Homeowners win $3.2 million from Goodyear, Heatway

BY ROBERT P. MADER

Of CONTRACTOR’s staff

DENVER — Five Beaver Creek, Colo., homeowners and a homeowners association have won a $3.2 million jury verdict in early May against Goodyear Tire & Rubber and Heatway Systems in an Entran II hydronic hose suit.

The jury found Heatway to be more than 50% at fault and Goodyear less than 50% at fault for the damage caused by leaking Entran II hydronic heating hose. On the verdict form, the jury did not find any fault with contractors, homeowners or manufacturers of other hydronic components in the radiant heating systems.

“I think in all actuality it was like kissing your sister based on expectations people had from the Vista trial that occurred earlier,” said Lee Gray of Holland & Hart, the attorney for the homeowners. “If this had occurred a year ago, people would have been ecstatic.”

In Vista Development v. Goodyear homeowners won $23 million from Goodyear (April, pg. 5). Goodyear also was found in that case to have produced defective hose and to have violated the Colorado Consumer Protection Act.

The case of Sumerel v. Goodyear involved five single-family homes worth $5 million to $7 million each. The homeowners association also controlled an expansive snow-melt system for four properties and stairs connecting the residences and a hot tub in a common area.

“This was a different case [from Vista] for procedural reasons,” Gray said. The judge took the findings from Vista and prohibited Goodyear from arguing that it had not violated the Colorado Consumer Protection Act or that the tubing was defective. So while Goodyear could not argue that its tubing was not defective, Gray explained, it could argue that the defect had not caused the damages.

“The most significant difference was Goodyear’s defense,” Gray noted. “They admitted they made mistakes and took some responsibility, but they mainly defended against any intentional actions to violate the Colorado Consumer Protection Act or intentionally make a defective product. When faced with a company that admitted it made mistakes and took some responsibility, this jury was not willing to charge punitive damages to Goodyear although it found for full remediation and related damages from Goodyear and Heatway.”

Goodyear was pleased that Heatway was found mostly at fault. In an official statement, the company said:

“Goodyear is happy to finally have had an opportunity to have Heatway face the homeowners directly and to have Heatway’s responsibility assigned by the jury. The company believes the judge improperly ruled that a previous court decision in February 2002, to which Heatway was not party, determined that the hose is defective and that the jury in Sumerel was bound by that previous finding. The judge totally ignored a previous Ohio verdict in favor of Goodyear that said the hose was merchantable. More than 95% of the Entran II hose in use is operating fine and, if maintained properly, will continue to do so for many years.”

Both plaintiffs and defendants have filed post-trial motions that may change the jury award.

The Sumerel homeowners are among only 19 plaintiffs nationwide that could sue Heatway directly. The 19 plaintiffs, of which the Sumerel group were six, opted out of the Heatway bankruptcy settlement and told the bankruptcy judge that they wished to pursue Heatway — or more specifically, its insurance companies that control the only assets Heatway has left.

Goodyear had manufactured the hose for now-bankrupt Heatway Systems (April 2000, pg. 3). Heatway lost its federal court case against Goodyear, filed for bankruptcy and was purchased out of bankruptcy by Watts Industries. Watts is now running the operation as Watts Radiant. As part of the bankruptcy settlement, Heatway put aside $2.9 million in a fund to compensate homeowners with defective systems. Believing the $2.9 million was too little, the 19 homeowners opted out of the bankruptcy settlement.

Randy Herrick-Stare, a Denver attorney representing the estate of Heatway, said the parties will seek to have certain aspects of the judgment amended in the post-trial motions, and after that all parties will have an opportunity to appeal. On appeal, Goodyear and Heatway would have to post bonds for the judgment amounts and will probably ask the judge for a stay so they don’t have to pay the award until the appeal runs its course.

Cases in the Colorado Court of Appeals typically take two years, he said. If any of the parties doesn’t like the outcome of the appeal, it can appeal to the state supreme court, which has the option of taking the case or declining to hear it.

If the homeowners ultimately prevail, they will then have to try to collect from Heatway’s insurance companies by suing them in federal court in Missouri. The insurance companies have already filed suit in federal court in Missouri, asking a federal judge for a declaratory judgment on whether they owe any money and, if so, to whom and for what.

Herrick-Stare noted that the insurance policies cover different time periods and different liabilities. For example, a policy may cover breach of warranty but not negligence, and vice versa. Or a policy may cover damage caused by the hose such as damage to walls and ceilings, but not cover the cost to replace the hose itself.