Robert Benda, on behalf of himself and all others similarly situated v. Prairie Meadows Racetrack and Casino Inc. and Iowa Horsemen's Benevolent and Protective Association and Iowa Thoroughbred Breeders and Owners Association ( 2023 )

IN THE SUPREME COURT OF IOWA
No. 21–0649
Submitted January 18, 2023—Filed April 14, 2023
ROBERT BENDA, on behalf of himself and all others similarly situated,
Appellant,
vs.
PRAIRIE MEADOWS RACETRACK AND CASINO, INC.,
Appellee,
and
IOWA HORSEMEN’S BENEVOLENT AND PROTECTIVE ASSOCIATION and
IOWA THOROUGHBRED BREEDERS AND OWNERS ASSOCIATION,
Intervenors-Appellees.
Appeal from the Iowa District Court for Polk County, Scott D. Rosenberg,
Judge.
A horseman appeals the district court’s refusal to certify a class action to
pursue a claim that a horseracing venue breached its contracts with a
horsemen’s association. AFFIRMED.
May, J., delivered the opinion of the court, in which Christensen, C.J., and
McDonald and Oxley, JJ., joined. Mansfield, J., filed a dissenting opinion, in
which Waterman, J., joined. McDermott, J., took no part in the consideration or
decision of the case.
2
Todd M. Lantz (argued) of the Weinhardt Law Firm, Des Moines, and
Tyler M. Smith of Smith Law Firm, PLC, Altoona, for appellant.
Dennis P. Ogden (argued) and Thomas L. Flynn of Brick Gentry, P.C., West
Des Moines, for appellee.
Ryan G. Koopmans (argued), Waukee, for intervenor-appellee Iowa
Horsemen’s Benevolent and Protective Association.
Jeffrey M. Lipman (argued) of Lipman Law Firm, P.C., West Des Moines,
for intervenor-appellee Iowa Thoroughbred Breeders and Owners Association.
3
MAY, Justice.
“Our review of the district court’s ruling granting or denying certification
of a class is limited because the district court enjoys broad discretion” in
determining whether class certification is appropriate. Freeman v. Grain
Processing Corp., 895 N.W.2d 105, 113 (Iowa 2017) (quoting Legg v. W. Bank,
873 N.W.2d 756, 758 (Iowa 2016)). In this case, Robert Benda claims that Prairie
Meadows Racetrack and Casino, Inc., (Prairie Meadows) breached contracts that
govern the distribution of winnings among owners and breeders of successful
horses. Benda appeals the district court’s refusal to certify his case as a class
action. Based on the specific facts of this unusual case, we do not conclude that
the district court abused its broad discretion. There is a reasonable basis in the
record to conclude that Benda could not appropriately represent the class.
Comes v. Microsoft Corp., 696 N.W.2d 318, 326 (Iowa 2005) (“On appellate review,
the question is whether there is any reasonable basis in the record to support
the district court’s finding.”). Specifically, the record shows fundamental
conflicts as to (1) the core question of whether Prairie Meadows breached the
contracts, and (2) the appropriate remedy: a lump sum of money damages or—
as the contracts expressly provide—an equitable remedy involving payouts for
future horseraces.
Because the district court acted within its broad discretion, we affirm.
4
I. Background.
Prairie Meadows is Iowa’s only venue for live pari-mutuel1 racing of
thoroughbred horses. Pari-mutuel horseracing is heavily regulated. At the
federal level, the Interstate Horseracing Act regulates “interstate commerce with
respect to wagering on horseracing.” 15 U.S.C. § 3001(b) (2018); see id.§§ 3001–3007. The Act prohibits certain wagers on Prairie Meadows’s races
unless Prairie Meadows has “a written agreement with the horsemen’s group”
that represents the majority of owners and trainers racing there. Id.
§ 3004(a)(1)(A); see id. § 3002(12) (defining “horsemen’s group” for purposes of
the Act). For thoroughbred racing, that “horsemen’s group” is the Iowa
Horsemen’s Benevolent and Protective Association (Iowa HBPA). The Iowa HBPA
represents over 1,100 horsemen2 who race thoroughbred horses at Prairie
Meadows. Iowa HBPA “promotes the common business interests of the members
and strives to improve the conditions of the thoroughbred industry.”
There’s also state-level regulation. Iowa Code chapter 99D creates a
regulatory agency—the Iowa Racing and Gaming Commission (IRGC)—and vests
it with broad powers, including the power “[t]o regulate the purse structure for
race meetings.” Iowa Code §§ 99D.5, .7(5)(a) (2018). The Code also imposes some
particular duties on the IRGC. For example, section 99F.6 requires the IRGC to
“authorize” Prairie Meadows “to use receipts from gambling games and sports
1There appear to be two alternative spellings: pari-mutuel and parimutuel. The Iowa Code
uses “pari-mutuel,” and we follow suit. Iowa Code § 99D.2(7) (2018) (defining “[p]ari-mutuel
wagering”).
2In this context, “horsemen” is a gender-neutral term.
5
wagering within the racetrack enclosure to supplement purses for races
particularly for Iowa-bred horses pursuant to an agreement which shall be
negotiated between” Prairie Meadows “and representatives of the . . . horse
owners.” Id. § 99F.6(4)(a)(3). Those representatives are the Iowa HBPA.
This case focuses on “supplement purses,” also known as “purse
supplements.” These are additional amounts paid to owners and breeders of
Iowa-bred horses that finish in first through fourth place.3 As the term
“supplement” implies, these supplement purses are in addition to other purses
that the horses might win. Suppose that, in a particular race, a non-Iowa-bred
horse takes first and an Iowa-bred horse takes second place. The non-Iowa-bred
horse would take the base purse that had been designated for the first-place
winner. The Iowa-bred horse would win both the base purse designated for the
second-place winner and a supplement purse designated for Iowa-bred horses.4
Before the start of the racing season (which generally runs from May to
September), Prairie Meadows enters into a contract that governs the terms of
racing during that year’s season. Consistent with the statutory scheme, Prairie
Meadows enters these contracts with Iowa HBPA—whom the contracts describe
as “the representative entity for all horsemen racing at” Prairie Meadows. Also
3The amounts paid to breeders are also referred to as “breeder’s awards.” For our
purposes, we will use the term “purse supplements” to describe the amounts paid to both owners
and breeders of Iowa-bred horses.
4There are also races limited to Iowa-bred horses. There, the owner of each placing horse
receives both a base purse and a supplement.
6
consistent with the statutory scheme, the contracts are subject to approval by
the IRGC.
Through these contracts, Prairie Meadows and the Iowa HBPA determine
(subject to IRGC approval) the total amounts that Prairie Meadows will set aside
for thoroughbred racing for the season. For instance, in March 2010, Prairie
Meadows and the Iowa HBPA entered a contract governing the 2010–2014
seasons. In it, Prairie Meadows and the Iowa HBPA agreed that the annual “total
purses (including supplements)” for thoroughbred horses would be 83% of “11%
of the first $200 Million of net receipts” and “6% of the net receipts above $200
Million.” Similar terms appear in the January 2015 contract that governed the
2015–2019 seasons.
The contracts also address how these amounts should be divided between
base purses—which any horse can win—and supplements—which are
designated for Iowa-bred horses. According to the 2015 IRGC meeting minutes,
“for approximately 25 years” the supplement for Iowa-bred-horses had been
calculated using the “Rasmussen formula.” The Rasmussen formula was the
product of an agreement between Jim Rasmussen, who represented Prairie
Meadows; Dick Clark, who represented the Iowa HBPA; and Gary Lucas, who
represented the Iowa Thoroughbred Breeders and Owners Association (ITBOA).
ITBOA is a nonprofit organization responsible for promoting the breeding and
racing of thoroughbreds in Iowa. In 2020, ITBOA represented “400+ Iowa-bred
thoroughbred owners and breeders.” It is the largest association that represents
this group.
7
Under the Rasmussen formula, the purse supplement amount is set at
20% of the “net purse amount,” that is, 20% of the purses available to all horses.
For example, the 2004 and 2005 contracts called for “total purses (including
supplements) of $15 million.” This total was allocated between $2,500,000 for
purse supplements and $12,500,000 for base purses, that is, purses that any
horse could win. Thus the net purse amount (the total of base purses) was equal
to the total purse money divided by 1.2. As the contracts put it:
Calculation:
Net Purse Amount (Total Purses divided by 1.2) 12,500,000
Supplement (20% of Net Purse Amount) 2,500,000
Total 15,000,000
Similarly, the 2006 contract stated that “20% of the net purse amount
allocated for Thoroughbred Horses (the gross Thoroughbred Horse purse amount
divided by 1.20) shall be supplemented to Iowa bred horses placing in first
through fourth positions, but capped at a maximum of $50,000 per race.”
Similar language appears in the contracts for 2007, 2008, and 2009.
As mentioned, in 2010, Prairie Meadows and the Iowa HBPA entered into
a five-year agreement for the 2010–2014 seasons. It said: “20% of the net purse
amount allocated for Thoroughbred Horses each year shall be supplemented to
Iowa-bred horses placing in first through fourth positions, but capped at a
maximum of $50,000 per race.” Similar language appears in the 2015–2019
contract.
During the 2010 contract negotiations, there were disputes over a variety
of issues. To avoid future disputes, the Iowa HBPA and others asked the 2011
8
legislature to codify the practice of allocating purse supplements. That spring,
the legislature enacted Iowa Code section 99D.22, which states, in part:
No less than twenty percent of all net purse moneys distributed to
each breed, as described in section 99D.7, subsection 5, paragraph
“b”, shall be designated for registered Iowa-bred foals in the form of
breeder’s awards or purse supplement awards to enhance and foster
the growth of the horse breeding industry.
Iowa Code § 99D.22(1)(c).
Prairie Meadows and the Iowa HBPA believed that, through this statute,
the legislature had enacted their existing contractual practice—the Rasmussen
formula. But some ITBOA members were not satisfied with this approach. They
thought purse supplements should be calculated as 20% of the total purse
amount allocated to thoroughbreds. To illustrate the difference: under the
Rasmussen formula, if the total purse amount was $15,000,000, then the
amount of money available to all horses would be $12,500,000, and the purse
supplement would be 20% of $12,500,000, or $2,500,000. Under the alternative
approach, if the total purse amount was $15,000,000, then the amount available
to all horses would be $12,000,000, and the purse supplement would be
$3,000,000, that is, 20% of $15,000,000. Either way, Prairie Meadows pays
$15,000,000. The difference is how the money is disbursed.
In November 2014, the ITBOA filed a petition for declaratory order with the
IRGC. The ITBOA asked the IRGC to declare that this alternative approach was
required by the newly-enacted statute. Significantly, though, the ITBOA did not
ask the IRGC to make its order retroactive to 2014, 2013, 2012, or any prior
season. Nor did ITBOA ask for the alternative formula to apply in the 2015
9
season. Instead, ITBOA asked for it to “take effect January 1, 2016.” In other
words, ITBOA asked for the alternative formula to first take effect in the 2016
racing season.
The Iowa HBPA intervened. It argued for continued adherence to the
Rasmussen formula.
Following a hearing in January 2015, the IRGC issued a declaratory order.
The IRGC acknowledged that “for the last twenty-plus years,” Prairie Meadows
had calculated purse supplements for Iowa-bred horses according to the
Rasmussen formula. The IRGC also noted that the proper reading of the new
statute was “concededly a close question.” Ultimately, though, the IRGC
concluded that the statute required the use of ITBOA’s proposed formula.
However, “to avoid any disruptions during the 2015 meet and in order to best
protect all parties’ interests,” the IRGC stayed its order “until November 1,
2015”—i.e., after the 2015 meet concluded. So, under the IRGC order, the new
calculation would not take effect until the 2016 meet. Prairie Meadows could
continue to use the Rasmussen formula for the 2015 meet.
Over three years later, in December 2018, Benda commenced this action
against Prairie Meadows.5 Benda claimed that he “is a breeder and owner of
Iowa-foaled horses that performed well enough in races at Prairie Meadows from
2012–2015 that Benda was entitled to breeder’s awards and purse supplements
in each year.” Benda asserted “a class-wide claim to correct” what he
5In October 2019, Benda filed his first amended petition, the relevant pleading for
purposes of this appeal.
10
characterized as “a blatant miscalculation of awards due from Prairie Meadows
to Iowa horse breeders and owners.” Specifically, Benda alleged that Prairie
Meadows had illegally used the Rasmussen formula during the proposed class
period of 2012 through 2015.6 Benda claimed that this improper approach had
resulted in an underpayment of $1.8 million.
Benda asserted claims for unjust enrichment (count I), breach of implied
contract (count II), breach of written contract (count III), breach of statutory duty
(count IV), and declaratory relief (count V). Four of these five claims were based
on alleged breaches of statutory duties.7 One of Benda’s claims—count III—was
a third-party beneficiary claim based on the written contracts between Prairie
Meadows and the Iowa HBPA. As relief, Benda requested “certification of this
action as a class action” and “a judgment against Prairie Meadows . . . in an
amount sufficient to fully compensate the Plaintiff and the other Class Members
6The amended petition explains:
Rather than multiplying the net purse moneys for thoroughbreds and quarter
horses by 0.2 to determine the minimum amount it had to pay under section
99D.22, Prairie Meadows erroneously first divided the net purse by 1.2 and then
multiplied the quotient by 0.2. This miscalculation was used to determine the
amount of money deposited in a fund that was used to pay purse supplements.
. . . The difference between what Prairie Meadows should have paid in
breeder’s awards and purse supplements (according to Iowa Code § 99D.22(1)(c),
the written agreements with the IAHBPA, and the data that Prairie Meadows
reported to the IRGC) and Prairie Meadows’ actual distributions in the form of
breeders awards and purse supplements was over $1.8 million from 2012–2015.
7Count I alleged Prairie Meadows had been unjustly “enriched” through “racing activity
that was premised on the statutory framework for purse supplements and breeder’s awards.”
Count II alleged an implied contract that “it would distribute purses in accordance with
applicable Iowa law.” Count IV alleged “Prairie Meadows violated its statutory obligations and
duties to Plaintiff under the plain terms set forth in Iowa Code Chapter 99D and all related
sections of the Iowa Code.” Count V sought a declaration that plaintiff “is a beneficiary entitled
to purse supplements and breeder’s awards under Iowa Code Chapter 99D and all related
sections of the Iowa Code.”
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for the underpayment of Iowa breeder’s awards and purse supplements from
2012–2015, plus interest and attorney’s fees.”
Prairie Meadows answered and asserted affirmative defenses. Among other
things, Prairie Meadows asserted that it “is not a proper party in this action
because it received no benefit from” any erroneous division of purses.
Iowa HBPA filed a motion to intervene and an answer. Iowa HBPA
emphasized that Benda’s lawsuit was premised on contracts between Iowa HBPA
and Prairie Meadows. And, according to Iowa HBPA, “there was no breach of the
Prairie Meadows/Iowa HBPA contracts.” Iowa HBPA asserted that “Benda’s
claims should be dismissed and his request to certify a class denied.”
The district court granted Iowa HBPA’s motion to intervene. Soon after,
Iowa HBPA filed a motion for summary judgment, which Prairie Meadows joined.
While the summary judgment motion was pending, Benda filed a motion
for class certification. He described the proposed class as “[a]ll horse breeders or
owners who were eligible to receive . . . supplement awards from Prairie Meadows
for one or more Iowa-foaled horses . . . from 2012–2015.”
ITBOA then moved to intervene. With its motion, ITBOA filed a resolution
of its board of directors. Here are some excerpts from the resolution:
WHEREAS, the Board has been advised by counsel on
Benda’s claims and the relief requested in the lawsuit, and
WHEREAS, ITBOA’s members would be potential members of
the class action proposed by Benda, and
WHEREAS, Benda’s requested relief would damage Iowa’s
racing industry, and would be contrary to the interests of ITBOA’s
members, and
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WHEREAS, Benda’s requested relief, and his attorney’s
request for fees, are not in the best interest of Iowa-bred owners and
breeders, and
WHEREAS, neither Benda nor his counsel can or should
represent the interests of Iowa-bred owners and breeders, because
IRGC revoked Benda’s license to race horses in Iowa, and
WHEREAS, the ITBOA, as representative of its 400+ members
who would be affected by this lawsuit, should be allowed to intervene
in Benda’s lawsuit . . . .
ITBOA, Iowa HBPA, and Prairie Meadows all resisted Benda’s motion for
class certification. Each presented supporting evidence. For instance, Iowa HBPA
presented an affidavit from William Gessmann, who served as president of Iowa
HBPA from 2002 to 2017. During that time, Gessmann “led the contract
negotiations with Prairie Meadows on behalf of the Iowa HBPA.” In particular,
Gessmann “represented the Iowa HBPA in negotiating and signing” the
2010–2014 and 2015–2019 contracts at issue in this case. In Gessmann’s view,
Prairie Meadows had “allocated funds to purse supplements consistent with the
Iowa HBPA’s intent.” “I do not agree that Prairie Meadows breached the Iowa
HBPA contract as alleged by Benda,” Gessmann added.
Meanwhile, the district court ruled on the pending summary judgment
motion. The court concluded that because section 99D.22(1)(c) creates no private
cause of action, Benda’s claim for breach of statutory duty (count IV) must be
dismissed. Likewise, the court reasoned, Benda cannot bring any other claims
that rely on section 99D.22(1)(c) “to create a common law duty.” Accordingly, the
court dismissed Benda’s claims for unjust enrichment (count I), breach of
implied contract (count II), and declaratory relief (count V). But the court
13
declined to dismiss Benda’s claim for breach of the written contracts. The court
believed that the agreements between Prairie Meadows and the Iowa HBPA
created contractual duties that were independent of the statute.
Soon after, the district court heard the motion for class certification.
Ultimately, the court entered an order denying certification. Benda appealed
under Iowa Rule of Civil Procedure 1.264(3), which permits an immediate appeal
as of right from “[a]n order certifying or refusing to certify an action as a class
action.”
II. Standard of Review.
As noted, “[o]ur review of the district court’s ruling granting or denying
certification of a class is limited because the district court enjoys broad
discretion in the certification of class action lawsuits.” Freeman, 895 N.W.2d at
113 (quoting Legg, 873 N.W.2d at 758). We adopt a district court’s findings if
“there is any reasonable basis in the record to support” them. Comes,
696 N.W.2d at 326 (citing Stone v. Pirelli Armstrong Tire Corp., 497 N.W.2d 843,
846–49 (Iowa 1993)). “Reversal is appropriate only if the record reveals that the
district court’s decision was based on clearly untenable or unreasonable
grounds.” Stone, 497 N.W.2d at 845.
III. Analysis.
A. Introduction. Class actions are governed by Iowa Rules of Civil
Procedure 1.261 through 1.279. As the district court properly observed, “[o]ur
class-action rules are remedial in nature and should be liberally construed to
favor the maintenance of class actions.” Comes, 696 N.W.2d at 320.
14
Under our rules, a class may be certified
if four requirements are met: (1) the class is so numerous or so
constituted that joinder is impracticable; (2) a common question of
law or fact exists; (3) the action should be certified as a class action
for ‘fair and efficient adjudication of the controversy’; and (4) the
representative parties will protect the interests of the class fairly and
adequately.
Iowa Ann. Conf. of United Methodist Church v. Bringle, 409 N.W.2d 471, 474 (Iowa
1987); Iowa R. Civ. P. 1.262(2) (permitting certification if the district court “finds
all of the following:” (1) “[t]he requirements of rule 1.261 have been satisfied,”
(2) “[a] class action should be permitted for the fair and efficient adjudication of
the controversy,” and (3) “[t]he representative parties fairly and adequately will
protect the interests of the class”); see id. r. 1.261(1)–(2) (requiring (1) the class
to be “so numerous or so constituted that joinder of all members, whether or not
otherwise required or permitted, is impracticable” and (2) “a question of law or
fact common to the class”).
“The plaintiff has the burden of establishing that a purported class of
plaintiffs meets the prerequisites.” Vos v. Farm Bureau Life Ins., 667 N.W.2d 36,
45 (Iowa 2003). “A failure of proof on any one of the prerequisites is fatal to class
certification.” Id.In this case, the district court did not find that any of the prerequisites
had been met. Its order focused on two concerns. First, the court rejected the
notion that class certification would advance the “fair and efficient adjudication
of the controversy,” as rule 1.262(2)(b) requires. Iowa R. Civ. P. 1.262(2)(b).
Second, the court found “Benda is not an adequate representative party to
protect the interests of the purported class members,” as rule 1.262(2)(c)
15
requires. Id. r. 1.262(2)(c). Because we conclude that the question of adequate
representation is dispositive, we focus on it. See Stone, 497 N.W.2d at 846(concluding district court did not abuse its discretion in denying class
certification solely on basis of adequacy of representation).
B. Fair and Adequate Representation. Under rule 1.262(2)(c), a class
may not be certified unless the class representative will “fairly and adequately
. . . protect the interests of the class.” Iowa R. Civ. P. 1.262(2)(c). We have said
that “adequacy of representation is perhaps the most significant of the
prerequisites to a determination of class certification.” Stone, 497 N.W.2d at 846(quoting Folding Cartons, Inc. v. Am. Can Co., 79 F.R.D. 698, 701 (N.D. Ill. 1978));
see also Rattray v. Woodbury County, 614 F.3d 831, 835 (8th Cir. 2010) (“The
inquiry into adequacy of representation, in particular, requires the district
court’s close scrutiny, because the purpose of Rule 23(a)(4) is to ensure due
process for absent class members, who generally are bound by a judgment
rendered in a class action.”).
A district court may not conclude that “the representative parties fairly
and adequately will protect the interests of the class” unless the court
find[s] all of the following:
a. The attorney for the representative parties will adequately
represent the interests of the class.
b. The representative parties do not have a conflict of interest
in the maintenance of the class action.
c. The representative parties have or can acquire adequate
financial resources, considering rule 1.276, to ensure that the
interests of the class will not be harmed.
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Iowa R. Civ. P. 1.263(2).
When considering the adequacy of representation, “each case must be
judged on its own facts.” Stone, 497 N.W.2d at 847. “Resolution of the issue
depends on all the circumstances presented.” Id. “When a court denies class
action certification on the basis of inadequate representation there are usually
special circumstances or a combination of factors involved.” Id.That is true here. Under the particular circumstances of this highly
unusual case, we find no abuse of discretion in the district court’s determination
that Benda is not an appropriate class representative. Rather, we see multiple
areas of conflict between Benda and the interests of potential class members.
First, as explained, Benda’s proposed class action is opposed by the Iowa
HBPA, which represents over 1,100 horsemen who run thoroughbreds at Prairie
Meadows. Indeed, under both state and federal law, the Iowa HBPA is the legally
designated representative of horsemen for purposes of bargaining and signing
purse agreements with Prairie Meadows. And the very contracts on which this
case relies were negotiated by and entered into by the Iowa HBPA. But Iowa
HBPA does not believe Prairie Meadows breached the contracts. As part of its
opposition to class certification, Iowa HBPA filed an affidavit from William
Gessmann, a former president of the Iowa HBPA who actually negotiated the
contracts at issue in this case. Gessmann testified that “Prairie Meadows
allocated funds to purse supplements consistent with the Iowa HBPA’s intent.”
There’s more. Although the core premise of Benda’s suit is that Prairie
Meadows breached by following the Rasmussen formula, the Iowa HBPA believes
17
the opposite is true.8 The Iowa HBPA notes that it “indisputably wanted and
urged Prairie Meadows to perform the contract using the Rasmussen formula.”
This is not a brand-new position that Iowa HBPA manufactured in response to
Benda’s current suit. Back in 2015—three years before Benda’s lawsuit—the
Iowa HBPA litigated before the IRGC about the proper allocation of purse money
and supplements. The record from those 2015 proceedings makes it clear that—
in Iowa HBPA’s view—the Rasmussen formula was the right way for Prairie
Meadows to distribute purse money. And that view is, of course, the opposite of
Benda’s theory in this case.
That’s not all. Even if the Iowa HBPA agreed with Benda’s view of the
merits, it would still think that this class action is a bad idea. Iowa HBPA
explains that horseracing requires “the coordination of owners, trainers,
breeders, and—obviously—Prairie Meadows.” They must work “together for the
common good of the entire industry.” But “[s]uing Prairie Meadows for over
$2 million,” as Benda proposes, would “hurt[] Prairie Meadows, who is a partner
in promoting the horseracing industry in Iowa.” And so, Iowa HBPA and its
members “have an interest in opposing this lawsuit, regardless of the merits.”
Iowa HBPA is not alone in resisting this suit. As noted, although Iowa
HBPA is the statutorily designated representative of the horsemen and—indeed—
the promisee for the contracts on which Benda’s case is based, there is another
8In his reply brief, Benda argues that even if the Rasmussen formula is the proper
calculation, Prairie Meadows still did not follow the formula correctly and, therefore, underpaid
purse supplements. Even if this is true, we do not believe it resolves the important conflicts
present here. For one thing, it doesn’t resolve the conflict over whether the Rasmussen formula
should apply. Also, as will be explained, it doesn’t resolve the conflict over appropriate remedies.
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important group that represents horsemen who race at Prairie Meadows. That
group is ITBOA, a 400+ member organization that represents “Iowa-bred
thoroughbred owners and breeders.” Because of ITBOA’s focus on Iowa-bred
horses, “ITBOA’s members would be potential members of the class action
proposed by Benda.” But ITBOA agrees with Iowa HBPA that the class action is
a bad idea. ITBOA thinks that “Benda’s requested relief would damage Iowa’s
racing industry, and would be contrary to the interests of ITBOA’s members.”
In short, Benda’s suit faces substantial resistance. As Iowa HBPA
observes, “it may be unprecedented” that “two groups who already represent
virtually every proposed class member have intervened to say that this case
should be dismissed and class certification denied.” This is particularly striking
because Benda has not countered by identifying any group of potential class
members—not even just a handful—who support the case. The one potential
class member who has given support to the suit appears to have based her
position on her knowledge and trust of Benda’s attorneys. She admitted that she
hadn’t “gotten into the merits” of the case and didn’t know whether Benda would
adequately represent the interests of all of the potential class members.
In Benda’s view, though, the opposition he faces here is no different from
that in Kragnes v. City of Des Moines, 810 N.W.2d 492, 498 (Iowa 2012). In
Kragnes, we concluded that—although some class members opposed the class
action—there was “no fundamental conflict among the class members” as to
whether the defendant city had collected fees illegally. Id. at 500. Here, though,
there are fundamental conflicts as to whether Prairie Meadows did anything
19
wrong. Both ITBOA and Iowa HBPA hold the position that Benda’s suit “has no
merit.” And Iowa HPBA believes Prairie Meadows made appropriate payments
from 2012 through 2015. That’s a fundamental conflict about the central merits
issue in this case, namely: Did Prairie Meadows breach the contracts by failing
to make appropriate payments from 2012 through 2015?
There are other problems, too. As the district court noted, the IRGC has
revoked Benda’s license to race horses in Iowa.9 ITBOA believes this means that
Benda “neither . . . can [n]or should represent the interests of Iowa-bred owners
and breeders.” Others have expressed similar views. And our cases acknowledge
that “[t]he stature of the purported class representative is a legitimate area of
inquiry.” Stone, 497 N.W.2d at 847.
But we are much more troubled by a different aspect of Benda’s license
situation. The contracts on which Benda’s suit depends include a clause that
dictates the remedy for underpayment of purses or supplements. It provides that
“[a]ny underpaid purses or supplements” from prior years must be “set aside
solely to enhance purses and supplements” in future years. Benda doesn’t want
this remedy because—unlike many possible class members—Benda is no longer
racing at Prairie Meadows. In his deposition, Benda was asked about the
possibility of requiring Prairie Meadows to pay out the alleged underpayment
through future purse supplements. Benda responded: “Well, that would be
unfair to the owners in 2012 to ’15 that no longer are participating. How do they
9In his reply brief, Benda points out that horses that he bred in Iowa are still racing at
Prairie Meadows. However, we do not believe this resolves the conflicts we have described.
20
recover -- how do they recover? Such in a specific instance myself. I’m not racing.”
(Emphasis added.).
According to Benda’s own testimony, then, the remedy prescribed in the
contracts is not a remedy that would benefit Benda—although it might benefit
other class members who still race at Prairie Meadows. This shows that Benda
has a conflict with class members that is “fundamental, going to the specific
issues and controversies.” Vignaroli v. Blue Cross of Iowa, 360 N.W.2d 741, 746
(Iowa 1985). And it shows Benda has a “conflict of interest in the maintenance
of the class action” for purposes of rule 1.263(2)(b). Iowa R. Civ. P. 1.263(2)(b);
Stone, 497 N.W.2d at 848 (holding the district court could properly consider a
conflict between the potential class representative, who no longer worked for
defendant-employer, and potential class members who remain as employees).
This alone shows denial of certification was not an abuse of the district court’s
“broad discretion.” Kragnes, 810 N.W.2d at 503 (“[T]he applicable standard of
review accords broad discretion to the district court . . . .”).
We have considered all of Benda’s counterarguments. For example, we
note Benda’s suggestion that “Iowa’s class action rules do not permit an inquiry
into the merits of class action claims for relief.” We think the analysis is
somewhat more nuanced. Certainly, we agree that class certification doesn’t
depend “on a determination of whether the plaintiffs will ultimately prevail on
the merits.” Vos, 667 N.W.2d at 45. This doesn’t mean, though, “that the court
may not require sufficient information to form a reasonable judgment in deciding
whether to certify a class action.” Id. at 46 (quoting Martin v. Amana
21
Refrigeration, Inc., 435 N.W.2d 364, 367–68 (Iowa 1989)). Indeed, “[b]ecause ‘the
class determination generally involves considerations that are enmeshed in the
factual and legal issues comprising the plaintiff’s cause of action,’ ” the class
certification “analysis often requires the court ‘to probe behind the pleadings
before coming to rest on the certification question.’ ” Id. (quoting Cohn v. Mass.
Mut. Life Ins., 189 F.R.D. 209, 212 (D. Conn. 1999)). That is true here. As
explained, the question of adequate representation is interlaced with possible
remedies available to the class as well as the basic question of whether Prairie
Meadows breached the contracts.
Benda makes other points that are worthwhile. For instance, Benda
suggests that the district court placed too much emphasis on Benda’s various
legal and financial problems, including alleged impropriety by Benda in
connection with horseracing. The district court believed that these various
problems would impact Benda’s credibility and, therefore, “make his
representation less effective.” As to the specific question of credibility, we
disagree with the district court. As we confirmed with counsel at oral arguments,
it is unlikely that Benda would even have to testify at a trial of this matter. And
so his credibility as a witness is not especially relevant. Moreover, because Benda
is represented by highly-skilled attorneys who are fronting the costs of this
litigation, Benda’s financial problems haven’t and wouldn’t undermine his ability
to advance the litigation.
All the same, though, Benda’s problems are not irrelevant. As noted, they
impact Benda’s stature. Much more importantly, though, Benda’s problems have
22
led to him losing his license to race horses. They make it unlikely that he will
race at Prairie Meadows again. And that creates fundamental conflicts between
Benda and horsemen he wants to represent.
III. Conclusion.
As we emphasized in Kragnes, “the applicable standard of review accords
broad discretion to the district court” in determining whether conflicts preclude
class certification. Kragnes, 810 N.W.2d at 503. Applying this deferential
standard of review to the unusual facts of this particular case, we find no abuse
of discretion in the district court’s determination that certification is
inappropriate. We affirm.
AFFIRMED.
Christensen, C.J., and McDonald and Oxley, JJ., join this opinion.
Mansfield, J., files a dissenting opinion, in which Waterman, J., joins.
McDermott, J., takes no part.
23
#21–0649, Benda v. Prairie Meadows Racetrack and Casino, Inc.
MANSFIELD, Justice (dissenting).
I respectfully dissent.
I. Class Representation Is Adequate.
In my view, Robert Benda is an adequate class representative under Iowa
Rule of Civil Procedure 1.263(2). His claim is a third-party beneficiary claim for
breach of contract; Benda alleges misapplication of a mathematical payment
formula. As the majority notes, “[I]t is unlikely that Benda would even have to
testify at a trial of this matter.” Benda is represented by capable class action
counsel who are fronting the costs of litigation. Benda’s licensure status and
other legal or financial problems are irrelevant to the contract interpretation
issues at the heart of this case.
Benda may have had past conflicts with the Iowa Horsemen’s Benevolent
and Protective Association (Iowa HBPA) and Prairie Meadows, but rule 1.263(2)
requires only that he not have “a conflict of interest in the maintenance of the
class action.” Iowa R. Civ. P. 1.263(2)(b) (emphasis added). There is no showing
that Benda is conflicted in that sense. He will be financially better off if this
lawsuit is successful, and the defendants do not point to any reason why he
would not be motivated to pursue it.
The majority really is advancing several other reasons why a class should
not be certified. The district court did not rely on these reasons. I do not find any
of them persuasive or supported by our class action rules.
24
II. The Opposition of the Iowa HBPA Is Not a Reason for Denying
Certification; They Have a Conflict of Interest.
One reason is that the Iowa HBPA opposes Benda’s suit. That’s not
surprising. The Iowa HBPA negotiated the contract on which Benda is suing. If
Benda has a claim, that means the Iowa HBPA neither negotiated nor
administered the contract correctly. So the Iowa HBPA is not a disinterested
party. If anybody has a conflict of interest, it is the Iowa HBPA. The Iowa HBPA’s
opposition is not a reason for denying class certification.
III. The Opposition of Some Class Members Is Not a Reason for
Denying Certification.
Nor is the opposition of some class members a reason for denying class
certification. Neither the Iowa HBPA nor the Iowa Thoroughbred Breeders and
Owners Association (ITBOA) surveyed their members. Many might support the
lawsuit if they saw the prospect of receiving cash payments. Nonetheless, I
accept for purposes of discussion that some class members are opposed to
Benda’s lawsuit. That is not enough to defeat class certification. See Kragnes v.
City of Des Moines, 810 N.W.2d 492, 500 (Iowa 2012); Vignaroli v. Blue Cross of
Iowa, 360 N.W.2d 741, 746–47 (Iowa 1985). In any securities class action,
various insiders will have large holdings of stock in the corporation and will be
opposed to class certification. Do they get a veto? Of course not. The situation
may be similar here.
25
IV. The Record Indicates That Prairie Meadows Can Pay a Judgment;
Any Decision to Pursue Prior Overpayments Would Be That of Prairie
Meadows.
The reasons given by the Iowa HBPA and the ITBOA for not allowing this
litigation against Prairie Meadows to go forward—even if the claim has legal
merit—are also unpersuasive. A successful lawsuit would “hurt” Prairie
Meadows only in the sense that paying a casino jackpot hurts Prairie Meadows.
The record shows that Prairie Meadows generates a “casino net win” of
approximately $200,000,000 per year. That is more than enough to pay a verdict
in this case.
I also doubt that anyone other than Prairie Meadows would end up paying
any part of a verdict or settlement in this case. If Prairie Meadows decides to
pursue owners and breeders who received prior overpayments in good faith, that
would be a decision attributable to Prairie Meadows, not anyone else.
Note that we affirmed class certification in Kragnes v. City of Des Moines
even though the defendant there was not a racetrack and casino earning
$200,000,000 a year but a city being ordered to pay “roughly $40 million” to its
residents. 810 N.W.2d at 498, 515. This was a much clearer case of class
members being forced to fund their own successful class action, including the
attorney fees for the class counsel. See id. at 496. True, the city’s residents were
to receive tax refunds, but the residents would end up paying for those refunds
(plus attorney fees) through whatever financing mechanism the city used. Id. at
502–03.
26
V. The Contract Does Not Defeat Benda’s Class Claim.
Finally, the majority contends that Benda’s third-party beneficiary breach
of contract claim will fail on the merits. The majority points to a contract clause
relating to “Underpaid Purses.” The majority doesn’t actually quote the clause,
and I believe a quotation from the contract shows that the clause is plainly
inapplicable:
Underpaid Purses From Prior Years. To the extent that PRAIRIE
MEADOWS has not fully distributed all net purse money or purse
supplements for Thoroughbred Horses from prior years, such
underpaid funds shall be segregated and set aside by PRAIRIE
MEADOWS in a separate interest bearing account (the “Account”)
for Thoroughbred Horse racing at PRAIRIE MEADOWS, the principal
of which shall be paid in purses and/or supplements for
Thoroughbred Horse racing at PRAIRIE MEADOWS in subsequent
years.10
To my reading, this paragraph deals with the situation where Prairie
Meadows has leftover purse and purse supplement money that “has not [been]
fully distributed.” Such funds go into an escrow to enhance future purses and
supplements. That’s not the situation here. Prairie Meadows doesn’t have leftover
money; it is alleged to have paid out according to the wrong formula. Iowa HBPA’s
executive director confirmed that this “underpayment account” has no
connection to the purse supplements for Iowa horses.
Normally, “we decline to ‘engage in free-ranging merits inquiries at the
certification stage.’ ” Freeman v. Grain Processing Corp., 895 N.W.2d 105, 120
(Iowa 2017) (quoting Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455,
10The quotation is from the 2015 contract. The same wording appears in the 2010
contract except the phrase “all allotted purses” is used instead of “all net purse money or purse
supplements.”
27
466 (2013)). “The merits should be analyzed only to the extent relevant in
determining whether the rules have been satisfied.” Id. But even if we were to
make an exception to this practice and examine the merits here, I’m not
persuaded that the “Underpaid Purses From Prior Years” clause provides a
defense.
I would also note that Benda’s third-party beneficiary breach of contract
claim has already been through the summary-judgment wringer and emerged
unscathed. The defendants did not raise this particular clause as a reason for
granting summary judgment.
VI. This Case Is Well Suited for Class Adjudication.
Our cases emphasize that “the proponent’s burden is light” to establish
the grounds for class certification. Freeman, 895 N.W.2d at 114 (quoting City of
Dubuque v. Iowa Tr., 519 N.W.2d 786, 791 (Iowa 1994)). Benda met that light
burden. As the majority acknowledges, “[t]he class action rules should be
‘liberally construed and the policy should favor maintenance of class actions.’ ”
Id. (quoting Lucas v. Pioneer, Inc., 256 N.W.2d 167, 176 (Iowa 1977) (en banc)).
“A key factor is whether ‘common questions of law or fact predominate over any
questions affecting only individual members.’ ” Id. at 115 (quoting Iowa R. Civ.
P. 1.263(1)(e)). That key factor is met here. All several hundred class members
are in the same boat: their claims rise or fall based on resolution of the disputed
formula. If Benda’s interpretation prevails, the class members all were underpaid
and the individual recoveries will be based on simple math. That common
question—which payout formula governs—predominates over individual issues.
28
Importantly, the amount of each individual claim is probably too small to
justify individual lawsuits. These claims will be heard, if at all, as a group. As we
reiterated in Freeman v. Grain Processing Corp., the goal of our class action rules
is the
efficient resolution of the claims or liabilities of many individuals in
a single action, the elimination of repetitious litigation and possibly
inconsistent adjudications involving common questions, related
events, or requests for similar relief, and the establishment of an
effective procedure for those whose economic position is such that
it is unrealistic to expect them to seek to vindicate their rights in
separate lawsuits.
Id. at 114 (quoting Comes v. Microsoft Corp., 696 N.W.2d 318, 320 (Iowa 2005)).
That goal is thwarted by today’s majority opinion, which leaves the putative class
members without a meaningful remedy.
VII. Conclusion.
For all these reasons, I would reverse the district court’s order denying
class certification and remand for further proceedings. Of course, nothing is
permanent, least of all class action certification. Based on later developments, a
class can be decertified. Freeman, 895 N.W.2d at 119–20. For example, if it turns
out that Benda is truly alone on his own island and that no one else in the class
wants the case to go forward, decertification could be ordered for lack of
numerosity. Benda could then pursue his own individual claim. That’s not the
state of the record here.
Waterman, J., joins this dissent.