Beazer Homes

After four long years and a six-week trial, Beazer can claim victory for itself and the various subcontractor builders of the Adobe Mountain subdivision. Built in 1993 and 1994, this project consisted of 360 homes ranging in price from $59,900 to $98,900. In the Spring of 2000, after a marketing campaign, the law firm of Duke, Gerstel, Shearer convinced the property manager for the project to introduce them to the homeowners at a Spring Fling event. Suit was filed shortly thereafter. At first, the claim included only architectural issues that consisted of roofs and windows. Unsatisfied, the Plaintiffs' firm pressed on looking for more defects to include. Next, they looked for structural and soils issues. Finally, they looked for issues pertaining to HVAC and plumbing. All in all, they came up with a cost of repair in the $20,000,000 range for a total of 360 homes.

In October of 2000, the Honorable Colleen McNally certified the case as a class action. However, there was some question concerning what defects were included in the action. After some discovery and deposition practice, we brought several motions asking the Court to look at what defects should be included and also whether the case as a whole should be certified. Ultimately, we were successful in knocking out the post tension slab issues as well as any claims by homeowners who had sold their homes after certification of the class on October 15th, 2002. This reduced Plaintiffs' claims to approximately $12,000,000.

Trial began on February 5th, 2004. During trial, the attorneys agreed to let the case be proven according to disciplines. The Court ordered that all witnesses pertaining to each area of claimed defects would go on in one group before the next discipline would start. In other words, after putting on their structural expert, the Plaintiffs had to allow us to put on our structural experts before starting with the architectural issues. Thus, rather than listening to only the Plaintiffs' side for the first several weeks, they heard both sides of each issue throughout the trial. This, we believe, allowed the defense to keep the jury from choosing sides before all the evidence was in.

In addition, we chose not to settle with the subcontractors and not to turn on them either. This case did not present the usual model Plaintiffs' attorneys have come to love and expect. We were successful in keeping the subcontractors and their attorneys holding the party line through trial. The Additional Insured carriers stepping up and agreeing to 70% of the defense costs made this easier. We made a calculated decision to agree to a comparative indemnity position. Also, we agreed to allow the insurers to fight over the defense costs rather than make it part of the trial. This again kept the subcontractors' counsel in line and also avoided the necessity to put on evidence of the defense costs. That could have provided some amount of in fighting and also could have allowed the Plaintiffs to argue that there were real defects based upon the costs spent on lawyers and experts to fight them.

This was the first case of this nature in Arizona to go to trial by jury. Departing from the old formulas made it successful. Taking out several issues both before and during trial interrupted the Plaintiffs' presentation. Having subcontractor experts follow our experts only reinforced our position. Several subcontractor attorneys came up after the verdict and thanked us for letting them ride our coattails, but they did themselves a favor by trusting that we would all come out better if we stuck together. This should be the genesis of a new approach to defending these cases.

Jury Verdict
First, we won several defect issues before they even got to the jury. The jury afterward said they had a heated debate over one issue, only to learn it was no longer part of the case. We knocked out the anchor bolt defect ($1,200,000) after the Plaintiffs' expert, Bob Burkett said that they had inspected 41 homes for this issue, found the issue in eight of those homes, and of those eight several had good tight fitting anchor bolt holes next to the loose ones. The other issues were less dramatic, but another $1,600,000 was knocked out from their cost of repair before the jury saw it. These defects included air conditioning levelness issues, structural issues, and plumbing issues. Thus, after all testimony and evidence, the Plaintiffs' cost of repair was down to $8,100,000.

The Jury found in favor of Beazer on 15 out of the 25 defects submitted. The total amounted to $753,400. Wall (fence) claims made up $500,000 of that amount.

Therefore, Royce owes $350,000, Diversified owes $89,500, Pratte owes $41,500. We have settled with Hubbell for $15,000, Sonoran for $35,000, Gilbert for $21,000 and Pacific Stucco for $75,000. When you factor all of these numbers in, Beazer owes $126,400.

Post-Trial Issues:
Attorneys Fees will be contested. Since we did so well, we will ask the Court to either not award fees or give them to us. We prevailed on a number of claims and the vast majority were the larger claims. Thus, we may be able to convince the Court to at least not give them to the Plaintiffs. In addition, we should prevail on the contract claim and our claim for judgment against all who sold and left the class.

JNOV issues will be filed on the wall issue. The Plaintiffs' expert testified that the walls were defective due to soils issues. However, on my cross he could not point to which ones and also admitted that not all were distressed. In addition, he said to assume 100 lineal feet when not all homes have that amount. This is ripe for a class decertification issue. We suspect Royce will file it shortly.

Appeal is a possibility. At the beginning of the case we were all in agreement that we thought this case was a good candidate to take up into the court of appeals to test the efficacy of class certification in single family homes. However, we were so successful in knocking out many of the better issues we might want to re-think this issue. However, the wall issue, the ceiling stain issue and the cracked drywall issue are all still good choices to ask the court of appeals about. All have an assumed quantity for the repair and some questions about which homes they occurred in.

At the end of the day, the jury got it right. Over the course of the trial, we were able to drive home the part (without actually saying it) that this case was not about, and never had been about "broken homes" and dissatisfied homeowners. The case was about money; a payday for Plaintiffs' counsel and their experts. The homeowners were incidental to the claims in the trial. We showed the jury and they saw and heard the message loudly and clearly. Sticking together in essentially a joint defense effort paid unprecedented dividends, both in defending the defect allegations and keeping Plaintiffs' counsel off balance. As with the original construction efforts, working together got the job done.

Koeller, Nebeker, Carlson & Haluck
William A. Nebeker [EMAIL LAWYER]

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