Jessica Karmasek Apr. 4, 2016, 1:39pm


CHICAGO (Legal Newsline) - The defendant company in a class action filed nearly 10 years ago over a line of allegedly defective windows now wants a federal judge to dismiss the lawsuit against it, saying the plaintiffs in the case have had plenty of chances to properly amend their complaint.

Window-maker Pella Corporation filed its motion to dismiss and to strike class allegations with the U.S. District Court for the Northern District of Illinois, Eastern Division, in February.

“Enough is enough,” attorneys for the company wrote in an accompanying, 15-page memorandum filed Feb. 19. “In the 21 months since the case was remanded to this Court, Plaintiffs have had four opportunities to amend the Complaint to state a valid cause of action.

“Despite clear instructions from the Court, Plaintiffs have failed to do so.”

Pella argues Judge James B. Zagel, in turn, should dismiss the plaintiffs’ complaint with prejudice for all named plaintiffs.

In June 2014, the U.S. Court of Appeals for the Seventh Circuit overturned approval of a class action settlement involving Pella that was estimated to be worth $90 million. The court described the settlement as “inequitable -- even scandalous.”

Class counsel was to receive $11 million in fees, but one of those lawyers was Paul M. Weiss, who in November was disbarred by the Illinois Supreme Court because of allegations that he asked former female employees to have sex with him and exposed himself to them.

“He was found to have engaged in criminal conduct of a sexual nature against various women he employed at his law office, a female friend of his former landlord, and a woman walking down a suburban side street,” a notice of the court’s ruling stated.

The state Supreme Court had placed Weiss on interim suspension in August after a review board of the Illinois Attorney Registration and Disciplinary Commission, or ARDC, in July recommended he be suspended for 30 months and until further order.

The Seventh Circuit’s opinion, authored by Judge Richard Posner, said Zagel, in the Pella case, ignored both the arguments of objectors and danger signs that the Seventh Circuit and other courts have warned judges “to be on the lookout for.”

“In this case, despite the presence of objectors, the district court approved a class action settlement that is inequitable -- even scandalous,” Posner wrote in the appeals court’s 2014 ruling.

“The case underscores the importance both of objectors (for they are the appellants in this case -- without them there would have been no appellate challenge to the settlement) and of intense judicial scrutiny of proposed class action settlements.”

The Seventh Circuit’s opinion also included a statement on the benefits of class action lawsuits but noted that judges accustomed to adversary proceedings aren’t always qualified to judge a settlement’s fairness when both the defendant and the plaintiffs attorneys are seeking the same outcome.

“The defendant cares only about the size of the settlement, not how it is divided between attorneys fees and compensation for the class,” Posner wrote.

“From the selfish standpoint of class counsel and the defendant, therefore, the optimal settlement is one modest in overall amount but heavily tilted towards attorneys fees.”

After the Seventh Circuit denied the plaintiffs’ motion for rehearing in July 2014, the action was returned to Zagel’s court.

According to a March 15 docket entry, Zagel recently held a motion and status hearing in the action; both parties reported that discovery is proceeding.

The plaintiffs have until April 12 to reply to Pella’s motion to dismiss; Pella can reply on or before April 26.

Zagel has set a ruling on the motion for May 12. Pella’s motion to decertify is stayed, according to the entry.

Litigation against Pella began in 2006 over allegations that its ProLine Series of windows had a defect that allowed water to enter, damaging a wooden frame and the house itself.

Two classes were certified -- one of customers who had already replaced or repaired the alleged defect and one of customers who hadn’t.

Initially, the only named plaintiff was a dentist whose son-in-law was lead counsel for the class. His son-in-law is Weiss, who was the founder and senior partner of Complex Litigation Group.

Plaintiff Leonard Saltzman’s daughter, Weiss’ wife, was also a partner in Weiss’ firm. The two are defendants in a lawsuit that alleges they misappropriated the assets of their former firm, Freed & Weiss.

That firm was still another class counsel in the Pella case. An objector argued “the dissolution and descent into open warfare that consumed Freed & Weiss in 2011 and 2012 clearly rendered that firm inadequate class counsel, especially in light of the articulated financial needs of the partners that drove the settlement of this case.”

“The impropriety of allowing Saltzman to serve as class representative as long as his son-in-law was lead class counsel was palpable,” Posner pointed out in the Seventh Circuit’s opinion.

Four more named plaintiffs were added after the case was filed, but those four opposed approval of the settlement.

“But pursuant to a motion filed by George Lang, who at the time was a partner of Weiss, four other class members were added as named plaintiffs (Lang says that Weiss rather than he picked them),” Posner wrote.

The new four plaintiffs supported approval of the settlement.

Lang represented the four plaintiffs who were replaced and filed objections to the settlement. Also representing an objector was Ted Frank, founder of the Center for Class Action Fairness, now a subunit of the Competitive Enterprise Institute.

Posner, writing for the Seventh Circuit, said $11 million in fees in a $90 million settlement is not usually a problem. But the settlement did not specify how much money would be received by class members, only a procedure by which class members could claim damages.

“So there was an asymmetry: class counsel was to receive its entire award of attorneys fees up front; class members were to obtain merely contingent claims, albeit with a (loosely) estimated value of $90 million (actually far less, as we’ll see),” he wrote.

Zagel also approved the settlement before a deadline for filing claims and made no attempt to estimate how many claims were likely to be filed, Posner said.

The Seventh Circuit also took issue with the facts that any reduction in the $11 million in attorneys fees revert to Pella and not to class members.

“The settlement should have been disapproved on multiple grounds,” Posner wrote.

The appeals court removed Saltzman as lead plaintiff and Weiss’ firm as class counsel. The four named plaintiffs who were removed after they objected to the settlement were reinstated as lead plaintiffs.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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