Until now, owners of single-family homes were left to their own devices and resources in seeking redress for construction defects. Class suits were thought to be unavailable to homeowners despite their homes having been built by the same builder and suffering from the same general defects. The differences in subcontractors used, methods of construction, location of defects, time built and nature of resulting damages defeated class certification and deterred law firms from bringing class action lawsuits alleging construction defects. The economics of bringing an individual construction defect suit weighed heavily against litigation and, as a result, homeowners ended up either living with the defects or paying for repairs out of pocket.
Fortunately for homeowners, thanks to a recent decision from the Appellate Division captioned D’Andrea v. Hovnanian, 2013 N.J. Super. Unpub. LEXIS 1484 (App. Div. June 18, 2013) the landscape has now changed. According to the Appellate Division, the four prerequisites for bringing a class action lawsuit – numerosity, commonality, typicality, and adequate representation – were met by a class of plaintiffs who brought suit against developer K. Hovnanian (“Hovnanian”) for fire safety hazards in the HVAC system installed in their homes. According to the complaint, the class was rather broadly defined as:
All persons or entities who from June 27, 2001 to the present purchased a home in New Jersey from Defendants with a HVAC system installed such that the cavities between studs or partitions to be used as return ducts are not isolated from unused spaces with tight-fitting stops or sheet metal or with wood not less than 2-inch nominal thickness and/or where such cavities are part of a required fire-resistance-rated assembly.
Plaintiffs alleged numerous defects with Hovnanian’s construction of the return air cavity, including insufficient thickness of the I-joist webs, improper fireblocking construction, unsealed holes and cracks, and other building code violations. After many days of expert testimony, the trial court granted Plaintiffs’ motion to be certified as a class. Hovnanian filed an interlocutory appeal arguing that the trial judge erred in finding that the Plaintiffs satisfied the requirements for class certification.
Hovnanian relied on the absence of precedent regarding class action certifications in single-family residential construction defect cases to argue that the individualized nature of home construction made such causes of action unsuitable for class certification. Hovnanian pointed out, and Plaintiffs agreed, that there was no single deviation common to each class member’s home. Nevertheless despite the significant differences among the construction defects, there remained a “strong commonality in the nature of the claimed defect – fire safety hazards in HVAC return systems.” Seeing the forest instead of the trees, the Court focused on whether construction of the HVAC cavities met the applicable code rather than on the differences in materials and construction methods used.
The Court had no trouble finding that plaintiffs satisfied the requirement there be commonality among the claims because even though the improper construction varied from home to home, the effect of that construction remained the same:
The defective fireblocking may result from one or more of a finite set of reasons, but the effect is precisely the same on a specific, narrow aspect of the safety of class members’ homes.
Additionally, the answers to the questions regarding the alleged code violations for one plaintiff will be equally applicable to similar alleged code violations for another plaintiff.
Next the Court turned to questions of predominance and superiority. Predominance exists when the “questions of law or fact common to the members of the class predominate over any questions affecting only individual members.” R. 4:32-1(b)(3). The Court found that common questions of fact and law predominated over individual differences between the claims. The significance of the common thread i.e. improper return cavity fireblocking, outweighed the relevance of the individual issues of damages i.e. repairs. As a result, the trial court did not err in finding that the common issues predominated. The Court acknowledged that there is a great deal of judicial economy to be realized from deciding all the issues in one proceeding rather than hundreds of separate proceedings.
Finally Hovnanian challenged the trial court’s finding that the class form of litigation was proper and superior to other available methods. Recognizing the economic realities deterring individual claimants from pursuing individual lawsuits or arbitrations, the Appellate Division agreed that the class action device was particularly useful in this case. Efficiency and consistency weighed heavily in favor of class certification, as did fairness to the class members and a lack of prejudice to Hovnanian. The Court had little doubt that a class action was the best method of adjudicating the class members’ claims and therefore affirmed the trial court’s certification of the class.
This case sets important precedent for individual homeowners, especially those living within planned developments built by the same developer. Members of homeowners’ associations now have a potentially viable option of pursuing litigation as a class to recover for construction defects. Whereas expert fees and litigation costs are nearly insurmountable for an individual homeowner, the class structure allows members to share those costs while still seeking full recovery of their damages. While the D’Andrea decision has opened the door for construction defect cases to be brought as class actions, time will tell exactly how large that opening is. For the time being, however, it appears that homeowners, whose homes suffer from a common defect having the same adverse effect, are suitable candidates for class membership in a class action lawsuit.