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Evidence indicates a manufacturer of synthetic stucco may have improperly tried to stifle a class-action lawsuit involving a group of Hilton Head Island residents, according to a South Carolina judge.
Dryvit Systems Inc. negotiated "bonus" payments with lawyers that evidence suggests were aimed at getting the case dismissed, Circuit Court Judge J. Mark Hayes II wrote in a Jan. 13 court order.
Dryvit also settled individually with some homeowners who then may have failed in their responsibility to vigorously represent the interests of others in the state with claims against the company, Hayes' order stated.
Evidence "reflects that Dryvit paid bonuses to class representatives and their lawyers with the expressed goal of stifling the South Carolina litigation" so a national class-action lawsuit could finish first and limit the company's liability in this state, Hayes wrote in the order.
The company's actions could violate state rules governing class-action litigation, he wrote.
Dryvit's lawyers say the company acted properly and argue the South Carolina case should be dismissed.
Hayes refused to dismiss it last month because "significant and clear evidence has been presented from which a reasonable inference can be drawn that after the South Carolina class action was started, Dryvit engaged in wrongful conduct with the specific intent of stifling (its) proper and vigorous prosecution."
There are several other motions pending in the case, but Hayes' order could clear the way for a jury trial.
The complex case started after homeowners around the country began complaining in the mid-1990s that Dryvit's stucco trapped water inside walls, causing moisture damage.
A class-action lawsuit against Dryvit in Tennessee ended when the company settled in 2002. A judge ruled claimants in other states could get the same settlement as those in Tennessee, but several participants immediately challenged the settlement's fairness and appealed it.
Four South Carolina homeowners also believed the national settlement was "grossly inadequate." They pulled out of the national class action suit to pursue a statewide class-action suit on behalf of all South Carolina residents with claims against Dryvit, according to Hayes' order.
The four homeowners were John and Sally Cardamone, Benjamin T. and Diane M. Clark, Nathan W. and Jill C. Gordon, all of Hilton Head; and Ramona Gianni of Myrtle Beach.
Handling their suit were two firms -- Leath, Bouch & Crawford and Mullen, Wylie & Seekings, both based in Charleston -- and two individual lawyers, William Dixon Robertson of Columbia and Frank E. Grimball of Charleston.
The plaintiffs' lawyers sent a series of e-mails to Dryvit's attorneys beginning in December 2002, Hayes' order said. The lawyers suggested their clients' individual cases "needed to be resolved 'in order to eliminate the S.C. class,' " the order states.
The lawyers also discussed collecting $600,000 from Dryvit's fees to the national class-action lawyers, with an additional $225,000 to come from Dryvit later.
Hayes' order does not indicate which of the lawyers sent the e-mails.
Evidence "strongly indicates that these bonus payments to the attorneys were, at least in part if not wholly, 'contingent' on a South Carolina judge dismissing the South Carolina (class-action) case," Hayes wrote.
The four South Carolina homeowners all settled their individual cases by September 2003, with each receiving between $25,000 and $90,000.
The South Carolina class-action lawsuit, however, remained alive but dormant.
NEW PLAINTIFFS REVIVE CASE
Meanwhile, appeals of the national case finished in September 2005.
The same month, a judge allowed two Hilton Head homeowners to replace the original South Carolina plaintiffs, reviving the statewide class action. The new plaintiffs were Timothy and Janie Treon and P. Jennings Scearce.
Dryvit then moved for a summary judgment to dismiss their suit, arguing the final judgment in the national class action case should bar any new claims in South Carolina.
Last year, the Treons and Scearce filed two new suits in Beaufort County. Their suits allege Dryvit and the plaintiffs and lawyers originally involved in the South Carolina class action conspired to abandon that case. They are seeking class-action status and want the two suits consolidated.
Last month, Hayes denied Dryvit's request for summary judgment of the South Carolina class action.
"Genuine issues exist as to whether the finality of (the national class action) was improperly bought by Dryvit 'buying off' the South Carolina class," Hayes wrote.
Dryvit has appealed the order, but Hayes wrote that it may not be appealable under court rules.
DRYVIT: 'PAYMENTS WERE PROPER'
Dryvit officials referred questions to a lawyer for the company. He said Dryvit will prove it did nothing wrong.
"Dryvit's payments were proper, and the record will confirm that," said Andy Copenhaver of Wombyle, Carlyle, Sandridge & Rice, a firm based in Winston-Salem, N.C.
Lawyers for the Treons and Scearce declined to comment.
An attorney representing lawyers who handled the original S.C. class-action suit said no conspiracy existed.
The other defendants in those cases did not comment or could not be reached.
Hayes said judicial ethics prohibited him from discussing his order.