A six-year construction defect case in Nevada took yet another turn last December, when the state Supreme Court overturned a district court's ruling against Beazer Homes worth close to $16 million. The high court didn't absolve the builder of its liability but instead reversed and remanded the decision because the case was improperly tried as a class action.
The defects occurred in homes Beazer built between 1994 and 1999 in The Villages at Craig Ranch in North Las Vegas. Homeowners approached construction defect attorney Robert Maddox in 1998, reporting wall cracks and distorted window and door frames. Experts, Maddox says, ultimately determined that the problems were caused by expansive soils, a condition in which the soils beneath a house expand when exposed to water and contract as they dry.
Maddox and 200 homeowners filed the case in April 2000, after negotiations with Beazer “didn't go anywhere,” he says. Following years of discovery—and multiple attempts by Beazer's attorneys to decertify the case's class action status—the trial began in October 2002. The three-month trial was one of the longest construction defect trials in the state's history and resulted in a jury verdict that found the builder had been negligent and had negligently misrepresented material facts. (The jury also found negligence on the part of the homeowners, deeming them 7 percent negligent for the damages due to overwatering and improper landscaping.) It awarded the homeowners more than $7.3 million plus attorneys' fees, homeowners' costs, and interest.
The jury awarded less than what the homeowners sought—they asked for $23 million in damages—but continued to argue that the case should not have been a class action because each parcel of land is unique and, they contend, inspections of each house were not completed. (Maddox says that 198 homes were inspected both inside and out, along with the exteriors of the other two.)
The state Supreme Court agreed unanimously. “As a practical matter, single-family residence constructional defect cases will rarely be appropriate for class action treatment,” the court wrote in its opinion. It faulted the district court for allowing the class action to proceed without performing adequate analysis and after it admitted the awkward nature of the class action structure in the case.
Beazer's lawyers and the Southern Nevada HBA, which filed a brief in support of the company, expressed satisfaction with the ruling. “It's good for everyone,” says Dan Polsenberg, Beazer's appellate lawyer from the Las Vegas–based firm Beckley Singleton. “It's clear from this case and a couple of other cases on this issue that class actions were not causing judicial efficiencies.”
As expected, the homeowners are dismayed by the ruling. Maddox says many will explore settlements with Beazer. If those attempts fail and the case goes back to trial at the district court level, it will be “joined,” meaning the homeowners will file under a single suit, but they will each be named and will testify to their individual damages. That could extend the length of the trial substantially, Maddox says. But Polsenberg doesn't oppose a longer trial. “It will take the jury a little longer, but they will do a better job,” he says.
The ruling will affect other current and future construction defect cases. Maddox has several class actions under way that he says will either have to settle or be reconfigured, resulting in additional costs for everyone. “We have to spend a lot more money now, and the homeowners get to recover that money from the developers,” he says.
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Learn more about markets featured in this article: Las Vegas, NV.