ANDERSON CONTRACTING v. DSM COPOLYMERS

• Decision Date: 18 December 2009
• Docket Number: No. 07-0722.,07-0722.
• Citation: 776 N.W.2d 846
• Parties: ANDERSON CONTRACTING, INC., Appellee, v. DSM COPOLYMERS, INC., Appellant, Bayer AG; Bayer Polymers, L.L.C. n/k/a Bayer MaterialScience, L.L.C.; Bayer Corporation; Crompton Corporation, Uniroyal Chemical Corporation, Inc., n/k/a Crompton Manufacturing Company, Inc., The Dow Chemical Company; E.I. Dupont de Nemours & Company; Dupont Dow Elastomers, L.L.C.; DSM Elastomers Europe B.V.; and Exxon Mobil Chemical Corporation, d/b/a Exxon Mobil, Inc., Defendants.
• Court: Iowa Supreme Court

776 N.W.2d 846

ANDERSON CONTRACTING, INC., Appellee, v. DSM COPOLYMERS, INC., Appellant Bayer AG; Bayer Polymers, L.L.C. n/k/a Bayer MaterialScience, L.L.C.; Bayer Corporation; Crompton Corporation, Uniroyal Chemical Corporation, Inc., n/k/a Crompton Manufacturing Company, Inc., The Dow Chemical Company; E.I. Dupont de Nemours & Company; Dupont Dow Elastomers, L.L.C.; DSM Elastomers Europe B.V.; and Exxon Mobil Chemical Corporation, d/b/a Exxon Mobil, Inc., Defendants.

No. 07-0722.

Supreme Court of Iowa.

December 18, 2009.

Edward W. Remsburg of Ahlers & Cooney, P.C., Des Moines, Andrew S. Marovitz and Britt M. Miller of Mayer Brown LLP, Chicago, IL, and Richard J. Favretto, Gary A. Winters, and Andrew A. Nicely of Mayer Brown LLP, Washington, D.C., for appellant.

Joseph R. Gunderson and Jason D. Walke of Gunderson, Sharp & Walke, LLP, Des Moines, Rex A. Sharp of Gunderson, Sharp & Walke, LLP, Prairie Village, KS, and Isaac L. Diel of Sharp McQueen, PA, Overland Park, KS, for appellee.

HECHT, Justice.

A manufacturer appeals from the district court's order certifying a class in an action alleging price fixing of the market for ethylene propylene diene monomer (EPDM). We affirm.

I. Factual and Procedural Background.

Anderson Contracting, Inc. (Anderson), an Iowa corporation that performs roofing work, brought suit against various manufacturers, marketers, and distributors of EPDM¹ (EPDM manufacturers) for violations of the Iowa Competition Law.

EPDM is a synthetic rubber composed of ethylene, propylene, and diene monomers. EPDM is produced in various grades which exhibit different properties and is then used to make various products. It is most heavily used in the automobile industry to make weatherstripping, seals, belts, hoses, and tires. It is also used in roofing compounds, electrical insulation, garden hoses, golf club grips, and in gaskets and seals for many household appliances.

Anderson brought suit alleging the EPDM manufacturers conspired to restrain trade and fix the price of EPDM in violation of the Iowa antitrust laws. Anderson claims it purchased various items containing EPDM for a higher price than it would have had the conspiracy not existed and seeks to represent all end purchasers of products containing EPDM in the state of Iowa.

Anderson moved for class certification in June 2006. A contested hearing was held on December 1, 2006, and the district court granted class certification on March 16, 2007. The district court certified the class to include "all persons who indirectly purchased Defendants' EPDM in the State of Iowa, other than for resale, from January 1994 through December 2002."

The EPDM manufacturers appealed, contending the district court abused its discretion in certifying the class.

II. Scope of Review.

We review a district court's decision to grant a request to certify a class action for an abuse of discretion. Luttenegger v. Conseco Fin. Servicing Corp., 671 N.W.2d 425, 436 (Iowa 2003). "Our class-action rules are remedial in nature and should be liberally construed to favor the maintenance of class actions." Comes v. Microsoft Corp., 696 N.W.2d 318, 320 (Iowa 2005) (Comes II). When a district court's grounds for certification are clearly unreasonable, an abuse of discretion can be found. Varner v. Schwan's Sales Enters., Inc., 433 N.W.2d 304, 305 (Iowa 1988). However, if the district court "weighed and considered the factors and came to a reasoned conclusion as to whether a class action should be permitted for a fair adjudication of the controversy," we will affirm. Luttenegger, 671 N.W.2d at 437; accord Comes II, 696 N.W.2d at 321.

III. Discussion.

When determining whether to certify a class action, a district court is guided by Iowa Rules of Civil Procedure 1.261-1.263. "As soon as practicable after the commencement of a class action the court shall hold a hearing" and determine whether the action should proceed as a class action. Iowa R. Civ. P. 1.262(1). The court may certify a class if it finds three requirements are established: (1) the requirements of rule 1.261 are met, (2) a class action would provide for the fair and efficient adjudication of the case, and (3) the representative parties will protect the interests of the class. Iowa R. Civ. P. 1.262(2). The requirements of rule 1.261 are established if the class is either so numerous or constituted in such a way that joinder is impracticable and there is a question of law or fact common to the class. Iowa R. Civ. P. 1.261. To determine whether a class action will provide a fair and efficient adjudication of the case, rule 1.263 provides "the court shall consider and give appropriate weight to thirteen listed factors and other relevant factors." Iowa R. Civ. P. 1.263(1).

We have recognized that the language of rule 1.263 indicates the district court has "considerable discretion" in weighing the factors. Vignaroli v. Blue Cross of Iowa, 360 N.W.2d 741, 744 (Iowa 1985). The court will determine what weight, if any, to give to each of the listed factors. Vos v. Farm Bureau Life Ins. Co., 667 N.W.2d 36, 45 (Iowa 2003); Martin v. Amana Refrigeration, Inc., 435 N.W.2d 364, 369 (Iowa 1989). "Whether or not we agree with the decision arrived at by the trial court is not the issue. The issue is one of abuse of discretion." Martin, 435 N.W.2d at 369.

The district court issued a twenty-two page ruling examining each requirement for class certification, as well as each of the thirteen factors relevant to the determination of whether a class action is a fair and efficient method of litigation in this case. The district court described its decision to certify the class as a "close call" and acknowledged several concerns. When considering rule 1.263(1)(e), the court noted the potential difficulties confronting indirect purchasers when proving injury and damages, but ultimately concluded common questions predominate over individual ones and weigh in favor of certifying the class. When considering rule 1.263(1)(k), the court acknowledged the broad definition of the class coupled with the potential difficulty of identifying specific products containing the defendants' EPDM posed significant manageability problems which could prove insurmountable. Although the court did determine this factor weighed against certification, the court concluded that the requirements of rule 1.262 were met and certified the class. The district court noted it has the authority to amend the certification order at a later time or even to decertify the class if the circumstances later render such action appropriate. See Iowa R. Civ. P. 1.265; Vos, 667 N.W.2d at 46.

Several of the EPDM manufacturers appealed,² contending the district court abused its discretion in (1) certifying the class action despite its recognition of the potential manageability problems and (2) concluding common issues predominate over individual issues.

A. Manageability. The EPDM manufacturers allege the district court correctly determined the manageability factor weighs against class certification as a fair and efficient means to litigate the case, but argue the court abused its discretion by certifying the class. The manufacturers argue that because EPDM has a similar appearance to natural rubber, plastic, and vinyl, and because of the wide range of products that use EPDM and these other substances, it will be difficult, if not impossible, for potential class members to establish they are members of the class. Further, the manufacturers contend, even if potential class members can determine they purchased a product containing EPDM during the relevant time period, it will be even more difficult to determine if the EPDM was manufactured by one of the defendants. They also contend the definition of the class is ambiguous and problematic because the limitation to people who have purchased EPDM "other than for resale" is confusing and unclear. The parties agree that because of the prevalence of EPDM products, the class could potentially include every resident of Iowa during the established time frame. Thus, the EPDM manufacturers contend, the identification of class members will require hundreds of thousands of "minitrials" for each putative class member to establish his or her membership in the class.

The distribution channels of EPDM are complicated and extensive due to the nature of the substance. EPDM is extremely versatile. Because it is manufactured in various grades with different qualities, its uses vary widely, and it tends to be combined with other components to create other products. Often, these products are sold and, in turn, combined with or implemented into other products and again resold. (For example, consider the case of EPDM that is sold to a purchaser who combines it with other products to create a rubber hose which is then sold to a car manufacturer to be used in the assembly of motor vehicles.) The end product will not have "EPDM" or the original manufacturer's identity stamped on it, and indeed the EPDM-containing component part itself may be well-concealed within the final product (an appliance or automobile). Thus, the EPDM manufacturers contend identifying the members of the class will require a mini-trial for each potential class member to establish that he has indeed purchased not only a product containing EPDM and not another substance, but has purchased a product containing the defendants' EPDM.

Anderson does not dispute that the distribution channels are complicated and widely varied. It contends, however, that because it will prove class-wide injury and damages in the aggregate during trial, there will be no need for mini-trials establishing that each individual class member purchased an EPDM product for an inflated price. Assuming, only for argument's sake, that Anderson is successful at trial and proves one or more of the defendants violated the Iowa Competition Law, Iowa Code chapter 553, any potential mini-trials establishing class...