‘Scandalous’ Pella Window Class Action Settlement Overturned

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The 7th U.S. Court of Appeals has overturned the Pella window class action settlement after finding that the attorneys for the Class Members were set up to benefit substantially at the expense of the class. “In this case, despite the presence of objectors, the district court approved a class action settlement that is inequitable—even scandalous,” the appellate court said.

The Pella window class action lawsuit was initially filed nearly eight years ago by plaintiff Leonard E. Saltzman. It alleged that Pella Corp.’s “ProLine Series” casement windows manufactured and sold between 1991 and 2006 had a design defect that allowed water to seep behind the aluminum cladding and caused wood rot. Four other Class Members were eventually added as plaintiffs in the Pella class action lawsuit.

The Pella window settlement was reached in 2012 and approved last year by a federal judge. The class action settlement granted $11 million in attorneys’ fees and purported to provide $90 million to Class Members. However, “the claim forms are so complicated that Pella could reject many of them on the ground that the claimant had not filled the form out completely and correctly,” the appellate court said. Further, many Class Members were only offered a coupon to be used for future window purchases, which may not be worth much to them.

“The restrictions that Pella was allowed to place on the settlement would, if upheld, enormously reduce the Class Members’ recovery of their losses, and the residue is to be returned to Pella,” the appellate court said.

According to the 7th Circuit, the four other named plaintiffs opposed the Pella class action settlement when it had been presented to the district court for preliminary approval. Saltzman was the only plaintiff to support it. The plaintiffs in opposition were subsequently removed and four others who supported the class action settlement were added in their place. The initial class action settlement agreement reportedly only offered incentive awards to the class representative who approved the settlement. “This created a conflict of interest: any class representative who opposed the settlement would expect to find himself without any compensation for his services as representative,” the appellate court noted.

Out of more than 225,000 Class Members, only 1276 had submitted claims as of February 2013. These claims were worth just $1 million. Although nearly 10,000 more claims were filed after the Pella class action settlement was approved, “there is no evidence that Pella would pay the maximum benefits on all, or indeed on any, of the claims,” the appellate court said. “We just don’t understand the judge’s valuing the settlement at $90 million or thinking the feeble efforts of class counsel … to obtain benefits for the class (as distinct from benefits for themselves in the form of generous attorneys’ fees) worth $11 million.”

The appellate court further noted that Paul M. Weiss, lead counsel for the class, was Saltzman’s son-in-law, creating “a grave conflict of interest.” Although the class action settlement agreement also designates another firm as lead counsel, the class action settlement terms “gave lead class counsel ‘sole discretion’ to allocate the award of attorneys’ fees to which the parties had agreed among the class counsel, and Weiss proposed to allocate 73 percent of the fees to his own firm,” the appellate court said. Further, Pella allegedly agreed to advance $2 million in attorneys’ fees to lead class counsel even before notice of the Pella class action settlement had been sent to Class Members.

“Class counsel sold out the class,” the three-judge panel concluded.

The following statement has been posted on the Settlement Administrator’s website: “On June 2, 2014, the Seventh Circuit Court of Appeals reversed the District Court’s approval of the Settlement previously reached in Saltzman v. Pella. If a party to the litigation so chooses, it has until June 16, 2014 to seek rehearing at the Court of Appeals. Additionally, if a party so chooses, it has 90 days to petition the U.S. Supreme Court for review. If no party seeks rehearing, the 90 days will run from June 2, 2014. If any party to the litigation seeks rehearing, the 90 days will run from the Court of Appeals resolution of any motion for rehearing.”

The Pella Window Class Action Lawsuit is Saltzman v. Pella Corporation, et al., Case no. 06-cv-4481, in the U.S. District Court for the Northern District of Illinois.

UPDATE: On Feb. 8, 2018, after years in court, Pella Corporation agreed to pay close to $26 million to settle a class action lawsuit that alleged a line of its windows leaked and caused wood rot.

UPDATE 2: On March 23, 2018, the revised Pella ProLine windows defect class action settlement is now open. Click here to file a claim.