Elliott v. KB Home N.C., Inc., 2017 NCBC 37.
STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION COUNTY OF WAKE 08 CVS 21190
MARK ELLIOTT, TOR AND MICHELLE GABRIELSON, MICHIHIRO AND YOKO KASHIMA, FAIRWAY 13 PROPS., LLC, on behalf of themselves and all others similarly situated, Plaintiffs, ORDER APPROVING FINAL v. SETTLEMENT AND KB HOME NORTH CAROLINA, AWARDING ATTORNEYS’ FEES INC. AND KB HOME RALEIGH- DURHAM, INC.,
Defendants,
and
KB HOME RALEIGH-DURHAM, INC.,
Third-Party Plaintiff,
v.
STOCK BUILDING SUPPLY, LLC,
Third-Party Defendant.
THIS MATTER comes before the Court on Plaintiffs’ Motion for Final Approval
of Settlement (“Approval Motion”) and Unopposed Motion for Award of Attorneys’
Fees and Expenses and Service Awards (“Fee Motion”) (collectively, “Motions”)
pursuant to Rule 23 of the North Carolina Rules of Civil Procedure (“Rule(s)”). Both
Motions are unopposed by Defendant KB Home Raleigh-Durham Inc. (“KB Home”),
and after appropriate notice to class members was provided as required by the Court’s
Order Granting Preliminary Approval of Settlement, the Court received only one
objection to the settlement conditionally entered on January 4, 2017 (“Settlement”). On April 11, 2017, the Court held a hearing on the Motions and is satisfied as
to the fairness, reasonableness, and adequacy of the Settlement, and the fairness and
reasonableness of the fees, expenses, and service awards provided herein. Therefore,
having considered the Motions, the supporting Memorandums, materials filed with
the Motion, discussions with counsel during the hearing held on April 11, 2017, and
other appropriate matters of record, concludes that good cause exists to grant the
Motions. Therefore, the Court GRANTS the Final Approval Motion, CERTIFIES the
classes as defined below for settlement purposes only, APPROVES the Settlement,
and GRANTS the Fee Motion.
Whitfield Bryson & Mason LLP, by Daniel K. Bryson, Gary E. Mason, and Scott C. Harris, for Plaintiffs.
Bradley Arant Boult Cummings LLP, by Michael W. Knapp and Brian M. Rowlson, for Defendant KB Home Raleigh-Durham Inc.
Hunton & Williams LLP by A. Todd Brown, for Third Party Defendant Stock Building Supply, LLC.
Background
1. Plaintiffs in these actions are current and former owners of homes
constructed by KB Home in the Twin Lakes and Wynbrooke subdivisions in Cary,
North Carolina.
2. On January 31, 2008, Plaintiffs Mark Elliott, Tor and Michelle
Gabrielson, and Michihiro and Yoko Kashima filed a warranty claim with KB Home
because their homes did not have a weather-resistant barrier (“WRB”) beneath the
HardiePlank. The parties were unable to resolve Plaintiffs’ warranty claim, and on
December 5, 2008, Plaintiffs filed a class action lawsuit in Wake County Superior Court against KB Home North Carolina Inc., and KB Home alleging that KB Home
violated the applicable building codes and breached their respective contracts by not
installing a WRB beneath the HardiePlank siding resulting in damages from water
intrusion into the walls of the homes.
3. After Judge W. Osmond Smith, III, denied KB Home’s motion to dismiss
but granted KB Home North Carolina Inc.’s motion to dismiss, KB Home filed a third
party complaint against Stock Building Supply, LLC (“Stock”), who KB Home claimed
installed the exterior siding without a WRB on Plaintiffs’ homes. Stock moved for
designation of this case as a complex business case, which was granted on June 17,
2010, and assigned to the Honorable John R. Jolly, Jr.
4. On February 27, 2012, Judge Jolly issued an order certifying a class of
homeowners in North Carolina who own a home constructed by KB Home without a
WRB installed under the exterior siding. A Notice of Class Action was mailed to all
potential class members on or before March 15, 2012.
5. Following the February 27 Class Certification Order, KB Home initiated
a series of appeals during which stayed the case. Then, following an unsuccessful
mediation, the Court lifted the stay on June 5, 2015.
6. Due to changes in circumstances amongst some of the class members
following the February 27, 2012 Order, this Court modified the class definition on
September 25, 2015, to include a subclass of “Post-Notice Sellers,” which included
homeowners who owned a home constructed by KB Home without a WRB as of March
15, 2012, but who subsequently sold it. The Court ordered Plaintiffs to amend their complaint to add a subclass representative. Plaintiffs subsequently amended their
complaint to add Fairway 13 Properties, LLC, as their subclass representative.
7. On December 6, 2016, Plaintiffs filed their Unopposed Motion for
Preliminary Approval of Settlement, Certification of Settlement Classes, Approval of
Class Notice and Scheduling of Final Approval Hearing. After a discussions with
counsel for all parties, this Court entered its Order Granting Preliminary Approval
of Settlement, Certifying Classes for Purposes of Settlement, Directing Notice to the
Class, and Scheduling Final Approval Hearing (“Preliminary Approval”) and set a
hearing to consider certifying the classes, final approval of the settlement on April
11, 2017, and for determining attorneys’ fees, expenses, and service awards.
8. Plaintiffs filed the Approval Motion and the Fee Motion, as well as
supporting material, on March 28, 2017. This Court held a hearing on April 11, 2017.
9. In evaluating whether to finally approve a class action settlement,
courts follow a two step process that first examines whether the proposed class
satisfies North Carolina Rule of Civil Procedure 23, and second whether the
settlement is “fair, reasonable, and adequate.” Ehrenhaus v. Baker, 216 N.C. App.
59, 73, 717 S.E.2d 9, 19 (2011).
Class Certification
10. The Court first turns to whether the Settlement Classes should be
finally certified. Rule 23 of the North Carolina Rules of Civil Procedure governs class
actions. There are three basic requirements to establish class certification under Rule
23: First, parties seeking to employ the class action procedure pursuant to our Rule 23 must establish the existence of a class. A class exists when each of the members has an interest in either the same issue of law or of fact, and that issue predominates over issues affecting only individual class members. The party seeking to bring a class action also bears the burden of demonstrating the existence of other prerequisites: (1) the named representatives must establish that they will fairly and adequately represent the interests of all members of the class; (2) there must be no conflict of interest between the named representatives and members of the class; (3) the named representatives must have a genuine personal interest, not a mere technical interest, in the outcome of the case; (4) class representatives within this jurisdiction will adequately represent members outside the state; (5) class members are so numerous that it is impractical to bring them all before the court; and (6) adequate notice must be given to all members of the class.
Beroth Oil Co. v. N.C. Dep’t of Transp., 367 N.C. 333, 337, 757 S.E.2d 466, 470 (2014)
(citations omitted). “When all the prerequisites are met, it is left to the trial court’s
discretion whether a class action is superior to other available methods for the
adjudication of the controversy.” Id.
11. This is not the first time the Court has considered whether Plaintiffs can
maintain their action as a class. On February 27, 2012, this Court entered an order
certifying a class of persons in North Carolina who owned a home built by KB Home
without a WRB underneath the HardiePlank exterior siding. On September 25, 2015,
this Court confirmed the certification of the class but created a subclass of former
homeowners to address a change in circumstances—a change in home ownership—
from when the class certification order was entered. 12. The parties proposed two Settlement Classes that largely mirror the two
classes this Court certified on February 27, 2012, and September 25, 2015, with only
minor changes. These changes include clarifying that homeowners who transferred
ownership of a home but did not sell it, such as in the case of divorce, marriage, or
estate planning, retain their class membership, and adding a list of Settlement Class
members. Neither of these changes constitute a significant change to the previously
approved class definitions.
13. Since this Court entered an order preliminarily approving the
settlement and approving notice to be sent to the classes, the parties have informed
the Court that some individuals have provided information that fit the definition of
one of the class definitions yet do not appear on the list of Settlement Class members.
Accordingly, at the conclusion of the claims period, the parties will execute an
Addendum to Stipulation of Settlement and Release that provides a mechanism for
these individuals to benefit from the Settlement as class members once it is confirmed
that these homes do not have a WRB.
14. The Court finds that the Settlement Classes meet the prerequisites
under Rule 23. The Settlement Class Representatives’ claims are typical of the claims
of the respective Settlement Class members. The representatives for Settlement
Class A, Mark Elliott, the Gabrielson’s, and the Kashmina’s, all have the same
interests in repairing their homes and their claims are based on the same legal
injury—that KB Home failed to install a WRB. Likewise, Fairway 13 Properties, LLC, shares the same injury as Settlement Class B members of a decrease in sale value of
its home stemming from KB Home’s failure to install a WRB.
15. There are questions of fact and law that are common to all Settlement
Class members in the defined period, and these predominate over any potential
individual claim or issues that might be asserted by the Settlement Class
Representatives. The common questions of fact involved in this matter included
whether KB Home failed to install a WRB underneath the HardiePlank exterior
siding and the property and/or economic damages that resulted therefrom, a core
issue of fact that was common to all Settlement Class A and B members alike. The
common legal issue, whether KB Home failed to comply with the North Carolina
Building Code by not installing a WRB, arises out of this common factual issue. This
single core factual inquiry and core legal issue binds the Settlement Classes together
and makes them sufficiently cohesive. Because these issues predominate over any
individual issue or interest of the Settlement Class Representatives, and for the other
reasons previously articulated by the Court regarding its previous class certification
orders, two proper classes exist.
16. Additionally, the Court concludes that the Settlement Class
Representatives have no conflict of interest with the Settlement Classes, and that
they, as current and former homeowners, have a genuine personal interest in the
outcome of the case and that interest is shared by all class members. The Settlement
Class Representatives have shown a commitment to vigorously prosecute this action
by sitting for depositions, complying with document requests, and negotiating settlement terms with Settlement Class Counsel. Accordingly, the Settlement Class
Representatives fairly and adequately represent the interests of the respective
Settlement Class A and B members.
17. The Settlement Classes now consist of owners and former owners of
approximately 313 homes. This Court concludes that the class is so numerous that it
is impractical to join all members. See, e.g., Pope v. Harvard Banschares, Inc., 240
F.R.D. 383, 387 (N.D. Ill. 2006) (“Generally, where the membership of the proposed
class is at least 40, joinder is impracticable and the numerosity requirement is met”).
18. Because Plaintiffs have satisfied all class action prerequisites, this
Court has the discretion to determine whether a class action is superior to all other
methods for adjudication of this controversy. Beroth Oil Co., 367 N.C. at 337, 757
S.E.2d at 470. After a thorough and careful review of the Approval Motion, the
affidavits and evidence provided in support of the Approval Motion, the Court
concludes, in its discretion, that class certification is proper in this matter.
19. Accordingly, the Court finally approves and certifies the following class
as Settlement Class A:
All persons in the State of North Carolina who owned a home on March 15, 2012 and still owned the home as of November 10, 2016, in the Twin Lakes Homes or Wynbrooke Homes developments in Cary, North Carolina constructed by Defendant KB Home without a weather- restrictive barrier behind the exterior veneer of HardiePlank cement fiber lap siding and are listed in Amended Exhibit C of the Settlement Agreement. Excluded from the Class are: (a) any judge or magistrate presiding over this action and members of their families; (b) any Defendant and/or Third-Party Defendant and any entity in which any Defendant and/or Third-Party Defendant have a controlling interest or which has a controlling interest in any Defendant and/or Third-Party Defendant and its legal representatives, assigns and successors of any Defendant and/or Third-Party Defendant; and (c) all persons who properly execute and file a timely request for exclusion from the Class.
20. Likewise, the Court finally approves and certifies the following class as
Settlement Class B:
All persons in the State of North Carolina who owned a home on March 15, 2012, in the Twin Lakes Homes or Wynbrooke Homes developments in Cary, North Carolina constructed by Defendant KB Home without a weather- restrictive barrier behind the exterior veneer of HardiePlank cement fiber lap siding but who sold or otherwise transferred their ownership interest the home after March 15, 2012, do not qualify as a Class A member and are listed in Amended Exhibit C of the Settlement Agreement. Excluded from the Class are: (a) any judge or magistrate presiding over this action and members of their families; (b) any Defendant and/or Third-Party Defendant and any entity in which any Defendant and/or Third-Party Defendant have a controlling interest or which has a controlling interest in any Defendant and/or Third-Party Defendant and its legal representatives, assigns and successors of any Defendant and/or Third-Party Defendant; and (c) all persons who properly execute and file a timely request for exclusion from the Class.
21. Pursuant to the parties’ Addendum to Stipulation of Settlement
Agreement and subject to a confirmatory inspection, Amended Exhibit C to the
Settlement Agreement is deemed to include those individuals listed on Exhibit 1 of
the Addendum to Stipulation of Settlement Agreement.
Final Approval of Settlement 22. The Court next looks at the Settlement to determine whether the
Settlement is “fair, reasonable, and adequate.” Ehrenhaus, 216 N.C. App. at 73, 717
S.E.2d at 19. The burden of showing that the Settlement satisfies this standard rests
on Plaintiffs. Id. The determination of whether Plaintiffs have satisfied this burden
rests in the trial court’s sound discretion. Id.
23. While there are a variety of factors used to evaluate a settlement, the
court of appeals has identified two key factors in determining whether to approve a
proposed settlement of a class action: “the first is the likelihood the class will prevail
should litigation go forward and the potential spoils of victory, balanced against
benefits to the class offered in the settlement.” Id. at 74, 717 S.E.2d at 20. The second
factor “is the class’s reaction to the settlement.” Id.
24. As to the first factor, this Court notes that Plaintiffs obtained rulings in
this action that support their likelihood of success if this action were to go to trial.
These rulings include the February 27, 2012 Order that certified a class of
homeowners, the September 25, 2015 Order that maintained the class but created a
separate subclass, and the March 23, 2016 Order that found that KB Home’s
installation of HardiePlank siding without a WRB was not reviewed and approved by
the Town of Cary Code Enforcement Official as required by Section 205.1 of the North
Carolina Administrative Code.
25. Notwithstanding these rulings, Plaintiffs would be faced with numerous
risks that threatened the classes if this action were to proceed. For example, the
current homeowner class membership decreases, on average, by twenty-six homes per year. See September 25, 2015 Order at ¶ 23 n. 30. Thus, the current homeowner
class could have been diminished the longer the case proceeded, whether by trial or
subsequent appeals. Likewise, at the time the parties executed the Settlement, KB
Home had a pending motion to disqualify the former homeowners’ only class
representative, Fairway 13 Properties, LLC. Plaintiffs noted that the potential
disqualification of this class representative could threaten the existence of the sub-
class. KB Home could win at trial or appeal any adverse judgment, and could argue
that evidence developed at trial should lead the Court to decertify the class. Any
appeal could take years and would have a necessarily uncertain outcome.
26. Balanced against this background and these risks are the benefits
offered to the class in the settlement. Under the settlement, the current homeowner
class (“Settlement Class A”) are offered a choice between one of two benefits. First,
Settlement Class A members may select a lump sum cash benefit with a range from
$6,500 to $17,000 based on the original square footage of their home. Second,
Settlement Class A members may instead opt to apply for repairs to their home.
Under the repair option, Settlement Class A members can qualify to receive repairs
to their home that include the removal of the current HardiePlank siding, installation
of a WRB, and installation of new HardiePlank siding. In order to qualify for the
repair benefit, Settlement Class A members must pass a Neutral Testing Protocol,
which was developed by experts retained by Plaintiffs and KB Home but without
interference from the parties’ counsel. Settlement Class A members who apply, but
do not qualify for, the repair option will receive the lump sum cash benefit they otherwise qualified for less $2,000 which compensates for the cost of the testing
procedure and potentially increased administrative costs to KB Home.
27. Similarly, the former homeowner class (“Settlement Class B”) are
offered a choice between one of two benefits. Settlement Class B members may chose
a lump sum cash benefit of $3,250. Alternatively, Settlement Class B members may
choose to receive the actual documented decrease in sale value of their homes up to
$12,000. Settlement Class B members who select this second option are required to
submit contemporaneous evidence of a price decrease that was sought and obtained
related to a lack of WRB in order to qualify for this option. Finally, the benefits
available under this second option are limited to what Settlement Class B members
could receive based upon the original square footage of their home had they been a
Settlement Class A member.
28. The benefits available to the Settlement Classes are in line with the
damages they would receive if Plaintiffs were to proceed to a successful litigated
result. Settlement Class A members would generally be entitled to the cost to repair
their homes if they were successful at trial. The Settlement provides these members
with most, if not all, of what they could receive by providing the means to repair their
homes. Settlement Class B members would generally be entitled to the amount their
homes decreased in sale value due to the absence of a WRB. Likewise, the Settlement
provides these members with a guaranteed amount of compensation and the option
to increase their compensation if they can specifically establish their damages. 29. The Settlement received only one timely objection out of approximately
three hundred Settlement Class members. The objector questioned the adequacy of
the settlement benefits and the testing procedure used under the repair option for
Settlement Class A members. As to the adequacy of the settlement benefits, the Court
notes that the Settlement was negotiated by adverse parties engaged in litigation for
over 8 years and was the product of compromise. The benefits offered under the
Settlement fall well within the range of reasonableness. As to the testing procedure,
the Court has reviewed the Neutral Testing Protocol and finds that it is the product
of knowledgeable and capable engineers, and that it fairly accounts for any changes
in the weather that may affect the testing procedure. As such, the Court finds that
the lone objection is without merit.
30. Ultimately, after thorough consideration of the nature and strength of
Plaintiffs’ claims, the potential defenses they faced, and the impact that prolonged
litigation has already had and likely will continue to have on class membership, the
Court concludes, in its discretion, that the Settlement is fair, reasonable and should
be approved.
Attorneys’ Fees and Reimbursement of Expenses
31. Plaintiffs also move the Court to approve their request for an award of
$1,925,000 in attorneys’ fees and reimbursement of expenses. The Settlement
Agreement provides that “Class Counsel shall be entitled to apply to the Court for an
award of Attorneys’ Fees and Expenses in a total amount not to exceed $1,925,000.00
and that KB Home will not object to any application by Class Counsel for an award of Attorneys’ Fees and Expenses that does not exceed that total amount.” The request
is comprised of $1,776,506.39 in attorneys’ fees and $148,493.61 in out of pocket
expenses. Additionally, Plaintiffs request that each set of homeowners Settlement
Class Representatives receive $8,000 service award for a total of $32,000. The Fee
Motion is not opposed by KB Home. The settlement of this action is not contingent on
the award of attorneys’ fees to Settlement Class Counsel, and Settlement Class
members are not being asked to pay any of the fees or expenses. Settlement Class
Counsel submitted an affidavit attesting to the hours expended, billing rates, and
costs incurred.
32. While a court may not modify a contractual attorneys’ fees arrangement
reached in a settlement of a Rule 23 class action, it nevertheless must review the fees
sought for reasonableness and must approve any fees paid by way of settlement. See
Ehrenhaus, 216 N.C. App. at 74, 717 S.E.2d at 33 (“While any ‘compromise’ in a class
action must be reviewed by a court, a court cannot modify a purely contractual
settlement.”). Here, the parties agreed that Plaintiffs could apply to the Court for an
award of attorneys’ fees and reimbursement of expenses up to $1,925,000. The
determination of the amount of attorneys’ fees to be awarded is in the sound
discretion of the Court. G.E. Betz, Inc. v. Conrad, 231 N.C. App. 214, 242, 752 S.E.2d
634, 654 (2013). Accordingly, the issue before the Court is whether Plaintiffs’
counsel’s request for $1,925,000 in both fees and reimbursement of expenses is
reasonable. 33. The criteria for examining the reasonableness of attorneys’ fees was
considered in Ehrenhaus. In Ehrenhaus, the Court of Appeals held that the
reasonableness of attorneys’ fees is governed by Rule 1.5 of the Revised Rules of
Professional Conduct of the North Carolina State Bar (“RPC”). 216 N.C. App. at 96,
717 S.E.2d at 33. RPC 1.5 provides that “[a] lawyer shall not make an agreement for,
charge, or collect an illegal or clearly excessive fee or collect a clearly excessive
amount for expenses.” Id. The factors to be utilized when determining whether a fee
is clearly excessive include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.
Ehrenhaus, 216 N.C. App. at 96–97, 717 S.E.2d at 33–34.
34. The Fee Motion is unopposed, and Plaintiffs have provided sufficient
information and evidence to establish the reasonableness of their fee request under
the RPC 1.5 factors. Settlement Class Counsel has provided sufficient evidence of the
time and labor required to litigate the case.
35. Settlement Class Counsel and their previous firms collectively worked
over 6,400 hours and anticipate working an additional 100–200 hours in effectuating
the Settlement and assisting Settlement Class members in receiving the settlement benefits. Settlement Class Counsel’s current hour total is composed of 5,267 hours of
attorney time, and 1,229 hours of paralegal time.
36. Settlement Class Counsel established their experience, skill, and ability
to successfully conduct complex litigation. Settlement Class Counsel represented the
Settlement Class Representatives for a span of over eight years, during which they
successfully protected the Settlement Classes from de-certification and individual
arbitrations. The skill and labor required to litigate this action over eight years and
through several rounds of appeals, and the fact that essentially one firm1 performed
the work, also favorably weighs in Settlement Class Counsel’s favor.
37. Further, Whitfield Bryson & Mason partners Daniel K. Bryson, Gary E.
Mason, and Scott C. Harris each have decades of experience litigating construction
product defect cases and construction defect cases on an individual, multi-family, and
class basis. Mr. Bryson is one of the nation’s most respected and experienced
attorneys in these areas and, over his 28 year career, has successfully represented
thousands of owners in a wide variety of defective construction product suits, class
actions, multi-district litigation (“MDLs”), and various mass torts. Mr. Bryson has
also been lead, co-lead or a steering committee member in a number of successful
MDLs and class actions such as In re Mi Windows & Doors Prods. Liab. Litig., No.
2:12-mn-00001-DCN; MDL No. 2333 (D.S.C.); In re Chinese Manufactured Drywall
Prods. Liab. Litig., MDL NO. 2047 SECTION: L; 09-6072; 09-7393; 10-688; 10-792;
10-929; 10-930; 10-931; 10-1420; 10-1693; 10-1828 (E.D. La.); In Re: Elk Cross
1Mr. Daniel Bryson, Mr. Gary Mason, and Mr. Scott Harris, left their previous firms in October 2011 and formed their current firm on or about January 1, 2012. Timbers Decking Marketing, Sales Case Practices and Products Liability Litigation ,
MDL Docket No. 2577, No. 15-cv-0018 (JLL)(JAD) (D.N.J.); and, Smith v. Floor &
Decor Outlets of America, Inc., 1:15-cv-4316 (N.D. Ga.). Mr. Mason has previously co-
chaired the American Association of Justice (“AAJ”) Class Action Litigation Group
and focuses his practice on consumer class actions and mass torts. Mr. Bryson is the
past chair of the Construction Law Section of the North Carolina Bar Association.
Mr. Mason has served as lead counsel or class counsel in numerous defective
construction material class actions, including those involving FRT plywood,
polybutylene pipe, CCA wood, HTPV pipe, EIFS, Entran II and ACR concrete. In
addition, Mr. Harris has also secured substantial verdicts and settlements in a
variety of cases, including a multi-million dollar verdict in favor of homeowners for a
developer’s unfair and deceptive advertising and shoddy road construction, securing
a million dollar verdict for homeowners whose home was built on improperly
compacted soil, and has successfully represented condominium owners in various
construction defect cases in North Carolina, Florida, and Mississippi. Currently, Mr.
Harris is on the Plaintiffs’ Steering Committee for owners of allegedly defective
decking products, In Re: Elk Cross Timbers Decking Marketing, Sales Case Practices
and Products Liability Litigation, MDL Docket No. 2577, No. 15-cv-0018 (JLL)(JAD)
(D.N.J.) as well as on the Plaintiffs’ Steering Committee in Heber et al. v. Toyota
Motor Sales, USA, Inc., Case No.: 8:16-cv-01525-AG-JCG (C.D. Ca.). Due to their
expertise in complex construction related litigation and class actions, Settlement Class Counsel was able to secure a level of compensation to the classes that is quite
extraordinary.
38. Another factor to review in assessing an award of attorneys’ fees in
North Carolina is to determine whether it is fair and reasonable in view of
“community rates in the geographic area of the litigation.” G.E. Betz, Inc., 231 N.C.
App. at 244, 752 S.E.2d at 655. In this matter, Settlement Class Counsel have
proposed rates of $500 per hour for partners, $250 per hour for associates, and $125
an hour for paralegals2 in requesting $1,776,506.39 for over 6400 hours of work
performed by partners, paralegals and associates for eight years of work, including
attending hearings, conducting and preparing for depositions across the country,
responding to discovery and responding to dozens of briefs in the trial court as well
as in the appellate courts.
39. With these rates, Settlement Class Counsel generated attorneys’ fees of
over $1,986,301.25 and are therefore reducing their fees for this case. Settlement
Class Counsel’s requested fees of $1,776,506.39 reflects a loss of $209,794.86 from
2Settlement Class Counsel notes that several of its attorneys are based out of Washington
D.C. and thus have a higher billing rate than those typically charged in North Carolina. Further, rates of $500 per hour for partners and $250 per hour for associates represents a reduced hourly rate than those awarded to Settlement Class Counsel in other construction product class action settlements. See, e.g., Smith v. Floor & Decor Outlets of America, Inc., 1:15-cv-4316 (N.D. Ga.) (ECF Nos. 67, 69) (awarding attorneys’ fees at rates of $775 per hour for partners and $375 per hour for associates); In re Elk Cross Timbers Decking Marketing, Sales Practices and Products Liability Litigation, 15-0018, MDL No. 2577 (D.N.J.) (ECF Nos. 117) (approving attorneys’ fees at rates of $725 and $625 per hour for partners and $375 per hour for associates); In re MI Windows & Doors Prods. Liab. Litig., 2015 U.S. Dist. LEXIS 95889, *10, 2015 WL 4487734 (D.S.C. July 23, 2015) (approving a rate of $600 for partners, $300 for associates, and $125). Settlement Class Counsel’s lodestar time when calculated under previously
recognized North Carolina rates.
40. With 5,267 attorney hours in this matter, Settlement Class Counsel’s
requested fees of $1,776,506.39 yields an implied average attorney rate of $337.28.3
See e.g., Corwin v. British Am. Tobacco PLC, 2016 NCBC LEXIS 14, at *15 (N.C.
Super. Ct. Feb. 17, 2016) (concluding that fees yielding “an implied average hourly
rate of $325.04” to be “reasonable, and clearly not an excessive rate”); see also
Nakatsukasa v. Furiex Pharms. Inc., 2015 NCBC LEXIS 71, at *24 (N.C. Super. Ct.
July 1, 2015) (finding “rates of approximately $300–$550 per hour [as] typical of the
fees charged for this type of work in Wake County, North Carolina”).
41. Therefore, after carefully reviewing the foregoing, the Court finds, in its
discretion, that $1,776,506.39 is a reasonable attorney fee in this case.
42. Plaintiffs’ counsel requested reimbursement of expenses of $148,493.61
are also reasonable under the circumstances and the Court, in its discretion, awards
the full amount of these expenses.
43. Accordingly, the Court concludes that Plaintiffs should be awarded
$1,925,000 in attorneys’ fees and reimbursement of expenses.
44. Further, this Court finds, in its discretion, that $8,000 for each set of
Settlement Class Representatives up to $32,000 in service awards is reasonable for
the Settlement Class Representatives’ time and dedication to the Settlement Classes.
THEREFORE, IT IS HEREBY ORDERED THAT:
3 This implied average attorney rate is excluding the 1,229 hours of paralegal time that were
necessary for assisting in the resolution of this matter. 45. Unless otherwise defined herein, all defined terms shall have the
meanings as set forth in the Settlement Agreement.
46. The Settlement Notice has been given to the Settlement Classes
pursuant to and in the manner directed by the Order Granting Preliminary Approval,
proof of the mailing of the Settlement Notice has been filed with the Court and full
opportunity to be heard has been offered to all parties to the Action, the Settlement
Classes and persons in interest. The form and manner of the Settlement Notice is
hereby determined to have been the best notice practicable under the circumstances
and to have been given in full compliance with each of the requirements of North
Carolina Rule of Civil Procedure 23, due process and applicable law, and it is further
determined that all members of the Settlement Classes are bound by the Order and
Final Judgment herein.
47. Based on the record of the Action, the Court expressly and conclusively
finds, pursuant to North Carolina Rule of Civil Procedure 23, as follows:
a. that (i) the Settlement Classes, as defined above, are so numerous that
separate joinder of all members is impracticable, (ii) there are questions
of law and fact common to the Settlement Classes, (iii) the claims of the
Settlement Class Representatives are typical of the claims of the
Settlement Classes, and (iv) the Settlement Class Representatives and
their counsel have fairly and adequately protected the interests of the
Settlement Classes; and b. that the requirements of North Carolina Rule of Civil Procedure 23 have
been satisfied;
48. The Action is finally certified as a class action, pursuant to North
Carolina Rule of Civil Procedure 23.
49. Pursuant to North Carolina Rule of Civil Procedure 23, Plaintiffs Mark
Elliott, Tor and Michelle Gabrielson, Michihiro and Yoko Kashima, and Fairway 13
Properties, LLC, are finally certified as the Settlement Class Representatives. Daniel
K. Bryson, Gary E. Mason, and Scott C. Harris of Whitfield Bryson & Mason LLP is
finally certified as Settlement Class Counsel.
50. The Court finds, in its discretion, that the Settlement Agreement and
the Settlement Notice are fair, reasonable, adequate, and in the best interests of the
Settlement Classes, and are hereby approved pursuant to North Carolina Rule of
Civil Procedure 23. The parties are hereby authorized and directed to comply with
and to consummate the Settlement Agreement in accordance with the terms and
provisions set forth in the Settlement Agreement, and the Clerk of Court is directed
to enter and docket this Order and Final Judgment in the Actions.
51. This Order and Final Judgment shall not constitute any evidence or
admission by any Party.
52. Plaintiffs and the other members of the Settlement Classes who did not
timely and validly exclude themselves in accordance with the procedures set forth in
the Settlement Notice, on behalf of themselves and on behalf of their heirs, guardians,
executors, administrators, predecessors, successors and assigns, as well as any person accepting benefits under the Settlement Agreement are deemed to have as set
forth in the Settlement Agreement fully, finally and forever released, remised,
relinquished, acquitted, and forever discharged each and all of the Released Parties
of and from, and shall not now or hereafter institute, maintain, or assert on their own
behalf, on behalf of the Settlement Classes or on behalf of any other person or entity,
any claims, actions, causes of action, suits, rights, debts, obligations, reckonings,
contracts, agreements, executions, promises, damages, liens, judgments and
demands of whatever kind, type or nature whatsoever, both at law and in equity,
whether past, present or future, mature or not yet mature, known or unknown,
suspected or unsuspected, contingent or non-contingent, whether based on federal,
state or local law, statute, ordinance, regulation, code (including but not limited to
building code), contract, common law, or any other source, or any claim that Plaintiffs
or Settlement Class members had, or may have had against the Released Parties that
were or reasonably could have been alleged by them or on their behalf in the Action
or in any other court, tribunal, arbitration panel, commission, agency, or before any
governmental and/or administrative body, or any other adjudicatory body, on the
basis of, connected with, arising out of or relating to the failure to install a weather-
resistant barrier behind the exterior cladding during the construction of Class
members’ homes by the Released parties from 2005 through 2007 or any other issues
with their home that were or reasonably could have been discovered and/or alleged
in the Action, including, but without in any way limiting the generality of the
foregoing, the claims alleged in the Action, and any claims for breach of contract, breach of express or implied warranty, tort, or statutory violations arising from, or
directly or indirectly, or in any way whatsoever, pertaining to or relating to the
construction of Plaintiffs’ homes by the Released Parties from 2005 through 2007.
Provided, however, that the Released Claims do not include personal injury claims,
claims against those performing Repairs, claims arising out of or relating to the
Repairs, and any claims that have not yet expired under the terms of the KB Home
New Home Limited Warranty Agreement, if any, as of the Effective Date.
53. This Release covers by example and without limitation, any and all
claims for damages, equitable relief, attorneys’ fees, costs, expenses, expert fees, or
consultant fees, interest, or litigation fees, costs or any other fees, costs, expenses
and/or disbursements incurred by Settlement Class Counsel, or by Settlement Class
Representatives or by the Settlement Class members regarding Released Claims for
which any of the Released Parties might otherwise be claimed liable.
54. All Settlement Class members who did not timely and validly exclude
themselves shall be permanently barred and enjoined from hereafter instituting,
participating in, prosecuting or maintaining, either directly or indirectly, on their
own behalf, or on behalf of the Settlement Classes or any other Settlement Class
Member, person or entity, any action or proceeding of any kind asserting any of the
Released Claims.
55. The Parties shall be deemed to have agreed that the release described
in the Settlement Agreement will be and may be raised as a complete defense to and will preclude any action or proceeding based on the claims released by and through
the Settlement Agreement.
56. The release contemplated by the Settlement Agreement extend to claims
that the parties granting the release do not know or suspect to exist at the time of the
release, including, without limitation, claims which if known, might have affected the
Releasing Parties’ decision to grant the release. Plaintiffs, each member of the
Settlement Classes, KB Home and its stockholders shall be deemed to relinquish, to
the extent applicable, and to the full extent permitted by law, the provisions, rights,
and benefits of Section 1542 of the California Civil Code, which provides:
[A] general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.
57. Settlement Class Counsel is hereby awarded attorneys’ fees and
reimbursement of expenses in the amount of $1,925,000 from KB Home, which
amount the Court finds, in its discretion, to be fair and reasonable in this case and
which shall be paid to Plaintiffs’ counsel in accordance with the terms of the
Settlement Agreement. The Court also finds to be fair and reasonable service awards
of $8,000 each to the Settlement Class Representatives for a total of $32,000.
58. Plaintiffs and Settlement Class Members, and any of their respective
successors in interest, predecessors, representatives, trustees, executors,
administrators, heirs, assigns or transferees, immediate and remote, are hereby
individually and severally permanently barred and enjoined from commencing, prosecuting, instigating or in any way participating in the commencement or
prosecution of any action asserting any Settled Claims, either directly,
representatively, derivatively or in any other capacity, against any of the Released
Persons.
59. Without affecting the finality of this Order and Final Judgment,
jurisdiction is hereby retained by this Court for the purpose of enforcing, protecting
and implementing the Stipulation and the terms of this Order and Final Judgment,
including the resolution of any disputes arising out of the Stipulation or Settlement,
and for the entry of such further orders as may be necessary or appropriate in
administering and implementing the terms and provisions of the Settlement and this
Order and Final Judgment.
60. This Order and Final Judgment does not affect KB Home’s third party
claims against Stock Building Supply LLC, as these claims were not the subject of
the Settlement.
This the 17th day of April, 2017.
/s/ Gregory P. McGuire Gregory P. McGuire Special Superior Court Judge for Complex Business Cases