Palmer v. Gentek Bldg. Prods., Inc.

• Decision Date: 20 December 2019
• Docket Number: No. 20180450,20180450
• Citation: 936 N.W.2d 552
• Parties: Richard PALMER and Angela Palmer, Plaintiffs and Appellees v. GENTEK BUILDING PRODUCTS, INC., Defendant and Appellant
• Court: North Dakota Supreme Court

936 N.W.2d 552

Richard PALMER and Angela Palmer, Plaintiffs and Appellees

v.GENTEK BUILDING PRODUCTS, INC., Defendant and Appellant

No. 20180450

Supreme Court of North Dakota.

Filed December 20, 2019

Lisa M. Six (argued) and Garth H. Sjue (on brief), Williston, ND, for plaintiffs and appellees.

Brian D. Schmidt (argued) and Scott K. Porsborg (on brief), Bismarck, ND, for defendant and appellant.

VandeWalle, Chief Justice.

[¶1] Gentek Building Products, Inc. ("Gentek") appealed a judgment entered after a jury awarded Richard and Angela Palmer damages of $10,791, plus interest. Gentek also appealed an order awarding attorney fees of $80,379 to the Palmers, and taxation of costs and disbursements. We conclude the district court did not err in holding the Palmers were not bound by the federal district court’s final order and judgment approving a class action settlement in Eliason v. Gentek Bldg. Prods., Inc. , No. 1:10cv2093, 2013 WL 12284495 (N.D. Ohio Aug. 1, 2013) (" Eliason "). We further conclude, however, that the court erred in its award of attorney fees and in not ruling on Gentek’s objection to costs and disbursements. We affirm the judgment, but we reverse the order awarding attorney fees and taxation of costs and disbursements, and remand for further proceedings.

I

[¶2] In 2003, the Palmers purchased and installed "Driftwood" steel siding from Gentek on their home in Williston. Gentek provided a lifetime limited warranty for the siding. In September 2011, the paint began to peel on the siding installed on the south side of the home. In January 2012, the Palmers submitted a warranty claim to Gentek. On January 23, 2012, Gentek offered the Palmers the option of either a cash settlement or replacement with a substitute siding under the warranty, since Gentek had discontinued producing the type of siding originally installed. While the Palmers opted to have their siding replaced with a substitute, Gentek had difficulty finding a contractor willing to perform the warranty work due to the oil boom in the area.

[¶3] The Palmers were not alone in their claims of paint defects in Gentek’s siding, in that thousands of others also experienced delaminated paint and filed warranty claims with Gentek, resulting in a class action lawsuit being filed in the United States District Court for the Northern District of Ohio. See Eliason , No. 1:10cv2093, 2013 WL 12284495 (N.D. Ohio Aug. 1, 2013). In August 2013, the federal district court in Eliason entered a final order and judgment approving a class action settlement. Id.

[¶4] In October 2014, the Palmers commenced this action against Gentek, alleging Gentek breached their warranty by failing to replace the Palmers’ defective steel siding and seeking costs, disbursements, and attorney fees under the Magnuson-Moss Warranty Act, 15 U.S.C. § 2310(d). Gentek moved the district court for summary judgment before trial, asserting that the Eliason final order and judgment approving a class-action settlement barred the Palmers’ claim as a matter of law. The court denied Gentek’s initial summary judgment motion in July 2015 and denied its renewed motion in July 2017. The court essentially held the Palmers were not bound by the Eliason judgment because the federal court in Eliason did not acquire personal jurisdiction over the Palmers to make them parties. The court held that while the Palmers were known to Gentek, no evidence showed they had been given "individual notice" under Fed.R.Civ.P. 23(c)(2)(B)¹ for reasonably identifiable class members in class actions under Fed.R.Civ.P. 23(b)(3).

[¶5] The Palmers moved for partial summary judgment on liability, which the district court granted, and the case proceeded to trial on damages. In September 2018, the court held a two-day trial on the Palmers claim for damages. The jury subsequently entered a verdict in the Palmers’ favor and awarded $10,791 in damages plus six percent interest, accruing from February 20, 2012. The court awarded the Palmers $80,379 in attorney fees, in addition to their costs for procuring an appraisal expert and disbursements.

II

[¶6] Gentek argues that in denying their summary judgment motions, the district court erred in ruling the Palmers were not class members and their claim was not barred and in holding the court had jurisdiction over the dispute. Gentek argues the court lacked jurisdiction over the Palmers’ state court action because it was barred by the final order and judgment in Eliason .

[¶7] Rather than the district court's jurisdiction, however, the dispositive issue in this case is the extent to which the Palmers may collaterally attack the final class action judgment entered by the federal court in Eliason . Put another way, what is the scope of our review for the Palmers’ challenge on due process grounds to the binding effect of the federal district court’s final order and judgment in Eliason .

[¶8] In discussing collateral attack of a final judgment in a class action, one noted treatise explained:

A final judgment in a class action can bind absent class members only if it was rendered consistent with the requirements of due process. If an individual class member seeks to re-litigate the claims or issues resolved by a class action in later litigation and is met with the affirmative defense that her claims are precluded by the class judgment, she may therefore attempt to escape the binding effect of the class judgment by arguing that the judgment was rendered without due process. This is referred to as a "collateral attack" on the judgment, as distinguished from an appeal, which is a "direct attack" on the judgment.

The forum entertaining a challenge to the binding effect of the class action judgment must initially determine the extent to which it will examine the judgment for one of these alleged constitutional defects. The question is a perplexing one because the class action court itself will have necessarily made findings as to each of the due process concerns (notice, opportunity to be heard, opportunity to opt out, and adequate representation). The party collaterally attacking the judgment is therefore asking for a re -evaluation of one or more of those issues.

...

Most often the class member who wishes to collaterally attack the judgment never herself appeared in the class action court to press her due process concerns.... [W]hat is unique to the class action, ... is that even if the new litigant did not herself contest these issues in the class action forum, that court nonetheless necessarily made findings on the relevant due process issues as part of the class action process. The collateral forum is therefore always in the position of re -examining something the class action court has already examined, although the class action court undertook that prior examination after presentation by different adversaries or without adversarial presentation.

6 Newberg on Class Actions § 18:37 (5th ed. June 2019 Update) (footnotes omitted).

[¶9] Generally, it is well established that "a party seeking to avoid the binding effect of a prior judgment is entitled to collaterally attack the judgment on the grounds that the rendering court had no personal jurisdiction over him or her at the time the judgment was rendered." Lamarque v. Fairbanks Capital Corp. , 927 A.2d 753, 760 (R.I. 2007) ; see also Phillips Petroleum Co. v. Shutts , 472 U.S. 797, 805, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985) ("[A] judgment issued without proper personal jurisdiction over an absent party is not entitled to full faith and credit elsewhere and thus has no res judicata effect as to that party."); Kremer v. Chem. Constr. Corp. , 456 U.S. 461, 482, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982) ("A State may not grant preclusive effect in its own courts to a constitutionally infirm judgment, and other state and federal courts are not required to accord full faith and credit to such a judgment."). The court in Lamarque further explained why collateral attacks on class action judgments present a "distinct problem from attacks on other types of judgments":

This is so because the process due absent members of a class action suit—necessary to bind them to the judgment—has been a somewhat elusive concept. See Hansberry v. Lee , 311 U.S. 32, 41, 61 S.Ct. 115, 85 L.Ed. 22 (1940) ("[T]o an extent not precisely defined by judicial opinion, the judgment in a ‘class’ or ‘representative’ suit, to which some members of the class are parties, may bind members of the class or those represented who were not made parties to it."). However, in Shutts , the United States Supreme Court set forth some rather clear criteria with respect to one particular type of class action—the type at issue in this case: class actions specifically certified under Rule 23(b)(3) of the Federal Rules of Civil Procedure. Shutts involved a class action brought in Kansas state court in which the plaintiff class sought to collect interest on royalty payments that they alleged had been illegally delayed by the defendant, a Delaware corporation. Shutts , 472 U.S. at 799, 105 S.Ct. 2965. The trial court entered judgment for the plaintiff class, and the Supreme Court of Kansas affirmed, casting aside the defendant’s argument that the certifying state court could not adjudicate the claims of absent members of the plaintiff class because there were not sufficient minimum contacts between the state and each of those plaintiffs to meet the criteria for personal jurisdiction under International Shoe Co. v. Washington , 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). The Supreme Court agreed with the Supreme Court of Kansas and held that the Due Process Clause protects an absent class plaintiff "even though that plaintiff may not possess the minimum contacts with the forum which would support personal jurisdiction over a defendant." Shutts , 472 U.S. at 811, 105 S.Ct. 2965. Minimal due process, the Court held, requires that absent class plaintiffs:

"must receive notice plus an opportunity to be heard and

...