Dragon v. Vanguard Industries, Inc.

• Decision Date: 14 May 2004
• Docket Number: No. 90,039,90,039
• Citation: 277 Kan. 776,89 P.3d 908
• Parties: AUDIE DRAGON and JOHN HOWARD, For Themselves and All Others Similarly Situated, Appellees, v. VANGUARD INDUSTRIES, INC., VANGUARD PIPING SYSTEMS, INC., and VANGUARD PLASTICS, INC., Appellants.
• Court: Kansas Supreme Court

277 Kan. 776

89 P.3d 908

AUDIE DRAGON and JOHN HOWARD, For Themselves and All Others Similarly Situated, Appellees, v. VANGUARD INDUSTRIES, INC., VANGUARD PIPING SYSTEMS, INC., and VANGUARD PLASTICS, INC., Appellants.

No. 90,039

Supreme Court of Kansas

Opinion filed May 14, 2004.

Casey R. Law, of Bremyer & Wise, L.L.C., of McPherson, argued the cause and was on the briefs for the appellants Vanguard Industries, Inc. and Vanguard Piping Systems, Inc.

William H. Seiler, Jr., of McPherson, argued the cause and was on the briefs for the appellant Vanguard Plastics, Inc.

Rex A. Sharp, of Gunderson, Sharp & Walke, P.C., of Prairie Village, argued the cause, and Isaac L. Diel and Todd R. Seelman, of Diel & Seelman, P.C., of Prairie Village, and David B. Cohen, of Scarsdale, New York, were with him on the brief for the appellees. The opinion was delivered by

LUCKERT, J.

Plaintiffs Audie Dragon and John Howard are Georgia residents who filed suit on behalf of themselves and a nationwide class of property owners whose property contains polybutylene pipe manufactured from Mitsui resin. Plaintiffs allege this defective product, known as M pipe, was designed, manufactured, advertised, or sold by defendants.

The district court granted plaintiffs' motion for nationwide class certification and defined the class as: "All persons and entities that own real property or structures and/or improvements to real property in the United States in which there was installed between January 1, 1990, and the present Vanguard polybutylene plumbing containing resin manufactured by Mitsui Plastics, Inc." After denying a motion for reconsideration, the trial court amended its prior order to include the findings required before a request for interlocutory appeal may be made. See K.S.A. 60-2102(b). The Court of Appeals granted the defendants' application for permission to take an interlocutory appeal. This court denied plaintiffs' petition for review of that decision and transferred the appeal to this court on the court's own motion pursuant to K.S.A. 20-3018(c).

The defendants allege that the district court abused its discretion in finding that the prerequisites established by K.S.A. 2003 Supp. 60-223 were satisfied. More specifically, defendants allege that the trial court erred in not fully considering disputes regarding facts relevant to the statutory prerequisites and choice-of-law problems. The defendants also allege that the district court erred in relying on non-Kansas cases where other courts had certified class actions in which plaintiffs sought damages from manufacturers of defective polybutylene pipe made with a resin other than the Mitsui resin which is alleged to be a component of the defective product at issue in this case.

We find that the trial court failed to fully determine factual issues relating to the prerequisites for class certification and to rigorously analyze the requirements of commonality, typicality, predominance, and superiority. We reverse and remand for further proceedings on the issue of whether the requested class should be certified. K.S.A. 2003 Supp. 60-223 governs class actions. This provision is patterned after Fed.R.Civ.Proc. 23, although it is not identical, and this court has traditionally followed the federal courts' interpretation of the federal rule. Steele v. Security Benefit Life Ins. Co., 226 Kan. 631, 636, 602 P.2d 1305 (1979).

The federal rule was amended in 2003, and its Kansas counterpart in 2004, while this case was on appeal. The amendments to K.S.A. 2003 Supp. 60-223 are not yet effective (2004 House Bill No. 2764); therefore, the pre-amendment version of the statute governs this analysis.

K.S.A. 2003 Supp. 60-223(a), like its federal counterpart, imposes four requirements applicable to all class actions:

"(a) Prerequisites to a 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." K.S.A. 2003 Supp. 60-223(a).

In abbreviated form, these threshold elements require: (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation.

In addition to satisfying these four prerequisites, parties seeking class certification must show that the action is maintainable under K.S.A. 2003 Supp. 60-223(b)(1), (2), or (3). Plaintiffs in this case seek certification under K.S.A. 2003 Supp. 60-223(b)(3). This provision adds two additional prerequisites: common questions of law or fact must "predominate over any questions affecting only individual members" and class resolution must be "superior to other available methods for the fair and efficient adjudication of the controversy." K.S.A. 2003 Supp. 60-223(b)(3) includes a list of factors pertinent to a court's examination of the predominance and superiority requirements:

"(A) The interest of members of the class in prosecuting or defending separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against members of the class; (C) the appropriate place for maintaining, and the procedural measures which may be needed in conducting, a class action." K.S.A. 2003 Supp. 60-223(b)(3).

The trial court made specific findings that each of the prerequisites of K.S.A. 2003 Supp. 60-223(a) and (b)(3) had been met. Regarding the four prerequisites of K.S.A. 2003 Supp. 60-223(a), defendants focus upon the trial court's findings that commonality and typicality were met. Defendants also challenge the trial court's findings that the prerequisites of K.S.A. 2003 Supp. 60-223(b)(3), predominance and superiority, were met. Many of the prerequisites overlap, as do defendants' arguments. Intertwined with all of the defendants' arguments is the contention that the trial court erred in failing to fully consider and resolve factual questions regarding class issues before the court certified the class.

Standard of Review

"Trial judges are afforded substantial discretion in determining whether a class should be certified." Bigs v. City of Wichita, 271 Kan. 455, 477, 23 P.3d 855 (2001). As we noted in Saucedo v. Winger, 252 Kan. 718, 730-32, 850 P.2d 908 (1993), "`the amount and degree of judicial discretion will vary depending on the character of the question presented for determination.'" 252 Kan. at 731 (quoting Wallach, Judicial Discretion: How Much, in Judicial Discretion 12 [Smithburn 1991]). In general, when a discretionary decision is made "within the legal standards and takes the proper factors into account in the proper way, the [trial court's] decision is protected even if not wise." Davis, Standards of Review: Judicial Review of Discretionary Decisionmaking, 2 J. App. Prac. & Process 47, 59 (2000). However, "[a]buse is found when the trial court has gone outside the framework of legal standards or statutory limitations, or when it fails to properly consider the factors on that issue given by the higher courts to guide the discretionary determination." 2 J. App. Prac. & Process at 59. See Friendly, Indiscretion about Discretion, 31 Emory L.J. 747, 763 (1982); Rosenberg, Judicial Discretion of the Trial Court, Viewed from Above, 22 Syracuse L. Rev. 635 (1971); Schroeder, Appellate Justice Today: Fairness or Formulas, Wis. L. Rev. 9, 24 (1994). Applying these principles in the context of the discretionary decision to certify a class, the United States Supreme Court has explained "this discretion is not unlimited, and indeed is bounded by the relevant provisions of the ... Rules." Gulf Oil Co. v. Bernard, 452 U.S. 89, 100, 68 L. Ed. 2d 693, 101 S. Ct. 2193 (1981). In another case, the Court explained its reversal of the discretionary decision: "We do not, of course, judge the propriety of a class certification by hindsight. The District Court's error in this case... is the failure to evaluate carefully the legitimacy of the named plaintiff's plea ...." A class should be certified only "after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied." (Emphasis added.) General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 160-61, 72 L. Ed. 2d 740, 102 S. Ct. 2364 (1982).

While the trial court has substantial discretion in determining whether a class should be certified, the provisions of K.S.A. 2003 Supp. 60-223 must be applied and rigorously analyzed.

Did the Trial Court Abuse its Discretion by Not Weighing Evidence?

The defendants argue that the trial court abused its discretion by not resolving factual issues which defendants placed in dispute by filing affidavits and portions of the plaintiffs' depositions. This evidence related to the number of states where the product was sold, difficulties in identifying the product, and variances in the factors contributing to product failure.

The plaintiffs contend the trial court should make the certification decision solely on the basis of the allegations contained in the pleadings. In support of this argument plaintiffs cite Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 40 L. Ed. 2d 732, 94 S. Ct. 2140 (1974), in which the United States Supreme Court stated: "We find nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action." 417 U.S. at 177. Plaintiffs urge us to apply this conclusion broadly and conclude that the trial court must accept the class allegations as true and not inquire into the merits of the class facts.

This argument has been rejected by federal courts. In Falcon, the United States Supreme Court explained that in order to rigorously analyze the ...