates, a law firm based in Portland, OR, emphasizing legal issues facing manufacturers of windows and doors. He welcomes feedback on articles published in Window & Door and can be reached at 503/227-8424 or paul@prgarylaw.com.

*Previously published in the Window and Door Magazine