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D'Andrea v. Hovnanian

Superior Court of New Jersey, Appellate Division

June 18, 2013

MIKE D'ANDREA and TRACY D'ANDREA, on behalf of themselves and all other persons similarly situated, Plaintiffs-Respondents,


Argued December 4, 2012.

On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-0734-06.

Gary A. Wilson (Post & Schell, P.C.) of the District of Columbia, Pennsylvania, and Texas Bars, admitted pro hac vice, argued the cause for appellant (Post & Schell, P.C., and Mr. Wilson, attorneys; Mr. Wilson, John W. Dornberger, and Lee H. Eckell, on the briefs).

James C. Shah argued the cause for respondents (Trimble & Armano and Shepherd, Finkelman, Miller & Shah, LLP, attorneys; Mr. Shah and John W. Trimble, Jr., on the brief).

Archer & Greiner, attorneys for amicus curiae Weyerhaeuser Company (Christopher R. Gibson and Benjamin D. Morgan, on the brief).

Before Judges Alvarez, Waugh and St. John.


By leave granted, [1] defendants K. Hovnanian, Hovnanian Enterprise, Inc., and K. Hovnanian Venture I, LLC, take an interlocutory appeal of the December 29, 2011 class certification to plaintiffs, who assert claims related to the heating, ventilation, and air conditioning (HVAC) systems in their homes, which were built by defendants. After our review of the record, consideration of oral argument, and the written submissions of the parties, we now affirm.

The matter was initiated in May 2006, by plaintiffs' filing of a complaint on behalf of themselves and others similarly situated. The class designation consists of

[a]ll 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 ("class").

At issue is defendants' manner of construction of the return cavity that is a necessary component of the HVAC system in the homes of the proposed class, as the space in which return air is contained is an area of negative pressure. Since fire tends to move from positive to negative areas of pressure, it is important for safety reasons that those spaces are isolated with fireblocking from cavities not used for air movement. The return air cavity must be properly sealed off so that no return air escapes into adjacent unused non-return air cavities.

Plaintiffs allege a number of defects, including that the webs of I-joists found in the return cavities are three-eighths of an inch thick, rather than two-inches thick, have pre-punched holes, and were never tested for fire-containing properties. Fireblocking at the end of joist-bay plenums was constructed using Thermo-Pan or Thermo-Ply Red fiberboard. Holes were drilled into the I-joists to allow wires and pipes to pass through but the holes were never sealed, thereby violating code provisions regarding penetrations of fire stops and draft stops. The bottoms of the joist-bay plenums in basements were closed off with Thermo-Pan or Thermo-Ply. The vertical cracks between two-by-four beams in double-stud cavities were not sealed off as necessary for fireblocking. Cracks were improperly sealed with either a layer of Thermo-Ply or Thermo-Pan. Electrical wires penetrate some stud cavities. Electrical outlet boxes are sometimes located in return stud cavities and are not properly isolated from the return cavity. The air stud cavities on the side of homes which abut garages violate the code, because such garage walls are required to be fire resistant, and the International Residential Code-2000 (IRC-2000) requires that stud cavities not be part of a fire resistance mechanism.

Defendants counter that the identified structures were constructed in a manner that satisfies the intent of relevant building codes, that the materials utilized meet the intent of the codes, and that the performance of the materials meets all code requirements. Furthermore, defendants question whether the IRC-2000 code is applicable, suggesting that the earlier Council of American Building Officials Code-1995 (CABO-1995) applies. The IRC-2000 was not adopted until May 2003, and New Jersey allowed a grace period of six months thereafter for the mandatory implementation of that code. Defendants' expert report, however, observed that "in the areas that are germane to this matter, the CABO and IRC codes are essentially identical." Defendants further challenge plaintiffs' claims on the basis that plaintiffs exaggerate the requirements of fireblocking, that the building codes allowed for the use of different materials, and that code officials in the areas where plaintiffs' structures are located approved the manner of construction by virtue of the issuance of certificates of occupancy.

The trial judge decided the motion for class certification after eight days of testimony from expert witnesses on behalf of both sides and consideration of substantial oral argument and written submissions. During the course of the hearing, plaintiffs' expert Marur Dev testified, as did defendants' experts Charles Spitz and E. Mitchell Swann. Swann inspected seventy-five homes in seventeen different developments, while Dev inspected eighty homes in ten developments, identifying two or more fireblocking violations in each.

Judge Hoffman set forth detailed findings in compliance with Rule 4:32-1(a):

Number 1. I find that the class is so numerous the joinder of all members is impracticable. Although, I will be approving a somewhat modified class, I find that numbers are still likely to be in the neighborhood of 1, 000 – certainly in excess – well in excess of 500. This is clearly sufficient to meet the numerosity requirement. I would note in the case of Vargas [v.] Calabrese, 634 F.Supp. 910, District Court of New Jersey, 1986, [a] class of more than 40 individuals was found to be sufficient to satisfy the numerosity requirement.
Number 2. The requirement that there are questions of law or fact common to the class. Here, the common issue pertains to the methodology employed in the HVAC construction, and gives rise to numerous common questions and facts of law, including:
1) whether the defendant[s'] conduct failed to comply with applicable building codes;
2) whether the materials utilized by the defendants in the HVAC construction are equal to or superior to the materials otherwise mandated by the code; whether the defendant[s'] alleged wrongful conduct resulted in ascertainable loss and/or economic damages to the class; whether the defendant[s'] conduct constituted unlawful, unfair, and/or deceptive practices, in violation of the Consumer Fraud Act; and whether defendants breached their contracts with the plaintiffs and members of the class.
I find that these questions predominate over any individual questions of law and fact which may exist.
Number 3. That the claims or defenses of the representative parties are typical of the claims or defenses of the class, also known as typicality. The central issue here shared by the plaintiffs and members of the pu[ta]tive class can be summarized as whether defendant[s'] fire-blocking construction violated applicable codes.
In this case I find that the plaintiff[s'] claims are typical of the class they seek to represent. The plaintiffs purchased a home that contains the same fire-blocking issues found in the homes of the other class members. The claims all arise from the same course of conduct by Hovnanian. I, therefore, find the claims are typical and that this requirement has been satisfied.
Rule 4:32-1(b)(3) requires that the class action device or model, this peer method in adjudicating the matters in controversy. Pertinent factors that should be considered are the interest of members of the class in individually controlling the prosecution, or defense's separate actions, the extent and nature of any litigation concerning the controversy already commenced by or against members of the class, and the difficulties likely to be encountered in the management of a class action.
Here, there is obviously great judicial economy to be realized through having these issues decided in one proceeding rather than hundreds of proceedings. The class action device here seems particularly useful since it is unlikely the individual claimants would be in position to file an action, and that the rights of the members might not otherwise be vindicated without the class action model being utilized.
With regard to other litigation, the current state of knowledge with regard to this issue is that there is no other litigation pending. With regard to issues of manageability, I find no insurmountable hurdle in managing (Indiscernible) class action. The number in the neighborhood of 1, 000 is certainly not an excessively large number, and the claims through the litigation today have become rather well defined.
I'm further satisfied that the plaintiffs, Mike and Traci D'Andrea, are appropriate class representatives. There's nothing to indicate that they are not appropriate. They did have their own individual claims but they have settled out, thereby eliminating a potential for conflict.
And, finally, I am satisfied through the extensive efforts performance [sic] to date that the law firms of Trimble & Armano, and Shepherd, Finkelman, Miller and Shah, are appropriate appointees as class counsel.
On appeal, defendants raise the following points:
The Trial Court Erred in Determining that Respondents' Claims Met the Threshold Requirement of Commonality under New Jersey Civil Practice Rule 4:32-1(a)(2)
1. There is no Single Common Fireblocking Material Code Violation Applicable to All Class Members
2. Significant Proof of Code Violations is Entirely Missing and Class Certification should fail as a Matter of Law

Predominance and Superiority

1. Predominance
2. Class Treatment of Single Family Home Construction Defects is Unprecedented in New Jersey
3. Superiority


"Class certification decisions rest in the sound discretion of the trial court." Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123 (2007) (quoting Muise v. GPU, Inc. (Muise II), 371 N.J.Super. 13, 31 (App. Div. 2004)) (internal quotation marks omitted). Therefore, "[a]lthough the ordinary 'abuse of discretion' standard defies precise definition, it arises when a decision is made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis." Ibid. (alteration in the original) (quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)) (internal quotation marks omitted). While "class certification should be granted absent a clear showing that it is inappropriate or improper" and "[a] trial court deciding a motion for class certification affords the plaintiffs every favorable view of their complaint and the record, " nevertheless, "the court should undertake a 'rigorous analysis' to determine if the requirements of the rule have been met." Beegal v. Park W. Gallery, 394 N.J.Super. 98, 110-11 (App. Div. 2007). The trial court's determinations on questions of law related to class certification are reviewed de novo. Int'l Union of Operating Eng'rs Local No. 68 Welfare Fund v. Merck & Co., 192 N.J. 372, 386 (2007); Beegal, supra, 394 N.J.Super. at 111.

"[T]he class action is a device that allows 'an otherwise vulnerable class' of diverse individuals with small claims access to the courthouse." Lee v. Carter-Reed Co., 203 N.J. 496, 518 (2010). "Class actions 'should be liberally allowed where consumers are attempting to redress a common grievance under circumstances that would make individual actions uneconomical to pursue.'" Muise II, supra, 371 N.J.Super. at 30 (quoting Varacallo v. Mass. Mut. Life Ins. Co., 332 N.J.Super. 31, 45 (App. Div. 2000)). "When determining whether a class should be certified, a court is not to make a preliminary determination of the merits of the underlying claims." Delgozzo v. Kenny, 266 N.J.Super. 169, 180-81 (App. Div. 1993).


The trial court in this case heard extensive expert testimony, and based on that testimony and the experts' written reports, concluded that plaintiffs had met the test for class certification. Our Supreme Court has held that a court certifying a class must "'not decid[e] the ultimate factual issues' underlying the plaintiff's cause of action." Lee, supra, 203 N.J. at 505 (quoting Riley v. New Rapids Carpet Ctr., 61 N.J. 218, 223 (1972)). Instead, while treating the pleadings and discovery "in a light favorable to plaintiff, " ibid., a court must "accept as true all of the allegations in the complaint, " ibid. (quoting Int'l Operating Eng'rs, supra, 192 N.J. at 376) (internal quotations omitted). Nonetheless, the trial court still has a responsibility to "engage in 'rigorous analysis' to assess whether the requirements of class certification have been met." Ibid. (quoting Iliadis, supra, 191 N.J. at 106).

In our opinion, Judge Hoffman engaged in the appropriate analysis of the extensive evidence presented to him — enough to certify the class, treating the information in a light favorable to plaintiffs, while not deciding the ultimate issues in the case. See ibid. Indeed, Judge Hoffman found that although the plaintiffs did not "need . . . [to] prove the merits of [their] case at the class certification stage, to a considerable extent, the plaintiff[s] ha[d] done that" and the issues were "not so one-sided as to be capable of being decided as a matter of law." Sufficient evidence was adduced in the N.J.R.E. 104 hearings to at least establish that plaintiffs' causes of action have legitimacy.[2] Defendants' expert admitted that the letter of the code had not been followed with respect to the materials used in the HVAC return cavities. That air could escape from return cavities not properly sealed was clearly a violation of construction codes.


Defendants contend that the absence of precedent regarding class action certifications in single-family residential construction defect cases is proof of the fact that the unique nature of home construction makes such causes of action unsuitable for class adjudication. Defendants argue that the lack of a single deviation common to each class member's house means that there is a lack of commonality to the claims, and that therefore this requirement for class certification cannot be met. Plaintiffs agree that there are significant differences among the construction defects, but counter that the differences are inconsequential in terms of the legal analysis as to class certification. In this case there is strong commonality in the nature of the claimed defect ─ fire safety hazards in HVAC return systems ─ such that this requirement for a class action to be certified is readily satisfied.

Rule 4:32-1(a)(2) requires that plaintiffs demonstrate "questions of law or fact common to the class." In support of their argument against the necessary commonality, defendants mainly rely on Wal-Mart Stores, Inc. v. Dukes, ___U.S. ___, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011). Defendants are correct in stating that "Dukes makes clear . . . that an action devoid of a single common question capable of class-wide resolution must fail for want of commonality." However, defendants' application of that principle to the facts in this case is flawed.

Dukes involved a class action suit brought on behalf of all female employees against Wal-Mart alleging discriminatory employment policies and practices. Id. at ___, 131 S.Ct. at 2548, 180 L.Ed.2d at 386. The Dukes plaintiffs alleged that the fact that local managers of stores had "discretion over pay and promotions" led to the award of such benefits "disproportionately in favor of men, " and that the company's awareness of such an effect and consequent failure to remedy the situation resulted in disparate treatment. Ibid.

The Dukes court also found plaintiffs' evidence to be too anecdotal to demonstrate a general policy of discrimination. Because of their lack of "convincing proof of a companywide discriminatory pay and promotion policy, " plaintiffs did "not establish[] the existence of any common question." Id. at ___, 131 S.Ct. at 2556-57, 180 L.Ed.2d at 395.

The Supreme Court agreed with the Ninth Circuit dissent's assessment that class members "held a multitude of different jobs, at different levels of . . . hierarchy, for variable lengths of time, in 3, 400 stores, sprinkled across 50 states with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed." Id. at ___, 131 S.Ct. at 2557, 180 L.Ed.2d at 395-96 (quoting Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 652 (9th Cir. 2010) (Kozinski, J., dissenting)) (internal quotation marks omitted). But the highly individualized characteristics of each employee, and the different circumstances found in each store, readily distinguishes Dukes from this construction defect case.

Indeed, circumstances more analogous to this case are found in Lee, where the plaintiffs alleged false representations by a diet pill manufacturer. Lee, supra, 203 N.J. at 513. At the time of certification it was unclear which of multiple beneficial claims, if any, might turn out to be false. Id. at 523. The Supreme Court found, however, that sufficient commonality was established merely by the question of whether or not the defendants' product claims were false. Id. at 524-26. This despite defendants' position that the class representative's main grievance had to do with weight gain and that certain plaintiffs may have purchased the product in reliance on only one of the allegedly false beneficial claims or a combination of them. See id. at 523.

Here, plaintiffs' common question is whether or not the defendants' construction of the HVAC return cavities met the fireblocking requirements in applicable construction codes. Although the alleged construction defects resulted from the use of different materials and different construction methods, the fact of the matter remains that plaintiffs' claim centers around the singular objective question of whether the return cavities were properly fireblocked. 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. In contrast, in Dukes, a finding that one manager had discriminated against female employees in a particular region did not automatically result in a finding of discrimination by a manager in another locale. In sum, plaintiffs have satisfied the commonality requirement.


Defendants also challenge the court's conclusions regarding predominance. They assert that plaintiffs have not shown "that 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).

In determining predominance,

a court should conduct a "pragmatic assessment" of various factors. One inquiry is the significance of the common questions. That inquiry involves a qualitative assessment of the common and individual questions rather than a mere mathematical quantification of whether there are more of one than the other. The second inquiry is whether the "benefit" of resolving common and presumably some individual questions through a class action outweighs doing so through "individual actions." A third inquiry is whether a class action presents a "common nucleus of operative facts."

[Lee, supra, 203 N.J. at 519-20 (citations omitted).]

As the Court observed, "individual questions will remain" such as "[t]he number of bottles . . . purchased by a class member, the price of each bottle, and whether a refund was received" in addition to class members "offer[ing] proof of purchase, " these individual questions would not "present an onerous burden to plaintiff, much less an insuperable obstacle." Id. at 528.

The presence of individual issues of damages, or as in this case, repairs, does not per se defeat the predominance of the common issues of law and fact. See id. at 531 (finding that a court "cannot predict the outcome of a trial" with respect to which of the advertised benefits of a diet pill would be proven false and that the issue of damages in such a case "will be on plaintiff . . . to establish the causal relationship between the unlawful practice and the ascertainable loss"); Muise v. GPU, Inc. (Muise III), 391 N.J.Super. 90, 99 (App. Div. 2007) (explaining that individual differences do not automatically defeat certification if the common issue of liability and the fact of damage predominate). Simply stated, the different materials and techniques used in the return cavities of individual class members' houses does not defeat the commonality of the claims ─ improper return cavity fireblocking.

The judge properly performed the qualitative analysis of the common issues as compared to the individual ones. After many days of hearings, he identified the following "common questions and facts of law" which he found to predominate:

1) whether the defendant[s'] conduct failed to comply with applicable building codes;
2) whether the materials utilized by the defendants in the HVAC construction are equal to or superior to the materials otherwise mandated by the code; whether the defendant[s'] alleged wrongful conduct resulted in ascertainable loss and/or economic damages to the class; whether the defendant[s'] conduct constituted unlawful, unfair, and/or deceptive practices, in violation of the Consumer Fraud Act; and whether defendants breached their contracts with the plaintiffs and members of the class.

Although defendants repeatedly make the point that plaintiffs have to contend with the approval by different code officials of their HVAC return cavities, the trial court found that defendants submitted no evidence supporting that position after having litigated the same issue twice before two separate judges since 2009.

As Judge Hoffman said, "the defense chose to present no testimony or evidence upon which at least would support an argument that . . . what occurred in the use of substituted material here was something approved by the applicable building code officials." And he quoted his predecessor in the case, Judge Morgan, who observed that "from a technical standpoint, they[] [were] not allowed any substitute materials."

Furthermore, the trial court properly exercised its discretion in finding that "there is obviously great judicial economy to be realized through having these issues decided in one proceeding rather than hundreds of proceedings." To quote the trial judge, the numbers were "in the neighborhood of 1, 000" and would be "well in excess of 500."


Defendants contend that the class action method in this case would be unmanageable, and that individual arbitration of claims under private warranty plans is preferable. Plaintiffs counter that only the class action option will insure that the maximum number of homeowners will even learn of the existence of the defects. Plaintiffs also point out that given how "expert intensive" these matters are, arbitration would result in prohibitive costs, even if defendants were to pay applicable filing fees.

Rule 4:32-1(b)(3) requires plaintiffs to demonstrate that "a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Manageability is one of the pertinent factors in assessing superiority, R. 4:32-1(b)(3)(D), but "[d]enying class certification on manageability grounds is disfavored in general." Lee, supra, 203 N.J. at 530. "Whether a class action is superior to thousands of minor, individual actions or some other 'alternative procedure[]' involves considerations of fairness to the putative class members and the defendant, and the 'efficiency' of one adjudicative method over another." Id. at 520 (alteration in original). The fact that individuals may be less likely to sue due to economics is "[o]ne factor in this assessment." Ibid. Alternatively, the Court has previously said that "class members' 'lack of financial wherewithal' is an 'important factor' in the superiority analysis." Iliadis , supra, 191 N.J. at 115 (quoting Saldana v. City of Camden, 252 N.J.Super. 188, 200 (App. Div. 1991)).

In his decision, Judge Hoffman observed that "[t]he class action device here seems particularly useful since it is unlikely the individual claimants would be in position to file an action, and that the rights of the members might not otherwise be vindicated without the class action model being utilized." Though he did not identify arbitration as an alternative, we reach the same conclusion with respect to superiority when comparing a single class action to hundreds of separate arbitrations.

Potential individual class members are unlikely to discover and then file a potentially expensive arbitration claim against defendants. Given the common factual and legal issues, it promotes efficiency to have such issues decided in one proceeding. In the interests of fairness to class members, it is important to have the issues decided together in one forum to ensure consistency. Such a method is not unfair to defendants. In our view, there can be little doubt that a class action is a better method than individual arbitration for adjudicating class members' claims in this case.


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