Jackson v. Unocal Corp.

231 P.3d 12

Richard JACKSON, Mary Jackson, Thomas Fehringer, Robert Hradecky, Deborah Hradecky, Dean Lousberg, and Lousberg Partnership, on behalf of themselves and those similarly situated, Plaintiffs-Appellees,v.UNOCAL CORPORATION, Unocal Oil Company of California, and Unocal Pipeline Company, Defendants-Appellants.

No. 09CA0610.

Colorado Court of Appeals Div. A.

July 23, 2009.

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The Hannon Law Firm, L.L.C., Kevin S. Hannon, Justin D. Blum, Denver, Colorado; Inman Flynn Biesterfeld & Brentlinger, P.C., Richard P. Brentlinger, Eric J. Voogt, Denver, Colorado, for Plaintiffs-Appellees.

Holland & Hart L.L.P., John A. Ramsey, Rachel A. Yates, Greenwood Village, Colorado, for Defendants-Appellants.

Opinion by Judge WEBB.

This land damages class action arises from the release of asbestos during removal of an underground oil pipeline previously owned by defendants, Unocal Corporation, Unocal Pipeline Company, and Union Oil Company of California (collectively Unocal). We granted Unocal's petition under C.R.C.P. 23(f) and section 13-20-901, C.R.S.2008, for interlocutory review of the trial court's order certifying two classes represented by named plaintiffs, Richard and Mary Jackson, Robert and Deborah Hradecky, Thomas Fehringer, Dean Lousberg, and the Lousberg Partnership.

We conclude that the trial court abused its discretion by declining to resolve which side's experts were more persuasive as to opinions potentially determinative of class certification by failing specifically to address the need for individualized damages evidence; and by not performing a rigorous analysis of Unocal's affirmative defenses, which, like the experts, the court mistakenly treated as an impermissible inquiry into the merits. We also conclude that the court did not apply the correct burden of proof, which is by a preponderance of the evidence. Therefore, we vacate the certification order and remand for further findings as directed in this opinion. On remand, the trial court may, in its discretion, take additional evidence to the extent necessary because of the standards announced in this opinion.¹

I. Introduction

The pipeline ran for sixty-nine miles beneath easements in rural Logan and Weld Counties. In 1996, after having taken the pipeline out of service, Unocal sold it to a now-defunct salvage company that excavated and removed the pipe. This process left behind pieces of pipewrap insulation below and above ground along the easements. When tests revealed the presence of asbestos in the pipewrap, Unocal contacted state and federal environmental authorities. For the next several years, Unocal monitored and abated the asbestos along the easements under work plans approved by the Colorado Department of Public Health and Environment (CDPHE).

In 2006, plaintiffs brought this action, asserting claims for nuisance, negligence, trespass, respondeat superior, and unjust enrichment, and seeking compensatory damages for diminution of land value, remediation efforts, and loss of use and enjoyment. They sought to certify two plaintiff classes: the “easement property class,” for the sixty-six owners of properties from which pipe had been removed; and the “contiguous property class,” for 235 properties contiguous to the easement properties. As to the latter class, plaintiffs alleged “the asbestos pipewrap insulation was spread ... by wind[ ] to neighboring properties.”

The trial court held an evidentiary hearing on class certification. Plaintiffs submitted as expert testimony the deposition of an industrial hygienist, Dr. Terry Spear, and an air diffusion report prepared by an environmental engineer, Dr. Kumar Ganesan, who did not testify and had not been deposed. The environmental consultant overseeing the abatement program, Matthew Roberts, and a toxicologist, Dr. Brent Kerger, testified as experts for Unocal. They primarily disputed Dr. Spear's testimony concerning whether, and if so, when and to what extent, asbestos had migrated to the contiguous properties.

The trial court declined to resolve this conflicting expert testimony, explaining that “merits questions are not appropriate for determination at this stage,” and “whether the plaintiffs' experts or defendants' experts are correct ... is for the jury to determine after trial.” Nevertheless, finding that the “opinion of Dr. Spear and the modeling of Dr. Ganesan ... show some reasonable evidence that the contiguous properties are contaminated,” it certified the contiguous property class, as well as the easement class, under C.R.C.P. 23(a) and (b)(3).

The trial court recognized that there were “some questions of fact and law which are not common to all class members,” including “the amount of damages suffered by each class member.” But it did not specifically address Unocal's argument that the alleged need for highly individualized evidence of damages defeated predominance. As to Unocal's similar argument concerning affirmative defenses, the court merely said that, “Potential affirmative defenses are not to be considered during the class certification process as they go to the merits of the case.”

II. Standard of Review

“[W]hether to certify a class action lies within the discretion of the trial court and will not be disturbed unless the decision is clearly erroneous and an abuse of discretion.” Friends of Chamber Music v. City & County of Denver, 696 P.2d 309, 317 (Colo.1985); see also Farmers Ins. Exch. v. Benzing, 206 P.3d 812, 817-18 (Colo.2009). “An abuse of discretion occurs where the trial court's decision is manifestly arbitrary, unreasonable, or unfair, or when the trial court applies the incorrect legal standards.” Medina v. Conseco Annuity Assurance Co., 121 P.3d 345, 347 (Colo.App.2005).

III. The Burden of Proof for Class Certification

Initially, our review is confounded because, on the one hand, the trial court's certification order is unclear regarding the burden of proof that it required plaintiffs to meet before certifying the classes. On the other hand, Colorado law offers little guidance on exactly what that burden of proof should be. Hence, we begin with a brief overview of Colorado class action cases, then address the burden of proof applied by federal courts at the class certification stage, and based on federal precedent conclude that the burden is by a preponderance of the evidence, which we cannot say that the trial court applied.

A. Overview of Class Actions

“The basic purpose of a class action is to eliminate the need for repetitious filing of many separate lawsuits involving the interests of large numbers of persons and common issues of law or fact by providing a fair and economical method for disposing of a multiplicity of claims in one lawsuit.” Mountain States Tel. & Tel. Co. v. Dist. Court, 778 P.2d 667, 671 (Colo.1989).

C.R.C.P. 23 provides, as pertinent here:

(a) Prerequisites to Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if: (1) The class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.

(b) Class Actions Maintainable. Any action may be maintained as a class action if the prerequisites of section (a) are satisfied, and in addition:

....

(3) The court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include:

(A) The interest of members of the class in individually controlling the prosecution or defense of separate actions;

(B) The extent and nature of any litigation concerning the controversy already commenced by or against members of the class;

(C) The desirability or undesirability of concentrating the litigation of the claims in the particular forum;

(D) The difficulties likely to be encountered in the management of class action.

“The class action advocate bears the burden of demonstrating that the claims asserted are cognizable as a class action.” Ammons v. American Family Mut. Ins. Co., 897 P.2d 860, 862 (Colo.App.1995). “The [trial] court's obligation is to determine whether the requirements of C.R.C.P. 23 have been met.” Medina, 121 P.3d at 348. However, the parties have cited no Colorado case, nor have we found one, directly resolving the burden of proof that the class proponent must meet before the class may properly be certified.

Plaintiffs' emphasis on the observation in Benzing, 206 P.3d at 818, that the trial court “must generally accept as true the allegations in support of certification” does not resolve this question for two reasons. First, that decision did not mention the burden of proof beyond noting that it fell to the class proponent. Id. Second, the court later explained that the trial court should inquire into the class proponent's theory of the case to verify that common issues predominate over individual issues. Id. at 820.

B. Burden of Proof

Because “C.R.C.P. 23 is virtually identical to Fed.R.Civ.P. 23,” we look to cases applying the federal rule when interpreting its Colorado counterpart. Goebel v. Colorado Dep't of Institutions, 764 P.2d 785, 794 n. 12 (Colo.1988); see Benzing, 206 P.3d at 818; Medina, 121 P.3d at 348.

No Supreme Court case speaks directly to the burden of proof that the class proponent must meet to sustain certification of the class. General Telephone Co. v. Falcon, 457 U.S. 147, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982), holds that a class action “may only be certified if the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been...