Morrow v. Monfric, Inc.

                                                                                                July 7 2015


                                           DA 14-0464
                                                                                            Case Number: DA 14-0464

                  IN THE SUPREME COURT OF THE STATE OF MONTANA

                                           

JAMES MORROW, TYREL WERMELSKIRCHEN,
DUSTIN HIGGS, and others similarly situated,

              Plaintiffs and Appellants,

         v.

MONFRIC, INC., a California Corporation,

              Defendant and Appellee.



APPEAL FROM:            District Court of the Eleventh Judicial District,
                        In and For the County of Flathead, Cause No. DV-09-1269B
                        Honorable Robert B. Allison, Presiding Judge


COUNSEL OF RECORD:

                For Appellants:

                        Lawrence A. Anderson, Attorney at Law, P.C., Great Falls, Montana

                For Appellee:

                        Angela K. Jacobs, Marcel A. Quinn, Hammer, Jacobs & Quinn, PLLC,
                        Kalispell, Montana



                                                    Submitted on Briefs: April 1, 2015
                                                               Decided: July 7, 2015


Filed:

                        __________________________________________
                                          Clerk
Justice Laurie McKinnon delivered the Opinion of the Court.

¶1    Plaintiffs James Morrow, Tyrel Wermelskirchen, and Dustin Higgs, on behalf of

others similarly situated, appeal the denial of their motion for class certification in the

Eleventh Judicial District Court, Flathead County. We affirm.

¶2    The issue presented for review is whether the District Court abused its discretion

when it denied class certification on the grounds that the proposed class was not

sufficiently numerous.

                 FACTUAL AND PROCEDURAL BACKGROUND

¶3    Plaintiffs are laborers who worked on the construction and rehabilitation of two

multi-family housing projects in Kalispell, known as Glacier Manor and Treasure State

Plaza Apartments. The owner of the projects is Glacier States Associates, which hired

Monfric, Inc., as the general contractor. Monfric hired subcontractors to perform all of

the labor on the projects. Plaintiffs are employees of those subcontractors. The projects

were financed with industrial development bonds issued by the City of Kalispell. A

contractor on such a project is required by Montana law to pay prevailing wages. While

the contract between Glacier States and Monfric included a provision requiring Monfric

to pay prevailing wages, Plaintiffs claim that contracts between Monfric and its

subcontractors did not include that requirement. Plaintiffs claim they were not paid

prevailing wages.

¶4    Plaintiffs filed this wage and hour action and moved for certification of a proposed

class including all laborers, skilled tradesmen, and craftsmen who worked for Monfric or

its subcontractors and who were not paid prevailing wages during the construction and


                                            2
rehabilitation of Glacier Manor and Treasure State Plaza. Plaintiffs identified 28 persons

they claim were underpaid on the projects, seven of whom were named plaintiffs and

class representatives.    Monfric objected to the inclusion of four class members,

contending that they were not laborers. The class members not joined in the action thus

numbered between 17 and 21.

¶5     A hearing was held on the motion for class certification on May 29, 2014. The

District Court asked counsel for Plaintiffs why the remaining 17 to 21 individuals could

not simply be joined as parties. Counsel responded, “I can try to do that. I didn’t have

their names . . . and I don’t have all their addresses.” The District Court observed that the

proposed class was “a relatively small group of . . . local employees, although I suppose

if this work happened . . . prior to 2008 anyway that they’re probably all over in North

Dakota now.” Following the hearing, the District Court issued an order denying the

motion for class certification, concluding that the class was not so numerous that joining

its members as named parties would be impracticable. The District Court also observed

that certification of a class would not result in a more efficient use of judicial resources.

The District Court concluded that because Plaintiffs had failed to demonstrate numerosity

of the proposed class, it did not need to consider other factors.

                               STANDARD OF REVIEW

¶6     We afford district courts the broadest discretion when reviewing a decision on

class certification. Jacobsen v. Allstate Ins. Co., 

, 

,

. The district court “‘is in the best position to consider the most fair and

efficient procedure for conducting any given litigation.’”          Jacobsen, ¶ 25 (quoting


                                              3
Chipman v. Nw. Healthcare Corp., 

, 

, 

).

To the extent that a ruling on class certification is based on a finding of fact, we review

that finding for clear error. Mattson v. Mont. Power Co., 

, 

, 

. When the ruling involves a question of law, our review is de novo.

Mattson, ¶ 17.

                                      DISCUSSION

¶7     Whether the District Court abused its discretion when it denied class certification
       on the grounds that the proposed class was not sufficiently numerous.

¶8     A class action allows representative parties to bring claims on behalf of others

similarly situated, with the aim of conserving the resources of both the court and the

parties by permitting common issues to be litigated at once. Gen. Tel. Co. of the Sw. v.

Falcon, 

, 

 (1982) (citing Califano v. Yamasaki,

, 

 (1979)). As such, a class action is “‘an

exception to the usual rule that litigation is conducted by and on behalf of the individual

named parties only.’” Mattson, ¶ 18 (quoting Califano, 

, 

). M. R. Civ. P. 23 governs the propriety of class actions in Montana and prescribes

four prerequisites, each of which must be demonstrated before the class may be certified:

       (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.

These factors are often referred to as numerosity, commonality, typicality, and adequacy

of representation. Mattson, ¶ 18 (citing Diaz v. Blue Cross & Blue Shield of Mont.,


                                             4


, 

, 

). The party seeking class certification

bears the burden of demonstrating each of these factors. Diaz, ¶ 27. The failure to satisfy

any one of these prerequisites is fatal to class certification. Diaz, ¶ 27. Because M. R.

Civ. P. 23 corresponds to Fed. R. Civ. P. 23, we may look to federal case law for

guidance in interpretation. Chipman, ¶ 43.

¶9     There is no bright-line number of class members that will establish numerosity.

Instead, the numerosity of the class and impracticability of joinder must be determined on

a case by case basis, with consideration given to all of the surrounding circumstances.

Gen. Tel. Co. of the Nw. v. E.E.O.C., 

, 

 (1980);

Odom v. Hazen Transp., Inc., 

 (W.D.N.Y. 2011). The United States

Supreme Court has observed, however, that “as few as 15 employees” would likely “be

too small to meet the numerosity requirement.” Gen. Tel. Co. of the Nw., 

, 

; 1 Alba Conte & Herbert B. Newberg, Newberg on Class Actions

§ 3:5, 247 (4th ed. 2002). Generally, fewer than 21 potential class members is regarded

as inadequate, while more than 40 is likely to be sufficient. Cox v. Am. Cast Iron Pipe

Co., 

, 1553 (11th Cir. 1986); 2 James Wm. Moore, Allan D. Vestal &

Philip B. Kurland, Moore’s Manual: Federal Practice and Procedure § 14A.22 (2014).

¶10    Where a class is small in number, other considerations become more significant in

determining whether joinder is impracticable. Conte & Newberg, supra, §§ 3:3, at 225,

3:6, at 249-53.    Considerations recognized by other courts have included “judicial

economy arising from the avoidance of a multiplicity of actions, geographic dispersion of

class members, financial resources of class members, the ability of claimants to institute


                                             5
individual suits, and requests for prospective injunctive relief which would involve future

class members.” Robidoux v. Celani, 

 (2d. Cir. 1993); Conte &

Newberg, supra, § 3:6, at 250-52. While each of these factors may be relevant to the

question of class certification as a whole, this Court has not yet recognized their

applicability to the narrower issue of numerosity. The party seeking certification bears

the burden of making a factual showing demonstrating both the approximate number of

class members and the impracticability of joinder. Diaz, ¶ 27. Mere speculation or

conclusory allegations are not sufficient. Diaz, ¶ 31 (quoting Polich v. Burlington N.,

Inc., 

 (D. Mont. 1987)); Moore et al., supra, § 14A.22. Plaintiffs

must actually prove that they have satisfied the prerequisites for class certification.

Sangwin v. State, 

, ¶ 15, 

, 

. A court may not

simply take their allegations as true nor presume their compliance with the requirements

of M. R. Civ. P. 23(a). Sangwin, ¶ 15; Mattson, ¶ 15.

¶11    The proposed class in this case includes 24 to 28 persons, seven of whom are

named plaintiffs and class representatives. This is near the number below which class

certification is likely to be considered inappropriate. Gen. Tel. Co. of the Nw., 

, 

; Cox, 784 F.2d at 1553; Conte & Newberg, supra, § 3:5, 247 ;

Moore et al., supra, § 14A.22. The relatively small number of the proposed class is not

dispositive, and indeed, courts may reasonably reach differing conclusions as to the

propriety of certifying a class this size. In such circumstances, we defer to the District

Court’s broad discretion in determining whether a class action is “‘the most fair and




                                            6
efficient procedure for conducting’” the litigation. Jacobsen, ¶ 25 (quoting Chipman,

¶ 17). We cannot conclude that the District Court abused that discretion here.

¶12    When a class is relatively small, however, a court must also examine other factors

and circumstances that may make joinder impracticable. Gen. Tel. Co. of the Nw.,

, 

; Odom, 

. The additional factors to

be considered are flexible, and the impracticability of joinder must be determined on a

case by case basis, with consideration given to all of the surrounding circumstances.

Odom, 

. In this case, Plaintiffs raise four such circumstances: the

geographic dispersion of proposed class members; the limited financial resources of

proposed class members; the impracticability of litigating their “relatively small” claims;

and the interests of judicial economy.1 The consideration of these factors remains within

the broad discretion of the district court. Jacobsen, ¶ 25. The exercise of that discretion

is nevertheless bound by the applicable law, and must avoid arbitrary or unreasonable

results. Diaz v. State, 

, 

, 

; Peterson v. St.


1
  The concurring opinion suggests that our discussion of these factors, and our observation that
Plaintiffs presented no proof to support their arguments, constitutes unnecessary dicta. Obiter
dictum “‘is a remark made or opinion expressed by a judge, in his decision upon a cause, “by the
way”—that is, incidentally or collaterally, and not directly upon the question before the
court . . . .’” Black’s Law Dictionary 1240 (Bryan A. Garner ed., 10th ed. 2014) (quoting
William M. Lile et al., Brief Making and the Use of Law Books 304 (Roger W. Cooley & Charles
Lesley Ames eds., 3d ed. 1914)). The arguments we address here were presented to the District
Court, considered at the hearing on class certification, and are again raised in the parties’ briefs
on appeal. Therefore, they cannot reasonably be dismissed as incidental or collateral to the
decision of the District Court, or indeed, resolution of the numerosity issue on appeal. It is
well-established that numerosity involves consideration of more than the simple number of
potential class members. See Conte & Newberg, supra, §§ 3:3, at 225, 3:6, at 249-53. Where
the number of potential class members is “on the fence,” other factors that would make joinder
impracticable may be decisive. The discussion of those factors is necessary in a case such as this
and reflects the flexible nature of the class-certification analysis.


                                                 7
Paul Fire & Marine Ins. Co., 

, 

, 

. Thus,

our discussion is not resolved by reference to the standard of review alone, and we offer

guidance on the district court’s exercise of its discretion where appropriate.          See

Maloney v. Home & Inv. Ctr., Inc., 

, 

, 

.

¶13    We first address the alleged geographic dispersion of the proposed class members.

If the proposed class members are not found within the same jurisdiction, the

impracticability of joinder is increased. Monterrubio v. Best Buy Stores, L.P., 

 (E.D. Cal. 2013) (citing Riordan v. Smith Barney, 

 (N.D. Ill.

1986)). Plaintiffs argue that there is no evidence the proposed class members still reside

in the Kalispell area, and ask the Court to take judicial notice of the fact that many

Montana laborers work in the oil fields of North Dakota. Plaintiffs have offered no

evidence suggesting that the laborers who worked on the Monfric projects have left the

Kalispell area. Indeed, at the hearing on Plaintiffs’ motion for class certification, it was

made clear that counsel had not attempted to locate the remaining proposed class

members, and the idea that they may have left for North Dakota was based entirely on an

off-the-cuff suggestion by the District Court.     Plaintiffs have not produced facts in

support of their argument that the geographical dispersion of the proposed class members

makes their joinder in a single action impracticable. The District Court did not abuse its

discretion when it concluded that joinder was not impracticable because the proposed

class members were in the same geographic area.

¶14    Plaintiffs point to their allegedly limited financial means, the “relatively small”

size of their claims, and the interests of judicial economy to demonstrate that individual


                                             8
suits would be impracticable. The question we address with respect to numerosity of the

class, however, is not whether individual suits would be impracticable, but whether

joinder of the proposed class members in a single suit would be impracticable. M. R.

Civ. P. 23(a)(1). Indeed, although this prerequisite is often conveniently referred to as

“numerosity,” it is more accurately termed “impracticability of joinder.” See Conte &

Newberg, supra, § 3:6, at 250. Plaintiffs rely on Deposit Guaranty National Bank v.

Roper, 

, 

 (1980), and subsequent cases for the

proposition that “[w]here it is not economically feasible to obtain relief within the

traditional framework of a multiplicity of small individual suits for damages, aggrieved

persons may be without any effective redress unless they may employ the class-action

device.” This observation was not specific to the element of numerosity, but described

the benefits of class-action litigation as a whole. Roper, 

, 

. We agree that without the availability of a class action, aggrieved persons may be

without any effective redress; however, aggrieved persons who are able to join their

claims in a single action are not without effective redress, despite their small claims or

limited resources. The requirement of numerosity under M. R. Civ. P. 23(a)(1) does not

require a party to demonstrate the benefits of a single action; instead, it simply asks

whether, under the circumstances of the particular case, joinder is a practicable

alternative means of obtaining those benefits.     The arguments raised by Plaintiffs,

demonstrating the impracticability of individual actions, are of little relevance in

demonstrating the impracticability of joinder.




                                            9
¶15    The arguments raised by Plaintiffs may be relevant to other aspects of the

class-certification inquiry.    For example, M. R. Civ. P. 23(b)(1) asks whether

adjudication of individual claims would create a risk of inconsistent results or lead to

outcomes that may substantially impair the ability of other proposed class members to

protect their interests. M. R. Civ. P. 23(b)(3) asks whether “a class action is superior to

other available methods for fairly and efficiently adjudicating the controversy.” A court

does not reach the matters raised by M. R. Civ. P. 23(b), however, until the prerequisites

of 23(a) have been satisfied. Diaz, ¶ 27.

¶16    Because the District Court based its analysis of numerosity in part on these

considerations, and because they have been recognized by other courts in the context of a

numerosity analysis, see Robidoux, 

; Conte & Newberg, supra, § 3:6, at

250-52, we address them here. Plaintiffs first assert that the proposed class members are

laborers of limited financial means, and therefore unable to prosecute their individual

claims. The only evidence in the record pertaining to the financial means of the proposed

class members are documents establishing the prevailing wages for laborers in 2008, as

calculated by the Montana Department of Labor, and incomplete information regarding

the wages paid by subcontractors on the Monfric projects.            There is no evidence

establishing the current income or financial resources of the proposed class members.

Having raised the argument that limitations on their financial resources prevent them

from litigating their claims outside of a class action, Plaintiffs have nonetheless failed to

offer facts supporting their argument.      The District Court did not abuse its broad

discretion when it determined class certification was not appropriate.


                                             10
¶17    Plaintiffs also claim that the “relatively small” size of their claims makes

individual litigation impracticable. The small size of individual claims may weigh in

favor of class certification. For example, in a lawsuit where claims averaged $100 per

plaintiff, the United States Supreme Court concluded that “most of the plaintiffs would

have no realistic day in court if a class action were not available.” Phillips Petroleum

Co. v. Shutts, 

, 

 (1985). Based on an analysis

provided by Plaintiffs, their individual claims range from approximately $300 to $3,800.

Though the value of many of the claims is yet to be determined, the average claim

appears likely to be in the area of $1,500. It is not unusual in Montana courts for parties

to seek amounts comparable to Plaintiffs’ claims, particularly where, as here, they also

request attorney’s fees. See, e.g., McDunn v. Arnold, 

, 

, 

 (affirming district court award of $1,444.66 in damages and $20,697

for attorney’s fees and costs). There is no bright-line value of claims that will make class

certification appropriate, just as there is no bright-line number of prospective class

members that will do so. See Gen. Tel. Co. of the Nw., 

, 100 S. Ct. at

1706. We allow district courts broad discretion in determining whether class certification

is appropriate, Jacobsen, ¶ 25, and the District Court did not abuse its discretion here.

¶18    Plaintiffs also argue that class-action certification would promote judicial

economy by resolving their claims in one action, rather than several. The District Court

concluded that the eventual necessity of determining the type of labor performed by each

individual, the number of hours worked by each individual, the prevailing wage for that

type of labor, and the actual wage paid to that individual would outweigh the efficiency


                                             11
benefits of a class action. We defer to the discretion of the District Court in determining

“‘the most fair and efficient procedure for conducting any given litigation.’” Jacobsen,

¶ 25 (quoting Chipman, ¶ 17). We also observe, once again, that while a class action may

be more efficient than several individual actions, it is not more efficient than joinder of

the parties where practicable.       Here, it was not demonstrated that joinder was

impracticable. Instead, it was established that counsel had made no efforts to join the

remaining proposed class members in the action. Consequently, the District Court did

not abuse its discretion when it determined that joinder was not impracticable and a class

action was not the most efficient means of conducting the present litigation.

                                     CONCLUSION

¶19    The District Court did not abuse its discretion when it concluded that Plaintiffs

had failed to establish, as required by M. R. Civ. P. 23(a)(1), that their proposed class was

so numerous as to make joinder of its remaining members in a single action

impracticable. Plaintiffs’ failure to demonstrate this prerequisite was fatal to their motion

for class certification.

¶20    Affirmed.

                                                  /S/ LAURIE McKINNON

We Concur:

/S/ BETH BAKER
/S/ JIM RICE




                                             12
Justice Patricia O. Cotter, concurring.

¶21    I concur in the outcome of the Court’s Opinion. However, I do have a concern

with the Court’s extensive dissection of the evidence presented by the plaintiffs in

support of numerosity.      As the Court notes at ¶ 9, questions of numerosity and

impracticability of joinder must be determined on a case-by-case basis.         The Court

nonetheless appears to set a standard for what constitutes a sufficient level of proof with

respect to such factors as geographic dispersion and the financial resources of the

individual plaintiffs.   Because in future cases, these factors will vary widely in

application, relevance and weight depending on the particular facts before the reviewing

court, I believe the Court’s pronouncements regarding the proof required with respect to

such numerosity considerations to be unnecessary dicta.

¶22    This being said, I concur in the Court’s conclusion that the District Court did not

abuse its discretion in denying the plaintiffs’ motion for class certification. I reach this

conclusion because, as the cases cited by the Court illustrate, the number of potential

class members at issue here places this case on the numerosity “fence.” Had the District

Court concluded that numerosity was established, I would have affirmed that

determination as being within the court’s discretion, as it is in the best position to

determine the most efficient procedure for resolving the plaintiffs’ claims in the case

before it. The converse must also be true. In light of the gray area in which a class of

this size resides, I cannot conclude that the District Court abused its broad discretion

when it concluded that numerosity was not met under the circumstances presented. I

therefore concur in the decision of the Court.


                                            13
                                                   /S/ PATRICIA COTTER



Chief Justice Mike McGrath and Justice James Jeremiah Shea join in the concurrence of

Justice Patricia O. Cotter.



                                                   /S/ MIKE McGRATH
                                                   /S/ JAMES JEREMIAH SHEA

Justice Michael E Wheat, dissenting.

¶23    I respectfully dissent from the majority’s holding. I understand the importance of

giving broad discretion to district courts in determining whether to certify a class.

However, in this case I would remand with instructions to the District Court to grant the

class certification, because, in close call cases like this one, the equitable balance ought to

tip in favor of the injured party.

¶24    As noted by the majority, the number of potential class members in this case falls

squarely in the gray area for satisfying the numerosity requirement for class certification.

However, in the interest of justice, and given the impracticability of each plaintiff

bringing an individual suit for a relatively small amount of damages, I would allow the

plaintiffs to seek financial redress through the mechanism of the class action lawsuit.

¶25    Plaintiffs argue that, given the relatively small damages claimed by each

individual, it would be impractical for each claimant to bring an individual suit. The

majority explains in ¶ 10 that other courts have considered the impracticality of claimants



                                              14
bringing individual suits when determining whether class certification is appropriate.

The majority, however, refused to adopt the impracticality of individual suits as a

consideration in class certification.     Rather, the majority focuses solely on the

impracticality of joinder under M. R. Civ. P. 23(a)(1). While I acknowledge that the

question of whether joinder is impractical is a statutorily required consideration in

determining the appropriateness of class certification, I would also require courts to

consider the difficulty of individual plaintiffs pressing individual suits to recover small

sums.

¶26     We have explained that one of the benefits of class certification is to promote

fairness and judicial efficiency by consolidating like causes into a single action. Mattson

v. Mont. Power Co., 

, 

, 

. However, another

important policy consideration is that class action suits provide an avenue for plaintiffs

whose individual damages may be insufficient to justify bringing a solo claim to band

together and act as private attorneys general in enforcing their legal rights. Roper, 

. Without the availability of a class action, many disadvantaged plaintiffs

would be left without effective redress for their injuries. Roper, 

.

¶27     The majority essentially dismisses this second policy consideration, stating that,

through joinder, the plaintiffs would have an effective redress. This pronouncement

ignores the practical issues inherent in such a procedural process. Whereas a class-action

lawsuit allows qualifying plaintiffs to simply sign on as a member of the class, joinder

requires each plaintiff to file an individual suit. As a practical matter, it would be

difficult for many individuals seeking relatively small damages to find counsel willing to


                                            15
represent them for such small sums. On the other hand, the increased financial incentives

available to counsel for a class action should make finding competent counsel

significantly easier.

¶28    The majority focuses on whether joinder is impractical in an abstract sense, but

does not consider the impracticability of joinder for the very people who would be joined,

the plaintiffs. While I would not take the decision to certify a class out of the district

court’s discretion, I would urge district courts to apply a liberal interpretation of the

requirements for class certification, keeping in mind the inherent difficulties associated

with an individual seeking a small amount of damages from a large corporation, such as

the difficulty in finding legal counsel or, if counsel is unavailable, navigating the legal

process as a pro se litigant. Article II, section 16 of the Montana Constitution guarantees

citizens a right of access to the courts without denial or delay, yet access to justice in

Montana is at a critical low.        See, Montana Supreme Court Access to Justice

Commission, The Justice Gap in Montana: As Vast as Big Sky Country (Carmody and

Associates, July 2014). Today’s decision does nothing to alleviate that situation.

¶29    I respectfully dissent.


                                                 /S/ MICHAEL E WHEAT




                                            16