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Third Circuit Denies Fee Request in Owens Corning Suit

May 5, 2020 | Posted in : Fee Award, Fee Award Factors, Fee Denial, Fee Doctrine / Theory, Fee Entitlement, Fee Issues on Appeal, Fee Jurisprudence, Fee Request

A recent Law 360 story by Bill Wichert, “3rd Circ. Nixes Consumers’ Fees Bid in Owens Corning Suit” reports that the Third Circuit said consumers weren't entitled to attorney fees for scoring a circuit opinion that nixed a bankruptcy bar on class claims against Owens Corning over allegedly defective roofing shingles, with judges finding that the consumers were overselling the impact of that earlier ruling.  In a nonprecedential opinion, a circuit panel upheld a Pennsylvania federal court decision last year in a settled class action that denied the plaintiffs' fees bid for securing the Third Circuit's 2012 opinion in Wright v. Owens Corning, which revived claims related to shingles installed before the company received confirmation of its Chapter 11 plan in 2006.

The panel reasoned that U.S. District Judge Joy Flowers Conti properly rejected the consumers' application seeking fees under any of three theories, including the common fund and common benefit doctrines, both of which permit fees to lawyers "whose work substantially benefits an ascertainable class of beneficiaries," according to the opinion.  "Even if we could ascertain these plaintiffs, however, Wright benefitted them only by removing one obstacle to overcoming summary judgment — not by helping them prove their shingles were defective," the panel said in an opinion authored by U.S. Circuit Judge Thomas M. Hardiman.  "Such a 'minimal' benefit cannot support an award of fees under either the common fund or common benefit doctrine," the panel said.

At the time of Owens Corning's plan confirmation on Sept. 26, 2006 — which discharged all existing claims against the company — the so-called Frenville rule held that the validity of a claim in the bankruptcy context hinged on when a right to payment arose under applicable state law, court documents state.  The rule came from the Third Circuit's 1984 opinion in Avellino & Bienes v. M. Frenville Co. [In re M. Frenville Co.]  For claims brought under the law of a state where the so-called discovery rule applies, the Frenville rule held that the claim arose when the suing party discovers the injury, court documents state.

In its 2010 decision in JELD-WEN, Inc. v. Van Brunt [In re Grossman's Inc.] , the Third Circuit overturned Frenville, holding that "a claim arises when the claimant is exposed to the debtor's product or conduct, no matter when the claimant discovers the injury," according to the opinion.  Based on Grossman's, Judge Conti in 2011 granted summary judgment to Owens Corning in a proposed class action from plaintiffs Patricia Wright and Kevin West, who installed their shingles before the Chapter 11 plan was confirmed in 2006 but did not discover the alleged defects until 2009, court documents state.

"Because plaintiffs' claims against Owens Corning arose prior to the time the confirmation order was entered in 2006, those claims were discharged," Judge Conti said.  The following year, the Wright panel reversed that decision, finding that the Frenville rule applied to matters where reorganization plans were confirmed before Grossman's, court documents state.

On remand, Wright and West's suit was consolidated with three other actions, and the parties settled after the plaintiffs unsuccessfully sought class certification, court documents state. The plaintiffs then filed the instant motion seeking counsel fees based on Wright, but Judge Conti denied the application in February 2019.

On the plaintiffs' appeal of that ruling, they suggested that Wright revived millions of warranties and "prohibited [Owens Corning] from asserting the bankruptcy bar ab initio to avoid warranty claims," according to the opinion. That description of the 2012 ruling, however, is unfounded, the panel said.  "In Wright, we merely held that the Frenville rule applies to cases in which courts confirmed reorganization plans before Grossman's," the opinion said.  "So Wright benefitted only plaintiffs whose claims would have been discharged under Grossman's but not Frenville. That class of plaintiffs is not ascertainable, because the Frenville analysis is so fact intensive."

The panel also said Judge Conti was right to reject the application under the catalyst theory, which permits fees "if a plaintiff's litigation activity 'pressured a defendant to settle or render to a plaintiff the requested relief,'" citing the Third Circuit's 2015 opinion in Templin v. Indep. Blue Cross.  "The catalyst theory requires 'some degree of success on the merits,'" the panel said. "But as the district court concluded, plaintiffs' victory in Wright was purely procedural; it shed no light on the merits of any putative plaintiff's claim."