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Freeman v. Grain Processing Corporation

Supreme Court of Iowa

May 12, 2017


         Appeal from the Iowa District Court for Muscatine County, Thomas G. Reidel, Judge.

         Defendant appeals district court ruling certifying case as a class action.

          Michael R. Reck, Mark McCormick, Charles F. Becker, and Kelsey J. Knowles of Belin McCormick, P.C., Des Moines; Steven J. Havercamp and Eric M. Knoernschild of Stanley, Lande & Hunter, P.C., Muscatine; and Joshua B. Frank of Baker Botts L.L.P., Washington, D.C., for appellant.

          Sarah E. Siskind and Scott A. Entin of Miner, Barnhill & Galland, P.C., Madison, Wisconsin; James C. Larew of Larew Law Office, Iowa City; and Claire M. Diallo of Browne, Diallo & Roy, LLP, Princeton Junction, New Jersey, for appellees.

          WATERMAN, Justice.

         In this appeal, we must decide whether the district court abused its discretion by certifying this case as a class action. The plaintiffs are residents of Muscatine, Iowa, who live near a corn wet milling plant. The plaintiffs allege air pollution from the plant interferes with the use of their property. They have filed this lawsuit alleging state common law and statutory claims based on nuisance, trespass, and negligence theories. In a prior appeal, we held their claims were not preempted by the Federal Clean Air Act (CAA). Freeman v. Grain Processing Corp., 848 N.W.2d 58, 94 (Iowa 2014). On remand, the district court, over defendant's objections, granted the plaintiffs' motion for class certification and divided the class into two subclasses. For the reasons explained below, we affirm the class certification order.

         I. Background Facts and Proceedings.

         Grain Processing Corporation (GPC) has operated its corn wet milling facility in Muscatine since 1943, converting corn kernels into products for commercial and industrial use. On April 23, 2012, eight Muscatine residents living near GPC filed a putative class action on behalf of "themselves and others who have resided within one and one-half miles from the perimeter" of GPC's facility within the preceding five years, an estimated 4000 residents. Their petition provides this overview of their claims:

The plaintiffs allege the corn wet milling operation at GPC's facility creates hazardous by-products and harmful chemicals, many of which are released directly into the atmosphere. . . . They assert the polluting chemicals and particles are blown from the facility onto nearby properties. They note particulate matter is visible on properties, yards, and grounds and various chemical pollutants are also present. Compounding these adverse effects, according to the plaintiffs, GPC has used, continues to use, and has failed to replace its worn and outdated technology with available technology that would eliminate or drastically reduce the pollution. The plaintiffs assert these emissions have caused them to suffer persistent irritations, discomforts, annoyances, inconveniences, and put them at risk for serious health effects.

Id. at 63-64. The plaintiffs limited their damage claims to loss of use and enjoyment of property, foregoing claims for diminution in value or personal injury.

         GPC moved for summary judgment, asserting plaintiffs' common law and statutory claims were preempted by the CAA and Iowa Code chapter 455B (2011), Iowa's counterpart to the CAA. GPC's motion alternatively argued the lawsuit raised nonjusticiable political questions. The district court granted GPC's motion for summary judgment based on preemption and the political-question doctrine. The district court relied on a key federal preemption decision that subsequently was reversed on appeal. On our review, we concluded the plaintiffs' claims were not preempted or barred by the political-question doctrine. Id. at 83-85, 88- 89, 93-94. We reversed the summary judgment and reinstated the lawsuit against GPC, relying in part on the new federal appellate decision filed after the district court's ruling. See id. at 65 n.2 & 94. We remanded the case to the district court.

         A. Plaintiffs' Motion for Class Certification.

         The plaintiffs moved for class certification after remand. GPC resisted class certification on several grounds. The plaintiffs argued common questions of law and fact predominated over individual claims-a fundamental requirement for class certification. Common questions included "whether GPC violated its duty of care, whether the haze, odor, and smoke emitted from GPC [were] the product of negligence, and whether such emissions constituted negligence or unlawful trespass." The plaintiffs proposed a plan for adjudicating their claims. The plan focused on three prongs: GPC's common course of conduct, proof of harm, and calculation of damages.

         First, the plaintiffs proposed to show GPC's common course of conduct in knowingly creating a nuisance. They pointed to internal emails indicating GPC was aware of the pollution and the need to update equipment to improve air quality. For example, in 2008, Derek Biggs, GPC's plant manager, emailed coworkers observing, "At times when I was there, the parking lot and south end of Muscatine [were] covered in a haze, and if we had that odor, haze, etc. in Washington, we would have serious problems with the locals." Mick Durham, GPC's environmental director, received an email in 2010 from Kurt Levetzow, an employee of the Department of Natural Resources (DNR) who stated he was "amazed at a bluish colored haze that was leaving GPC's property and blanketing the residential neighborhood across from the plant." A 2012 email from Bill Chrisman, GPC senior process engineer, to Durham disclosed that over one weekend the facility's dryers caused "the neighborhood [to be] so smoky across the street that it was fairly hard to see, not to mention breathe." GPC engineers described the dryers as "antiquated, " "deteriorating, " "run down, " and "older higher polluting."

         The plaintiffs proposed to prove that GPC delayed fixing the problems by choosing to focus its resources elsewhere. Technologies to reduce emissions were available but not implemented at GPC's Muscatine plant. The plaintiffs characterized this common proof as the "most significant portion of the trial, " stating,

Whether it be a class case or an individual trial, there is going to be a lot of evidence, a significant amount of evidence regarding the culpability of GPC's conduct. That evidence will be the same, over and over again, for every single class member. Regardless if this case is tried once or tried hundreds or thousands of times, the same witnesses, the same documents will be testified about, the same issues [will be presented].

         The plaintiffs noted, "[T]hese conditions and GPC's knowledge of them are facts and evidence that reside at the heart of every class member's claims."

         In the second phase, the plaintiffs proposed to focus on proof of harm: that every resident within one-and-a-half miles suffered a nuisance. The plaintiffs would offer three categories of evidence. The first addressed causation; it "revolve[d] around GPC's public admissions that its operation had been causing the smoke, the odor and the haze that had concerned the Muscatine community for years."

         The next addressed harms suffered by the residents. The plaintiffs proposed to offer testimony from twenty to thirty "normal" persons living within the class boundaries, describing the common character of the harm. The plaintiffs submitted over 100 declarations from residents. Most described the smell emitted from the GPC plant as "burned corn" or "rotten eggs." Many mentioned dust-like particles accumulating on their lawns and homes. Sometimes the dust was white or gray, and sometimes it was darker. Most declarations indicated the smell or ash happened daily or nearly every day and mentioned symptoms of burning eyes and irritated sinuses. Many said they could not open windows or enjoy the outdoors due to the smell and dust. The plaintiffs alleged these declarations, together with residents' testimony, met the objective standard for nuisance: that normal persons in the community found the conditions offensive, annoying, or intolerable. The plaintiffs stated,

Plaintiffs are prepared to present testimony from normal persons from all over the class area who regard GPC's pollution as definitely offensive, seriously annoying or intolerable. Whether they are, in fact, normal persons living in the community will be a jury question. But if so, and if the jury credits their testimony, it will establish that GPC created a nuisance at their properties, and if in every portion of the class area normal persons testify that they experienced a nuisance, then it is permissible for a jury to infer that a nuisance has been suffered throughout the class area.

         GPC could then present conflicting testimony from other residents within the class boundaries who did not experience similar harm or were not bothered by the emissions.

         The final type of evidence plaintiffs intended to offer was air modeling data from Dr. Paul Rosenfeld. Dr. Rosenfeld plotted the dispersion of three types of emissions: volatile organic compounds (VOCs), particulate matter (PM10), and sulfur dioxide. These emissions were proxies for odor, smoke, and haze, respectively. Dr. Rosenfeld used AERMOD, an EPA-approved modeling algorithm that accounts for wind direction, wind speed, temperature, humidity, precipitation, and certain obstructions to estimate where the wind blew particles from GPC. Dr. Rosenfeld's model revealed pollutant concentrations and variations over time across the class area. He also developed a "wind rose" analysis, based on the sixteen cardinal wind directions, which he used to quantify the amount of time each property received "direct hits, " or was downwind from, the emissions. Dr. Rosenfeld's data showed "the presence of the same pollutants frequently and repeatedly on every property in the class, and . . . the presence of those pollutants at properties closely surrounding the properties of the testifying normal persons." At the class certification hearing, the plaintiffs' counsel explained,

And if you look at this, what you don't see, Your Honor, is during the hour of 5:00 to 6:00 a.m., a single solitary orange little cloud only covering the red cross that is Ms. Mockmore's property. What you do see is that when GPC's soup of pollutants are blown at Ms. Mockmore's property, all of the other parcels and properties in close proximity to Ms. Mockmore's are similarly hit by GPC's soup of pollutants.
And the Mockmore's property is not isolated in this observation, Your Honor. And this is important because this is why it supports the inference that we're asking the jury to make in this case, that when Ms. Mockmore or this normal person or that normal person testifies about his or her experience with GPC's pollutants . . . it is a reasonable inference for the jury to infer that similar properties in close proximity experience a similar nuisance[.]

         "All of this evidence in combination, these three categories of evidence, " the plaintiffs argued, "will support a reasonable inference by the jury that the nuisance conditions existed on every property in the class area."

         Finally, for the third phase of the plaintiff's proposed trial strategy, the plaintiffs suggested a formula for calculating damages. Initially, they proposed using a simple per diem formula, in which the jury would assess a per-hour amount ($10 to $15) for the time each resident lived in the area. Alternatively, the plaintiffs proposed another, more exacting formula in which the jury's assigned baseline per-hour value would be multiplied by each property's "direct hit" hours and prorated based on each property's pollutant concentration. Pollution concentration, plaintiffs argued, could be calculated as follows:

The formula takes the average concentrations of each of [VOCs, PM10s, and sulfur dioxide] present on each parcel and then sums them up to arrive at a property-specific concentration total and to determine how that compares to the total concentrations of the hardest hit property. And we refer to the hardest hit property as the baseline for all others. The formula divides the concentration total for each property into the . . . baseline total.

         Plaintiffs acknowledged that because the model measures only the amount of time a property is hit by emissions, lower concentration totals may measure emissions that residents would not notice. It would be left for the court and jury to identify what total concentration level, if any, constituted a nuisance. The plaintiffs admitted this formula does not account for time class members spent asleep or away from their property, but asserted the formula was permitted under our caselaw allowing approximation of damages.

         To the extent issues remained concerning individual damages, the plaintiffs contended these issues could be litigated during a "claims administration process typical to class actions." During this process, individual factors such as tenure of the residents and proximity to other sources of pollution could be addressed.

         B. GPC's Resistance to Certification.

         GPC argued the residents' claims were inherently individual, and as such, individual issues predominated over those common to the class. GPC pointed to variances in testimony submitted by the residents. For example, their descriptions of GPC's emissions differed, such as "yellow dust, " "syrupy, sticky residue, " "similar to pencil shavings, " "sticky, brownish tan particulates, " "small black pellets like peppercorns, " or "dust that looks like fur." Some residents had moved into the neighborhood with knowledge of the emissions, while others were unaware before moving. The neighbors had lived in the area for varying periods, some moving to the area after the lawsuit was filed and others living there for over fifty years. Some stated they may have received reduced pricing on their homes because of the pollution. Some lived closer to other emission sources, such as a wastewater treatment plant or railroad. GPC identified seven residents (out of over 100 declarants) who stated they never had been prevented from doing anything outdoors because of the smells or emissions. Even these residents, however, acknowledged the prevalent odor in their neighborhood from GPC's facility. The individual issues, GPC argued, necessitated a property-by-property, person-by-person analysis to determine whether GPC's conduct created a nuisance.

         GPC also resisted the residents' phased trial strategy. Specifically, GPC objected to the use of lay testimony to infer classwide harm. GPC noted a class action must "rise or fall" with the named plaintiffs. Allowing the jury to infer, from representative testimony, conditions on surrounding properties, GPC argued, would impermissibly alleviate each resident's burden to prove nuisance on his or her property. Moreover, using inferences would mask individual issues, hindering individual defenses and thereby depriving GPC of due process.

         GPC submitted expert testimony criticizing Dr. Rosenfeld's model and corresponding allocation of damages. It alleged the model was flawed because it combined disparate substances (VOS, PM10, and sulfur dioxide) to reach an aggregate total, even though properties with differing concentrations of these substances would experience differing harms. The model showed concentration totals on a linear scale, although testimony established that emissions would not be experienced linearly. A property with a concentration total of 200 would not suffer double the lost use of enjoyment as one with 100. The model only accounted for wind direction and failed to account for hours during which the residents were sleeping, on vacation, or otherwise away from home. Because the model measured emissions hitting the property even at levels that would not be perceptible, let alone cause compensable harm, GPC argued the model did not establish a nuisance. GPC also noted the residents' model and formula could not measure any alleged trespass or negligence by GPC.

         C. The District Court's Decision.

         The district court granted class certification. Noting its authority to modify or decertify the class at any time, the district court divided the class into two subclasses, one for members in close proximity to GPC, and the other for those in peripheral proximity. The court reasoned that plaintiffs' air dispersion analysis "yields results one would expect-properties in close proximity have comparable 'Concentration Totals' and direct-hit hours." Therefore, "named plaintiffs suffer the most comparable harm to absent class members who live in close proximity, and the closer the proximity the more analogous the harm." The court sorted six named plaintiffs into the close-proximity subclass and two into peripheral proximity.

         The district court further determined that common issues of law and fact existed and that common issues predominated over individual ones. Common issues included GPC's course of conduct, its knowledge of the pollution, and its level and duration of emissions. Addressing GPC's concerns, the district court, citing Miller v. Rohling, 720 N.W.2d 562 (Iowa 2006), stated,

Because Iowa measures the existence of nuisance-level harm objectively, a nuisance claim brought under Iowa law is not inherently individual. Indeed, Iowa's objective standard renders many of Defendant's Due Process arguments-idiosyncratic sensitivities, physical infirmities, life style choices, preferences for use and enjoyment, housekeeping habits-immaterial to proving nuisance. Further, Iowa's objective-nuisance standard supports Plaintiffs' plan for presenting the jury with lay testimony from witnesses-whom the jury can find are "normal persons living in the community"-to prove the class-wide impact of the alleged nuisance throughout each subclass area.
Miller also supports Plaintiffs' proposed use of formulaic damages. Miller upheld the trial court's formulaic use of an identical per hour dollar value for all of the plaintiffs notwithstanding differences in their proximity to the sources of the pollution. Miller also approved the trial court multiplying an identical per hour dollar value by sixteen hours a day-because it assumed that "most normal people would be out of their home a period of eight hours a day." . . . Miller approving formulaic damages based on reasonable inferences and approximation renders more of Defendant's Due Process arguments-each class member living in a different proximity to the source of the pollution, the varying rate of emission over time, the varying velocity and direction of the wind, and the number of hours each plaintiff was actually or wakefully present at his or her property-immaterial to proving nuisance.

         The district court concluded, "Due to the remedial nature of our class action rules, the manageability concerns raised by Defendant's arguments are presently insufficient to deny certification."

         GPC appealed as of right. See Iowa R. Civ. P. 1.264(3) ("An order certifying or refusing to certify an action as a class action is appealable."). GPC argues the district court abused its discretion in certifying the class and that certification infringed upon its due process rights. We retained the appeal.

         II. Standard of Review.

         "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 the certification of class action lawsuits." Legg v. W. Bank, 873 N.W.2d 756, 758 (Iowa 2016) (quoting Vos v. Farm Bureau Life Ins. Co., 667 N.W.2d 36, 44 (Iowa 2003)). We review a district court's class certification ruling for abuse of discretion. Id. The district court abuses its discretion when its "grounds for certifying a class action are clearly unreasonable." Id. If the district court " 'weigh[ed] and consider[ed] the factors and [came] to a reasoned conclusion as to whether a class action should be permitted for a fair adjudication of the controversy, ' we will affirm." Anderson Contracting, Inc. v. DSM Copolymers, Inc., 776 N.W.2d 846, 848 (Iowa 2009) (alterations in original) (quoting Luttenegger v. Conseco Fin. Servicing Corp., 671 N.W.2d 425, 437 (Iowa 2003)). To the extent GPC argues certification infringes upon its due process right to present a defense, our review is de novo. Kragnes v. City of Des Moines, 810 N.W.2d 492, 498 (Iowa 2012).

          III. Analysis.

         We must decide whether the district court abused its discretion by certifying this class action. GPC contends that commonality, a question of law or fact common to the class, is not present as required under Iowa Rule of Civil Procedure 1.261(2). GPC relatedly argues common issues of law or fact do not predominate over individual issues, a factor it contends the district court failed to sufficiently weigh when concluding a class action should be permitted for the fair and efficient adjudication of the controversy. See Iowa R. Civ. P. 1.263(1)(e). We determine that common issues of law or fact exist and predominate over individual issues. Finally, GPC argues the certification order violates due process by interfering with its right to litigate individual defenses. We disagree and conclude GPC will be able to litigate individual issues. We hold the district court did not abuse its broad discretion in certifying this class action.

         A. Whether the District Court Abused Its Discretion by Certifying the Class Action.

         Iowa Rules of Civil Procedure 1.261 through 1.263 govern class actions. Under rule 1.262, the district court may certify a class action if it finds all of the following:

a. The requirements of rule 1.261 have been satisfied.
b. A class action should be permitted for the fair and efficient adjudication of the controversy.
c. The representative parties fairly and adequately will protect the interests of the class.

Id. r. 1.262(2). Rule 1.261 provides parties may sue as a class when "[t]he class is so numerous . . . that joinder of all members . . . is impracticable" and "[t]here is a question of law or fact common to the class." Id. r. 1.261(1)-(2). "A failure of proof on any one of the prerequisites is fatal to class certification." City of Dubuque v. Iowa Trust, 519 N.W.2d 786, 791 (Iowa 1994). But at the class certification stage, "the proponent's burden is light." Id. The class action rules should be "liberally construed and the policy should favor maintenance of class actions." Lucas v. Pioneer, Inc., 256 N.W.2d 167, 175 (Iowa 1977). The goal of the 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.

Comes v. Microsoft Corp., 696 N.W.2d 318, 320 (Iowa 2005) (quoting 7A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1754, at 49 (2d ed. 1986) [hereinafter Wright]).

         Rule 1.263(1) lists thirteen factors the district court may consider in determining whether "the class action should be permitted for the fair and efficient adjudication of the controversy."[1] Iowa R. Civ. P. 1.263(1). These factors "center on two broad considerations: 'achieving judicial economy by encouraging class litigation while preserving, as much as possible, the rights of litigants-both those presently in court and those who are only potential litigants.' " Vos, 667 N.W.2d at 45 (quoting Vignaroli v. Blue Cross of Iowa, 360 N.W.2d 741, 744 (Iowa 1985)).

         A key factor is whether "common questions of law or fact predominate over any questions affecting only individual members." Iowa R. Civ. P. 1.263(1)(e). "[T]he language of rule 1.263 indicates the district court has 'considerable discretion' in weighing the factors." Anderson Contracting, 776 N.W.2d at 848 (quoting Vignaroli, 360 N.W.2d at 744). The district court decides what weight, if any, to give each of the factors and may weigh one factor more heavily than another. Id. "Whether or not we agree with the decision arrived at by the trial court is not the issue. The issue is one of abuse of discretion." Id. (quoting Martin v. Amana Refrigeration, Inc., 435 N.W.2d 364, 369 (Iowa 1989)). The district court has considerable leeway when deciding whether to certify the class. See, e.g., Legg, 873 N.W.2d at 761-62 (affirming class certification and noting broad discretion); Kragnes, 810 N.W.2d at 500 ("We find no abuse of the district court's broad discretion in ...

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