Opinion
Civil No. CV95-879-JO (LEAD).
May 24, 2004
Bruce R. Gilbert, Smith Eberhard, P.C., Portland, OR, argued the cause for Clark Son Construction, Inc.
Ben Shafton, Caron Colven Robison Shafton, Vancouver, WA, argued the cause for CSV Limited Partnership and Mortgage Investments, Inc.
Christopher I. Brain, Tousley Brain Stephens, PLLC, Seattle, WA, argued the cause for Class Counsel.
Michael H. Simon, Perkins Coie LLP, Portland, OR, argued the cause for LP Corporation.
Before this Court for resolution are Clark Son Construction, Inc.'s (Clark Son) Motions Against CSV Limited Partnership (CSV) to Enforce Settlement and Motion for Declaratory Relief (Motions To Enforce). The Motions To Enforce concern certain claims asserted in CSV Limited Partnership, et al. v. Courtesy Development, Clark Son, et al., Case No. 98-2-03504-1 (Superior Court of the State of Washington for Clark County, filed September 11, 1998 (CSV Lawsuit). The CSV Lawsuit concerns Phase Two of The Village at Columbia Shores Condominium (Columbia Shores Condominium), a high-rise building containing ninety-six (96) residential units and six (6) guest units. CSV is the condominium declarant and the developer of the Columbia Shores Condominium. To comply with Washington statutory law, RCW 64.34.300, which requires a condominium declarant to establish a homeowners association, CSV incorporated The Village at Columbia Shores Condominium Association (Association) on January 28, 1994. Construction of the Columbia Shores Condominium began in the latter part of 1994. Courtesy Development, Inc. or Courtesy Construction Co. (Courtesy) was the general contractor for the Columbia Shores Condominium. Courtesy entered into a subcontract with Clark Son to install Louisiana-Pacific Exterior Inner-Seal Siding (Exterior Inner-Seal Siding), a weather-resistant barrier, flashing and counter-flashing. The subcontract required Clark Son to furnish a warranty directly to CSV for its work. Clark Son completed its work in 1995. Construction of the Columbia Shores Condominium was substantially completed and a certificate of occupancy was issued on March 20, 1996, about a month before the Order, Final Judgment and Decree approving the Louisiana-Pacific Inner-Seal Siding Class Action Settlement (Settlement) was entered. CSV sold several units within the Columbia Shores Condominium before January 1, 1996. At the time of their purchase, the unit owners became members of the Association.
The term Exterior Inner-Seal Siding, as used in this opinion, has the same meaning as that used in the Louisiana-Pacific Inner-Seal Siding Class Action Settlement, where it is defined as follows: "Exterior Inner-Seal Siding means any year of manufacture or type of Oriented Strand Board lap or panel siding, soffit, fascia, or trim manufactured by L-P, but does not include any such products that were sold by L-P without an express warranty (e.g., utility board), or that were reclassified by L-P to exclude an express warranty before the date of this Agreement." Settlement Agreement, Section 1, DEFINITIONS, at 3.
Unless otherwise indicated, the term Exterior Inner-Seal Siding, as used in this opinion, refers to Exterior Inner-Seal Siding installed prior to January 1, 1996.
The Order, Final Judgment and Decree, which approved the Settlement, was signed by U.S. District Judge Robert E. Jones on April 26, 1996.
In 1996, after complaints by several of the Columbia Shores Condominium unit owners of water intrusion, CSV hired Montgomery Construction to remove a significant portion of the Exterior Inner-Seal Siding, replace the building paper, re-flash the windows and reinstall the removed siding. According to CSV, the removed Exterior Inner-Seal Siding was reinstalled because CSV's experts did not believe that the siding itself was the source of the water intrusion difficulties. The remedial work began in 1998. By that time CSV had sold all units in the Columbia Shores Condominium. Montgomery Construction also did a substantial amount of the corrective work to the interior of the units. Shortly thereafter, CSV filed the CSV Lawsuit against Clark Son and others. In the CSV Lawsuit, CSV alleges that it had suffered damages because Clark Son breached an express warranty by improperly performing its work. In the CSV Lawsuit, CSV seeks money damages for the costs that it incurred for the removal of the Exterior Inner-Seal Siding, reinstallation of siding, replacement of building paper, flashing, moisture barrier and repair of the water intrusion damage to the interior of the units and exterior sheathing, as well as associated investigation costs.
CSV states that its "claim against Clark [ Son] has nothing to do with any defect in [Exterior Inner-Seal S]iding. If it did, CSV would not have reinstalled siding that was removed to correct the problems with the weather resistive barrier." CSV's Reply Brief, at 12. "CSV's claim against Clark [ Son] has nothing to do with any defect in L-P Siding." Id. According to CSV, "the water intrusion difficulties ended with the remediation that was performed in 1998, which involved the replacement of the weather resistive barrier and flashings and the reinstalling of the [Exterior Inner-Seal S]iding." Id., at 14.
CSV also sued other defendants, alleging a breach of warranty claim against the Courtesy, and alleging contractors bond claims against issuers of bonds posted by Clark Sons and Courtesy.
In 1999, the Association sued CSV for other claimed defects associated with the Columbia Shores Condominium. CSV, Clark Son, Courtesy and the other defendants in the CSV Lawsuit agreed to hold their litigation in abeyance pending the outcome of the Association's lawsuit. The Association's lawsuit against CSV was settled in 2001. The litigation between CSV, Clark Son, Courtesy and the other defendants then proceeded. In August 2003, Clark Son first raised the Settlement as a defense in the litigation between it and CSV. Clark Son moved for summary judgment against CSV. In support of its motion, Clark Son asserts that CSV is a member of the Settlement Class, as that term is defined in the Settlement, and, as a Class Member, has, under the terms of the Settlement, released and forever discharged Clark Son of and from all the claims, including consequential damage claims that CSV alleges in the CSV Lawsuit. After hearing arguments on the summary judgment motion, the state trial judge abstained from ruling on the motion, because some of the issues raised in the summary judgment motion involve the interpretation of the terms, conditions and obligations of the Settlement, and, therefore, must be resolved by this Court.
Under the terms of the settlement, CSV allowed The Association to retain the monies ($54,157,71) it had received as a result of two claims it had filed under the Settlement.
Thereafter, Clark Son filed its Motions To Enforce in this Court. The Motions To Enforce raise several issues that concern the proper construction, interpretation and enforcement of the terms, conditions and obligations of the Settlement. The resolution of these issues is, therefore, properly before this Court and will be addressed by this Court.
Paragraph 9 of the Order, Final Judgment and Decree reads:
"Without affecting the finality of this Order, Final Judgment and Decree, the Court shall retain exclusive and continuing jurisdiction over the Actions and Parties, including all members of the Class, the administration and enforcement of the settlement, and the benefits to the Class, including for such purposes as supervising and implementation, enforcement, construction, and interpretation of the Settlement Agreement."
Section 13.3 of the Settlement Agreement provides:
"The Court shall retain exclusive and continuing jurisdiction of this Action, all Parties and Settlement Class members, to interpret and enforce the terms, conditions, and obligations of the parties."
One reason the Court retains exclusive and continuing jurisdiction of the Class action is to ensure consistent interpretation and enforcement of its terms, conditions, and obligations.
This Court begins with the issue of whether CSV, the declarant and developer of the Columbia Shores Condominium and owner of some of the Columbia Shores Condominium units at the time the Settlement was approved, or the Association is a member of the Settlement Class. In resolving this and the other issues raised by Clark Son's Motions To Enforce, this Court employs general principles of contract construction under Oregon law. See Settlement Agreement, Section 20.1, Miscellaneous Provisions, at 28 ("This [Settlement] is to be construed under and governed by the laws of the State of Oregon, applied without regard to its laws applicable to choice of law.") Under Oregon law, this Court must interpret the wording of the Settlement to effectuate the intentions of the parties, as those intentions can be determined from that wording and other relevant circumstances. Care Medical Equipment, Inc. v. Bladwin, 331 Or. 413, 418, 15 P.3d 561 (2000). See also ORS 41.240 (in the construction of a written instrument the intention of the parties is to be pursued if possible).
For the relevant text of the Settlement, this Court turns to the Definitions sections of the Settlement.
The Settlement Agreement defines the Settlement Class as:
"All Persons who have owned, own, or subsequently acquire Property on which Exterior Inner-Seal Siding has been installed prior to January 1, 1996 who are given notice in accordance with the Due Process Class of the United States Constitution.
"Excluded from the Settlement Class are:
1. All Persons who, in accordance with the terms of the Agreement, properly execute and file a timely request for exclusion from the Class; and
2. All Persons who are members of the certified class in the Florida action entitled Anderson v. Louisiana Pacific Corporation, No. 94-2458-CA-01."
Order, Final Judgment and Decree filed on April 26, 1996, at 2; Settlement Agreement, Section 1, DEFINITIONS, at 6-7. See also Notice of Approval of Settlement, ¶ 4, WHO IS COVERED BY THE SETTLEMENT, at 2.
Excluded from the Settlement Class also are "builders and developers who previously owned but no longer own structures with Exterior Inner-Seal Siding." Amendment to Settlement Agreement, Definitions, Section 1.2, at 2.
The term "Eligible Claimant," as used in the Settlement, "means the current owner of Property who has not assigned the claim, a subsequent purchaser of Property not subject to a prior assignment of claim, or a former owner of Property who holds a valid assignment of claim or who made a prior unreimbursed repair or replacement prior to January 1, 1996 or who presented a prior claim to L-P." Settlement Agreement, Section 1, DEFINITIONS, at 3.
Under the Settlement, the terms "Settlement Class" and "Eligible Claimant" have distinct meanings. A person must be a member of the Settlement Class to be an Eligible Claimant, but a person can be a member of the Settlement Class and not be an Eligible Claimant. During the settlement period, Eligible Claimants are eligible for relief for damaged Exterior Inner-Seal Siding on their Property. See Settlement Agreement, Section 5, Recovery Program, at 12.
For example, Jones owns a home on which Exterior Inner-Siding was installed prior to January 1, 1996. Jones did not timely "opt out" of the Settlement. Jones is a member of the Settlement Class and is also an Eligible Claimant. Jones does not file any claim under the Settlement, nor does he make any repairs to the Exterior Inner-Seal Siding. In December 1997, Jones sells his home on which the Exterior Inner-Seal Siding is installed to Smith. Jones does not obtain from Smith an assignment of claim indicating that he, Jones, has claim rights under the Settlement. Jones remains a member of the Settlement Class, but is no longer is an Eligible Claimant. Smith, the current owner of the home, is a member of the Settlement Class and an Eligible Claimant. During the settlement period, Smith, therefore, was eligible to file a claim for damaged Exterior Inner-Seal Siding on his home.
"Person" is defined in the Settlement as "any individual or legal entity or their successors or assigns." Settlement Agreement, DEFINITIONS, Section 1, at 4. "Property" is defined as "any structure including homes, mobile homes, townhomes, condominiums, apartments, commercial structures and other types of buildings or structures on which Exterior Inner-Seal Siding was installed prior to January 1, 1996 or on which Exterior Inner-Seal Siding was replaced by virtue of Damage." Settlement Agreement, Section 1, DEFINITIONS, at 5. (Emphasis added.)
From these definitions, this Court must answer this question: in the context of a condominium on which Exterior Inner-Seal Siding was installed, what person (individual or legal entity) "owns" the right to make a claim under the Settlement? Stating the question differently, who, in the context of a condominium, has standing as a Class Member to make a claim under the Settlement? In answering the question, it is helpful to examine the nature of a condominium.
A condominium is a form of shared property ownership created pursuant to statute. Roger A. Cunningham, William B. Stoebuck and Dale A. Whitman, The Law of Property (West 1984), at 37. The condominium statutes provide, inter alia, for the execution of an instrument called a "declaration" by which a particular tract of law is submitted in the provisions of the statute. The condominium statutes further provide for the election of a board of directors by the unit owners' association established by statute, and for covenants, bylaws, and administrative regulations adopted by the association to "run with" each unit and to bind all successive owners thereof. Id., at 38.
See, e.g., RCW 64.34.300 (relating to the organization of a unit owners' association).
Generally speaking, a condominium equals "units" plus "common elements," sometimes referred to as "common areas," owned by unit owners. Powell on Real Property, § 54A.01[2], at 54A-11. A condominium unit may be visualized as a "cube of air, the tangible boundaries of which are usually the finished side of the interior sheetrock, ceilings and floors." Id., at 54A-11-54A-12. Each condominium unit is separately owned in fee simple absolute by one or more persons. The common elements, which generally equal everything other than units — the exterior walls of the building, which includes the exterior siding, the hallways and other common areas within the building, and the exterior grounds around the building — are owned by all unit owners as tenants in common. However, it is the unit owners' association, which consists exclusively of the unit owners, that manages the condominium and has exclusive control and authority over the common elements, see, e.g., RCW 64.34.304(f), (g), (h), (i), and (j).
In this opinion, the terms "common elements" and "common areas," as used in this opinion, have the same meaning and are used interchangeably.
During argument before this Court on the Motions To Enforce, both Class Counsel and CSV's counsel stated that the unit owners own from the "paint in" and that everything else is a common element.
See, e.g., RCW 64.020(6) ("Common elements means all portions of a condominium other than the units.").
See, e.g., RCW 64.34.204 (similarly describing those portions of a unit which are owned by the unit owner and those portions of a unit which are a part of the common elements.).
Generally, the unit owners' association has statutory authority to bring, defend or intervene in litigation in its own name on behalf of itself affecting the condominium. See, e.g., RCW 64.34.304(1)(d).
The nature of a condominium, as described above, supports the following conclusions: (1) in the context of a condominium, the unit owners' association "owns" the right to make a claim under the Settlement for damaged Exterior Inner-Siding and, therefore, has standing as a Class Member; (2) the developer and declarant of a condominium are not a members of the Settlement Class; and (3) the unit owners of a condominium are not members of the Settlement Class.
Class Counsel's and LP's interpretation of the Settlement from the inception of the implementation and administration of the Settlement, and consistently followed throughout the Settlement claim period, concerning multi unit/commercial claim submission, reflects their intent that, in the context of a condominium, the "ownership" of the right to make a claim in the Settlement vests with the unit owners' association.
From the beginning of the Settlement, the Claims Administrator, when requested, mails the claimant a Claim Package. The Claim Package includes, inter alia, a Cover Letter from the Special Master expressing the authority of this Court over the Claims Process and a Claim Form with detailed instructions. The Claim Package, which is provided to Multi Unit/Commercial Property claimants, includes a document regarding claim form submission, which, after review and approval by Class Counsel and LP, was approved by the Special Master. That document, which is entitled "Louisiana-Pacific Inner-Seal Siding Litigation — Avoiding Common Pitfalls in Multi Unit/Commercial Claim Form Submission," was marked Exhibit 1 and noticed by this Court at the time of oral argument on the Motions To Enforce, after the parties were given the opportunity to be heard.
The Claims Administrator is the court-approved, independent firm hired to administer, under the supervision of the Court, the relief provided by the Settlement Agreement by resolving claims in a rational, responsive, cost effective, and timely manner. Settlement Agreement, Section 1, Definitions, at 2; Id., Section 10.1, Claims Administration, at 21.
The Multi Unit/Commercial Claim Form Submission, Exhibit 1, informs a Multi Unit/Commercial claimant of the necessity of providing the Claims Administrator with current proof of property ownership which shows exterior wall ownership. Exhibit 1, in relevant part, states:
"Clarification of exterior wall ownership solidifies an individual or group's right to file a claim. Include one of the following:
• Unit owners (townhouse, rowhouse, duplex, triplex, etc.): Include a current homeowners insurance declaration page that includes the name of the claimant(s), a complete property address, and a breakdown of the coverages for the unit/structure. A condominium unit owners policy is not sufficient of exterior walls ownership since it indicates that another party (i.e., association, management company, etc.) owns the claim rights. If the association's role is for property maintenance only, the claim rights would belong to the individual unit owners.
• Association/Incorporated Groups: Include a current commercial/master insurance policy or articles of incorporation that include the association/group name, property address(es), and, for articles of incorporation, a statement for exterior wall ownership. If the association's role is for property maintenance only, the claim rights would belong to the individual unit owners."
As previously observed, see page 3, n 5, supra, and consistent with requirements of Multi Unit/Commercial Claim Form Submission, Exhibit 1, the Association filed two complete and valid claims under the Settlement. With the filing of each of these claims, the Association provided the Claims Administrator with current proof of exterior wall ownership and claim rights with respect to the Columbia Shores Condominium and subsequently received compensation from the Settlement Fund for damaged Exterior Inner Seal Siding on the Columbia Shores Condominium.
From the foregoing, this Court holds that, in the context of the Columbia Shores Condominium, the Association "owns" the right to make a claim under the Settlement, and, therefore, has standing as a Class Member (and Eligible Claimant) under the Settlement. It is also clear that neither the fact that CSV is the declarant and developer of the Columbia Shores Condominium nor the fact that CSV owned some of the Columbia Shores Condominium's units at the time the settlement was approved would qualify CSV as a member of the Settlement Class or an Eligible Claimant.
Next, Clark Son, in it's the Motions To Enforce, asks this Court to determine the scope of the release in the Settlement granted by Class Members to LP and to all builders, installers, finishers, contractors, subcontractors, developers/first time sellers, painters, suppliers and distributors from claims relating to Exterior Inner-Seal Siding installed on a structure (Builders' Release).
In this opinion, the phrases "all builders/installers (or other persons or entities in the chain or distribution, installation, or finishing of Exterior Inner-Seal Siding) or "all builders/installers (or anyone else in the chain of distribution)" are also used to refer to the Builders' Release.
Before addressing that issue, this Court will first briefly describe the Settlement and claims process. Next, this Court will examine the relevant language of the Settlement concerning that issue and Class Counsel's and LP's expressed intentions concerning that language.
In Decision in the Matter of Krystal Place II Condominium Owners Ass'n v. Vistra, Inc., ( Krystal), filed in the U.S. District Court For The District of Oregon, February 7, 2001, this Court described the Settlement and the claims process as follows:
"* * * The Settlement resolves claims brought against L-P, relating to * * * Exterior Inner-Seal Siding, that was installed between 1985 and January 1, 1996. Under the terms of the Settlement, funds from the Settlement Fund are used to pay for removal and replacement of damaged Exterior Inner-Seal Siding to which Class Members are entitled under the Settlement.
"The Settlement is based on `claims made' during the seven-year claim period. To recover damages under the Settlement, [Eligible Claimants], whose Exterior Inner-Seal Siding becomes damage[d] or is damaged, must [have filed] claims with the court-approved Claims Administrator before January 1, 2003. Under the claims process created by the Settlement, a court-approved independent inspector then visits the claimant's property and determines the amount of square feet of damaged Exterior Inner-Seal Siding in accordance with a specific [Damage P]rotocol approved by the Court. [ See Amendment to Settlement Agreement, Section 3, Inspection Protocol, at 3, and Exhibit B, Memorandum Of Agreement As To Testing Protocol, attached thereto.] Under the [Damage P]rotocol [set forth in paragraph 5 of Exhibit B], the entire board or panel is considered damaged if any portion is determined to be damaged. No attempt is made by the inspector to determine the cause of the damage. This is because, under the Settlement L-P accepts total responsibility for failed Exterior Inner-Seal Siding regardless of how the siding was installed or maintained. Upon completion of the inspection, the inspector submits his findings to the Claims Administrator, who then calculates the Settlement Protocol Amount, i.e., the compensation offered to the claimant under the Settlement for the cost of removing and replacing Exterior Inner-Seal Siding found to be damaged by the inspector, less a deduction based on the age of the product
At the end of the seven year claim period, * * * [LP's 25-year limited Express Warranty remains in effect for the balance of its term when measured from the date of original installation." Amendment to Settlement Agreement, Section 6, at 6. See also Amendment to Settlement Agreement, Section 1.3, Definitions, at 2.].
" Damage means that Exterior-Inner-Seal Siding that fails at the time of the inspection to perform its essential purpose of cladding and protecting the wall assembly and presenting appropriate aesthetics." Settlement Agreement, Section 1, DEFINITIONS, p 2.
"The Settlement Protocol Amount is calculated by the Claims Administrator by multiplying the R.S. Means rate — a location-specific replacement cost determined by an independent court-approved supplier of construction cost information, the R.S. Means Company, Inc. — times the square footage of siding damaged and then subtracting any applicable age deductions and prior payments.
" Replacement Cost means the average cost per square foot of surface area of siding for full replacement including all materials and labor to replace and repair Damaged panels or boards and to repaint and otherwise restore the exterior to the extent necessary to make the repair as cosmetically acceptable as practicable in conformity with all applicable laws, building codes, and zoning regulations. Replacement costs will be set by agreement of the parties using Means' Price Data for such geographic areas as are agreed upon by the parties (the `Initial Means Price'). The Initial Means Price will be adjusted annually for inflation using the most representative Consumer Price Index (`CPI') for the geographic area covered by the respective Initial Means Price for the region in which the Property is located." Settlement Agreement, Section 1, DEFINITIONS, 5.
R.S. Means Company, Inc. an independent construction estimating firm, was hired by Class Counsel and L-P "to determine the cost of repair and replacement of Exterior Inner-Seal Siding throughout the country (Replacement Costs). R.S. Means Company, Inc. developed a discrete R.S. Means rate for 330 geographic areas identified by zip codes.
"The R.S. Means per square foot compensation rate, which is adjusted annually for inflation, is designed to reflect the prices that a fair and knowledgeable contractor will charge for removal and replacement of Exterior Inner-Seal Siding in a given locality." (Some footnotes omitted.) Krystal, at 10-12.
The components of the R.S. Means rate, includes, among other things, exterior molding and corner boards, door and window flashing, vapor or weather barriers, and caulking. Krystal, at 12.
With that explanation of the Settlement and claims process, this Court will now examine the relevant language of the Settlement concerning settled or released claims and Class Counsel's and LP's expressed intentions concerning that language.
The Settlement Agreement provides that Class Members fully and unconditionally released and discharged LP from all "Settled Claims," subject to certain exceptions not relevant here. Settlement Agreement, Section 14.1, Releases and Assignments, at 22-23.
A "Settled Claim" is defined in Section 1 of the Settlement Agreement, Section 1.3 of the Amendment to Settlement Agreement and is clarified in Section 5 of the Amendment to Settlement Agreement and Exhibit C to the Amendment to Settlement Agreement.
The Settlement Agreement states:
" Settled Claim means any claim, liability, right, demand, suit, matter, obligation, damage, loss or cost, action or cause of action, of every kind and description that the Releasing Party, (as defined in Section 14 of this Agreement), has or may have, whether known or unknown, asserted or unasserted, latent or patent, that is, has been, could reasonably have been or in the future might reasonably be asserted by the Releasing Party either in the Action or in any other action or proceeding in this Court or any court or forum, regardless of legal theory, and regardless of the type or amount of relief or damages claimed, against any of the Defendants, arising from or in any way relating to any defects or alleged defects of Exterior Inner-Seal Siding, or any part thereof. Without limiting the generality of the foregoing, Settled Claims shall include, without regard to the foregoing subject matter:
(1) any claim for breach or violation of any federal, state, common or other law;
(2) any claim for breach of any duty imposed by law, by contract or otherwise;
(3) any claim based on strict liability, negligence, reliance, breach of express or implied warranty, racketeering, fraud, conspiracy, consumer fraud, negligent misrepresentation, or intentional misrepresentation;
(4) any claim arising from or in any way related to the promotion, design, manufacture, production, sale, distribution, or assembly of Exterior Inner-Seal Siding, and/or any alleged defects in Exterior Inner-Seal Siding, or any part thereof;
(5) any claim for personal injury, emotional distress, or mental anguish associated with any of the above; and
(6) any claim for penalties, punitive damages, exemplary damages, or any claim for damages based upon a multiplication of compensatory damages associated with the above.
"However, Settled Claim does not include any claim for bodily injury (including wrongful death) and associated emotional distress and mental anguish, or claims arising from the purchase, sale or holding of L-P stock and does not include claims arising from the purchase of new L-P stock and does not include claims arising from the installation of new Exterior Inner-Seal Siding after January 1, 1996." Settlement Agreement, Section 1, DEFINITIONS, at 5-6. (Emphasis added.)
Section 14.1 of the Settlement Agreement, at 23, further provides:
"* * * To the extent claims may be asserted against persons or entities in the chain of distribution, installation of the Exterior Inner-Seal [S]iding, the Releasing Party shall be deemed to and does hereby release and forever discharge those persons or entities in the chain of distribution, installation, or finishing of Exterior Inner-Seal Siding from claims based solely on distribution, handling, installation, specification, or use of the Siding."
The definition of Settled Claim was modified in the Amendment to Settlement Agreement, Section 1, Definitions, at 2. That section reads:
"The definition of the term `Settled Claim' is revised by adding the following: `A `Settled Claim' does not include any claim for consequential damages to other structural components caused by the failure or repair of Exterior Inner-Seal Siding or to claims made against L-P after the expiration of the term of the Settlement Agreement under the express terms of the L-P 25-year Limited Warranty issued with the product." [Emphasis added.]
This revision of the definition of Settled Claim is described in the Notice of Approval of Settlement, dated April 26, 1996, which was mailed to Class Members, as follows:
"At the request of Class Members, the parties have clarified the definition of `settled claims' as used in the Settlement Agreement. Any consequential or incidental damages to your building structure caused by the damaged siding or its repair are not released by your participation. For example, if you believe the structure or interior of your home suffered damage as a result of damaged L-P exterior siding, you can still pursue those damages on your own even if you participate in the Settlement." Notice of Approval of Settlement, paragraph 5 I, Consequential Damages, at 4. [Emphasis added.]
The letter to John C. Cochenour, dated March 15, 1996, which was drafted and signed by LP's representative Stephen Grant and Co-Lead Class Counsel Christopher I. Brain and referenced in Section 5 of the Amendment to Settlement Agreement and attached thereto as Exhibit C, explains how the Settlement Agreement is intended to affect the rights or interests of persons in the sale and distribution chain of Exterior Inner-Seal Siding, whether distributors, dealers, builders, developers, installers, or whomever. Exhibit C, at 2-3, reads:
"Although the only parties to the Settlement Agreement are L-P and representative members of the class of persons who own (or have owned) structures with L-P siding, the Settlement Agreement is intended to be the sole remedy for any class member who claims injury as a result of damage to L-P Siding, regardless of whether redress for that injury is sought against L-P or anyone else in the `chain of distribution.' As to the owner of L-P Siding, L-P has elected to assume full financial liability for claims for damaged siding, regardless of issues of installation and maintenance. If the results were otherwise and a claimant were able to sue parties on claims related to L-P siding, L-P would not receive the benefit of the settlement since it would be at risk of being sued as a cross defendant in those actions. The whole point of the Settlement Agreement is to provide the claimant with a quick, effective remedy for damage to L-P Siding — regardless of the cause of the damage. [Emphasis added.]
"Accordingly, the Settlement Agreement broadly defines `Settled Claim' to include any claim which the claimant could make `regardless of legal authority . . . arising from or in any way related to any defects or alleged defects of Exterior Inner-Seal Siding,' including claims based on state or federal law, strict product liability, negligence, fraud, racketeering, negligent or intentional misrepresentation, etc. Once a final judgment is entered approving the Settlement Agreement, each class member[,] who has not opted out of the settlement[,] forever released L-P from `any and all Settled Claims.' (Settlement Agreement, paragraph 14.1). [Emphasis not in the original.]
"In addition, The Settlement Agreement provides:
`To the extent claims may be asserted against persons or entities in the chain of distribution, installation or finishing of the Exterior Inner-Seal siding, the Releasing party shall be deemed to and does hereby release and forever discharge those persons or entities from claims based solely on distribution, handling, installation, specification, or use of the Exterior Inner-Seal siding.'
"This paragraph makes clear that once approval of the Settlement Agreement has become final, all builders, installers, finishers, contractors, subcontractors, developers/first time sellers, painters, suppliers and distributors are released from `claims' related to siding. In this regard, the word `claims', includes, but is not limited to, all `Settled Claims' as that word is defined in the agreement.
"The Notice [Of Approval Of Settlement] that was sent to class members clearly made this point in plain English: `In exchange for the ability to participate in the Settlement, Class Members agree to release all claims against the Defendants or any third party involved in building, installing or distributing the product, relating to any defect or alleged defects in Louisiana-Pacific Inner Seal siding installed prior to January 1, 1996, other than claims for bodily injury, wrongful death, or associated emotional distress and mental anguish.' [Emphasis in original.]
"We hope the foregoing clarifies for you that, with the exceptions noted, the language of the Settlement Agreement, as well as the acknowledged mutual intention of the parties to the agreement, clearly releases builders and anyone else in the distribution and sale chain from any liability for damages arising from the sale or installation of L-P siding. In this respect, the Settlement Agreement treats the builders more favorably than L-P since the release provided in the agreement remains in effect as to the builders whether or not L-P continues to fund the settlement whereas L-P retains liability if it fails to fund all claims submitted under the Settlement Agreement. See Sections 19.2, 19.3 and 19.4. Section 4.10 does not affect the [S]ection 14.1 release of builders (and others in the chain of distribution/installation)."
As this Court noticed in Krystal, at 12-14, the intentions of Class Counsel and LP concerning the scope of the Builders' Release and the reasons for its inclusion in the Settlement Agreement were articulated by Class Counsel in a Declaration, as follows:
"One of the significant elements of the settlement was the waiver by L-P of its defenses for improper installation and maintenance of the [Exterior] Inner-Seal Siding. L-P had published detailed installation and maintenance instructions; however, our research indicated that the majority of the siding was installed contrary to the specific instructions by L-P (primarily lack of sufficient painting on the drip edges, caulking and overdriven/underdriven nails) and that the vast majority of home owners did not receive copies of the installation and maintenance instructions. Class Counsel believed, regardless of whether or not the siding was properly installed, that an unacceptably high percentage of the product would fail, especially in wet or humid environments.
"Because L-P was accepting 100 percent responsibility for failed siding, regardless of how it was installed or maintained, we believed it was appropriate to release the builders and installers from any liability related to or resulting from damaged L-P siding because compensation to be paid under the Settlement Agreement was intended to cover the entire replacement cost for the removal and installation of that portion of the L-P siding which was deemed damaged pursuant to the Settlement Agreement. We also desired to avoid the multiplicity and expense of litigation which could be brought by claimants alleging that the siding was improperly installed by their builders. Our concern was that even if L-P assumed full liability, if the builders were not released, litigation would be brought against them and they would then in turn sue L-P and significant funds would be spent by all parties debating liability. Since installation defenses were waived, and L-P assumed full responsibility, there was no point in putting the parties to this additional expense.
"* * * [A]s a result of input from third parties as well as the further negotiations, clarifications of the scope of the release were negotiated with respect to consequential damages and a more particular and detailed statement of the scope of the Builder's Release was prepared consistent with the original Settlement Agreement.
"With respect to consequential damages, our experts advised us that it would be rare when a failure of the siding itself would cause consequential damages to the substructure because in order for that to happen, siding would have to have decomposed to the point where it no longer operated as cladding to the structure and the protective water membrane between the siding and the subwall would also have to be breached. Nevertheless, class counsel was concerned that there could be situations where consequential damages could arise as a result of damaged [Exterior] Inner-Seal Siding. There was no practical method to incorporate a compensation formula for potential consequential damages into the settlement. Accordingly, the resolution was that consequential damages caused by the failure of [Exterior] Inner-Seal Siding would not be released and L-P would remain liable therefore. This clarification was made in Section 1.3 of the Amendment to the Settlement Agreement * * *.
"Because of the change in the scope of `Settled Claims,' it was necessary to again re-examine the scope of the Builder's Release. Exhibit C to the Amendment to the Settlement Agreement incorporated language which clarified that the Builder's Release was broader than the release which applied to L-P. In other words, builders and installers were also released from consequential damage claims resulting from the failure of [Exterior] Inner-Seal Siding. Again, since L-P was remaining liable for all claims related to consequential damages resulting from the failure of the siding, for the same reasons and logic builders were released with respect to installation defenses for damaged siding, they would also be released for the consequential damages resulting from failed siding. The March 15, 1996, letter clarifying these issues states in part as follows:
"This paragraph makes clear that once approval of the Settlement Agreement has become final, all builders, installers, finishers, contractors, subcontractors, developers/first-time sellers, painters, suppliers and distributors are released from `claims' related to siding. In this regard, the word `claims' includes, but is not limited to all `Settled Claims' as that word is defined in the agreement.
"We hope the foregoing clarifies for you that, with the exceptions noted, the language of the Settlement Agreement, as well as the acknowledged mutual intention of the parties to the agreement, clearly releases builders and anyone else in the distribution and sale chain from any liability for damages arising from the sale or installation of L-P siding. In this respect, the Settlement Agreement treats the builders more favorably than L-P since the release provided for in the agreement remains in effect as to the builders whether or not L-P continues to fund the settlement whereas L-P retains liability if it fails to fund all claims submitted under the Settlement Agreement." (Emphasis added.)
Declaration in Opposition to Cross-Defendant's Motion for Summary Judgment or, Alternatively, Motion for Summary Adjudication, dated September 20, 2000, in Superior Court of the State of California for the County Sonoman, in Meadowview Limited Partnership v. John Gunter, Case No. 22018.
In the Memorandum By Class Counsel Regarding Clark Son's Motions To Enforce And For Declaratory Relief, at 3, Class Counsel asserts, before this Court, that the scope of the Builders' Release has been "discussed and misinterpreted by many" and that "[t]o" understand why it was drafted and what it covers, it is essential to understand the basis for its inclusion in the Settlement Agreement." In that memorandum, Class Counsel argues:
"* * * The Purpose of the Builders' Release was to Release Siding Installers and Builders/First Time Sellers from Claims Related to Damaged Siding. [Emphasis in original.]
"Class Counsel maintained that [Exterior] Inner-Siding was defective, prone to rot and early decomposition. LP never agreed the siding was defective. Regardless of whether or not LP admitted the product was defective, the parties came to a resolution which generously compensated the Settlement Class members who had Damage to their siding.
"During the litigation and during settlement negotiations, LP maintained that the siding failure, at least in part, was caused by the failure of (I) the builder/contractor to install the siding in accordance with the LP installation instructions and (ii) the owner to properly maintain the siding in accordance with the LP maintenance procedures. Significant discussion and negotiation took place with respect to whether or not LP would be allowed to raise `causation defenses' to claims based on installation and maintenance deficiencies. Ultimately, LP agreed to waive `causation defenses' in the context of the damage Inspection Protocol incorporated into the Settlement Agreement. Waiving these defenses, however, raised a host of issues with respect to builder liability, which issues were negotiated through April 26, 1996, the date the Settlement was approved.
"The basic premise was that if LP [were] to assume the complete responsibility for the siding failure, the builders/installers of the siding should not be responsible for the damaged siding. In other words, merely because a builder/installer failed to install siding in accordance with the LP installation instructions would not submit the builder/installer to liability for Damaged Siding. Since LP was assuming 100% responsibility for damaged siding, it would not benefit LP's position if it was left exposed to litigation by builders/installers to Damaged siding because Settlement Class members could first recover from LP and then sue builder/installer for any `deficiency' they believed was due to them.
"From the Class standpoint, Class Counsel believed the cost of litigation to the members of the Settlement Class would, in many cases, exceed the benefit of leaving the builders exposed to continued litigation, and it was far more advantageous to eliminate the installation/maintenance defenses than to allow LP to retain them and preserve builder/installer liability. Therefore, the amount of compensation from LP, as well as the Inspection Protocol, were tied to a complete release of builders/installers and, therefore, LP from third-party suits from builders/[installers] sued by Settlement Class members.
"From LP's standpoint, it was not willing to agree to waive the installation and maintenance defenses or agree to the Inspection Protocol or Replacement Cost compensation unless it obtained complete `peace' from potential third-party litigation. This was a `win/win/for Settlement Class members. They were not subject to installation/maintenance defenses when making a claim, received a more generous Replacement Cost compensation and avoided costly potential litigation with their builder/installer.
"Accordingly, the purpose of the `[B]uilders' [R]elease' was to ensure that if there was Damage to the siding, the builder/installer would not be liable for the cost of siding replacement merely because the builder/installer did not follow installation instructions. It was never discussed or intended that the [B]uilders [R]elease would be a `carte blanche' release for other construction-related defects. [Emphasis added.]
"* * * The scope of the [B]uilders' [R]elease was intended to address Damaged siding. In other words, if the siding was Damaged, it made no difference what the cause of the Damage was. Therefore, the builder/installer would not be liable for its replacement.
"Prior to negotiating these terms, Class Counsel had consulted with many wood product experts, installers, builders and structure inspectors. We were aware that it would only be in a rare situation that siding failure would exclusively cause water intrusion/consequential damages.
"Class counsel was unwilling to allow LP to release its liability for structural damage caused by siding failure. This is a critical point, as it was the consequential damages caused by the failure of the siding that was in issue.
"We [Class Counsel LP] initially attempted to incorporate some method of a consequential damage award into the Settlement Agreement for those Settlement Class members who could demonstrate consequential structural damage. It immediately became apparent, however, that each case would be individual and a protocol formula would not work. In the end, we agreed that claims for consequential damages caused by damaged Inner-Seal siding would not be released, and if a Settlement Class member had consequential damages as a result of the siding failure, then the Settlement Class member could pursue LP separately for such claims outside the Settlement. [Emphasis added.]
"The effect of the builders' release was to extend the release to builders for consequential damages caused by siding failure. We did not intend to release builders/installers for consequential damages caused by anything other than Damaged siding. Put simply, if a builder/installer failed to follow the installation instructions, the siding failed and the failed siding was the cause of the consequential damages, the builder/installer was released." [Emphasis added.].
This Court believes that these assertions are consistent with the language of the Settlement and LP's and Class Counsel's expressed intent in Exhibit C to Amendment to Settlement, concerning the purpose and scope of the Builders' Release.
The foregoing review of the relevant language of the Settlement concerning the scope of the term "settled claims" and the scope of the Builders' Release, Class Counsel's and LP's expressed intentions concerning that language as set forth in the Amendment to Settlement Agreement, Exhibit C, and the arguments of the attorneys in this matter concerning that language, leads this Court to the following conclusions:
(1) Under the Settlement, LP accepts full financial responsibility for damaged or failed Exterior Inner-Seal Siding, regardless of whether the siding was improperly installed or maintained.
(2) Class Members fully and unconditionally released LP and all individuals and companies involved in the distribution, installation, construction and first time sale of structures with Exterior Inner-Seal Siding from all claims "arising from or in any way related to the promotion, design, manufacture, production, sale, distribution, or assembly of Exterior Inner-Seal Siding, and/or any defects or alleged defects in Exterior Inner-Seal Siding, or any part thereof," other than certain claims not relevant to Clark Son's Motions To Enforce.
(3) Included among the consideration that LP bargained for (and is entitled to receive) in the Settlement is relief from the risk and expense associated with defending itself against third-party claims brought by builders/installers (or other persons or entities in the chain or distribution, installation, or finishing of Exterior Inner-Seal Siding) who find themselves sued by Class Members asserting settled or released claims alleging damage arising from or in any way related to the promotion, design, manufacture, production, sale, distribution, or assembly of Exterior Inner-Seal Siding, and/or any alleged defects in Exterior Inner-Seal Siding, or any part thereof.
(4) LP is not released from any claim by a Class Member for consequential damages to other structural components that are a part of the "structure" of the affected property to the extent those damages are caused by the failure or repair of Exterior Inner-Seal Siding.
(5) The release to builders/installers (or other persons or entities in the chain or distribution, installation, or finishing of Exterior Inner-Seal Siding) is broader than the release which applies to LP.
(6) All builders/installers (or other persons or entities in the chain of distribution, installation or finishing of the Exterior Inner-Seal Siding) are released from all claims by class members described in (2), supra, and all claims by Class Members for consequential damages to other structural components that are a part of the "structure" of the affected property to the extent those damages are caused by the failure or repair of Exterior Inner-Seal Siding.
(7) All builders/installers (or other persons or entities in the chain of distribution, installation or finishing of the Exterior Inner-Seal Siding) are not released from any claim by a Class Member for consequential damages to other structural components to the extent those damages are caused by something other than the failure or repair of Exterior Inner-Seal Siding.
(8) Although not members of the Settlement Class and, therefore, not bound by the terms, conditions and obligations of the Settlement, CSV, the condominium declarant and developer of the Columbia Shores Condominium, Courtesy, the general contractor for the Columbia Shores Condominium, Clark Son, the subcontractor, who installed the Exterior Inner-Seal Siding, weather resistance barrier, flashing and counter-flashing on The Columbia Shores Condominium, are beneficiaries of the releases described in (2) and (6), supra.
(9) A Class Member's claim's against a builder/installer (or any other person or entity in the chain of distribution, installation or finishing of the Exterior Inner-Seal Siding) for consequential damages to other structural components of the "structure" of the property on which Exterior Inner-Seal Siding was installed is fully and unconditionally released and forever discharged under the Settlement to the extent the cause of those damages is the failure or repair of Exterior Inner-Seal Siding.
(10) A Class Member's claim against a builder/installer (or any other person or entity in the chain of distribution, installation or finishing of the Exterior Inner-Seal Siding) for consequential damages to other structural components of the "structure" of the property on which Exterior Inner-Siding was installed is not released and discharged under the Settlement to the extent the cause of those damages is something other than the failure or repair of Exterior Inner-Seal Siding.
(11) A Class Member's claim against a builder/installer (or any other person or entity in the distribution, installation, construction, finishing, or use of Exterior Inner-Seal Siding) for consequential damages to other structural components of the "structure" of property on which Exterior Inner-Siding was installed, which is based on the failure to install a proper weather resistive barrier and/or appropriate flashings, is not a Settled Claim or a released claim under the Settlement.
(12) Whether a Class Member's claim against a builder/installer (or any other person or entity in the chain of distribution, installation or finishing of the Exterior Inner-Seal Siding) for consequential damages to other structural components of the "structure" of the property on which Exterior Inner-Seal Siding was installed has been fully and unconditionally released and discharged under the Settlement depends upon the cause(s) of those damages. This is a factual question for the finder of fact.
As set forth in Exhibit C to the Amendment to Settlement Agreement, at 2:
"[A]ll builders, installers, finishers, contractors, subcontractors, developers/first time sellers, painters, suppliers and distributors are released from `claims' relating to [Exterior Inner-Seal S]iding. In this regard, the word `claims,' includes but is not limited to, all `Settled Claim' as that word is defined in the agreement."
As previously stated, supra, at 12, A "Settled Claim does not include any claim for bodily injury (including wrongful death) and associated emotional distress and mental anguish, or claims arising from the purchase of new L-P stock and does not include claims arising from the installation of new Exterior Inner-Seal Siding after January 1, 1996." Settlement Agreement, Definitions, Section 1. at 6.
This Court will now apply the foregoing conclusions to the issues raised by the Motions To Enforce.
In the CSV Lawsuit, CSV's claim for consequential damages against Clark Son and Courtesy is not a settled or released claim, because CSV is not a member of the Settlement Class and is not bound by the terms, conditions, and obligations of the Settlement. The liability issue presented by CSV's allegations is what caused the water intrusion and resulting consequential damages to other structural components of the Columbia Shores Condominium. CSV contends that the resulting consequential damages were caused by the improperly installed water resistive barrier and/or flashings. This is a factual question for the finder of fact. To the extent the finder of fact determines this to be true, Clark Son and Courtesy would be the responsible parities. Under conclusion (10), supra, at 22, CSV, Clark Son, and Courtesy, would not have been protected under the Builders' Release, if a similar claim had been made in a lawsuit brought against them by the Association or any other Class Member.
CSV contends that its claim against Clark Son and Courtesy for consequential damages to other structural components of the Columbia Shores Condominium are for loss of profits and represent attempts to mitigate a loss of goodwill and that the Settlement does not preclude it from pursuing those claims in state court. CSV is correct. Although a claim for loss of profits and loss of good will is a Settled Claim under the terms of the Settlement, see Settlement Agreement, Section 1, DEFINITIONS, at 5-6, it is not a Settled Claim as to CSV, because CSV is not a member of the Settlement Class and is not bound by the terms, conditions, and obligations of the Settlement. See U.S. District Judge Robert E. Jones' opinion in In re Louisiana-Pacific Inner-Seal Siding Litigation, 234 F. Supp.2d 1170 (D.C. Or 2002).
CSV's Reply Brief, at 17.
U.S. District Judge Robert E. Jones presided over the Fairness Hearing and entered the Order, Final Judgment and Decree approving the Settlement.
The last issue this Court will address, in the context of the CSV Lawsuit is whether the phrase "consequential damages to other structural components," includes any costs incurred by CSV for the removal and replacement of the Exterior Inner-Seal Siding, the removal and replacement of the flashing, and the removal and replacement of the weather resistive barrier? For the following reasons, the answer is "no."
The phrase "consequential damages to other structural components" (emphasis added) does not include damage to Exterior Inner-Siding, for which LP, under the Settlement, accepted full financial responsibility. Nor does that phrase include damage to any of the components of compensation of the R.S. Means rate, which are considered part of the cost of replacing damaged Exterior Inner-Seal Siding. These components, as previously stated, include, among other things, exterior molding, corner boards, door and window flashing, vapor or weather barriers, and caulking. The phrase "consequential damages to other structural components" refers to such items as sheathing and framing that are part of the "structure" of the affected property.
To the extent that this Court's opinion in Krystal is inconsistent with this opinion, Krystal is overruled.
Understandably, in this matter, Clark Son relies heavily upon this Court's opinion in Krystal to support its Motions To Enforce. However, the written memoranda and arguments of counsel in this matter have persuaded this Court that Krystal was wrongly decided.
ORDERED AND ADJUDGED that Clark Son's Motions (#612) To Enforce are granted in part and denied in part. CSV's claim in the CSV Lawsuit against Clark Son, Courtesy and other defendants for "consequential damages to other structural components" of the Columbia Shores Condominium may proceed consistent with this opinion.
IT IS SO ORDERED.