![if gte IE 9]><![endif]><![if gte IE 9]><![endif]><![if gte IE 9]><![endif]><![if gte IE 9]><![endif]><![if gte IE 9]><![endif]>
Not a Lexis+ subscriber? Try it out for free.
LexisNexis® CLE On-Demand features premium content from partners like American Law Institute Continuing Legal Education and Pozner & Dodd. Choose from a broad listing of topics suited for law firms, corporate legal departments, and government entities. Individual courses and subscriptions available.
Is the certification of a class by an NC state court set in stone or can it be modified during the course of the litigation?
The federal rule vs. the state rule
There is a difference between the federal rule governing class actions (FRCP 23) and the North Carolina equivalent (NCRCP 23). The length and precision of the federal rule is overwhelming when measured against the short and simple state rule.
The Federal rule contains a specific provision allowing the presiding judge to alter or amend a class certification order: It says that "[a]n order that grants or denies class certification may be altered or amended before final judgment." FRCP 23(c)(1)(C).
The NC Rule, by contrast, is silent on this subject.
The Original Class Certification
The ability of a Business Court to alter or amend a previously entered class certification order was at issue last week in an unpublished Order in Elliott v. KB Home North Carolina, Inc. Judge Jolly had certified a class in the case three years ago, in 2012. I wrote about that case at the time the class was certified.The class members had in common the issue whether Defendant KB Home should have installed a weather resistant barrier (a "WRB") behind the HardiePlank® siding on homes which they had purchased from KB Homes in two developments in Cary, North Carolina.
Judge Jolly certified a class of "all persons who own a home that was constructed by Defendant KB Home without a weather restrictive barrier" behind the HardiePlank. Class notice went out in March 2012.
Three and a half years later, the case is now before Judge McGuire after a couple of trips to the Court of Appeals and Judge Jolly's retirement.
Change In Ownership Of The Homes Owned By The Class Memberrs
Here was the issue for Judge McGuire: Even before the class notice was sent, 38 of the members of the potential class sold their homes ("Pre-Notice Sellers") to others. And following the mailing of the class notice, 79 of the class members sold their homes ("Post-Notice Sellers") to others. Who are proper class members? Are all of the homeowners who owned the homes without a WRB on the date of class notice members of the class, even if they had sold their homes? Or should membership in the class be confined to homeowners who originally bought their homes from KB Homes and continued to own them through the date of final judgment in the case (who knows how long it will be before that happens?).
A request for modification to the class definition was made by the Plaintiff.
There are multiple issues regarding those potential class members who sold their homes after receiving the class notice. They either did or did not disclose the existence of this litigation or the absence of a WRB to their buyer. If they did not, there might have been no impact on the sales price and they therefore might have no damages. And they certainly did not have a continuing interest in the installation of a WRB, no longer being owner of the house.
Did Judge McGuire have the power to modify Judge Jolly's order certifying the class? If Judge McGuire were a federal judge, yes. But as a state court judge, maybe not. The NC Court of Appeals held ten years ago that:
Clearly, the federal rule contemplates continuing review of the class certification status of an action. See 3B Moore's Federal Practice ¶ 23.50 at 23-410. Rule 23 of the North Carolina Rules of Civil Procedure contains no such provision, Nobles v. First Carolina Communications, 108 N.C.App. 127, 423 S.E.2d 312 (1992) [subscribers can access an enhanced version of this opinion: lexis.com | Lexis Advance], rev. denied 333 N.C. 463, 427 S.E.2d 623 (1993), and we will not judicially legislate one.
Dublin v. UCR, Inc., 115 N.C. App. 209, 444 S.E.2d 455, 461 (1994) [lexis.com | Lexis Advance].
But given that a class certification order is an interlocutory order, Judge McGuire held that Judge Jolly's order was:
'subject to change at any time to meet the justice and equity of the case' and [was] 'modifiable for changed circumstances.'
Order ¶9 (quoting Dublin, supra, 115 N.C. App. at 220).
He said, however, that there would have to be "a change in circumstances since [the date of the certification order] that has altered the legal foundation upon which Judge Jolly based his decision to certify the class." Op. ¶10.
As to the homeowners who had purchased from the Pre-Notice Sellers, Judge McGuire ruled that Judge Jolly had "at least impliedly" considered the existence of persons buying the homes before the class was certified, and that he had not intended to limit the class to those who had purchased their homes directly from KB Homes. The existence of the homeowners buying their homes from the Pre-Notice Sellers was therefore not a "changed circumstance warranting modification of the class definition. Op. ¶16.
The Home Owners Who Had Sold Their Homes After The Class Was Certified Became Members Of A Subclass
Judge McGuire rejected the argument that the potential that the Post-Notice Sellers might have different damages from other class members (in that they would not need the benefit of an WRB being installed or that they might not have suffered damage upon the sale of their home) was a "changed circumstance warranting modification of the class. He said that:
such individual differences in damages, by themselves, are not sufficient to defeat class certification where they do not predominate over common questions of law or fact affecting an entire class.
But the Post-Notice Sellers nevertheless did represent a "changed circumstance." That was due to the reason that the Post-Notice Sellers would need to individually establish that they had suffered any injury at all.
The overarching common question in the case remains whether KB Homes complied with the building code and the manufacturer's recommendations regarding the need for a WRB. (Judge McGuire recently denied KB Home's motion for summary judgment on this issue in another unpublished Order).
borrowing from the U.S. Supreme Court's recent Wal--Mart decision on class certification, Judge McGuire held that:
'[w]hat matters to class certification . . . is not the raising of common "questions" -- even in droves -- but, rather the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation. Here, the answer to the question of whether the failure to install a WRB violated the then-existing building code will ''drive the resolution' of Plaintiff's claims.
Op. ¶26 (quoting Wal-Mart Stores v. Dukes, 131 S.Ct. 2541, 2550-511 (2011) [lexis.com | Lexis Advance]).
The "changed circumstances" allowed a modification of the class definition to create a sub-class of the Post-Notice Sellers. Counsel for the class were directed to add a named Plaintiff who was a Post-Notice Seller to represent the interests of the class. Op. ¶29.
Are you confused about which homeowners are in this class and which are not? Here's my take on that:
Time of Transaction
In Or Out Of Class?
Sold before class notice
Out (neither party sought their inclusion (Op. ¶14 & n.18)
Bought before class notice
Sold after class notice
Bought after class notice
II haven't written about a class action issue for a while given the entry of the Robinson Bradshaw firm into the elite class of law firms with blogs. Lawyers there write an excellent blog devoted entirely to the subject of class actions in North Carolina: the Carolinas Class Action blog.
Read other articles on the North Carolina Business Litigation Report, a blog by Mack Sperling for lawyers focusing on issues of North Carolina business law and the day-to-day practice of business litigation in North Carolina courts.
For more information about LexisNexis products and solutions, please connect with us through our corporate site.
They are always used to give details on any selected topic. In an article, it is important to use the English accurately. Different kinds of article structures are there. I like the one which you have used in your article. It requires a good experience to write such a great quality post. I have gone through all of your articles; I have noticed one thing that you are always sure about your content. It is really a positive thing you can give to your reader. Your posts make us read further in an interesting way. Your article is perfect for me as I am working with https://essayservices.org Keep sharing more. Thank you.