Ruling Class: Evaluating Class Allegations for Complex Construction Claims in California

• Citation: Vol. 34 No. 1
• Publication year: 2016
• Author: Michael Parme

Ruling Class: Evaluating Class Allegations for Complex Construction Claims in California

Michael Parme

Michael Parme is a Senior Associate in Haight Brown & Bonesteel, LLP's San Diego office. Mr. Parme's litigation practice encompasses the defense of commercial and insurance-related civil actions. He is a Certified Litigation Management Professional and has written and presented on issues related to complex and class action litigation. Mr. Parme is a graduate of Notre Dame Law School (J.D. 2008).

For more than a half century, the class action has been utilized with increasing frequency to efficiently prosecute a multitude of similar individual claims. The class action allows one lawsuit to encompass the claims of numerous individuals so long as their claims are sufficiently similar pursuant to established criteria. Unquestionably, this confers a benefit not only on the class members, who in many cases would not otherwise individually seek relief, but also benefits the judicial system by promoting economy. While the class action has thrived in certain contexts such as consumer and employment litigation, practitioners have also sought to utilize it in other contexts. This article looks at how this proliferation has impacted construction litigation and evaluates the implications of class certification from a risk management perspective.

Part I of this article reviews the underlying framework and legal standard for certification of class action claims in California. Part II frames the issue of class certification in the context of construction litigation and discusses its application. Part III reviews California case law specific to certification of construction-related claims, addressing the substantive arguments both for and against certification. Part IV distills the substantive law into a practical approach for evaluating a construction defect lawsuit with class action allegations.

I. THE STANDARD FOR CLASS CERTIFICATION IN CALIFORNIA

California Code of Civil Procedure section 382 authorizes class actions when the question is "one of a common or general interest, of many persons, or when the parties are numerous, and it is impractical to bring them all before the court . . . ." The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members.¹ The "community of interest" requirement requires the court to determine whether (1) common questions of law or fact predominate, (2) the class representative has claims or defenses typical of the class, and (3) the class representative can adequately represent the class.²

This article focuses on the "community of interest" component, and, more specifically, the question of predominance. While ascertainability must be shown to obtain certification of a class, this is often not difficult to establish in a construction defect lawsuit. In the case of, for example, a class of condominium or single-family homeowners, the class can be ascertained with minimal difficulty given the availability of title records, sales documentation, and limited geographical proximity of the proposed class members. Similarly, whether the class representative's claim is typical of the class and whether he or she can adequately represent the class are no doubt important issues. Nevertheless, courts have discretion to allow a party to cure, by substitution or amendment, a deficiency related to a class representative. Particularly where the lawyers seeking certification can show that such a cure is feasible, courts are disinclined to deny class certification based solely on these issues.

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Predominance, on the other hand, directly examines the plaintiffs' theory of liability and underlying injury. The Supreme Court of California formulates the question of predominance as follows:

The "ultimate question" the element of predominance presents is whether "the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants." [Citations.] The answer hinges on "whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment." [Citation.] A court must examine the allegations of the complaint and supporting declarations [citation] and consider whether the legal and factual issues they present are such that their resolution in a single class proceeding would be both desirable and feasible.³

This determination of whether common questions of law and fact predominate is, generally speaking, how the court determines whether class certification should stand or fall. The plaintiff will argue the prevalence of common questions of law and fact justifies dispensing with a case-by-case approach. The defendant, on the other hand, will contend the common questions do not predominate and the case involves distinct claims and fact questions that should be separately adjudicated. These arguments are presented to the court through a motion for class certification filed by the plaintiffs.

The burden is on the moving party to provide substantial evidence of predominance.⁴ Courts have interpreted this requirement to mean that the evidence presented is not qualified, tentative, or conclusory.⁵ The defendant must then offer evidence in opposition to the motion for class certification challenging the evidence of predominance offered by the plaintiffs.

Ultimately, the court will determine whether the case is appropriate to be certified as a class action or whether it should proceed only as to the named plaintiff or plaintiffs. The stakes are high for both sides at the class certification stage. A ruling in favor of the plaintiffs normally increases the defendant's exposure, oftentimes significantly. Denial of class certification effectively pulls the rug out from under the plaintiffs, forcing them to pursue relief individually, or perhaps not at all. As such, it is important for practitioners to have a strong grasp of both the law of the case as well as the underlying facts that potentially support or defeat predominance. The next section looks at the substantive law that applies to certification of construction-related claims.

II. FRAMING THE ISSUE: CERTIFICATION IN CONSTRUCTION LITIGATION

Class certification arises in the realm of construction litigation in cases that present a large number of putative plaintiffs that have each allegedly suffered a legally cognizable injury resulting from the same construction defect or underlying event. In the case of a lawsuit presenting ten single-family homes involving the same defect, class certification would almost certainly not be granted. The pool of plaintiffs is simply too small to justify presenting it as a class action. The plaintiffs would likely proceed jointly as plaintiffs or by separate lawsuits. In contrast, class certification might be utilized in a lawsuit that presents allegations regarding 300 condominium units that manifest a defect or injury to property that is not designated common area by the community's covenants, conditions, and restrictions. Depending on what building components are designated as the owner's separate property (in other words, not owned in common with other members of the community), the case may be suitable for consideration as a class action if the class of...