Ritter, Laber and Associates v. Koch Oil, 20000224.

• Decision Date: 20 March 2001
• Docket Number: No. 20000224.,20000224.
• Citation: 2001 ND 56,623 N.W.2d 424
• Parties: RITTER, LABER AND ASSOCIATES, INC., Elizabeth Cantarine, Personal Representative of the Estate of Eugene A. Burdick, and Russell L. Kiker, Plaintiffs and Appellees, v. KOCH OIL, INC., A DIVISION OF KOCH INDUSTRIES, INC., and Charles Meduna, Defendants and Appellants.
• Court: North Dakota Supreme Court

623 N.W.2d 424

2001 ND 56

RITTER, LABER AND ASSOCIATES, INC., Elizabeth Cantarine, Personal Representative of the Estate of Eugene A. Burdick, and Russell L. Kiker, Plaintiffs and Appellees, v. KOCH OIL, INC., A DIVISION OF KOCH INDUSTRIES, INC., and Charles Meduna, Defendants and Appellants.

No. 20000224.

Supreme Court of North Dakota.

March 20, 2001.

Ronald H. McLean (argued) and Jane L. Dynes, Serkland Law Firm, Fargo, ND, for plaintiffs and appellees.

Marvin L. Kaiser (appeared), Kaiser Law Firm, Williston, ND, for plaintiffs and appellees.

Gary J. Gordon (appeared) and James J. Fetterly, Rider Bennett Egan & Arundel, Minneapolis, MN, for plaintiffs and appellees.

Brad D. Brian (argued), Ronald K. Meyer (appeared), Munger, Tolles & Olson, LLP, Los Angeles, CA, for defendants and appellants.

John W. Morrison (appeared) and Shane A. Hanson (appeared), Fleck, Mather & Strutz, Ltd., Bismarck, ND, for defendants and appellants.

James M. Armstrong (appeared), Foulston & Siefkin, Wichita, KS, for defendants and appellants.

J. Kory Parkhurst (appeared), Koch Industries, Inc., Wichita, KS, for defendants and appellants. NEUMANN, Justice.

[¶ 1] Koch Oil and Charles Meduna, Koch's North Dakota assistant chief gauger, ("Koch") appealed from an order certifying a class action under N.D.R.Civ.P. 23, brought by a class of persons represented by Ritter, Laber and Associates, Eugene Burdick, and Russell Kiker ("Ritter"). We affirm.

I

[¶ 2] The class consists of approximately 6,000 unidentified owners of royalty and leasehold interests in approximately 2,300 oil wells in North Dakota. Koch purchased or sold oil from the wells between January 1, 1975 and December 1988, and measured the oil by hand gauging. The class representatives allege Koch acquired more oil than it paid for because of inaccurate measurements, and they seek additional revenues based on their proportionate ownership of the oil. They seek an accounting and money damages for conversion and unjust enrichment.

[¶ 3] In Ritter, Laber & Assocs., Inc. v. Koch Oil, Inc., 2000 ND 15, ¶ 31, 605 N.W.2d 153, we reversed a previous certification of the class representatives' lawsuit as a class action under N.D.R.Civ.P. 23. We concluded the trial court did not abuse its discretion in analyzing the factors for certification under N.D.R.Civ.P. 23(c)(1)(C), (E), (G), and (K), but the court misapplied the law in its analyses of the "joint or common interest" factor under N.D.R.Civ.P. 23(c)(1)(A), and the "incompatible standards" factor under N.D.R.Civ.P. 23(c)(1)(B). Koch, at ¶¶ 13, 16. We remanded for a redetermination of the class certification based on a correct application of the law under N.D.R.Civ.P. 23(c)(1). Koch, at ¶ 31.

[¶ 4] On remand, the trial court again certified the lawsuit as a class action, finding a class action provided a method for the "fair and efficient adjudication of the controversy" under N.D.R.Civ.P. 23(c)(1).

II

[¶ 5] We have construed N.D.R.Civ.P. 23 to provide an open and receptive attitude toward class actions. Koch, 2000 ND 15, ¶ 3, 605 N.W.2d 153; Werlinger v. Champion Healthcare Corp., 1999 ND 173, ¶ 7, 598 N.W.2d 820; Peterson v. Dougherty Dawkins, Inc., 1998 ND 159, ¶ 10, 583 N.W.2d 626. A trial court has broad discretion in deciding whether to certify a class action under N.D.R.Civ.P. 23. Koch, at ¶ 4; Werlinger, at ¶ 6. On appeal, we will not overturn a trial court's decision to certify a class action unless the court abused its discretion. Koch, at ¶ 4; Werlinger, at ¶ 6. A trial court abuses its discretion if it acts in an unreasonable, arbitrary, or unconscionable manner. Koch, at ¶ 4; Werlinger, at ¶ 6. A trial court also abuses its discretion when its decision is not the product of a rational mental process leading to a reasoned decision, or when it misinterprets or misapplies the law. Koch, at ¶ 4.

[¶ 6] To certify a class action under N.D.R.Civ.P. 23, four requirements must be met:

(1) The class is so numerous or so constituted that joinder of all members, whether or not otherwise required or permitted, is impracticable;

(2) There is a question of law or fact common to the class;

(3) A class action should be permitted for the fair and efficient adjudication of the controversy; and

(4) The representative parties fairly and adequately will protect the interests of the class.

Koch, 2000 ND 15, ¶ 5, 605 N.W.2d 153, quoting Werlinger, 1999 ND 173, ¶ 8, 598 N.W.2d 820.

[¶ 7] In this case, the certification dispute involves whether a class action should be permitted for the fair and efficient adjudication of the controversy. Rule 23(c)(1), N.D.R.Civ.P., lists thirteen factors for trial courts to consider in determining whether a class action satisfies the requirements for the fair and efficient adjudication of the controversy. Koch, 2000 ND 15, ¶ 10,605 N.W.2d 153. A trial court must weigh those factors, and no one factor predominates over the others. Id.

III

[¶ 8] Koch argues the trial court erred in certifying this class action because the court misinterpreted and misapplied the law in deciding the requirements of N.D.R.Civ.P. 23(c)(1)(A) and (C) were satisfied.¹

A

[¶ 9] Koch argues the trial court erred as a matter of law in deciding the "joint or common interest" factor under N.D.R.Civ.P. 23(c)(1)(A) was satisfied, because Koch's liability is not a fixed amount and the adjudication of one class member's claim will not be res judicata on the claim of any other class member.

[¶ 10] In Werlinger, 1999 ND 173, ¶¶ 49-52, 598 N.W.2d 820, the plaintiffs' claims relied on the same employment policies and practices of an employer and its predecessors, and we reversed a trial court decision that the "joint or common interest" factor weighed in favor of certification. We said:

Historically, class actions were divided into three categories: true, spurious, and a hybrid of the first two. 7A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1752, at 16 (2d ed.1986). A true class action was one in which all plaintiffs have a common and undivided interest in the subject matter of the suit. Knowles v. War Damage Corp., 171 F.2d 15, 17 (D.C.Cir.1949). Issues determined in a true class action were res judicata for any member of the class, even though a person might never have been a party to the action. Id. at 18. In a so-called spurious class action, the rights sought to be enforced are "several, and there is a common question of law or fact affecting the several rights and a common relief is sought." Id. In this type of suit, joinder into a class action is a matter of economy and efficiency on the part of the courts and parties, and individuals not joining are not bound by the decision. Id.

Rule 23(c)(1)(A), N.D.R.Civ.P. contemplates a joint interest similar to the old "true" class action as evidenced by Rule 23(h)(1) prohibiting exclusion from the class if an affirmative finding is made under Rule 23(c)(1)(A), or put differently, if a mandatory class action is found.

Here, the joint interest found by the district court is merely a possible common question of fact or law. It does not reach the level of a joint or common interest which would give rise to a mandatory class action. Therefore, the district court erred in finding a joint or common interest existed among the plaintiffs.

Werlinger, at ¶¶ 50-52. Although the trial court's analyses of most of the factors in N.D.R.Civ.P. 23(c)(1) were affirmable, the court partially relied on an incorrect analysis of the joint or common interest factor. Because the extent of the court's reliance on that factor was not clear, we remanded for a determination of the certification issue under a correct consideration of the factors in N.D.R.Civ.P. 23(c)(1). Werlinger, at ¶ 56.

[¶ 11] In Koch, 2000 ND 15, ¶ 11,605 N.W.2d 153, the trial court found a "joint or common interest," because class members had an interest in recovering against Koch and the class members had a common legal claim based on a common nucleus of fact. We said:

In Werlinger, the district court found the [joint and common interest] factor weighed in favor of certification because the plaintiffs relied on the same policies and practices of the same employer and its predecessors. Id. at ¶ 49. This decision was based on a misinterpretation of "`joint or common interest.'" We explained in Werlinger this factor is similar to the old "true" class action in which all plaintiffs must have a common and undivided interest in the subject matter of the suit. Id. at ¶ 50. Generally a common interest exists if one plaintiff's failure to collect would increase the recovery of the remaining plaintiffs or if the defendant's total liability does not depend on how the recovery of a claim is distributed among the class members. 5 James Wm. Moore et al., Moore's Federal Practice § 23.07[3][b][ii] (3d ed.1997).

The district court did not have the benefit of Werlinger and found only that there was a common interest in recovery and a common nucleus of fact. Thus, the district court misapplied the law and we remand to the district court to reconsider its finding of a joint or common interest among the plaintiffs in light of Werlinger.

Koch, at ¶¶ 12-13.

[¶ 12] On remand, the trial court found:

(A) The Court determines that a common or joint interest exists among members of the class. A common interest exists if the defendant's total liability does not depend on how the recovery of a claim is distributed among the class members. Ritter, Laber and Associates v. Koch, 2000 ND 15, ¶ 12, 605 N.W.2d 153, 157 (N.D.2000). If Koch is found to possess profits from oil for which it did not pay and if it is found that those profits must be returned, Koch's liability would not depend on how the profits would be distributed.

[¶ 13] Koch argues the "joint or common interest" factor is not satisfied because (1) Koch's liability depends on how the claim of each individual class member is decided and is not a...