Chapter 14 - § 14.10 • CLASS AND COLLECTIVE ACTIONS

• Jurisdiction: Colorado

§ 14.10 • CLASS AND COLLECTIVE ACTIONS

A class action is a lawsuit brought on one's own behalf and in a representative capacity on behalf of others similarly situated. The Colorado Supreme Court has said that in our system of justice, "class actions serve a number of important functions," including providing "a fair and economical method for disposing of a multiplicity of claims in one lawsuit," "access to judicial relief when [plaintiffs] might not otherwise have such access," and "protect[ing] defendants from inconsistent obligations," leading Colorado to favor "'the maintenance of class actions.'"²³⁴⁷

The Colorado Court of Appeals has expressly approved class actions on behalf of unit owners for damage to common elements in a condominium complex.²³⁴⁸ Such formal class actions are probably no longer necessary in most cases in light of Colorado's Common Interest Ownership Act, which expressly confers standing on homeowners' associations to pursue damage claims on behalf of two or more unit owners with respect to matters affecting the "common interest community."²³⁴⁹

Homebuilders and their material suppliers vigorously resist class actions by single-family homeowners affected by the same faulty construction technique or defect, and such suits meet limited success. One Colorado district court certified a class action on behalf of over 1,600 homeowners for claims arising from cement slab-on-grade flooring systems in basements over expansive soils, where the homeowners alleged that the flooring systems rendered the basements unsuitable for finishing due to differential movement of the floors caused by the underlying soils.²³⁵⁰ The Colorado Supreme Court refused to exercise its jurisdiction under C.A.R. 21 to consider the propriety of the class certification order.²³⁵¹ Eventually, the case proceeded to trial and the jury returned a verdict for the homeowner class on their negligence, breach of implied warranty, and violation of the Colorado Consumer Protection Act claims. The case settled while post-trial motions were pending, and before individual bifurcated trials on damages and affirmative defenses. Similar class actions brought against other builders all settled on similar terms, involving "slab repair and replacement" programs for over 16,000 homes.²³⁵² One settlement also included a 10-year structural warranty to replace a warranty issued by a third-party warrantor that became insolvent.²³⁵³

In another case, a district court certified a class action on behalf of over 300 lot and home purchasers asserting tort, contract, and state and federal statutory claims. The purchasers premised their motion for class certification on allegations that the developer, who was also a "declarant" under Colorado's Common Interest Ownership Act, had misled them regarding the condition of, and cost to maintain, the community's roads, and that the developer and its successor declarant had breached promises and covenants regarding the roads.²³⁵⁴ Two other lawsuits settled for amounts totaling over $57 million to resolve claims arising from defectively manufactured windows that allowed moisture to leak into homes and wall cavities, causing damage to the homes and loss of use of the windows.²³⁵⁵ A district court refused to certify class claims against a different window manufacturer and its distributor, however, finding that individual issues predominated over common issues of law or fact as to the defective window claims, but the court certified claims against the window installer for class treatment.²³⁵⁶

Courts outside Colorado have expressed mixed views on whether class actions arising from construction defects affecting many single-family homes are properly subject to class certification.²³⁵⁷

§ 14.10.1-Rule 23 Class Action Certification Requirements

Despite many courts' reluctance to certify class actions, in the proper case such actions serve the twin pillars ofjustice and economy underlying C.R.C.P. 23. Class actions often allow class members to share litigation costs, rendering pursuit of their claims economical and feasible. A single class action can preserve judicial resources compared to multiple, separate lawsuits arising from the same common nucleus of facts.

Settling a class action requires court approval, including approval of attorney fees.²³⁵⁸ F.R.C.P. 23, governing class actions in federal court, was significantly amended effective December 1, 2003.

Generally, C.R.C.P. 23(a) requires the representative plaintiff(s) to establish, before a class may be certified, that: (1) the class is so numerous that joinder of all members is impracticable (numerosity); (2) there are questions of law or fact common to the class (commonality); (3) the claims or defenses of the representative plaintiff(s) are typical of those of the class (typicality); and (4) the representative plaintiffs) and his or her counsel will fairly and adequately protect the interests of the class (adequacy).²³⁵⁹

After certification, to maintain a class action, C.R.C.P. 23(b) requires the representative plaintiff(s) to continue to satisfy C.R.C.P. 23(a)'s prerequisites, and also to show:

1) Prosecution of separate actions by individual class members would create a risk of either (a) inconsistent or varying individual adjudications, that would create incompatible standards of conduct for the party opposing the class, or (b) individual adjudication that would dispose of the interests of absent individuals or impair their ability to protect their interests;
2) The party opposing the class has acted or refused to act on grounds generally applicable to the class, making injunctive or declaratory relief with respect to the class as a whole appropriate; or
3) Common questions of law or fact predominate over any questions affecting only individual members (predominance), and a class action is superior to any other available method of adjudicating the controversy (superiority).²³⁶⁰

When analyzing the predominance and superiority of a class action, the court must consider: (1) the interest 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 the particular forum; and (4) the difficulties likely to be encountered in the management of a class action.²³⁶¹

When considering whether a case should be certified and whether predominance exists, "a court must engage in a fact-driven, pragmatic inquiry balancing judicial efficiency against the need to provide a forum for resolution of disputed losses."²³⁶² Whether class certification is proper is within the court's discretion, and such certification will be upheld unless clearly erroneous.²³⁶³ The court has great flexibility in shaping the action, the relief granted, and its certification order, to achieve the purposes of the class action device.²³⁶⁴ Courts also have responsibility to exercise control over class actions, which may include reasonably limiting communications between the defendants and the class members before and after class certification.²³⁶⁵

Courts have certified fraudulent concealment claims for class treatment over objections that individualized questions of reliance predominated.²³⁶⁶ Courts are more receptive to class claims founded on identical failures to disclose material facts, particularly when the case involves a statutory disclosure duty, as opposed to claims involving affirmative misrepresentations.²³⁶⁷

CDARA II's requirement that the notice of claim process be satisfied as to each claimant's property before suit may proceed may impede class certification of construction defect claims.²³⁶⁸ However, a court may permit the certification process to proceed while precluding any individual claim from moving forward until the NCP is satisfied as to that individual claim. For more discussion of this question, see "[CDARA II's] Effect on Class Action Suits" in § 14.2.3.

§ 14.10.2-Interlocutory Appeal of Class Certification Ruling

C.R.S. § 13-20-901(1) provides, "A court of appeals may, in its discretion, permit an interlocutory appeal of a district court's order that grants or denies class action certification under court rule so long as application is made to the court of appeals within fourteen days after entry of the district court's order." The court of appeals considers five non-exclusive factors when determining whether to exercise its discretion to permit an interlocutory appeal of an order granting or denying class certification:

1) Whether the trial court's ruling effectively prevents the plaintiff from continuing to pursue the matter or places irresistible pressure on the defendant to settle (death knell);
2) Whether the trial court's class certification decision likely constitutes an abuse of discretion (substantial weakness);
3) Whether allowing the appeal will permit resolution of an unsettled legal issue important to the particular litigation, as well as important in itself;
4) The status of discovery, pendency of relevant motions, and length of time the action has been pending; and
5) The likelihood that future events could make immediate appellate review more or less appropriate.²³⁶⁹

Apart from the five non-exclusive factors listed above, special compelling circumstances may require a different result as to whether to permit interlocutory appeal of an order granting or denying class certification.²³⁷⁰ However, the most important consideration for making such determination is whether the trial court's order is likely to effectively dispose of the litigation.²³⁷¹

The Colorado Supreme Court's approval of a homeowners' association suing on behalf of its unit owners in a representative capacity as to matters affecting the common interest community under CCIOA²³⁷² avoids the need to seek class certification of such claims and...