Opinion
No. UWY CV 04-0185580 S (X02)
March 21, 2006
MEMORANDUM OF DECISION RE PLAINTIFFS' MOTION FOR CLASS CERTIFICATION
I. FACTS
Plaintiffs, the Towns of New Hartford and Barkhamsted, have brought this action against defendant Connecticut Resources Recovery Authority (hereinafter referred to as CRRA) on their own behalf and on behalf of the other 68 member municipalities in CRRA's Mid-Connecticut Project. The suit was initially instituted by the Town of New Hartford. The Town of Barkhamsted entered the case as a plaintiff in 2004. Plaintiffs seek (i) a declaratory judgment that CRRA is not permitted to impose the financial losses it has suffered as a result of the failure of the CRRA-Enron transaction on the municipalities participating in the Mid-Conn Project; (ii) a permanent injunction enjoining CRRA from imposing losses on the Project municipalities as net operating losses of the Mid-Conn Project; and (iii) an order directing CRRA to make restitution of all monies obtained from the plaintiff Towns and other municipalities in the Mid-Conn Project on account of such losses. Plaintiffs have moved for certification as a class action.
CRRA is a quasi-public entity established by statute for the purpose of developing a statewide waste-management program. C.G.S. Sections 22a-261 et seq. During the 1980s, in cooperation with several municipalities, CRRA developed the Mid-Connecticut Project (Mid-Conn Project), one of several regional solid-waste-disposal systems. The Mid-Conn Project now serves 70 Connecticut municipalities and consists primarily of a trash-to-energy facility, four transfer stations, the Hartford landfill, and a regional recycling center.
Each of the 70 municipalities that participate in the Mid-Conn Project has entered into a service agreement. Under these contracts, the municipalities pay a rate-per-ton "tipping fee" to dispose of their solid waste in the Mid-Conn Project system. CRRA then processes the trash into steam or electricity and sells the resulting energy.
In 2000 and 2001, CRRA restructured the energy-purchase agreement which it had with Connecticut Light Power (hereinafter CLP). The restructuring included a three-way deal involving CRRA, CLP, and a subsidiary of the Enron Corporation, in which Enron received a pre-payment of $220 million. Enron defaulted on its obligations after making only a few payments, and filed for bankruptcy.
The powers of CRRA are vested in and exercised by the CRRA Board of Directors. During the time period of the allegations in the complaint, the CRRA Board consisted of 13 full members. The CRRA Board was headed by a chairman appointed by the governor. The daily operations of CRRA were administered by a president appointed by the chairman and approved by a majority of the CRRA Board of Directors.
The municipalities participating in the Mid-Conn Project are required, by their contracts, to pay the Project's "Net Cost of Operation" — i.e., that portion of the Mid-Conn Project annual operating expenses (including payment of principal and interest on Mid-Conn Project bonds) that is not covered by CRRA's sales of steam or electricity or other sources of revenue. Pursuant to CRRA's contracts with the Mid-Conn Project's participating municipalities, CRRA annually adjusts the rate per ton of garbage hauled (i.e. the tipping fee) paid by the participating municipalities so that the municipalities' aggregate payments — referred to in their respective contracts as "Service Payments" — will be sufficient to pay the Mid-Conn Project's annual Net Cost of Operation.
Plaintiffs' Revised Complaint alleges that CRRA, acting through its Board of Directors, undertook a series of unauthorized, illegal, and ultra vires acts which improperly inflated CRRA's Net Costs of Operation and, thus, resulted in the imposition of increased charges on each municipality participating in the Mid-Conn Project. In particular, it is alleged these illegal and ultra vires acts included a purported sale of energy to a subsidiary of Enron Corporation that was, in reality, a disguised illegal and ultra vires $220 million unsecured loan. When Enron Corporation subsequently collapsed, CRRA lost the entire $220 million principal of the loan. Plaintiffs' Revised Complaint alleges that the Enron transaction was wholly outside CRRA's statutory authority. Plaintiffs' Revised Complaint further alleges that defendants illegally diverted $60 million of Mid-Conn Project assets to a separate CRRA entity, thus further increasing the Mid-Conn Project's Net Cost of Operation. Said Complaint further alleges that CRRA entered into — and the individual defendants of CRRA approved — other illegal, unauthorized and ultra vires acts, including the award of no-bid contracts and diversion of CRRA physical assets to political associates and donors of former Governor John Rowland, the illegal payment of thousands of dollars for exorbitant travel and meals and entertainment expenses for Governor Rowland, his staff and personal friends and supporters and the Republican Governors Association, unrelated to CRRA's statutory purpose, improper expenditures for lobbyists unrelated to CRRA's statutory purpose, and an ultra vires $500,000.00 "donation" unrelated to CRRA's statutory purposes, to the National Geographic Society.
Plaintiffs' Revised Complaint alleges that, as a result of these illegal, unauthorized, and ultra vires acts, CRRA has imposed in the past, and will seek to impose in the future, increased Service Payments on each of the municipalities participating in or served by the Mid-Conn Project. Said complaint alleges that the members of the Mid-Conn Project stand to lose $20 million dollars each year in increased Net Cost of Operation costs of the Project as a result of defendant CRRA's unlawful and ultra vires conduct.
In addition to the declaratory judgment and permanent injunction, plaintiffs allege that the Board of Directors violated their duty to act in good faith and acted with gross negligence and willful and wanton disregard of their duties. Plaintiff seeks compensatory and common-law punitive damages against the defendant directors. Plaintiffs' claims for money damages against the officers and directors of CRRA have been dismissed. That dismissal is currently on appeal to the Connecticut Supreme Court.
The parties argued the matter before the Court on March 3, 2006 at which time the court deferred ruling on the matter. The Court would be remiss without complimenting both Attorney Golub and Attorney Green on the excellent presentation of both their briefs and oral argument.
II. LAW
Class certification in Connecticut is governed by Practice Book Sections 9-7 and 9-8. Practice Book Section 9-7 provides:
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.
Practice Book Section 9-8 provides:
An action may be maintained as a class action if the prerequisites of Section 9-7 are satisfied and the judicial authority 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.
"In determining whether to certify the class, a trial court is bound to take the substantive allegations of the complaint as true." Collins v. Anthem Health Plans, Inc., 266 Conn. 12, 24 (2003), citing Rivera v. Veterans Memorial Medical Center, 262 Conn. 730, 743 (2003). Plaintiffs bear the burden of establishing that the requirements for class certification are satisfied. Arduini v. Automobile Ins. Co. of Hartford, 23 Conn.App. 585, 589 (1990). "A trial court must undertake a rigorous analysis to determine whether the plaintiffs have borne the burden of demonstrating that the class certification requirements of Connecticut Practice Book Sections 9-7 and 9-8 have been met." Collins v. Anthem Health Plans, Inc., 275 Conn. 309, 320-21 (2005). In determining the propriety of a class action, "the question is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of (the class action rules) are met." Collins, supra, 266 Conn. at 25, quoting Eisen v. Carlisle Jacquelin, 417 U.S. 156, 178 (1974). Although the movant bears the burden of establishing that each requirement of the Practice Book Rules is met, the trial court has broad discretion in determining whether a suit should proceed as a class action, Collins, supra, 266 Conn. at 23, and "doubts regarding the propriety of class certification should be resolved in favor of certification." Id. at 25, quoting Rivera, 262 Conn. at 743.
Connecticut Practice Book Sections 9-7 and 9-8 impose six requirements which must be satisfied before a court may grant a motion for class certification. These requirements are: (1) numerosity, which requires that joinder of all the members of the putative class be impracticable; (2) commonality, which requires that there be questions of law or fact common to the class; (3) typicality, which requires that the claims or defenses of the representative parties are typical of the claims or defenses of the class; (4) adequacy, which requires that the putative class members have interests that align with the class representative; (5) predominance, which requires that common questions of law or fact predominate over individual issues; and (6) superiority, which requires that the class action must be superior to other available methods for the fair and efficient adjudication of the controversy. Defendants do not contest the requirements of commonality, typicality, and predominance. They do contest the issues of numerosity, adequacy of representation, and superiority.
Connecticut cases define the contours of the class certification requirements. Also, because the class-certification requirements established by Practice Book Sections 9-7 and 9-8 are similar to the requirements of the Federal Rules of Civil Procedure, Connecticut courts will look to federal case law "for guidance in construing our class certification requirements." Collins, 266 Conn. at 33. Decisions of the Second Circuit, although not binding on Connecticut courts, "are particularly persuasive as to the parameters of class certification. Collins, 266 Conn. at 52 n. 22, citing Turner v. Frowein, 253 Conn. 312, 341 (2000).
A. Numerosity
The Mid-Conn Project is comprised of 70 municipalities. Two of those municipalities are currently represented in this lawsuit. "There is no mechanical test for determining whether in a particular case the class is so numerous that joinder of all members is impracticable . . . The issue is one for the court to be resolved in light of the facts and circumstances of the case." Campbell v. New Milford Board of Education, 36 Conn.Sup. 357, 360-61, aff'd, 193 Conn. 93 (1984). The United States Court of Appeals for the Second Circuit has stated that "the difficulty in joining as few as 40 class members should raise a presumption that joinder is impracticable." Robidoux v. Celani, 987 F.2d 931, 935 (2d Cir. 1993) (citing 1 Herbert B. Newberg, Newberg on Class Actions: A Manual for Group Litigation at Federal and State Levels Section 3.05, at 141-42 (2d ed. 1985); see also Marcera v. Chinlund, 595 F.2d 1231, 1238 (2d Cir.) judg. vacated on other grounds, 442 U.S. 915 (1979) ("[t]here is little doubt that the 42 sheriffs constitute a group sufficiently large to meet the numerosity requirement for Rule 23(a)(1)"). 3B James W. Moore, et al., Moore's Federal Practice Section 23.05(1), at 139-45 (2d ed. 1987) (courts generally certify classes in excess of forty); Ward v. New Haven, 1990 WL 265 296 (Conn.Super. Dec. 3, 1990) (Vertefeuille, J.) ( 3 Conn. L. Rptr. 71) (class consisting of 59 members meets numerosity requirement for class certification).
In Connecticut, it is well established that "there is no magic number that automatically fulfills the numerosity requirement . . . because numerosity is tied to impracticability of joinder under the particular circumstances of the case." Arduini v. Automobile Ins. Co. of Hartford, 23 Conn.App. 585, 590 (1990). "Courts should not be so rigid as to depend upon mere numbers as a guideline on the practicability of joinder; a determination of practicability should depend upon all the circumstances surrounding a case." Demarco v. Edens, 390 F.2d 836, 845 (2d Cir., 1968).
In addition to size, the considerations identified by the Second Circuit as relevant to determining the practicability of joinder include:
judicial economy arising from the avoidance of a multiplicity of actions, geographical dispersion of class members, financial resources of class members, the ability of claimants to institute individual suits, and requests for prospective injunctive relief which would involve future class members.
CT Page 5251 Robidoux, supra, at 936.
In addition, Newberg suggest that the ease of identifying and contacting class members should also be considered. See 1A Conte H. Newberg, Newberg on Class Actions (4th Ed. 2002) Section 3.6, p. 250-52.
Defendants argue that all of the above factors militate against the granting of the plaintiffs' motion for class certification. "Knowledge of names and existence of members has been called the most important factor, precisely because it renders joinder practicable." Primavera Familienstiftung v. Askin, 178 F.R.D. 405, 410 (S.D.N.Y 1988). Defendants argue that the potential class in this case are the 70 Connecticut municipalities that participate in the Mid-Conn Project. They contend that all of the municipalities are known to the plaintiffs and, in fact, the plaintiffs gave notice of the suit to each of the other municipalities that participate in the Mid-Conn Project when suit was initiated. Accordingly, it is practicable, they submit, for plaintiffs to communicate personally with each municipality and arrange for it to join the suit. Therefore, defendants argue that the class is easily identified and a class action is not appropriate. Indeed, as defendants accurately point out to the court, many cases with a potential class membership in excess of 40 result in the denial of class certification because joinder is not impracticable on the basis that the potential members are known and identifiable. In Blood v. First Blodd Assocs., 125 F.R.D. 39 (S.D.N.Y. 1989), for example, the court found that joinder was not impracticable for 57 limited partners because the plaintiff knew "the names and addresses of each (putative class member)" and because "it was practicable to communicate personally with each . . . and to arrange for his or her joinder." Id. at 43. See also Moore v. Trippe, 743 F.Sup. 201 (S.D.N.Y. 1990) (joinder would not be difficult in part because all 54 potential class members were known to plaintiffs, who had provided the court with a list of names); Hum v. Dericks, 162 F.R.D. 628, 634-35 (D.Hawaii 1995) (joinder of 200 potential class members was not impracticable because class members were identifiable from records and most lived within the same state). In Maltagliati v. Wilson (CV-97 0575612) 1999 Conn.Super.LEXIS 2777 (Oct 7, 1999), the court (Mulcahy, J.) denied class certification for 118 homeowners in a suit against builders. The court opined that "proximity and ease of identification (of potential class members) tend to make joinder more practicable." Id. at 13. The court concluded that the plaintiffs did not meet their burden of demonstrating that joinder would be impracticable because all 118 potential class members were located in Connecticut and were easy to identify. Id. Thus, defendants argue that plaintiffs "fail to meet the elementary requirement that supports the whole theory of class actions: representation by one person of a group so numerous that joinder in one suit would be impracticable." Garcia v. Gloor, 618 F.2d 264, 267 (5th Cir. 1980).
Defendants further argue that the plaintiffs fail to satisfy the numerosity requirement because of the geographic proximity of all potential class members. The geographic dispersion of potential class members favors a finding of impracticability, whereas a centrally located class favors a finding of practicability. 1A. Conte H. Newberg, Newberg on Class Actions (4th Ed. 2002) Section 3.6, p. 255-56; see also Andrews v. Bechtel Power Corp., 780 F.2d 124, 131-32 (1st Circuit 1985) (joinder considered more practicable when all members of class are from same geographic area). In Villano v. Constantinou, (X07-CV-1-0077486S) 2003 Conn.Super.LEXIS 1345 (May 2, 2003), the court (Sferrazza, J.) denied class certification because the plaintiff failed to establish the numerosity requirement. The court found that joinder was not impracticable in part because "all identified members for both subclasses are Connecticut residents." Id. at 3. The plaintiff "cannot merely speculate regarding the difficulty of joinder but must show that such difficulty renders joinder reasonably unworkable." Id. See also Liberty Lincoln Mercury, Inc. v. Ford Marketing Corp., 149 F.R.D. 65 (D.C.N.J. 1993). In view of the fact that all of the members of the proposed class are located in Connecticut, defendants argue, the request for class certification must be denied.
Additionally, defendants submit, each of the Mid-Conn Project municipalities has the sophistication and resources to protect its own interests. Whether potential class members have the financial resources, ability, and interest to bring individual suits are all relevant factors in determining whether joinder is practicable. See Primavera, supra at 411. Where potential class members possess these characteristics, courts find that joinder is practicable and deny class certification. In the instant case, each potential class member is a municipal government and has the sophistication and resources to protect its own interests. They argue that "as the case law indicates, a class action is not appropriate when proposed class members are able to protect and defend their own interests." Liberty, supra at 74.
Finally, defendants argue that the plaintiffs fail to demonstrate a sufficient lack of economy to warrant a class action. They argue that the plaintiffs have failed to demonstrate that joinder of each municipality interested in pursuing an action would be logistically unfeasible or prohibitively expensive. They further state that on the basis of the number of municipalities that have expressed interest in plaintiffs' cause of action — none of which is handicapped by geographic dispersion or insufficient resources — it is more likely that the actual number of additional individual actions will be closer to zero than to 68. Indeed, a common theme to defendants' argument is that, since only one town has joined the lawsuit thus far, the class certification process is pointless because there is indifference or direct opposition to the lawsuit.
Plaintiffs counter the defendants' positions by stating that the size of the class creates the presumption that class certification is appropriate. They argue that consolidating in a class action what would otherwise be seventy individual actions avoids crippling the courts with a multiplicity of actions and thereby serves judicial economy. In re Drexel, supra at 290. (Although the court notes that the class in Drexel was 850 as opposed to the present proposed class of 70.) Additionally, they argue that the potential class members are dispersed throughout several judicial districts in the State. Separate actions in lieu of a class action would, therefore, involve different courts, again adding to the burden of the judicial system and needless duplication.
Plaintiffs further argue that individual adjudication would also drastically increase the legal expenses of all of the parties. Moreover, it is claimed that individual lawsuits could lead to potentially inconsistent results if the claims are not brought as class actions. See Robidoux, supra at 936.
Each side presents strong arguments which must be analyzed by the court by way of a rigorous examination. Plaintiffs are entitled to a presumption in favor of class certification in view of the size of the class. However, the fact that all members of the class are identified and the entire class is in Connecticut favors the defendants' position. Judicial economy would be saved if the class were certified and the cases heard in one location. Undoubtedly, the certification would save potential legal expenses for all of the parties, since only one action and one trial would be involved. Further, certification would avoid the potential for inconsistent results.
Plaintiffs contend that, contrary to the arguments of defendants, many of the potential class members are very small towns in Connecticut which have limited budgets. They argue that these towns do not have unlimited resources with which to pursue extended litigation. Certainly, there is a wide disparity in the financial capabilities of the potential town members of the class. The Court notes that the two towns who have joined the lawsuit are not the most populous in Connecticut. The towns, however, would seem to have enough financial resources to institute legal proceedings if they so desired. The court does not believe that the factor involving the financial resources of the class members contemplated municipalities who had not demonstrated a showing of financial hardship. The municipality has the wherewithal to obtain additional monies through taxes. It may not be politically expedient to do so, but the situation of a municipality cannot compare to that of an indigent person who cannot afford the expenses of litigation.
It must also be noted that the request for injunctive relief will affect all future class members. See Robidoux, supra, at 935. Further, in the Robidoux case all of the potential class members were also economically disadvantaged and were unable to pursue individual actions. Additionally, all of the 100 class members resided in the State of Vermont.
Defendants' argument opposing class certification based upon the number of prospective class members that have joined as named plaintiffs in a pending class action prior to class notice is not persuasive to the court. Courts and commentators have criticized reliance on the number of prospective class members who have not joined a suit prior to formal class notice as a factor in determining the appropriateness for class certification. Authorities have noted that non-support is equivocal and there are too many unknown reasons for non-support for the class litigation prior to certification and class notice. A. Conte and Newberg, Newberg on Class Actions, Section 3:30 (4th ed. 2005).
In balance, if the Court were to consider all of the above factors, plaintiffs' arguments regarding numerosity would probably fail. However, a court in considering a class certification motion must consider all of the circumstances of the case. There is one additional circumstance in this case which militates in favor of the plaintiff regarding the impracticability of joinder.
On August 17, 2005 CRRA management sent a letter to all of the municipalities in the Mid-Conn Project and conducted a series of meetings with member Towns to dissuade them from participating in the lawsuit. While courts are divided on the propriety of a party's pre-certification contacts with putative class members, it is clear that a defendant may not exploit a position of dominance or give false or misleading information in an attempt to dissuade putative class members from participating in a pending class action. See Manual for Complex Litigation, Third, Section 30.24 at 233 (1995) ("Defendants ordinarily are not precluded from communications with individual class members before certification, but may not give false or misleading information or attempt to influence class members in making their decision"). See also Kleiner v. First National Bank of Atlanta, 751 F.2d 1193, 1202 (11th Cir. 1985) (upholding order precluding unsupervised communications between defendant bank and class members in relation to litigation where situation was inherently coercive because potential class consisted of bank borrowers dependent on bank for future financing).
Defendants argue that there is nothing wrong with CRRA communicating with its customers and advising them on the current status of pending litigation. The court agrees. However, the question is not the advisement itself, but rather whether or not said advisement was misleading.
It is the plaintiffs' position that the propriety of class certification should not be determined by extrajudicial lobbying and political pressure on the prospective class members. Rather, they argue, that where, as here, a lawsuit will, on its face, determine the rights of a large group and the results of the litigation will apply equally to all members of that group, the fairer and better process is to provisionally certify the class and to provide notice — which has been vetted and Court-approved for fairness and accuracy — of the litigation and its implications to prospective class members. Those class members would then have the opportunity to opt out of the class litigation on the basis of fair notice.
Plaintiffs further argue that the certification process is particularly appropriate in this situation here because, pursuant to the Towns' contracts with CRRA, the only relief available for a breach of those contracts is equitable, and the only relief sought in this action is a declaratory judgment, injunction and restitution. Any decision to grant (or deny) an injunction precluding CRRA from imposing the costs, for the alleged ultra vires Enron transaction and other diversions, on the participating municipalities of the Mid-Conn Project will, necessarily, affect every municipality in that project and determine their rights for restitution against CRRA. Plaintiffs submit that all parties potentially affected by such an injunction should have an opportunity to be heard. Similarly, any potential settlement of this action will likewise necessarily affect every municipality in the project and should properly include all of the affected parties.
In March 2004, CRRA issued a letter to all Mid-Conn Project Towns signed by its President Thomas Kirk, which advised that the instant lawsuit would cost them in the form of increased tipping fees and that any plaintiffs in the litigation would, in effect, be suing themselves:
As you may be aware, the Town of New Hartford, one of the 70 towns that comprise the Connecticut Resources Recovery Authority Mid-Connecticut Project, is suing CRRA, its former president and Directors and others over the Enron debacle. While we may not discuss the merits of this case, or any similar suits that have been filed, we do believe it is incumbent upon us to point out some relevant facts.
. . . We believe that our fiduciary relationship to the cities and towns that comprise the Mid-Connecticut Project requires us to point out the potential ramifications of such lawsuits.
CRRA is required by statute and by separation agreements to defend and indemnify former board members and officers against suits such as the New Hartford suit. Further, because CRRA's insurance policy has an Absolute Enron Exclusion, if the insurer denies a claim, any legal fees, penalties or damages incurred because of this action would be paid out of Mid-Connecticut Project revenues, namely the tip fees paid to CRRA by those same cities and towns. In other words, New Hartford is in effect suing itself and the other Mid-Connecticut Project municipalities.
. . . For these reasons, we feel obligated to advise you to think carefully before pursuing this litigation.
The Town of Barkhamsted agreed to join New Hartford's action in January 2004, and is now a named plaintiff. Plaintiffs' counsel has represented that the Town of Winchester has now voted to join this lawsuit. In addition, counsel for the Town of West Hartford has entered an appearance in this action and West Hartford is awaiting a decision on plaintiffs' motion for class certification before formally determining how to proceed.
CRRA's assertion that the Towns are effectively suing themselves because CRRA will be required to impose any costs of the judgment in this action on the Towns in the form of increased tipping fees is misleading. The entire gravamen of plaintiffs' complaint, for the purpose of considering this motion the court must accept as true, is that CRRA is legally precluded from attempting to impose the costs of an allegedly illegal, unauthorized and ultra vires transaction on the member municipalities of the Mid-Conn Project. The purpose of the lawsuit is directly opposite to the statement CRRA made to its member municipalities. If successful, the Towns would not be suing themselves. They would be making an effort to lower their eventual tipping fees. The statement also does not mention the potential for invoking certain indemnification agreements which CRRA had with various law firms, should CRRA be held liable to any third party.
CRRA has also asserted to Mid-Conn Project members that it has incurred $500,000.00 in legal fees to defend this action. CRRA has not advised its members, however, that said costs, except for $100,000.00, have been covered by insurance, representing the deductible in its insurance policy toward the costs of defending all of the litigation in which it is involved.
CRRA has made further statements to the Mid-Conn Project municipalities that this lawsuit has impeded certain settlements, and that the monies received from these settlements would have allowed CRRA to reduce the municipalities' tipping fees:
Further, CRRA could have netted eight-figure settlements from other parties involved in the Enron deal, settlements which could lead to rebates to towns or tip fee reductions; but those parties won't settle as long as this suit is out there.
Contrary to CRRA's statements that other recoveries will have direct benefits for municipalities, CRRA President Kirk has testified that CRRA has adopted the official position that it will not reimburse Project municipalities for any of their increased tip fees from the proceeds of any of its pending claims until and unless it recovers enough money to make up the annual shortfall in Project revenues occasioned by the failure of the Enron Transaction that the Project incurs or will incur for each year through 2012.
On August 17, 2005 Mr. Kirk sent a letter to the governments of all Mid-Conn Project towns. In the letter CRRA represented that the pendency of this lawsuit will prevent CRRA from distributing to the participating municipalities a $5 million arbitration award which CRRA won against the Metropolitan District Commission, a Mid-Conn Project contractor:
Unfortunately, we will not be able to return the full amount (of the MDC arbitration award) back to the towns. This is due to the second issue of interest, the continuing legal proceedings against CRRA by two member towns.
At his deposition Mr. Kirk testified that he has made a personal decision to set aside the potential proceeds of the award as an undesignated reserve for contingent costs including risks completely unrelated to the pendency of this lawsuit.
The court has not been able to locate a case of this nature in Connecticut. The authorities mention the need to insure fairness in the process. See Manual for Complex Litigation, Third, Section 30.24 (1995). The question for the court, in this instance, is the appropriate remedy after the potential class may have been tainted by misleading information.
The court has considered all of the circumstances in this case. The court finds that several of the statements made by CRRA to its Mid-Conn municipalities have been misleading, and that the existence of these statements has made it difficult, if not impossible, for the plaintiffs to pursue their efforts regarding joinder in this case. The Towns may well believe that they will have increased costs by joining the lawsuit. In view of the statements, joinder is not practicable in this case. Plaintiffs meet the requirements for numerosity as part of their motion for class certification. All parties should be restored to the point that everyone is on an equal playing field.
B. Commonality
The issue of commonality does not require that common issues predominate. Commonality "only requires that some common issues exist, not that they predominate." Campbell v. New Milford Board of Education, 36 Conn.Sup. 357 (1980). The commonality requirement is met if "(the) plaintiffs' grievances share a common question of law or of fact." Collins, supra, 266 Conn. at 34. The rule does not require that all questions of fact and law be common, but only that a question of law and fact be present which is common to all the members of the class. Abramovitz v. Ahern, 96 F.R.D. 208, 216 (D. Conn. 1982).
Defendants do not contest the issue of commonality. Indeed, the seventy member municipalities of the Mid-Conn Project meet the requirement of commonality. It is undisputed that each municipality participating in the Mid-Conn Project has entered into a contract with CRRA that requires the municipality to make Service Payments to CRRA calculated, in the aggregate, to defray the Mid-Conn Project's Net Cost of Operation. Plaintiffs have also alleged that CRRA and its directors entered into a series of illegal, ultra vires, and otherwise improper transactions that wrongly increased the Mid-Conn Project's Net Cost of Operations and that in doing so, engaged in a similar course of conduct as to each participating municipality. Plaintiffs have further alleged that the expenses and losses incurred by the Mid-Conn Project, on account of the transactions at issue in this action, resulted in the same change in tipping fees charged to all of the municipalities in the Mid-Conn Project. All of the member municipalities, as members of the putative class, were affected in a common manner by the alleged wrongdoing in this action. Plaintiffs have met the necessary elements to establish commonality.
C. Typicality
The typicality requirement is satisfied "when each class member's claim arises from the same course of events and each class member makes similar legal arguments to prove the defendant's liability." Collins, supra, 266 Conn. at 34. "When it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is usually met irrespective of minor variations in the fact patterns underlying individual claims." Robidoux, supra, 987 F.2d at 936-37.
The defendants do not contest the typicality requirement. Plaintiffs' claims arise out of defendant's course of conduct in causing or approving the transactions by CRRA which led to the expenses and losses for the Mid-Conn Project, which increased the Net Cost of Operation of that Project and which, in turn, required an increase in the tipping fees charged to plaintiffs as participating municipalities in the Project. Thus, the same factual and legal arguments will be advanced on behalf of each municipality, since defendants' alleged conduct in regard to each of the transactions at issue involved the same course of conduct as to each municipality. Proof of defendants' alleged liability to other putative member municipalities will be based on the same conduct as proof for the two plaintiffs currently in the case. Likewise, each municipality's damages is affected in the same way by defendants' past and potential future increases in the annual tipping fee. The same factual and legal arguments exist as to each member's proof of liability and damages. Thus, the typicality requirement of Practice Book Section 9-7 has been satisfied by the plaintiffs.
D. Adequacy
"Adequacy of representation is measured by two standards. First, class counsel must be `Qualified, experienced and generally able' to conduct the litigation. Second, the class members must not have interests that are `antagonistic to one another.'" Drexel, supra, at 291.
There is no question that class counsel are qualified, experienced, and generally able to conduct this litigation. Defendants do not question this issue. Plaintiffs' counsel have conducted several class actions and are very experienced in these matters.
Defendants do contest the second prong of the adequacy test. They argue that all 70 Mid-Conn municipalities do not share a common view of plaintiffs' suit or its goals. They cite testimony to the effect that as many as twenty towns have voiced their opposition to this suit. They further point to the fact that only two municipalities are part of the suit, despite the efforts of the plaintiffs to recruit more towns.
Defendants cite the Liberty Lincoln Mercury, Inc. case, supra, as authority for the fact that widespread knowledge of a lawsuit and sheer indifference by potential class members to join indicates that potential class members do not share a common goal. Defendants point to the fact that all municipalities were sent copies of the lawsuit and the suit has received widespread publicity. They argue that such indifference makes it obvious that interests and goals of a majority of potential class members do not align with the plaintiffs' interests.
Plaintiffs argue that all of the member communities of the putative class have sustained the same increases in tipping fees as the plaintiffs. If class certification is granted and plaintiffs' claims are granted, all of the proposed members of the class would be entitled to relief identical to any relief granted to the plaintiffs. Plaintiffs further argue that, indifference is not an appropriate argument prior to class certification. Further, they contend that the campaign of letter writing, and the misleading information contained in those letters, could well have led to the indifference, and or opposition on the part of the Towns. They contend that if, as defendants argue, the municipalities are truly indifferent, they can opt out of any class certification provisionally granted by the court.
It is unnecessary to consider any indifference at this point because any class member that does not want to participate in the litigation post-certification is not prejudiced by certification, since such member can withdraw from the litigation by opting out of the class. J.W.T, Inc. v. Joseph E. Seagram Sons, Inc., 63 F.R.D. 139, 142 n. 8 (N.D.Ill. 1974).
Plaintiffs dispute defendants' allegations that there is an expressed disapproval of this lawsuit by many of the potential class members. However, the fact that some potential class members disapprove of the litigation does not demonstrate the sufficient indicia of inadequacy to warrant a finding of inadequate presentation. Horton v. Goose Creek Independent School Dist., 690 F.2d 470 (5th Cir. 1982). "As a general rule disapproval of the action by some class members should not be sufficient to preclude a class action on the ground of inadequate representation." Alba Conte Herbert B. Newberg, Newberg on Class Actions, Section 3:30 (4th ed. 2005).
"In any substantial class action there always is the possibility that some members of the class will take a position different from that of those who have assumed the laboring oar on a litigation. But such differences of opinion do not preclude a class action." Rosado v. Wyman, 322 F.Sup. 1173 (E.D.N.Y. 1970). In addition, courts have held that a motion for certification should not be defeated on the basis of potential class members' dissatisfaction when the interests of the dissident members will be adequately advanced by defendants who adamantly oppose the plaintiff's claims. Horton, supra, at 470 et seq.
The absence of evidence that the lawsuit will adversely affect any legally cognizable interest of the potential class members militates against any claim of inadequacy. Larry James Oldsmobile-Pontiac-GMC Truck Co., Inc. v. General Motors Corp., 164 F.R.D. 428 (N.D.Miss. 1996). This lawsuit seeks to redress the defendants' alleged violation of the potential class member's legal rights. "The class member who wishes to remain a victim of unlawful conduct does not have a legally cognizable conflict with the class representative." Alba Conte Herbert B. Newberg, Newberg on Class Actions, Section 3:30 (4th ed. 2005). Herein, there has been no showing that any of the rights of the putative class will be affected by the granting of the class certification. Plaintiffs have satisfied the requirements of the Practice Book. The claimed conflict of interest and indifference arguments are not persuasive to the court. Particularly, in light of the content of the letters sent by the defendants to the prospective class. The content of the letters raises a serious question for the court regarding the objectivity of the claimed indifference or conflict of interest.
E. Predominance
Practice Book Section 9-8 requires that, in addition to the requirements of Section 9-7, the court must also determine whether questions of law or fact predominate over individual issues.
The predominance inquiry tests whether the proposed classes are sufficiently cohesive to warrant adjudication by representation . . . Class-wide issues predominate if resolution of some of the legal or factual questions that qualify each class member's case as a genuine controversy can be achieved through generalized proof, and if these particular issues are more substantial than the issues subject only to individualized proof.
Collins, supra, 266 Conn. at 48.
"When common questions represent a significant aspect of a case so that they can be resolved for all class members in a single unit, then predominance exists." Walsh v. National Safety Associates, Inc., 44 Conn.Sup. 569, 588-89 (1996), aff'd, 241 Conn. 278 (1997). In making this determination, the critical inquiry is "whether the issue of liability is common to members of the class." Macarz v. Transworld Systems, Inc., 193 F.R.D. 54 (D.Conn. 2000). In Collins our Supreme Court cited to four factors set forth in Fed.R.Civ.P. 23(b)(3) to be considered in determining whether plaintiff has satisfied the predominance criterion: "(1) the interests of members of the class in individually controlling the prosecution or defense of separate actions; (2) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (3) the desirability or undesirability of concentrating the litigation of the claims in a particular forum; (4) the difficulties likely to be encountered in the management of a class action." Collins, 266 Conn. at 48-49.
Defendants do not contest the predominance issue. Indeed, all four of the requirements established in Collins are satisfied. The complaint seeks the same relief as to every municipality participating in the Mid-Conn Project. No potential class member has any strong interest in controlling prosecution of those claims in an individual action separate from this one. There is no other pending litigation against CRRA commenced by any other member of the potential class. It is certainly desirable to litigate the issues involved in this lawsuit once, rather than pursuing multiple individual lawsuits on behalf of every member of the proposed class. Further, there is no particular difficulty likely to be encountered in the management of a class action. Plaintiffs have proven the issue of predominance to the court's satisfaction.
F. Superiority CT Page 5264
The final requirement of Practice Book 9-8 is that the class action be "superior to other available methods for the fair and efficient adjudication of the controversy."
Plaintiffs argue that, absent class certification, the court system may be faced with the potential burden of litigating numerous individual lawsuits, all arising out of the same set of operative facts alleged in the Complaint. The resolution of the common issues in one action will produce an efficient use of judicial resources and result in a single outcome, they argue, thereby eliminating confusion and promoting consistency.
Plaintiffs further contend that this action meets all of the classic indicia of superiority — judicial economy, avoidance of inconsistent verdicts and the need for consolidation to create the necessary incentive for vindication of rights — and class certification is, therefore, appropriate. Collins, 266 Conn. at 57-58.
Defendants contend that among the factors used to determine whether a class action is superior to other methods of adjudication is "the interest of members of the class in individually controlling the prosecution or defense of separate actions." Collins v. Anthem Health Plans, Inc., 275 Conn. 309, 346 (2005).
Defendants further argue that many of the potential class members have already expressly declined to join the suit when contacted by the plaintiff New Hartford. They contend that this fact "clearly indicates a lack of support for this litigation and may well suggest that a large percentage of potential class members are interested in individually controlling any claims they may have." McNerney v. Carvel (CV-00579244), 2001 Conn.Super.LEXIS 619 (February 23, 2001) (Solomon, J.).
Second, Defendants argue, there is no reason to resort to the class-action mechanism. All potential class members are identified; centrally located in Connecticut; and possess the necessary sophistication, resources, and stake to protect their own interests.
The court is of the opinion that the opposition or indifference cited by the defendants is tainted, in view of the misleading information contained in the letters. There may, in fact, be many reasons that other towns have not joined the lawsuit. One of the reasons may be that the towns believe the precise wording of the letters to the effect that joining the suit would be suing themselves. That statement alone is misleading, and creates a false impression in the reader's mind. The suit, if successful, is about saving money for the towns, not about suing themselves and costing money. If CRRA cannot pass the cost of the loan failure onto its customers, but recovers money from other sources, the charges for the tipping fees should be reduced, and all of the towns in the Mid-Conn project would benefit.
The court has previously responded to defendants' second argument. Certainly, in a case of this nature, the certification of the class would avoid inconsistent verdicts, and would promote judicial economy because all of the cases would be heard in one central location. All witnesses would testify once in a trial instead of, perhaps, numerous times, and all exhibits could be contained in one location. The certification of the class is clearly the superior method by which to hear these cases. The plaintiffs have met their burden of proof with regard to the issue of superiority.
III. CONCLUSION
For the foregoing reasons, the plaintiffs have met their burden with regard to all of the six necessary requirements for class certification. The motion for class certification is, therefore, granted. Many of the opinions of the court are based upon the court's acceptance of the substantive allegations of the plaintiffs' complaint, which the court must accept as true for the purposes of this motion. The court has performed a rigorous examination of the requirements for class certification and their relationship to the facts, as required by our Supreme Court. In determining the propriety of this motion the court does not intend to indicate any opinion on the ultimate merits of the case, or whether the plaintiffs will prevail at trial, but only whether the requirements of a class action have been met. Any doubts which the court may have had about the propriety of a class action, particularly on the question of numerosity, have been resolved in favor of certification.