Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Certainteed Fiber Cement Siding Litigation

United States District Court, Eastern District of Pennsylvania

March 20, 2014

IN RE CERTAINTEED FIBER CEMENT SIDFNG LITIGATION This document relates to: ALL CASES

MEMORANDUM

O’NEILL, J.

This multidistrict litigation arises out of the claims of plaintiffs Steve Clavette, Chad Epsen, Monique Orieux, Chris Thames, Gwen Weithaus, Steven Wiedmeyer, Richard Tesoriero, John Robards, Barbara Robards, James Dibley, Patricia Swanson and Koreen Grube against defendant CertainTeed Corporation related to the alleged premature failure of CertainTeed-made Weatherboards Fiber Cement Siding, Lap Siding, Vertical Siding, Shapes, Soffit, Porch Ceiling and 7/16" Trim (collectively, Siding). While the litigation progressed, the parties conducted settlement negotiations and I preliminarily approved the parties' settlement on October 3, 2013. Notice was sent to the members of the settlement class in accordance with the Court-approved notice plan. Plaintiffs have now moved for final approval of the settlement and for attorneys' fees. After reviewing the parties' submissions and holding a final fairness hearing on February 19, 2014, at which counsel for one group of objectors appeared, I will grant the motions for final approval and for attorneys' fees.

BACKGROUND

I. Nature of the Claims

Plaintiffs claim that the Siding is defective and does not meet the standards represented in CertainTeed's marketing materials. Dkt. No. 87-1 at ECF p. 16. They assert that while CertainTeed marketed and represented the Siding to be "the finest-performing product of its kind, " and "engineered for decades of superior protection, wear and durability, " the contrary is true. Id Instead, they claim that the Siding is defectively designed and manufactured in such a way that it prematurely fails, causing damage to underlying structures. Id Deterioration of the Siding allegedly manifests as, inter alia, "cracking, surface crazing or micro-cracking, warping, bowing, product shrinkage and excessive gapping." Id Plaintiffs contend that the Siding must be repaired or replaced sooner than reasonably expected as a result of the alleged defects. Id.

CertainTeed contends that the Siding is manufactured to meet all ASTM, industry and CertainTeed standards and that, in many cases, problems observed with the Siding are a result of improper installation or storage. Dkt. No. 86 at ECF p. 2. Absent settlement of plaintiffs' claims, CertainTeed is prepared to contest liability by showing that its Siding met industry standards, that most homeowners with Siding installed had no problems with the Siding and that installation was often the cause of the failed Siding. Id CertainTeed would assert legal defenses against plaintiffs' claims, including that its 50 year limited warranty for the Siding protects it against plaintiffs' claims. Id CertainTeed also would argue that a class could not be certified. See Dkt. No. 87-1 at ECF p. 52.

II. History of the Litigation

The first class action against CertainTeed relating to the alleged premature failure of its Siding was filed on November 30, 2010. Dkt. No. 87-2 at ¶ 14. The U.S. Judicial Panel on Multidistrict Litigation issued an order on August 8, 2011 transferring to this Court all of the subsequent actions concerning the Siding that were filed in federal district courts, finding that seven actions then pending "involve[d] common questions of fact, and that centralization under Section 1407 in the Eastern District of Pennsylvania [would] serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation."[1] Id at ¶ 15.

Prior to reaching the proposed settlement of plaintiff s claims, class counsel "investigated the cause of the Siding's alleged failure; the warranties that came with the Siding; the applicable legal standards for product defect cases involving defective construction materials; and relevant class action standards." Dkt. No. 87-2 at ¶ 18. "Class Counsel obtained and analyzed documents obtained in discovery, took and defended depositions, retained product defect experts from a national forensic engineering firm, interviewed over 300 witnesses, incurred significant costs relating to the forensic testing and analysis of the Siding and performed numerous on-site property inspections all over the country." Id at ¶ 20. CertainTeed made initial discovery productions to co-lead counsel on March 23 and 24, 2011 and met with class counsel to provide its view of the merits of plaintiffs' claims on March 30, 2011. Id at ¶ 22-23. "The parties began seriously engaging in an [alternative dispute resolution] track in or around June 2011" and continued to exchange discovery thereafter. Dkt. No. 87-2 at ¶¶ 28-41, 44-45, 47-55, 57-60. The parties also conducted depositions of some plaintiffs and a Rule 30(b)(6) deposition of CertainTeed. Id ¶¶ 56, 61. On June 26 and 27, 2012, the parties engaged in a two-day in-person mediation session with the Hon. James R. Melinson. Id at ¶ 64. All negotiations were at arm's length. Id at ¶ 65. On August 15, 2013, following another in-person meeting between counsel for CertainTeed and co-lead counsel, the parties reached the settlement agreement that I preliminarily approved on October 3, 2013 and that is now before the Court for final approval. Id at ¶ 68; see also Dkt. No. 28.

III. The Limited Warranty and the Settlement

Siding, when purchased, was subject to a limited warranty. With the exception of the first two years following purchase (i.e., the CertainTeed SureStart period), the limited warranty provided by CertainTeed restricts purchasers of the Siding to recover only the cost of the affected Siding materials, reduced by a pro rata deduction for usage. Under the limited warranty, in the first two years after installation, should the Siding have a manufacturing defect, CertainTeed provides labor and replacement Siding to building owners to resolve their claim. Dkt. No. 87-4 at ¶ 3. After the Siding has been installed for two years, the limited warranty provides exclusively for replacement Siding. Id It does not provide compensation for any labor costs. Id The limited warranty is also subject to a proration schedule whereby during years zero through two, the consumer receives 100% of the original purchase price. Id at ¶4. During years three through fifty, claims are subject to a 2% reduction in purchase price for each year elapsed. Id

Ordinarily, to recover under the limited warranty, a property owner completes a claim form and submits photos of their claimed problem. Id at ¶¶ 7-8. From 1999 through 2013, CertainTeed's Consumer Services Department for its Siding Products Group processed 19, 520 Siding warranty claims. Id at ¶ 5. Prior to the announcement of the settlement, the overall claims rate for all alleged defects as a percentage of sales of the Siding was 1.7%. Id.

The settlement now before the Court for consideration "does not extinguish Settlement Class Members' warranty rights under their Limited Warranties that accompanied their purchase of the Siding." Dkt. No. 107-1. Instead, it provides class members with benefits beyond those afforded by their existing limited warranties, in essence creating, a super warranty on the limited warranty by providing for cash payments that not only include material costs, but also include the costs associated with labor and paint. See Dkt. No. 30 at ¶ 7.[2] ("The value of the Siding with Qualifying Damage for which the Claimant is Entitled to compensation . . . shall include the Cost of Siding material, labor and paint."). Unlike the limited warranty, the settlement also provides for replacement of an entire wall where more than 5% of the Siding on the wall manifests qualifying damage.[3] Dkt. No. 87-4 at ¶ 10.

After the claims submission period ends and for as long as their limited warranties remain in effect, settlement class members may still make claims under their limited warranty for any portion of their siding that has not already been subject to relief from CertainTeed or through the settlement. Dkt. No. 107-1.

IV. The Settlement Class and the Settlement Fund

Plaintiffs seek approval of a settlement class that is defined to include:

All individuals and entities that, as of September 30, 2013, own homes, residences, buildings, or other structures located in the United States, on which CertainTeed Weatherboards Fiber Cement Siding, Lap Siding, Vertical Siding, Shapes, Soffit, Porch Ceiling and 7/16" Trim was installed on or before September 30, 2013.

Dkt. No. 30 at ¶ 1.1.bb.[4] CertainTeed estimates that approximately 300, 000 structures are clad with the Siding. Dkt. No. 87-4 at ¶ 11; Dkt. No. 87-5 at ¶ 17. Most of the structures are residential, approximately two percent are commercial buildings. Dkt. No. 87-3 at ¶9; Dkt. No. 87-5 at ¶17. Settlement class members are geographically dispersed throughout the United States. Dkt. No. 87-5 at ¶ 17.

Prior warranty claimants are not excluded from the settlement class. Rather, settlement class members who have already

resolved through warranty, settlement or adjudication a claim against CertainTeed relating to the Siding on a Wall Section that is different from the subject of the current claim will be deemed to have an Eligible Claim with respect to the Wall Section that was not the subject of the prior warranty, settled, or dismissed claim.

Dkt. No. 30 at ¶ 5.4. Under the terms of the Settlement Agreement,

[i]f a Claimant still has a valid SureStart warranty, they must first make a claim with CertainTeed under that warranty. The Claimant may, after accepting compensation under the SureStart warranty, make a claim in this Settlement, but only to recover that amount which exceeds what they have already received from CertainTeed.

Dkt. No. 30 at ¶ 5.4.

The settlement agreement provides for a gross, non-reversionary cash Settlement Fund of $103.9 million, which includes the costs of settlement administration, notice to class members, service awards to named plaintiffs and attorneys' fees and costs. See Dkt. No. 30 at ¶¶ 4.1, 4.4; Dkt. No. 87-2 at ¶ 3. Under the terms of the settlement agreement, CertainTeed is to make payments into the settlement fund as follows: (1) $2 million was to be paid into the fund within 25 days of the entry of the preliminary approval order; (2) $35 million is to be paid into the fund within 30 days of the Effective Date; (3) three equal installments totaling $22.3 million are to be paid every 90 days following the first payment after the Effective Date; (4) four equal installments totaling $22.3 million are to be paid in Year 2 of the Settlement, made on January 1, April 1, July 1 and October 1; (5) four equal installments totaling $11.15 million on January 1, April 1, July 1 and October 1 in Year 3 of the Settlement; and (6) in Year 4 of the Settlement, four equal installments totaling $11.15 million on January 1, April 1, July 1 and October 1. Dkt. No. 30 at ¶ 4.1. The settlement agreement also provides that if the balance of the Settlement fund falls at any time below $5 million before CertainTeed makes its last payment into the fund, "CertainTeed shall, within 14 business days of receiving written notice of the shortfall from Lead Counsel or the Claims Administrator, pay into the Fund an amount equivalent to the total amount paid out of the Fund during the previous three months." Dkt. No. 30 at ¶ 4.2.

V. Compensation Under the Settlement

The amount of each cash payment to be made to claimants under the settlement is based on the amount of Siding eligible for replacement, the cost of removing and replacing damaged Siding (including paint) and the age of the Siding being replaced. Payments will be calculated using the RS Means cost estimator. RS Means is a cost estimator that accounts for regional differences in labor and materials costs by using zip codes to factor in the specific costs of nearly any type of construction in a particular area of the country. Dkt. No. 87-1 at ECF p. 20 n.5. It has been used in the construction/building industry for almost 40 years. Id

Qualifying damage to Siding is defined as shrinkage between the ends of Siding in excess of 3/16", except that for Siding installed abutting windows, doors or trim, shrinkage must exceed 5/16". Dkt. No. 30 at ¶ 1. ly. Qualifying damage also includes Siding with warping in excess of 1/2", cracking through the board or delamination. Id Claimants may qualify for a payment under the Settlement as follows:

a. If Qualifying Damage exists on 5% or greater of either the total number of boards or on boards which represent 5% or more of the total square footage on the affected Wall Section, the Claimant is eligible for compensation for the number of boards on the entire wall section.
b. If the Claimant does not qualify for compensation for the entire Wall Section pursuant to Section 7.2(a) [of the settlement agreement], compensation will be based on the actual number of boards or panels with Qualifying Damage and will be prorated based on the actual number of boards with Qualifying Damage plus any necessary boards immediately above or below the affected boards. The proration for the materials will be based on the schedule under the original warranty. The remaining costs will follow the schedule set forth . . . below.
c. The schedule for valuing the claim is as follows:

Date of Original Installation

Percent of RS Means at time of Final Approval

2013

80%

2012

76%

2011

72%

2010

68%

2009

64%

2008

60%

2007

56%

2006

52%

2005

48%

2004

44%

2003

40%

2002

36%

2001

32%

2000

28%

1999

24%

Id at ¶ 7.2.

Plaintiffs contend that the cost of boards to re-side an average home (all four sides) is approximately $14, 000. Dkt. No. 87-1 at ECF p. 21. The average cost of siding a home in the United States, including materials, labor and other expenses is approximately $500/square, with a square consisting of 100 square feet of siding that comes in 12 foot lengths ranging in width from 5 1/4 inches to 12 inches. Id An average home requires about 28 squares. Id. Accordingly, plaintiffs offer the following example of a recovery for a Settlement class member:

if two out of the four sides of an average size home built in 2006 had qualifying damage in excess of 5%, and each of the sides was of equal size, then one-half of the 28 squares, or 14 squares, would need to be replaced. According to the proration schedule in the Settlement Agreement, which reflects both a reduction for the number of years of service the homeowner received from the Siding, and the compromises inherent in the settlement process, the claim would be valued at 52% of RS Means, which equals $3, 640 ((14 squares x $500/square) x .52).

Dkt. No. 87-1 at ECF p. 22.

Plaintiffs note that all claims under the settlement will be paid on a two-payment schedule in order to ensure that claimants in year one are not treated differently from those who make claims in subsequent years. Id; see also Dkt. No. 30 at ¶ 7.3. As soon as the claim is administered, a first payment will be made in the amount of 50% of the claim value. Dkt. No. 30 at ¶ 7.3. If monies remain in the settlement fund at the end of the six year claims submission period, a second payment will be made on a pro rata basis to all claimants who submitted valid claims, unless class counsel seeks Court approval to accelerate payments based on the claims rate. Dkt. No. 87-1 at ECF p. 22. The settlement provides that the claims administrator shall file annual reports of payments made to valid claimants during the prior year. Dkt. No. 30 at ¶ 6.29. The Court will review the annual reports and Co-Lead Class Counsel shall petition the Court for approval to release the second round of payments based on the funds available at or near the end of the Claims Submission Period. Depending on the claims rate, the second payment to claimants may equal the remaining 50% of the "full value of their claim with a reduction for usage." Dkt. No. 30 at ¶ 7.3.

Pursuant to Addendum B to the settlement agreement, executed by the parties and submitted to the Court on February 19, 2014,

[i]f the Settlement Fund has not been exhausted following the expiration of the Claims Submission Period, the Claims Submission Period will remain open for as long as there are remaining funds. The Claims Administrator will continue to accept claims from Settlement Class Members until the Settlement Fund is exhausted. Settlement Class Members who submit Eligible Claims during this extended period of time will receive a one-time payment for their claim according to the proration schedule in Section 7.2(c) of the Settlement Agreement, up to the point the Settlement Fund is exhausted. The Claims Administrator will pay claims in the order in which they are received after the end of the Claims Submission Period, until the Settlement Fund is exhausted.

Dkt. No. 109. All of the settlement fund, less attorneys' fees and costs, service awards and claims administration costs awarded by the Court, will be paid to settlement class members. Dkt. No. 87-1 at ECF p. 22. No money will be returned to CertainTeed at any time. Id[5]

VI. Resolution of Claims

The settlement agreement requires class members to submit a claim form containing information regarding the amount of Siding installed and affected by qualifying damage in order to calculate the remedy due under the Settlement. The information sought on the claim form does not differ significantly from the information sought by CertainTeed's Consumer Services department through its usual limited warranty claims procedure. Dkt. No. 87-4 at ¶ 7. It asks for information identifying the claimant and establishing the address and ownership of the building where the Siding is installed. Id at ¶ 8. Because qualifying damage is required to be eligible to participate in the Settlement, and in order to prevent false claims, the claim form also requires that settlement class members demonstrate with photographs that their Siding has, in fact, manifested a defect. Dkt. No. 30 at ¶ 6.6. Photographs are required in lieu of the more onerous task of removing the Siding and sending it to CertainTeed. Dkt. No. 87-4 at ¶ 8. Photographs are also required under the standard warranty claims process. Dkt. No. 87-4 at ¶ 8. e. Because there are several manufacturers of fiber cement siding and homeowners frequently do not know their siding manufacturer's identity the claim form also requests information that will ensure that the complained-of siding is in fact CertainTeed's Siding. Dkt. No. 87-4 at ¶ 8; Dkt. No. 30 at ¶ 6.5.

If a claimant does not establish an eligible claim, the settlement agreement requires the claims administrator to send a letter to the claimant including "the reason why the Claimant has not shown an Eligible Claim." Dkt. No. 30 at ¶ 6.12. Claimants have two opportunities to remedy any deficiencies in their claim. Id at ¶ 6.13. If a claim is denied, the claimant has a right to appeal the denial to an independent claims reviewer. Dkt. No. 30 at ¶ 6.18.[6]

Settlement class members may file a claim form within six years of the Settlement's effective date, unless the Settlement Fund has not been exhausted following the expiration of the Claims Submission Period, in which case, the Claims Submission Period will remain open for as long as there are remaining funds. See Dkt. No. 30 at ¶1.1.i; Dkt. No. 109. Claim forms may be obtained by calling a toll-free number or downloaded online at the settlement website .[7] Id at ECF p. 24. The website will be available for the duration of the six year claims submission period. Id

VII. Named Plaintiffs

Plaintiffs move to have named plaintiffs Steve Clavette, Chad Epsen, Monique Orieux, Chris Thames, Gwen Weithaus, Steven Wiedmeyer, Richard Tesoriero, John Robards, Barbara Robards, James Dibley, Patricia Swanson and Koreen Grube finally appointed as class representatives. Dkt. No. 87 at ECF p. 2. They have also requested service awards in the total amount of $65, 000 as follows: (1) service awards of $2, 500 per household awarded to named plaintiffs and class representatives Steve Clavette, Chad Epsen, Monique Orieux, Chris Thames, Gwen Weithaus, Steven Wiedmeyer, Richard Tesoriero, John Robards, Barbara Robards and Koreen Grube; (2) a service award of $2, 500 to settlement class member Canal Park Lodge, LLC, who contributed to this litigation similarly as the named plaintiffs; and (3) service awards of $2, 500 per household to plaintiffs Steve and Karyn Hardig; Salvatore and Brooke Bongiorno; William and Tina Brantly; Kirby and Jennifer Dean; Evan and Monica Epp; Christopher and Kelly Everetts; Mary Kathleen Harrison; Jim and Karen Macmonagle; Stephen and Laura McNally; Thomas and Cassandra Aiosa; Annie Cheung; Chester and Eva Tai; Lethanial and Melissa Saunders; Michael and Stephanie Sherman; and Sherman Green, all of whom were plaintiffs in this MDL. Dkt. No. 87-1 at ECF p. 24-25. Paragraph 4.4 of the settlement agreement provides that incentive fees to the named plaintiffs shall be paid out of the settlement fund. Dkt. No. 30 at 4.4.

VII. Claims Administrator

Plaintiffs also seek final appointment of Analytics (formerly BMC Group) as the claims administrator. They seek approval of payments from the settlement fund to the claims administrator, whose fees for notice and claims administration totaled $1, 369, 695.42 as of January 29, 2014. $1, 318, 153 of that amount has already been paid. The claims administrator estimates that fees through the completion of claims processing will not exceed an additional $571, 468.00. Id at ECF p. 25. Paragraph 4.4 of the settlement agreement provides that, inter alia, "the Settlement Fund Shall be used by the Claims Administrator to pay the approved costs of notice, claims administration, including the Claims Administrator and the Independent Reviewer." Dkt. No. 30 at ¶ 4.4.

IX. Class Counsel

Plaintiffs move for the appointment of Michael McShane of Audet & Partners, LLP and J. Laddie Montague, Jr. and Shanon J. Carson of Berger and Montague, P.C. as co4ead counsel for the settlement class. Dkt. No. 87 at ECF p. 2. Class counsel have petitioned the Court for attorneys' fees payable from the settlement fund in the amount of $18, 500, 000.00 and costs in o the amount of $304, 996.65. Id Paragraph 4.4 of the settlement agreement provides that attorneys' fees and costs are to be paid from the Settlement Fund. Dkt. No. 30 at ¶ 4.4.

X. Notice

Also consistent with the Court's preliminary approval Order, the claims administrator provided notice to the settlement class via: (1) direct mailed notice to known class members with pending, open and rejected warranty claims (when addresses were known and available); (2) paid notice placements appearing regional editions of Parade Magazine and USA Weekend as well as in hard copy and electronic trade publications; (3) paid television advertising targeting potential class members; (4) paid internet advertising targeting potential class members; (5) nationwide press release via PRNewswire's US1 distribution to more than 5, 815 traditional media outlets (print, TV and radio) and 5, 400 websites and online databases; and (6) a dedicated case website). Dkt. No. 87-5 at ¶ 10.

Plaintiffs assert that the efforts undertaken to notify potential class members of their rights under the Settlement reached approximately 82% of likely class members an average of 2.5 times each nationwide. Id at ¶ 75. The notice plan began on October 23, 2013 and o Plaintiffs' fee approval motion is discussed in further detail below. continued via print, the internet and television, giving class members time to see the notice and respond accordingly prior to the deadline for exclusion and objections on December 31, 2013. Id

A short form notice was used in print ads and internet media.

[P]rint advertisements explained: (1) the type of Siding and dates covered by the class action; (2) the terms of the Settlement; (3) the legal rights of Settlement Class Members, including the right to request exclusion, object, and appear at the hearing; (4) the intent of class Counsel to petition for attorneys' fees and costs; and (5) the details for contacting the Claims Administrator and the website and toll-free phone number for obtaining additional information.

Dkt. No. 87-1 at ECF p. 66. A long form notice was mailed to each settlement class member with a valid mailing address who had pending, open or ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.