Mattson v. Montana Power Co. , 368 Mont. 1 ( 2012 )

December 27 2012
DA 11-0413
IN THE SUPREME COURT OF THE STATE OF MONTANA
2012 MT 318REBECCA E. MATTSON, et al.,
Plaintiffs and Appellants,
v.
MONTANA POWER COMPANY, PPL MONTANA, LLC,
TOUCH AMERICA HOLDINGS, INC., MONTANA POWER LLC,
a/k/a NORTHWESTERN ENERGY, and NORTHWESTERN CORPORATION,
Defendants and Appellees.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and For the County of Flathead, Cause No. DV-99-548(A)
Honorable Katherine R. Curtis, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
James H. Goetz (argued), Goetz, Gallik & Baldwin, P.C.,
Bozeman, Montana
Calvin T. Christian, Christian, Samson, Jones & Chisholm,
Missoula, Montana
Jamie S. Franklin, The Franklin Law Firm, LLC, Chicago, Illinois
Larry Elison, Attorney at Law, Gold Canyon, Arizona
Thomas R. Meites, Michael M. Mulder, Meites, Mulder & Glink,
Chicago, Illinois
For Appellee Montana Power Company:
Joseph Seifert, Keller, Reynolds, Drake, Johnson & Gillespie, P.C.,
Helena, Montana
David A. Dial, Nicholas P. Panayotopoulos, Michael Sexton, Kristen L.
Henrichs, Emily A. Poe, Weinberg, Wheeler, Hudgins, Gunn & Dial,
Atlanta, Georgia
For Appellee PPL Montana, LLC:
Martin S. King, Sean Morris (argued), Worden Thane, P.C.,
Missoula, Montana
Argued and Submitted: May 9, 2012
Decided: December 27, 2012
Filed:
__________________________________________
Clerk
2
Justice James C. Nelson delivered the Opinion of the Court.
¶1 Plaintiffs are a group of landowners or former landowners with properties on the
shores of Flathead Lake and a portion of the upper Flathead River (Landowners). They
commenced the instant action in 1999 in the Eleventh Judicial District Court, Flathead
County, against Montana Power Company (MPC) and MPC’s successor, PPL Montana,
LLC (PPLM).
¶2 The present appeal is the third in the course of this litigation. In Mattson v. Mont.
Power Co., 2002 MT 113, 309 Mont. 506, 48 P.3d 34 (Mattson I), this Court upheld the
District Court’s denial of PPLM’s motion to substitute the District Court judge. In
Mattson v. Mont. Power Co., 2009 MT 286, 352 Mont. 212, 215 P.3d 675 (Mattson II),
this Court reversed a portion of the District Court’s order granting summary judgment in
favor of the defendants, vacated the District Court’s orders concerning class certification,
and remanded for further proceedings.
¶3 On remand, the District Court denied Landowners’ renewed motion for class
certification. The sole issue in this appeal is whether the District Court erred in its
application of Mattson II to the class-certification question under Rule 23 of the Montana
Rules of Civil Procedure. We conclude that the District Court did so err. We therefore
reverse and remand with instructions to certify the class, as specified below, and for
further proceedings consistent with this Opinion.
BACKGROUND
¶4 Flathead Lake is located in northwest Montana. Covering 191 square miles, it is
the largest natural freshwater lake west of the Mississippi. Its two primary tributaries are
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the upper Flathead River and the Swan River, which enter from the north and east. The
lake drains to the south into the lower Flathead River.
¶5 In 1930, the Federal Power Commission issued Rocky Mountain Power Company
(RMPC, a subsidiary of MPC) a 50-year license to construct and operate a dam on the
lower Flathead River. RMPC transferred the license to MPC in 1938. Construction of
the dam (Kerr Dam) began in 1930 but then was delayed due to the Great Depression. It
was finally completed in 1938, and commercial operations began in 1939. The dam is
located on the lower Flathead River 4.5 miles downstream of the lake’s natural outlet. It
regulates the lake’s water level and generates electrical power for customers in Montana.
¶6 In 1976 (four years before the original 50-year license expired), MPC and the
Confederated Salish and Kootenai Tribes of the Flathead Reservation filed competing
applications for a new license to operate the Kerr Project (the dam, the reservoir, and
appurtenant facilities). They eventually reached a settlement under which a new 50-year
license would issue to MPC and the Tribes jointly, and MPC would hold and operate the
project for the first 30 years (i.e., until 2015), at which point the Tribes would have the
option of taking over the project. The Federal Energy Regulatory Commission issued the
joint license in July 1985. MPC continued to manage and operate the project until 1999,
when it conveyed its interest to PPLM. PPLM has operated the dam since.
¶7 Flathead Lake is fed by snowmelt and by releases from Hungry Horse Dam.1
Prior to the construction of Kerr Dam, the lake’s water level rose an average of eight feet
1
Hungry Horse Dam is located northeast of the lake on the South Fork of the
upper Flathead River. It was completed in 1953.
4
each year from mid-April to early June due to spring runoff. The average peak elevation
was 2,890 feet above mean sea level. The water level then dropped steadily during the
summer to a base level where it would remain until the following spring. Under Kerr
Dam operations, however, the lake is raised to 2,893 feet (three feet higher than the
average pre-dam peak) by June 15 each year, and is maintained at or close to this level
through the summer and into the fall. The lake is then lowered gradually over the fall and
winter months to 2,883 feet by April 15, at which point spring runoff begins the cycle
anew. The dam was operated in substantially the same manner from 1938 to 2007. As
described below, PPLM made a relevant change in procedure in 2007.
¶8 Landowners contend that MPC’s and PPLM’s practice of maintaining the lake at
full pool (2,893 feet) has caused, and will continue to cause, substantial damage to their
properties. They assert that the shoreline of Flathead Lake and the upper Flathead River
is continuously being eroded and undercut by such operation of Kerr Dam, resulting in an
“ever-widening footprint” of the lake. They explain that erosion is more severe during
storms, that storms are stronger in the fall, and that the presence of higher-than-normal
waves during fall storms produces substantial shoreline erosion and property damage.
Thus, Landowners claim that most of the damage to their properties takes place in the fall
when the lake is artificially held at or near 2,893 feet. They contend that this practice of
keeping the lake at high levels into the fall storm season when shoreline erosion is most
significant causes unreasonable and unnecessary damage to their properties.
¶9 There is no question that artificially maintaining the lake at full pool impacts
shoreline properties. In fact, RMPC anticipated this. In a September 1937 letter to the
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Federal Power Commission, RMPC stated that holding the lake at 2,893 feet for longer
time intervals than those which typically prevailed under pre-dam conditions would
“affect” lake borderlands and could, for instance, cause “waterlogging of lands beyond
the conventional project boundary.” A report issued by the Federal Energy Regulatory
Commission in 1984 confirms this prediction. It states that because the lake, from about
May through January, is held at high levels which formerly occurred naturally for only
short periods (May through July), the delta and nearby islands at the head of the lake
have suffered “high level erosion” and have been “progressively reduced in size.” This is
due to the fact that the shorelines in these areas “are now subjected to extended periods of
wave erosion during times when they were formerly well above the lake level.” MPC
conducted its own study of shoreline erosion in the early 1990s, which revealed that the
shoreline is retreating at several locations at the north end of the lake “in response to
wind-generated waves at the higher water surface elevation.” MPC’s report states that
this shoreline retreat is expected to continue as far as 2,100 feet inland on the east side
and 1,640 feet inland on the west side before an equilibrium beach profile is reached.
“Without intervention, wildlife habitat and developed lands such as the Eagle Bend golf
course could be inundated within a few decades.” A 1994 report prepared for MPC by
Dr. Mark Lorang (who is now one of Landowners’ consultants in the present litigation)
likewise states that “[w]ave energy is the main physical forc[e] responsible for shoreline
erosion in Flathead Lake.” Dr. Lorang explains that the higher the lake level and the
longer high lake levels are maintained, the more shoreline erosion. “Ultimately, future
shoreline erosion on Flathead Lake will depend on how the lake level is regulated.”
6
¶10 Dr. Lorang has been studying Flathead Lake since 1982, and has been studying
shoreline erosion in particular since the mid-1990s. In his August 8, 2005 affidavit, he
explains that the construction of Kerr Dam greatly altered the annual vertical distribution
of wave energy, resulting in erosion and land loss across all shore lands except those
composed of bedrock. He notes, in this regard, that property owners have invested in
miles of seawall, revetment, and rip-rap construction along the shoreline of the lake, and
that much of the undeveloped shoreline erodes away every year. Dr. Lorang has
established study sites at various locations around the lake and found that shoreline
retreat is most severe along the delta area of the river mouth located on the north shore of
the lake. Annual land losses in that area are “on the order 40 to 50 feet.” He found that
land losses at other locations around the lake, due to elevated lake levels and wave
erosion, varied between 1.5 feet and 12 feet annually. Notably, Dr. Lorang found nearly
zero erosion in some of these areas in 2001, a particularly dry year when the lake did not
reach and hold full-pool levels. In Dr. Lorang’s opinion, a one-foot reduction of the lake
level before the end of October each year “would dramatically reduce erosion lakewide
that occurs during the fall storm season.”
¶11 Prior to 2007, the average lake level as of November 1 each year was 2,892 feet.
Starting in the fall of 2007, PPLM voluntarily implemented a procedure of lowering that
level by one foot—i.e., down to 2,891 feet as of November 1. PPLM’s stated purpose for
doing this was to greatly reduce lakewide shoreline erosion in the fall.
¶12 Key to the parties’ claims and defenses in this case is the fact that Landowners’
properties are subject to flood easements, which RMPC and MPC obtained from
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shoreline property owners in the 1930s, ’40s, and ’50s. These easements allow the
operator of Kerr Dam to flood, subirrigate, drain, or otherwise affect shoreline properties
with the waters of Flathead Lake. Landowners contend that MPC and PPLM have acted
outside the scope of these easements by operating the dam “in a manner not reasonably
necessary to the enjoyment of their rights, resulting in continuous erosion, property
damage, and loss of shoreline on the plaintiffs’ properties.” Landowners assert claims of
trespass, nuisance, a taking of property, and breach of the easements. MPC and PPLM,
conversely, maintain that their operation of the dam has been within the scope of the
easements and that they are not liable, therefore, for Landowners’ claimed damages. This
Court addressed the parties’ differing views of the easement language in Mattson II. Our
various interpretations of that language bear directly on the class-certification issue in the
instant appeal and are explained in the Discussion section below.
¶13 Turning now to the class-certification proceedings, Landowners commenced this
action on behalf of themselves and similarly situated landowners and filed motions to
certify the lawsuit as a class action under Rule 23(a) and (b)(3) of the Montana Rules of
Civil Procedure. The District Court granted the motions as to MPC in March 2001 and as
to PPLM in July 2003. The court certified the following class:
All persons and entities (other than Defendants and the Confederated Salish
and Kootenai Tribes of the Flathead Reservation, Montana) that own real
property either with frontage on the shoreline of Flathead Lake in Flathead
County or Lake County, Montana, or which contains a bank of the Flathead
River located in Flathead County, Montana, or both.
¶14 In analyzing Landowners’ motions for class certification, the District Court stated
that it was “required to take the Plaintiffs’ allegations in support of the class action as
8
true,” citing Eisen v. Carlisle and Jacquelin, 417 U.S. 156, 177-78, 94 S. Ct. 2140(1974). In its cross-appeal in Mattson II, PPLM argued that the District Court had erred
in this respect. This Court agreed, concluding that the District Court had overread the
Eisen decision. Mattson II, ¶ 64. Notably, the Supreme Court has recently confirmed
this conclusion. See Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S. Ct. 2541, 2552
n. 6 (2011). Citing federal precedent as persuasive authority,2 we observed that nothing
in Rule 23 requires a district court to accept all of the complaint’s allegations when
deciding whether to certify a class. Mattson II, ¶ 65 (citing Szabo v. Bridgeport Machs.,
Inc., 249 F.3d 672, 675 (7th Cir. 2001)). In fact, it may be necessary to look past the
pleadings because “ ‘a court must understand the claims, defenses, relevant facts, and
applicable substantive law in order to make a meaningful determination of the
certification issues.’ ” Mattson II, ¶ 65 (quoting Castano v. Am. Tobacco Co., 84 F.3d
734, 744 (5th Cir. 1996), and also citing Gen. Tel. Co. of the Southwest v. Falcon, 457
U.S. 147, 160, 102 S. Ct. 2364, 2372 (1982)). Thus, for purposes of analyzing a motion
for class certification, we adopted the following guidelines:
“(1) a district judge may certify a class only after making determinations
that each of the Rule 23 requirements has been met; (2) such determinations
can be made only if the judge resolves factual disputes relevant to each
Rule 23 requirement and finds that whatever underlying facts are relevant
to a particular Rule 23 requirement have been established and is persuaded
to rule, based on the relevant facts and the applicable legal standard, that
the requirement is met; (3) the obligation to make such determinations is
not lessened by overlap between a Rule 23 requirement and a merits issue,
even a merits issue that is identical with a Rule 23 requirement; (4) in
2
In interpreting and applying M. R. Civ. P. 23, Montana courts are not required to
march lockstep with federal court interpretations of Fed. R. Civ. P. 23. We may consult
and rely on federal precedent, however, to the extent it is persuasive.
9
making such determinations, a district judge should not assess any aspect of
the merits unrelated to a Rule 23 requirement; and (5) a district judge has
ample discretion to circumscribe both the extent of discovery concerning
Rule 23 requirements and the extent of a hearing to determine whether such
requirements are met in order to assure that a class certification motion
does not become a pretext for a partial trial of the merits.
Mattson II, ¶ 67 (quoting Miles v. Merrill Lynch & Co., 471 F.3d 24, 41 (2d Cir. 2006)).
¶15 Having concluded that the District Court applied an incorrect “take the Plaintiffs’
allegations as true” standard, we vacated the District Court’s July 2003 order certifying
the class as to PPLM and remanded for reconsideration under the Miles guidelines.
Mattson II, ¶¶ 67, 70. The District Court’s March 2001 order granting class certification
as to MPC had not been challenged in Mattson II and, thus, remained in force (for the
time being).
¶16 On remand, Landowners filed a renewed motion for class certification as to
PPLM. The parties briefed the issue, and the District Court held an evidentiary hearing
in August 2010, at which time various witnesses testified and a number of exhibits were
admitted. The District Court issued its findings of fact, conclusions of law, and order on
June 16, 2011. The court concluded that Landowners had failed to establish all of the
elements of Rule 23(a) and (b)(3), and the court thus denied their renewed motion to
certify the class as to PPLM. Moreover, the court decertified the class as to MPC as well.
The District Court’s reasoning will be discussed below, where relevant.
STANDARDS OF REVIEW
¶17 We review a district court’s decision on a motion for class certification for an
abuse of discretion. Chipman v. N.W. Healthcare Corp., 2012 MT 242, ¶ 17, 366 Mont.
10450, 288 P.3d 193. The question under this standard is not whether this Court would
have reached the same decision, but whether the district court acted arbitrarily without
conscientious judgment or exceeded the bounds of reason. Chipman, ¶ 17. Of course,
“[a] court abuses its discretion if its certification order is premised on legal error.”
Hawkins v. Comparet-Cassani, 251 F.3d 1230, 1237 (9th Cir. 2001); accord Marisol A.
v. Giuliani, 126 F.3d 372, 375 (2d Cir. 1997) (“[T]he failure to follow the proper legal
standards in certifying a class . . . is an abuse of discretion.”). Likewise, “when a district
court’s decision is not supported by findings as to the applicability of Rule 23 criteria, it
is not entitled to the traditional deference” given to determinations of class status. Local
Joint Exec. Bd. of Culinary/Bartender Trust Fund v. Las Vegas Sands, Inc., 244 F.3d
1152, 1161 (9th Cir. 2001) (internal quotation marks omitted). “To the extent that the
ruling on a Rule 23 requirement is supported by a finding of fact, that finding, like any
other finding of fact, is reviewed under the ‘clearly erroneous’ standard. And to the
extent that the ruling involves an issue of law, review is de novo.” Miles, 471 F.3d at
40-41. Thus, for example, “a ruling on numerosity, based on a finding of fact that is not
clearly erroneous and with application of a legal standard that is correct, could be
affirmed as within allowable discretion, in some circumstances, whether the ruling
determined that this Rule 23 requirement was met or not met.” Miles, 471 F.3d at 41.
DISCUSSION
¶18 The class action is “an exception to the usual rule that litigation is conducted by
and on behalf of the individual named parties only.” Califano v. Yamasaki, 442 U.S. 682,
700-01, 99 S. Ct. 2545, 2557 (1979). Rule 23 of the Montana Rules of Civil Procedure
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governs the propriety of a class action in Montana. The threshold inquiry into whether a
class action is appropriate requires analysis of the four prerequisites set out in Rule 23(a):
numerosity, commonality, typicality, and adequacy of representation. Diaz v. Blue Cross
& Blue Shield of Mont., 2011 MT 322, ¶ 27, 363 Mont. 151, 267 P.3d 756. These four
requirements “ensure[ ] that the named plaintiffs are appropriate representatives of the
class whose claims they wish to litigate” and “effectively limit the class claims to those
fairly encompassed by the named plaintiff’s claims.” Wal-Mart, 131 S. Ct. at 2550(internal quotation marks omitted). Once the Rule 23(a) prerequisites are satisfied, the
analysis shifts to Rule 23(b), which sets forth additional requirements depending on the
type of class action being sought. Diaz, ¶ 27.
¶19 Landowners seek class certification under Rule 23(b)(3). Accordingly, they must
satisfy the four criteria of Rule 23(a) and the two criteria of Rule 23(b)(3):
1. numerosity: the class is so numerous that joinder of all members is
impracticable;
2. commonality: there are questions of law or fact common to the class;
3. typicality: the claims or defenses of the representative parties are typical of
the claims or defenses of the class;
4. adequate representation: the representative parties will fairly and adequately
protect the interests of the class;
5. predominance: the questions of law or fact common to the class members
predominate over any questions affecting only individual members; and
6. superiority: a class action is superior to other available methods for fairly and
efficiently adjudicating the controversy.
See McDonald v. Washington, 261 Mont. 392, 400, 862 P.2d 1150, 1154-55 (1993).
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¶20 As to the first criterion (numerosity), the District Court observed that Landowners
intend to include persons who have owned any shoreline of Flathead Lake or certain
portions of the Flathead River since November 9, 1991. Counsel represented that as of
2002 or 2003, he was aware of 3,000 owners of shoreline or riverbank property. By
including those who have owned any of the properties since November 1991, the District
Court noted that the number of potential class members is “exponentially increased.”
The court ruled, therefore, that “the number of putative class members is sufficiently
numerous.” MPC and PPLM do not dispute this determination.
¶21 As to the third criterion (typicality), we have explained that this requirement is
designed to ensure that the interests of the named representatives are aligned with the
interests of the class members, the rationale being that a named plaintiff who vigorously
pursues his or her own interests will necessarily advance the interests of the class.
Chipman, ¶ 53; McDonald, 261 Mont. at 402, 862 P.2d at 1156. The District Court
found that the named plaintiffs here, if they were to represent a class, would pursue their
claims and advance those of the remaining class members. MPC and PPLM do not
dispute this determination.
¶22 As to the fourth criterion (adequate representation), the requirements are that the
named representatives’ attorney be qualified, competent, and capable of conducting the
litigation, and that the named representatives’ interests not be antagonistic to the interests
of the class. Chipman, ¶ 57; McDonald, 261 Mont. at 403, 862 P.2d at 1156. The
District Court observed that despite the 11-year course of this lawsuit, Landowners have
been represented by the same counsel, and there is no reason to believe that the same
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counsel will not capably continue to do so. Furthermore, after striking four of the named
plaintiffs as class representatives (on the ground that they have no ownership interest in
the property which they contend is being damaged), the District Court found that the
remaining named plaintiffs could fairly and adequately represent the interests of the
proposed class. MPC and PPLM do not dispute this determination.
¶23 That leaves the second, fifth, and sixth criteria—commonality, predominance, and
superiority, respectively—which are at the center of this appeal. Although the District
Court separately analyzed each of these three requirements, the court noted that they are
“quite inter-related” in the present case. Again, they require: that there are questions of
law or fact common to the class; that the questions of law or fact common to the class
members predominate over any questions affecting only individual members; and that a
class action is superior to other available methods for fairly and efficiently adjudicating
the controversy. Ultimately, the District Court ruled that these three requirements were
not met for essentially one reason: the issue of whether MPC’s and PPLM’s operation of
Kerr Dam caused unreasonable damage to, or interfered unreasonably with, shoreline
properties “will vary drastically among the members of the class and will require an
analysis on a property-by-property basis” considering such things as a given property’s
location, use, soil type, shoreline characteristics, erosional forces, and natural or
manmade erosion controls. In this respect, it appears the District Court misconstrued our
decision in Mattson II and thus based its class-certification decision on a premise that is
both factually and legally incorrect. To understand why, it is necessary to explain our
interpretations of the flood easements in Mattson II.
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¶24 Although the language of the assorted easement contracts varies to some extent,
they all grant MPC and its successors
the perpetual right and easement for flooding, subirrigating, draining, or
otherwise affecting with the waters of Flathead Lake and its tributaries all
or any part of the hereinabove described lands which are, will or may be
affected by the regulation and control of the waters of Flathead Lake by the
construction, maintenance and operation of a dam and hydroelectric power
development in the Flathead River below said lake, which dam is designed
to control and regulate the waters of Flathead Lake at varying elevations,
not exceeding a maximum controlled water level of 2893 feet, U.S.G.S.
datum, at said dam.
This Court rendered four critical interpretations of this language in Mattson II.
¶25 First, we rejected Landowners’ argument that the “2893 feet” clause creates a
height limit or “contour line” around Flathead Lake at 2,893 feet, such that the dam
operator may not allow the lake’s waters to invade or affect any shoreline properties
above this elevation. On the other hand, we also rejected PPLM’s opposing argument
that the dam operator has a boundless right to flood “the entire parcel” of every shoreline
property owner. We instead interpreted the easements as follows:
Taken as a whole, the easement language reflects that the grantors
conveyed the right to flood, subirrigate, drain, or otherwise affect only that
part of their parcels which may be “affected” when the water level of
Flathead Lake is regulated at a maximum controlled elevation of 2,893 feet
at Kerr Dam. Some parcels may be “affected” entirely when the water
level is at this elevation, while others may not be “affected” at all. But
again, the dam operator’s right extends to only those parts of the parcels
which are “affected” when the water level is at 2,893 feet at the dam.
Hence, dam-related effects to the Landowners’ properties which occur
because the water level is regulated at the dam above an elevation of 2,893
feet would be beyond the scope of the easements.
Mattson II, ¶ 23 (footnote omitted). In this regard, we noted that the easement language
contemplates that “all or any part of” a given shoreline parcel may be “affected” when
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the water level is raised to an elevation of 2,893 feet at the dam. Therefore, while the
water level may on occasion exceed 2,893 feet at other points around the lake, as
Landowners claim, and while MPC and PPLM may have “affected” various shoreline
properties at points on those properties above an elevation of 2,893 feet, as Landowners
also claim, “such events are permitted by the easement language when the water level is
regulated at the dam at an elevation of 2,893 feet or less.” Mattson II, ¶ 24.
¶26 Second, Landowners argued that if the “2893 feet” clause were not interpreted as a
vertical limit on the dam operator’s right to use and affect shoreline properties, then the
dam operator could expand the surface area of Flathead Lake indefinitely at the expense
of shoreline property owners by undercutting and eroding away their properties. They
asserted that such expansion has occurred over the past several decades and that, as a
result, the 2,893-foot contour line around the lake is wider now than it was in the 1930s.
Landowners maintained that their predecessors did not agree to this “ever-expanding
taking” of shoreline property. Mattson II, ¶ 26. In this regard, Frank M. Kerr (RMPC’s
vice president and general manager) told these people prior to the construction of the
dam: “If you will build or do anything on your property in the light of your experience as
to what elevations of the lake have prevailed heretofore, you will in no way be affected
by the new conditions.” See Mattson II, ¶ 10. As noted, the lake’s average pre-dam peak
elevation was 2,890 feet, and the water level dropped steadily during the summer to
roughly 2,882 feet, where it would remain until the following spring, whereas now the
level is maintained at or near full pool (2,893 feet) from mid-June into early fall.
16
¶27 In light of these circumstances, we concluded that the property owners did not
intend to grant, and the dam operator did not intend to obtain, “an unfettered right to sink
their properties completely and permanently into the lake.” Mattson II, ¶ 27. We agreed
that any interpretation of the easement language under which shoreline property owners
granted the dam operator the perpetual right to flood and erode their properties entirely,
thereby rendering those properties permanently submerged and unusable for customary
purposes, would be absurd—but only “insofar as Kerr Dam is operated unreasonably.”
Mattson II, ¶ 27. In this regard, we noted that RMPC and MPC did not guarantee, and
the property owners could not reasonably expect, that there would be no damage at all to
their properties resulting from the dam operator’s exercise of its easement right over the
years. Thus, we held that construing the “2893 feet” clause to be a limitation on the
water level at the dam, as opposed to a limiting contour line around the lake, did not
create an absurdity. Rather, construing the easement language to grant a right to use the
Landowners’ properties in a manner that is not reasonably necessary, or to cause
unreasonable erosion and damage to those properties, would create the absurdity.
Mattson II, ¶ 28. The crux of this holding is that reasonable damage caused to shoreline
properties through reasonable operation of the dam is permissible under the easement
contracts—a concept we elaborated upon in the next two points below.
¶28 Third, Landowners argued that the easement contracts do not allow the dam
operator to cause “erosion” to shoreline properties. The relevant easement language
grants “the perpetual right and easement for flooding, subirrigating, draining, or
otherwise affecting” shoreline properties with the waters of Flathead Lake and its
17
tributaries. Of course, “eroding” is not listed, and we agreed with Landowners that the
right to “erode” is not included in the term “otherwise affecting.” Mattson II, ¶¶ 34-36.
Nevertheless, based on the longstanding maxim that when an easement is created, every
right reasonably necessary for its enjoyment is included by implication, Mattson II, ¶ 37,
we concluded that because some “eroding” is inevitable in the course of perpetually
flooding, subirrigating, and draining shoreline properties, a grant of the right to flood,
subirrigate, and drain would be of no avail if it did not also include a grant of the right to
erode, Mattson II, ¶ 38. “Hence, the right to cause some erosion is necessary to the
enjoyment of the right to perpetually flood, subirrigate, and drain and, thus, is included
by implication in the easements.” Mattson II, ¶ 38. We further held, however, that the
scope of the erosion right is defined as that which is “reasonably necessary” to the
enjoyment of the express right to flood, subirrigate, and drain. Mattson II, ¶ 40. As such,
the critical question with regard to erosion is whether the specific erosion of which the
Landowners complain was and is “reasonably necessary.” If reasonably necessary, then
the erosion is within the easements. If not reasonably necessary, then the erosion is not
within the easements. Mattson II, ¶ 40.
¶29 Fourth, and lastly, we adopted the separate but related rule that “unless clearly
authorized by the terms of the servitude, the holder of an easement is not entitled to cause
unreasonable damage to the servient estate or interfere unreasonably with its enjoyment.”
Mattson II, ¶ 47; see also Restatement (Second) of Property: Servitudes § 4.10 (2000).
We concluded that this “is an independent requirement on an easement holder’s use of
the easement. In other words, this requirement can be breached even if the easement
18
holder is operating within the easement’s technical parameters.” Mattson II, ¶ 55. The
underlying rationale for this rule is that
the owner of a servient estate expects that the easement holder may do what
is reasonably necessary to enjoy the servitude and, in the process, cause
reasonable damage to her property, but does not expect the holder to inflict
unreasonable damage or interference. . . . [W]e presume that the parties
intended a fair balance of their interests and, to that end, intended the
easement to be used in such a manner that unreasonable damage to or
interference with the servient estate would not occur . . . .
Mattson II, ¶ 52. What this means for purposes of the present lawsuit is that while the
dam operator may use shoreline properties in a manner that is reasonably necessary for
the convenient enjoyment of its easements, the dam operator has a separate obligation not
to cause unreasonable damage to the properties or interfere unreasonably with their
enjoyment. Mattson II, ¶¶ 44, 55.
¶30 These reasonableness requirements are critical to the claims raised in this lawsuit,
as there is nothing in the language of the flood easements expressly requiring the dam
operator to lower the water level at particular times of year. The obligations to lower the
lake to 2,883 feet by April 15 and to raise it to 2,893 feet by June 15 are contained in the
license issued by the federal government. Mattson II, ¶ 11. The flood easements, on the
other hand, specify a maximum elevation of 2,893 feet at the dam but do not expressly
prohibit the dam operator from keeping the lake at that level year-round. Any obligation
to lower the lake level exists by virtue of the reasonableness requirements which we held
in Mattson II are implicit in the easement contracts.
¶31 In light of these interpretations of the flood easements, our decision in Mattson II
made it clear that the parties’ claims and defenses in this lawsuit boil down to two
19
interrelated questions: first, whether the erosion caused by MPC’s and PPLM’s operation
of Kerr Dam has been reasonably necessary to the enjoyment of MPC’s and PPLM’s
express right to flood, subirrigate, and drain shoreline properties, Mattson II, ¶ 40; and
second, whether MPC and PPLM have caused unreasonable damage to, or interfered
unreasonably with the enjoyment of, shoreline properties, Mattson II, ¶ 55. Importantly,
we did not state in Mattson II that these questions should—or even could—be decided on
a property-by-property basis. Indeed, short of negating the laws of physics, there is
simply no way for the dam operator to maintain the water level at different elevations
around the lake simultaneously. As Landowners correctly point out, “there is only one
method of operating the dam that can be employed at one time,” and it therefore would
be impossible for the dam operator “to treat one plaintiff’s property one way and another
plaintiff’s property a different way.” Whatever elevation is selected, it applies to every
shoreline property concurrently.
¶32 Correspondingly, the reasonableness of the selected elevation is not determined on
an “individualized” basis, as the District Court incorrectly opined. Either the erosion
being caused at various points around the lake at a chosen water level is reasonably
necessary to the enjoyment of the express right to flood, subirrigate, and drain, or it is
not. Erosion cannot be reasonably necessary at Yellow Bay and, at the same time, not
reasonably necessary at the north shore. Likewise, damage cannot be reasonable in Big
Arm and, at the same time, unreasonable in Polson Bay. Again, the dam operator can
select only one water level at the dam, which is then applicable to the entire lake. And
for this reason, while a particular elevation might seem unreasonable as to one shoreline
20
property considered in isolation, or even 20 properties considered together, this does not
mean the dam is being operated unreasonably. To hold otherwise would make the dam
operator hostage to the most geologically fragile shoreline property, which is not a
reasonable interpretation of the flood easements.
¶33 Reasonableness in the present context “depends on the circumstances, such as the
character of the servient estate, the purpose for which the servitude was created, and the
use of the servient estate made or reasonably contemplated at the time the easement was
created.” Mattson II, ¶ 44. Although RMPC and MPC secured the flood easements on a
property-by-property basis, every one of the easements had a common purpose: to enable
the dam operator to regulate the waters of Flathead Lake up to a maximum elevation of
2,893 feet at the dam, and to correspondingly flood, subirrigate, drain, or otherwise affect
all of the shoreline properties simultaneously. Mattson II, ¶ 14. Hence, the aggregate of
the benefits and burdens imposed on all of the shoreline properties together, along with
any regulatory and financial considerations applicable to the dam’s operation, must be
considered as a whole to determine whether the particular water level chosen by the dam
operator at the particular time of year is reasonably necessary to its operation or is going
to result in unreasonable damage to or interference with shoreline properties. Some
properties may not be damaged at all, while others might suffer significant erosion, but
the reasonableness of the water level cannot be determined on a property-by-property
basis any more than the water level can be set on such a basis.
¶34 PPLM contends that “[w]hat may be reasonable to one [shoreline] property may
be unreasonable to another [shoreline] property.” For this proposition, PPLM cites
21
Mattson, ¶ 44 (what constitutes unreasonable damage and interference depends on the
circumstances, such as the character of the servient estate, the purpose for which the
servitude was created, and the use of the servient estate made or reasonably contemplated
at the time the easement was created), and Guthrie v. Hardy, 2001 MT 122, ¶ 47, 305
Mont. 367, 28 P.3d 467 (what may be considered a reasonable use of a general easement
is usually a question of fact to be determined in the light of the situation of the property
and the surrounding circumstances). Contrary to PPLM’s contention, however, a critical
circumstance here is the fact that MPC and PPLM cannot operate the dam one way as to
one shoreline property while operating it a different way as to another shoreline property.
Reasonableness in this context, therefore, necessarily involves a balancing of myriad
factors and competing interests relating to the regulation of the lake level—for example,
the purposes for which the flood easements were created, the characteristics of all the
servient estates, the interests of the shoreline property owners, the interests of the dam
operator, any applicable government regulations, and any legal obligations the dam
operator has to other entities or individuals (such as downstream water users). To
illustrate this point, a jury theoretically could find that the extent of erosion occurring
around the lake when it is maintained at 2,893 feet from mid-June to mid-September is
reasonable when balanced against the recreational needs of shoreline property owners
and businesses and the need to make the dam’s operation feasible, but that the degree of
erosion occurring when the lake is maintained at or near this elevation into October and
November is unreasonable in light of these same factors or other factors, such as the
increased intensity of fall storms.
22
¶35 Seen in this light, the District Court erred in concluding that there are no questions
of law or fact common to the class under Rule 23(a)(2). At this point, it is necessary to
acknowledge a recent divergence between the federal approach and Montana’s approach
to the commonality requirement. Under extant Montana caselaw, commonality “ ‘is not a
stringent threshold and does not impose an unwieldy burden on plaintiffs.’ ” Ferguson v.
Safeco Ins. Co. of Am., 2008 MT 109, ¶ 26, 342 Mont. 380, 180 P.3d 1164 (quoting
LaBauve v. Olin Corp., 231 F.R.D. 632, 667 (S.D. Ala. 2005)). Generally, Rule 23(a)(2)
is given “ ‘a permissive application’ ” so that the commonality requirement is usually
found to be satisfied. McDonald, 261 Mont. at 401, 862 P.2d at 1155 (quoting Jordan v.
Los Angeles County, 669 F.2d 1311, 1320 (9th Cir. 1982)); accord Chipman v. N.W.
Healthcare Corp., 2012 MT 242, ¶ 47, 366 Mont. 450, 288 P.3d 193. We have said that
commonality is satisfied when the question of law linking class members is substantially
related to resolving the litigation, even though individuals may not be similarly situated,
or when there is a common core of salient facts coupled with disparate legal remedies
within the class. Ferguson, ¶ 23 (citing Sieglock v. Burlington Northern & Santa Fe Ry.
Co., 2003 MT 355, ¶ 11, 319 Mont. 8, 81 P.3d 495); see also Chipman, ¶ 47 (under our
existing law, commonality is met when a single issue is common to all class members,
regardless of differences among the class (citing Ferguson, ¶ 16, and Diaz v. Blue Cross
& Blue Shield of Mont., 2011 MT 322, ¶ 32, 363 Mont. 151, 267 P.3d 756)).
¶36 In contrast, the Supreme Court has “significantly tightened” the commonality
requirement for purposes of federal Rule 23(a)(2). See Chipman, ¶¶ 47-49 (discussing
Wal-Mart, 131 S. Ct. 2541). Under Wal-Mart, “the class members’ claims must depend
23
on a common contention that is capable of classwide resolution, ‘which means that
determination of its truth or falsity will resolve an issue that is central to the validity of
each one of the claims in one stroke.’ ” Chipman, ¶ 48 (quoting Wal-Mart, 131 S. Ct. at
2551). “ ‘What matters to class certification . . . is not the raising of common
“questions”—even in droves—but, rather the capacity of a classwide proceeding to
generate common answers apt to drive the resolution of the litigation. Dissimilarities
within the proposed class are what have the potential to impede the generation of
common answers.’ ” Wal-Mart, 131 S. Ct. at 2551 (ellipsis and emphasis in original)
(quoting Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84
N.Y.U. L. Rev. 97, 132 (2009)). In her partial dissent, Justice Ginsburg (with whom
Justices Breyer, Sotomayor, and Kagan joined) argued that the Wal-Mart majority was
erroneously blending Rule 23(a)(2)’s threshold commonality criterion with the more
demanding predominance and superiority criteria of Rule 23(b)(3), and thereby elevating
the Rule 23(a)(2) inquiry so that it is no longer easily satisfied. Wal-Mart, 131 S. Ct. at
2565-67. The dissenters argued that dissimilarities between class members and whether
such individual differences impede common adjudication are more properly considered
as part of the Rule 23(b)(3) inquiry, not the Rule 23(a)(2) inquiry. “The Rule 23(b)(3)
predominance inquiry is meant to test whether proposed classes are sufficiently cohesive
to warrant adjudication by representation. If courts must conduct a ‘dissimilarities’
analysis at the Rule 23(a)(2) stage, no mission remains for Rule 23(b)(3).” Wal-Mart,
131 S. Ct. at 2566 (dissenting opinion) (citation, brackets, and some internal quotation
marks omitted). At the Rule 23(a)(2) stage, the dissenters argued, the question is not
24
what distinguishes individual class members, but what unites them. Wal-Mart, 131 S. Ct.
at 2567.
¶37 The question arises as to whether Montana, which in the past has followed the lead
of federal courts in class-certification analysis, should abandon its “permissive” approach
to Rule 23(a)(2)’s commonality requirement in favor of the Wal-Mart majority’s more
stringent standard. In Diaz, we cited Wal-Mart in the context of our Rule 23(b)(2)
analysis, but we did not do the same with respect to our Rule 23(a)(2) analysis. Instead,
we applied Montana’s longstanding law on commonality. See Diaz, ¶¶ 32-34, 42. In
Chipman, we concluded that the plaintiffs satisfied the commonality requirement even
under the more stringent Wal-Mart standard. We acknowledged that there were
dissimilarities within the proposed class, but we emphasized what was common to the
class: “common facts connect all class members in relation to the ultimate resolution of
this dispute,” and “[a] court’s determination of whether a standardized group contract
exists and the legal obligations of the parties will generate common answers applicable to
all class members.” Chipman, ¶ 52. It may be necessary in a future case—where the
issue is properly briefed and argued, and the choice of one standard over the other is
dispositive of the commonality inquiry—to decide whether Montana will retain its more
permissive approach or instead adopt the Wal-Mart majority’s approach. But in the
present case, as we did in Chipman, we conclude that Landowners satisfy the more
stringent standard in any event, because their claims “depend upon a common
contention” which is “of such a nature that it is capable of classwide resolution”—i.e., the
25
“determination of its truth or falsity will resolve an issue that is central to the validity of
each one of the claims in one stroke.” Wal-Mart, 131 S. Ct. at 2551.
¶38 The “common contention” is that MPC and PPLM have operated Kerr Dam
unreasonably and caused unreasonable damage to shoreline properties. This contention is
not merely “capable of classwide resolution,” but is in fact incapable of being resolved
on a property-by-property basis. As explained, the reasonableness of the dam’s operation
and resulting damage to shoreline properties depends on a balancing of many factors, one
of which is the aggregate of the benefits and burdens imposed on all shoreline properties
concurrently. Insofar as the flood easements are concerned, the dam’s operation cannot
simultaneously be reasonable and unreasonable. If, upon consideration of the factors
bearing on MPC’s and PPLM’s decision to maintain the lake level at particular elevations
at particular times of year, the trier of fact finds that the aggregate damage to, or
interference with, shoreline properties is unreasonable, then MPC or PPLM is subject to
liability for those damages. The amount of damages, of course, will then have to be
determined on a property-by-property basis. See Yokoyama v. Midland Natl. Life Ins.
Co., 594 F.3d 1087, 1094 (9th Cir. 2010) (“ ‘The amount of damages is invariably an
individual question and does not defeat class action treatment.’ ” (alteration omitted)
(quoting Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir. 1975))); accord McDonald, 261
Mont. at 403-04, 862 P.2d at 1157 (“ ‘[I]t has been commonly recognized that the
necessity for calculation of damages on an individual basis should not preclude class
determination when the common issues which determine liability predominate.’ ”
(emphasis omitted) (quoting Bogosian v. Gulf Oil Corp., 561 F.2d 434, 456 (3d Cir.
26
1977))). Conversely, if the trier of fact reaches the opposite finding (i.e., that MPC’s and
PPLM’s choice of water levels has been reasonably necessary and has not unreasonably
damaged the shoreline), then MPC and PPLM are not liable to any shoreline property
owners—for the reason that the flood easements permit the dam operator to cause
reasonably necessary erosion and reasonable damage to the servient estates when the
water level is regulated at the dam at an elevation of 2,893 feet or less. In short, on the
question of MPC’s and PPLM’s liability, the shoreline property owners sink or swim
together. What this means, of course, is that the damage occurring at the north end of the
lake, where erosion has been most pronounced, may actually be within the scope of the
flood easements, and thus noncompensable, if it is resulting from reasonable operation of
the dam. But that is the nature of the easement right which Landowners’ predecessors
granted to RMPC and MPC.
¶39 For these same reasons, we further conclude that the question common to all class
members’ claims (the reasonableness of MPC’s and PPLM’s conduct) predominates over
any questions affecting only individual members, and that a class action is superior to
other available methods for fairly and efficiently adjudicating this controversy.
The predominance inquiry focuses on the relationship between the common
and individual issues and tests whether proposed classes are sufficiently
cohesive to warrant adjudication by representation. Rule 23(b)(3)’s
predominance and superiority requirements were added to cover cases in
which a class action would achieve economies of time, effort, and expense,
and promote . . . uniformity of decision as to persons similarly situated,
without sacrificing procedural fairness or bringing about other undesirable
results. Accordingly, a central concern of the Rule 23(b)(3) predominance
test is whether adjudication of common issues will help achieve judicial
economy.
27
Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944 (9th Cir. 2009) (ellipsis in
original; citations, footnote, and internal quotation marks omitted). The matters pertinent
to the predominance and superiority questions include (A) the class members’ interests in
individually controlling the prosecution or defense of separate actions, (B) the extent and
nature of any litigation concerning the controversy already begun by or against class
members, (C) the desirability or undesirability of concentrating the litigation of the
claims in the particular forum, and (D) the likely difficulties in managing a class action.
M. R. Civ. P. 23(b)(3)(A)-(D). In the present case, the first two of these factors have not
been raised. The analysis has instead centered on the latter two factors.
¶40 The District Court observed that the properties around the lake differ in a variety
of respects. They include wetlands, forests, floodplains, and river delta. Some have rock
outcroppings or large natural boulders, while others have gravel beaches or bluffs. There
are docks and boathouses built of varying materials, and seawalls and other shore
stabilization projects of widely varying types. The types of soil also vary, as do the
geographical alignments of the properties in relationship to wind and wave action. The
court noted that the properties have been put to various uses—including farmland,
townsites, marinas or yacht clubs, golf courses, private residences, lodge properties for
hire by the public, and highway frontages. The court thus reasoned that “to determine
whether erosion on each piece of property is unreasonable or interferes unreasonably with
the landowner’s enjoyment of the property, will necessarily evolve into a series of
individual trials.” PPLM makes this same argument on appeal. Yet, while it is true that
the characteristics and uses of shoreline properties vary, all of the different characteristics
28
and uses must be considered together, in the aggregate, as part of the reasonableness
inquiry. This does not constitute a series of individual trials; it constitutes a balancing of
numerous factual considerations in an overall assessment of what lake level is reasonable
to maintain at any given time.
¶41 The only individual questions in this lawsuit relate to the amount of damages—if
it is determined, first, that MPC and PPLM are liable for operating the dam unreasonably.
As noted above in ¶ 38, the fact that damages must be determined on an individual basis
does not negate class certification as to liability. Yokoyama, 594 F.3d at 1094;
McDonald, 261 Mont. at 403-04, 862 P.2d at 1157; see also M. R. Civ. P. 23(c)(4)
(“When appropriate, an action may be brought or maintained as a class action with
respect to particular issues.”). We hold that the predominance criterion is met.
¶42 Lastly, as to superiority, the District Court noted two factors. First, the court again
cited the proposition that reasonableness must be determined under an “individualized
inquiry” based on “the uniqueness of the party’s individual property and not the 3,000
properties (and the multiple owners of each of those properties) which the putative class
desires to represent.” For the reasons already discussed at length above, this proposition
is incorrect. Second, the District Court observed that “there are a number of agencies and
organizations with differing agenda which are impacted by the operation of Kerr Dam
and/or have been created to express their interests in the operation of the dam.” The
court listed some of them: the Organization to Save Flathead Lake, Flathead Lakers,
Flathead County, the Confederated Salish and Kootenai Tribes, the Montana Department
of Fish, Wildlife and Parks, and the United States Fish and Wildlife Service. The court
29
stated—without elaboration—that these entities “would not be heard in this litigation,
which suggests that a single determination for all the properties owned by the proposed
class Plaintiffs would not be superior to individual analyses.” Yet, to the extent these
entities do not have a legal stake in the operation of Kerr Dam, their views are irrelevant
to this lawsuit anyway. Conversely, to the extent these entities do have an actual legal
stake in the dam’s operation, their interests bear on the issue of whether the dam is being
operated reasonably and, as such, should be factored into the determination of that issue.
In considering, then, whether it is preferable for these entities to present their interests in
several thousand individual trials, or just one classwide trial, it seems obvious that the
latter is far superior to the former. Accordingly, given the nature of the reasonableness
issue underlying Landowners’ claims—a question whose answer depends on a balancing
of various competing interests—a class action is far superior, for purposes of fairly and
efficiently adjudicating the controversy, to innumerable individual lawsuits.
CONCLUSION
¶43 Based on the foregoing analysis, we hold that the six criteria for certification of a
class action under Rule 23(a) and (b)(3) have been satisfied. Due to the legal errors in the
District Court’s analysis, as discussed above, we conclude that the District Court abused
its discretion in decertifying the class as to MPC and in denying Landowners’ renewed
motion for class certification as to PPLM. We therefore reverse the District Court’s order
of June 16, 2011, and direct the court to certify the following class on remand:
All persons and entities (other than the United States, the defendants, and
the Confederated Salish and Kootenai Tribes of the Flathead Reservation,
Montana) that have owned real property at any time since November 9,
30
1991, either with frontage on the shoreline of Flathead Lake in Flathead
County or Lake County, Montana, or which contains a bank of the Flathead
River located in Flathead County, Montana, south of the point at which
Lower Valley Road (east of U.S. Highway 93) intersects with the Flathead
River, or both.[3]
Given this resolution of the appeal, it is unnecessary to address Landowners’ argument
(Issue 4 in their opening brief) that the District Court erred in failing to consider a portion
of the evidence submitted by Landowners in support of class certification.
¶44 Reversed and remanded for further proceedings consistent with this Opinion.
/S/ JAMES C. NELSON
We Concur:
/S/ MIKE McGRATH
/S/ MICHAEL E WHEAT
/S/ PATRICIA COTTER
/S/ BRIAN MORRIS
Justice Beth Baker, dissenting.
¶45 I dissent because the Court introduces confusion into our class certification
standards and fails to accord proper deference to the District Court’s role in deciding
whether a case should proceed as a class action.
3
This statement of the class is taken from Landowners’ proposed findings of fact
and conclusions of law filed in the District Court on August 23, 2010.
31
¶46 The Court points out that in Mattson II, we reversed the District Court’s summary
judgment ruling in favor of the Defendants and remanded for further factual development
regarding two “interrelated” issues: first, whether Defendants made unreasonable use of
the flood easements and second, whether Defendants caused unreasonable damage in the
course of that use. Opinion, ¶ 31. While interrelated , the questions nonetheless are
discrete, and were discussed as two separate issues in Mattson II. Mattson II, ¶¶ 40, 43.
In light of the conflicting evidence provided by the parties regarding both questions, we
vacated the District Court’s denial of Defendants’ motion for an evidentiary hearing and
ordered the District Court to consider evidence as required in evaluating the class
certification criteria. Mattson II, ¶ 67. We stated the District Court’s summary judgment
ruling was erroneous due to “conflicting evidence regarding the kind and causes of
erosion and the propriety of keeping the lake at full pool into the fall.” Mattson II, ¶¶ 41-
42. Adopting the rules of Restatement (Third) of Property: Servitudes § 4.10, we held
that Defendants also could incur liability independently of the flood easements for
unreasonable damage to, or interference with, Plaintiffs’ properties. Mattson II, ¶ 52. In
other words, even if keeping the lake at full pool in October fell “within the easement’s
technical parameters,” MPC and its successors had “a separate obligation not to cause
unreasonable damage to the properties or interfere unreasonably with their enjoyment.”
Mattson II, ¶ 55.
¶47 We directed the District Court on remand to reconsider its class certification
decision by considering and resolving “factual disputes relevant to each Rule 23
requirement” and by following the additional guidelines we adopted from the Second
32
Circuit’s decision in Miles. Mattson II, ¶ 67. The District Court followed these
instructions by holding an evidentiary hearing and considering the conflicting evidence in
re-evaluating the class certification criteria. It stated accurately that Mattson II required
evaluation for class certification purposes of whether the Defendants “caus[ed]
unreasonable damage to the properties or interfer[ed] unreasonably with the landowners’
enjoyment of their properties, or both.” The District Court provided a detailed summary
of the evidence in forty-seven findings of fact on which it relied in determining that
Plaintiffs had not satisfied the Rule 23 requirements. It noted that adjudication of
whether Defendants’ easement use was reasonable required evaluation of numerous
factors and that there were drastic factual variations between the 3,000-plus properties:
31. The easements at issue herein were created over an approximately
twenty-year period of time and they cover properties that span miles and
miles of shoreline on the Flathead Lake and Flathead River. They consist,
in part, of farm land; town sites; marinas or yacht clubs; golf courses;
private residences; lodge properties for hire by the public; highway
frontages; boat docks, boathouses, and piers built of varying materials;
seawalls and other shore stabilization projects of widely varying types. . . .
The natural characteristics of the properties include wetlands, forests,
floodplains, river delta, rock outcroppings, large natural boulders, gravel
beaches, bluffs, and varying types of soil and soil characteristics. . . . The
properties are situate[d] along the north lake shore, where most of the big
waves break due to the prevailing wind . . . the south shore which is quite
shallow and the waves are not impacted by the dominant wind pattern, the
east and west shores which differ significantly from each other and from
the north and south lake shores, and along the lower Flathead River.
Due to these variations, as well as other considerations relevant to the “reasonableness”
inquiry, the District Court determined that Plaintiffs had not satisfied the requirement of a
common question of law or fact that predominated over individual differences, and also
failed to show that a class action was the superior mode of adjudication. M. R. Civ. P.
33
23(a)(2), (b)(3). The District Court concluded that evaluation of the lake level’s impact
on all of the properties inevitably would require individualized trials to determine
Defendants’ liability, making a class action overly complicated and uneconomical.
¶48 We review the District Court’s determination of the Rule 23 class certification
criteria for an abuse of discretion and reverse only if the District Court “acted arbitrarily
without conscientious judgment or exceeded the bounds of reason.” Chipman, ¶ 17
(citations omitted). “Trial courts have the broadest discretion when deciding whether to
certify a class.” Sieglock, ¶ 8 (citing McDonald, 261 Mont. at 399, 862 P.2d at 1154).
The District Court’s judgment must be “accorded the greatest respect because it is in the
best position to consider the most fair and efficient procedure for conducting any given
litigation.” Chipman, ¶ 17 (citations omitted). Miles, on which the Court purports to
rely, makes clear that while factual findings are reviewed for clear error and legal
conclusions de novo, the abuse of discretion standard nonetheless applies to each
certification criterion, as well as to the court’s final decision on certification. Miles, 471
F.3d at 32, 40-41. The Court reverses as to each of three certification criteria—
commonality, predominance and superiority—because the District Court’s interpretation
of our holding in Mattson II was “incorrect”; but the Court does not specify how the
District Court misinterpreted that precedent or identify error in any of the District Court’s
factual determinations. The Court notes, “[i]mportantly, we did not state in Mattson II
that these questions should—or even could—be decided on a property-by-property
basis,” Opinion, ¶ 31; however, the question whether individual trials would be necessary
was a determination for the District Court to make on remand. Mattson II, ¶ 68
34
(remanding for factual development and determination of the Rule 23 criteria). In my
view, the Court has disregarded the role of the fact-finder and failed to apply the proper
standard of review.
¶49 The Court provides only one reason for reversing the District Court’s
determination of the commonality, predominance and superiority requirements:
Defendants can operate the dam to effectuate only one lake level at a time and thus,
“[e]ither the erosion being caused at various points around the lake at a chosen water
level is ‘reasonably necessary’ to the enjoyment of the express right to flood, subirrigate,
and drain, or it is not.” Opinion, ¶ 32. Rather than clarify where the District Court erred
in deciding each criterion, this Court merely reiterates that dam operators cannot “operate
the dam one way as to one shoreline property while operating it a different way as to
another shoreline property.” Opinion, ¶ 34.
¶50 The District Court acknowledged that the lake could be operated at only one level,
but determined that Plaintiffs failed to show Rule 23(a)(2) commonality because of the
myriad sub-issues arising in evaluating “reasonableness” of the lake level with respect to
the wide range of servient estates:
28. The only element Plaintiff has established as common to all members
of the class is Defendants’ “decision to hold the lake level high into the fall
storm season.” . . . The evidence demonstrates that the issue of whether
Defendants’ operation of the dam caused damage or interference with each
proposed class member’s property, and particularly unreasonable damage
or unreasonable interference, will vary drastically among the members of
the class and require an analysis on a property-by-property basis of the
nature of the property, such as soil type; natural or manmade erosion
controls; the location of the property; natural characteristics of the
shoreline; the use and enjoyment to which the landowner puts the property;
and the ordinary, anticipated impacts on the properties from Defendants’
35
reasonably necessary enjoyment of their easement rights. There is
significant differentiation between the erosional force, from the operation
of the dam and from other causes, at work in the Flathead River and those
in Flathead Lake. The Plaintiffs have not suggested how they will establish
the amount of erosion or the causes thereof along the Flathead River, or
how the unreasonableness of any erosion in the river attributable to the
operation of Kerr Dam will be established. The Court must find from the
available evidence that individualized determinations will be mandated,
suggesting that there is not a significant common “core of salient facts”
among all class members sufficient to find that there are questions of fact or
law common to the class.
(Emphasis in original.) Importantly, the District Court also recognized that a class-wide
decision on the reasonableness of Defendants’ dam operation would not dispose of the
question of Defendants’ liability to all Plaintiffs such that only individualized damages
would need to be proven:
34. This is not a question of the differing extent of each property owner’s
damages as Plaintiff contends, which does not necessarily defeat class
certification. The Montana Supreme Court ruled that liability may only be
imposed if it is found that “MPC and PPLM caused erosion that was not
reasonably necessary to the enjoyment of their rights thereunder, by
causing unreasonable damage to the properties or interfering unreasonably
with the landowners’ enjoyment of their properties, or both.” . . .
Therefore, all of the considerations that enter into a resolution of conflicts
over the extent of an easement . . . must be evaluated as an element of
Plaintiffs’ claims.
(Emphasis in original.) This is precisely what we said in Mattson II. Mattson II, ¶ 69.
The District Court’s observation, after hearing the evidence, that there were numerous
potential causes of the erosion present on individual Plaintiffs’ properties leads to the
conclusion that, if Defendants are to be found liable to the entire class, causation would
need to be shown on an individualized basis. The District Court followed Mattson II by
relying on Restatement (Third) of Property: Servitudes § 4.10, comment (c) of which
36
states: “The uses that are reasonably necessary for enjoyment of an easement change over
time[.] . . . [Such] conflicts frequently present difficult factual issues as to how broadly or
narrowly the purpose should be defined[.] . . . Resolution of the conflict often demands a
detailed inquiry into the particular facts and circumstances of the case, and the issues as
to intent, reasonable expectations, purpose, reasonableness of use, and extent of damage
and interference are usually intertwined.” In Mattson II, we listed numerous cases that
followed “the reasonableness standards set forth in § 4.10,” and that held that a
defendant’s liability for breach of an easement must be proven based on the facts and
circumstances of the case. Mattson, ¶ 47 (“[t]he law requires that [the easement holder’s]
use of the easement not unreasonably burden the servient tenement.”) (quoting Sampson
v. Grooms, 230 Mont. 190, 195, 196, 748 P.2d 960, 963, 964 (1988)).
¶51 Based on authorities cited in Mattson II, the District Court concluded that “no
definite rule can be stated as to what may be considered a reasonable use of an easement
as distinguished from an unreasonable use; rather, the question is usually one of fact to be
determined in the light of the situation of the property and the surrounding
circumstances.” It follows that Defendants’ liability turns on the fact-based evaluation of
reasonableness with respect to each property. The District Court recognized that Mattson
II required additional factual development under two separate theories in order to
determine whether Defendants would be liable for unreasonable erosion. Mattson II,
¶¶ 42, 56. The legal authorities and instructions we provided in Mattson II became the
law of the case, “which must be adhered to throughout its subsequent progress, both in
the trial court and upon subsequent appeal.” Hafner v. Conoco, Inc., 1999 MT 68, ¶ 20,
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293 Mont. 542, 977 P.2d 330 (quoting Marriage of Scott, 283 Mont. 169, 175-76, 939
P.2d 998, 1002 (1997)).
¶52 The Court now presumes without explanation that class adjudication of the
“reasonableness” of dam operation disposes of the question of liability to all class
members, such that the class complaint satisfies Rule 23(a)(2)’s requirement of a
common answer. The Court simply asserts, “[t]he only individual questions in this
lawsuit relate to the amount of damages—if it is determined, first, that MPC and PPLM
are liable for operating the dam unreasonably.” Opinion, ¶ 41. During oral argument
before this Court, however, Plaintiffs’ counsel conceded that adjudication of the
“reasonableness” of Defendants’ dam operation would not necessarily dispose of the
question of Defendants’ liability because Plaintiffs still could pursue claims under
Mattson II’s “second question”:
THE COURT: Coming back to your discussion of the disjunctive test,
question one and question two, and I think your argument is that you think
question one is the common question that could be tried as a class. . . . I’m
envisioning how that would play out if you did try that first issue as a class
and Montana Power would come into the trial and introduce all the
evidence where a lot of these properties had not been damaged and there
was no erosion and the jury concludes that . . . the power companies’ use of
the dam, maintenance of the dam, was reasonable—we hold in favor of the
defendant on this first question. That doesn’t end the liability claims for the
property owners, does it? They would still have a claim under the second
question, wouldn’t they?
COUNSEL: That’s correct, because it is disjunctive . . . you’re absolutely
right. If the test is disjunctive and I think it’s just clear that it is . . . then
intellectual honesty would say that it’s one or the other, doesn’t have to be
both—could be both, of course.
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This exchange reflects our holding in Mattson II and confirms that, even if a jury rules in
favor of MPC and PPLM, Plaintiffs still could bring individual actions challenging the
effect of the lake level on their own properties. For the same reason, if the jury finds in
favor of Plaintiffs on the question of breach of easement, individual Plaintiffs also may
pursue their alternative claims of trespass, nuisance, and a taking of their properties,
potentially resulting in thousands of separate suits against Defendants. Thus, there are
multiple grounds for concluding that Plaintiffs’ question does not generate a common
answer “that will drive the resolution of the litigation.” Chipman, ¶ 52. Individualized
proof of liability still will be necessary and, regardless of what the jury decides regarding
the first question, Plaintiffs may pursue individual actions for unreasonable interference
and property damage arising from Defendants’ use of their easements.
¶53 Rather than address these and other concerns that the District Court emphasized in
evaluating commonality, the Court questions whether Rule 23(a)(2) even requires a
common answer in Montana. Opinion, ¶ 37. I disagree that the “question arises” in this
case, since we resolved it in Chipman. As we recognized there, the United States
Supreme Court’s Wal-Mart decision heightened the burden of federal class action
plaintiffs in demonstrating commonality under Fed. R. Civ. P. 23(a)(2). The class
complaint must include not only a common question of law or fact—plaintiffs must
additionally demonstrate that there are “common answers apt to drive the resolution of
the litigation.” Chipman, ¶ 48 (quoting Wal-Mart, ___ U.S. at ___, 131 S. Ct. at 2551).
(Emphasis in original.) We characterized our previous cases as the law Montana
followed “[p]rior to Wal-Mart,” Chipman, ¶ 47, and unequivocally adopted the more
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stringent standard, emphasizing “this Court’s long history of relying on federal
jurisprudence when interpreting the class certification requirements.” Chipman, ¶ 52; see
also Mattson II, ¶¶ 64-67 (following “the approach of the federal courts” and citing
cases). We agreed that “[d]issimilarities within the proposed class are what have the
potential to impede the generation of common answers,” Chipman, ¶ 48, but decided that
adjudication of the class plaintiffs’ question in that case—“whether a standardized group
contract exists and the legal obligations of the parties”—would generate a common
answer that disposed of the central issue for all class members in one stroke. Chipman,
¶ 52. Importantly, Chipman involved only a claim for declaratory relief and thus we did
not address the additional certification prerequisites for class damages claims—
superiority and predominance. Chipman, ¶ 59.
¶54 Citing Chipman, the Court now states that the question “whether Montana will
retain its more permissive approach or instead adopt the Wal-Mart majority’s approach”
may be resolved in “a future case.” Opinion, ¶ 37. The Court discusses and quotes the
opinion of Wal-Mart’s dissenting justices who disagreed with the Supreme Court’s
adoption of the heightened commonality threshold—ignoring our clear application of the
Wal-Mart standard in Chipman. Opinion, ¶ 36. These statements on the heels of
Chipman muddle Montana’s class action law rather than provide any clarity or guidance
to the district courts and the practicing bar. See e.g. Robert H. King, Jr., Four Lessons
from Wal-Mart v. Dukes and Their Application to Montana Class Action Law, 73 Mont.
L. Rev. 255, 284 (Summer 2012) (suggesting that the question whether Montana courts
will adopt the Wal-Mart commonality standard has not been resolved but that the courts
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“should follow” Wal-Mart) and Robert H. King, Jr., Update to Previously Published
Article, 38 Montana Lawyer 7 (Dec./Jan. 2012) (reporting that Chipman “affirmatively
resolved” the question of Montana’s commonality standard by adopting the heightened
commonality threshold of Wal-Mart). Despite Chipman’s unequivocal language, it is
now unclear what prospective class plaintiffs must demonstrate in order to meet the Rule
23(a)(2) commonality requirement.
¶55 Whether or not the commonality factor is met, the Court further disregards the
deference owed the District Court’s determinations of the Rule 23(b)(3) requirements of
predominance and superiority, which grant the trial court broad authority to evaluate the
overall suitability of a case for class adjudication. A court’s evaluation of predominance
is “pragmatic” because the court weighs common issues against non-common issues in
determining the most efficient mode of adjudication. Newberg et al., Newberg on Class
Actions § 4:51, 200 (5th ed., Thompson/West 2011). Plaintiffs must meet a higher
burden in showing predominance than in demonstrating a common question of law or
fact. Newberg, Newberg on Class Actions § 4:51, 198 (as a general rule, “[t]he
predominance demand is stricter than Rule 23(a)(2)’s commonality requirement”). A
prospective class seeking money damages may be certified under Rule 23(b)(3) only if:
the court finds that the questions of law or fact common to the class
members predominate over any questions affecting only individual
members, and that a class action is superior to other available methods for
fairly and efficiently adjudicating the controversy. The matters pertinent to
these findings include:
(A) the class members’ interests in individually controlling the prosecution
or defense of separate actions;
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(B) the extent and nature of any litigation concerning the controversy
already begun by or against the class members;
(C) the desirability or undesirability of concentrating the litigation of the
claims in the particular forum; and
(D) the likely difficulties in managing a class action.
M. R. Civ. P. 23(b)(3). These considerations are “a nonexhaustive list of factors
pertinent to a court’s ‘close look’ at the predominance and superiority criteria.” Amchem
Prods. v. Windsor, 521 U.S. 591, 615-16, 117 S. Ct. 2231, 2246 (1997); see McDonald,
261 Mont. at 404, 862 P.2d at 1157 (discussing the 23(b)(3) factors). Considering the
substantial amount of evidence presented, the District Court determined that the
individual variations between the Plaintiffs’ properties outweighed their proposed
common question. It concluded:
33. An attempt to evaluate in a class action setting the differing
characteristics of all class members’ properties, the uses made of the
properties at the time the easements were created, over time and today, and
the locations of the properties, to determine whether erosion on each piece
of property is unreasonable or interferes unreasonably with the landowner’s
enjoyment of the property, will necessarily evolve into a series of
individual trials.
¶56 The preliminary factual development of this case documented in the District
Court’s decision supports its conclusion that a class action would be unmanageable and
that “[c]lass certification will complicate rather than economize resolution of these
issues.” The court also reasoned that requiring individual trials would not result in
multiple lawsuits arising out of the same set of facts and questions of law because “there
are some properties owned by proposed class members that are not actually experiencing
erosion” and further, because Mattson II’s second question would inevitably require
additional individual suits.
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¶57 The Court fails to explain how one trial requiring fact-specific evaluation of the
dam’s effects on 3,000 different properties over time will not evolve into a series of
separate trials. The Court states:
all of the different characteristics and uses must be considered together, in
the aggregate, as part of the reasonableness inquiry. This does not
constitute a series of individual trials; it constitutes a balancing of
numerous factual considerations in an overall assessment of what lake level
is reasonable to maintain at any given time.
Opinion, ¶ 40. (Emphasis in original.) The Court does not disagree that the question of
“reasonableness” presented here will require case-by-case analysis of a multitude of
factors, but simply instructs the District Court to evaluate those factors in the context of
one lawsuit—a task the District Court found to be unmanageable under the specific
circumstances of this case. The trial court is uniquely positioned to make that
determination and is entitled to considerable deference in matters of trial administration.
Fink v. Williams, 2012 MT 304, ¶ 18, ___ Mont. ___, ___ P.3d ___. This is particularly
so when reviewing a district court’s determination of superiority, which involves
comparison of class litigation to procedural alternatives, including “multiple individual
actions, joinder of claims, the use of test cases, and administrative procedures, among
others.” Newberg, Newberg on Class Actions § 5:25, 473.
¶58 Finally, the District Court could consider, if “appropriate,” certification of the
“particular issue” whether Defendants made unreasonable use of the flood easements, as
allowed by M. R. Civ. P. 23(c)(4). See Valentino v. Carter-Wallace, Inc., 97 F.3d 1227,
1234 (9th Cir. 1996) (providing that, where appropriate, trial court may proceed with
class treatment with respect to “particular issues” under Fed. R. Civ. P. 23(c)(4)(A), even
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if certification of the entire action is not warranted). That is a matter I would leave open
for the parties and the District Court to consider, since the record does not show that the
Plaintiffs made such a request.
¶59 The District Court followed our directive in Mattson II to reconsider the
certification criteria after providing the opportunity for further factual development of the
two issues we identified. Its determination of each of the Rule 23 criteria was based on
application of the legal principles provided in Mattson II to the evidence developed
during the hearing. Having sent the case back to the District Court for fact-finding, I
would defer to its thorough analysis of the evidence and conclude that the District Court
did not abuse its discretion in denying class certification in this case. I dissent from the
Court’s failure to do so.
/S/ BETH BAKER
Justice Jim Rice joins in the dissenting Opinion of Justice Baker.
/S/ JIM RICE
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