Tierra Realty Trust, L.L.C. v. Vill. of Ruidoso , 3 N.M. 485 ( 2013 )

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New Mexico Compilation
Commission, Santa Fe, NM
'00'05- 09:50:38 2013.03.08
IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: 2013-NMCA-030Filing Date: January 8, 2013
Docket No. 31,190
TIERRA REALTY TRUST LLC,
a New Mexico Limited Liability Company,
and all other residential wastewater and sewer
customers of the Village of Ruidoso, New Mexico,
who are similarly situated,
Plaintiffs/Appellants,
v.
VILLAGE OF RUIDOSO,
NEW MEXICO, a New Mexico
incorporated municipality,
Defendant/Appellee.
APPEAL FROM THE DISTRICT COURT OF LINCOLN COUNTY
Karen L. Parsons, District Judge
Keleher & McLeod, P.A.
Kurt Wihl
Richard B. Cole
Christina Muscarella Gooch
Albuquerque, NM
for Appellants
Atwood, Malone, Turner & Sabin, P.A.
Bryan Evans
Carla Neusch Williams
Roswell, NM
for Appellee
OPINION
HANISEE, Judge.
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{1} In this interlocutory appeal, we review the district court’s denial of class certification
for monetary damages pursuant to Rule 1-023 NMRA. While the district court certified the
proposed class of Ruidoso residential sewage and wastewater users for injunctive and
declaratory relief under Rule 1-023(B)(2), it barred certification under both Rules 1-
023(B)(1)(a) and (B)(3) with respect to monetary damages. We hold that the district court
abused its discretion because its decision to deny full class status was not supported by
substantial evidence. We therefore reverse and remand for further proceedings consistent
with this Opinion.
I. BACKGROUND
{2} The Village of Ruidoso (Defendant) entered into a consent judgment in federal court
pursuant to alleged violations of the Federal Water Pollution Control Act. The judgment
required Defendant to construct a new “$35 million” wastewater treatment plant in order to
comply with federal pollution guidelines for wastewater discharge. In an effort to procure
funding for the plant, Defendant passed legislation increasing its wastewater rates for
residential users. The first rate increases were incorporated into Defendant’s fee structure
on November 27, 2007.
{3} In response, Tierra Realty Trust, LLC (Plaintiff), a sixty-unit apartment complex for
senior citizens, contacted Defendant in April 2008, to protest the rate increases. In May
2008, those discussions resulted in an informal agreement that Plaintiff deposit funds into
an interest-bearing escrow account, in lieu of paying the utility fees, until a settlement or
court order could be reached. Plaintiff did not deposit funds according to the agreement, and
instead continued paying the disputed utility bills to Defendant until August 2009, when it
timely filed the complaint in the current case. Plaintiff filed suit on behalf of itself and all
other similarly situated residential wastewater and sewer customers, alleging that the rate
increases were unreasonable contrary to NMSA 1978, Section 3-18-1(H) (1972) (stating that
a municipality may “establish rates for services provided by municipal utilities and revenue-
producing projects, including amounts which the governing body determines to be
reasonable and consistent with amounts received by private enterprise in the operation of
similar facilities”), and discriminatory under the equal protection clause. Plaintiff sought
injunctive relief, declaratory judgment, and monetary damages.
{4} Thereafter, Plaintiff filed a motion for class certification on all grounds of relief
sought, which Defendant opposed, raising the affirmative defenses of voluntary payment,
laches, and estoppel. Plaintiff replied that the proposed class acted under duress when it
continued to make payments to Defendant after the rate change. After a hearing on the
matter, the district court certified the class for injunctive and declaratory relief, but denied
class certification for monetary damages. In denying certification, it concluded that although
“there are numerous common issues of both fact and law[,]” “[i]ndividual issues regarding
voluntary payment and the related issue of duress will predominate over the common
issues,” such that “the damage[s] claim will be very difficult to manage. Plaintiff filed an
application for interlocutory appeal seeking review of the district court’s order, which we
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granted pursuant to Rule 12-203(A) NMRA.
II. DISCUSSION
{5} In order to obtain certification of a class action, Plaintiff must first establish that all
four prerequisites of Rule 1-023(A), commonly referred to as numerosity, commonality,
typicality, and adequacy, are satisfied. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591,
613 (1997); Armijo v. Walmart Stores, Inc., 2007-NMCA-120, ¶¶ 25-26, 142 N.M. 557, 168
P.3d 129. Then, Plaintiff must show that the class is maintainable under one of several
criteria set forth in Rule 1-023(B). See Amchem Prods., 521 U.S. at 614; Armijo, 2007-
NMCA-120, ¶¶ 25-26. In district court, Plaintiff specifically argued that the proposed class
met the criteria of Rule 1-023(B)(1)(a) or (B)(3), contending either that separate causes of
action would result in inconsistent or varying adjudications establishing incompatible
standards of conduct for Defendant, or that common questions predominate to such a degree
that a class action was superior to other methods of adjudication. With respect to damages
certification, the district court determined that Plaintiff failed to satisfy both Rule 1-023(A)
and (B), and therefore denied class status.
{6} “We review the district court’s decision to certify or not certify a class action for an
abuse of discretion.” Davis v. Devon Energy Corp., 2009-NMSC-048, ¶ 12, 147 N.M. 157,
218 P.3d 75. “[A] district court abuses its discretion when it misapprehends the law or if the
decision is not supported by substantial evidence.” Brooks v. Norwest Corp., 2004-NMCA-
134, ¶ 7, 136 N.M. 599, 103 P.3d 39. Substantial evidence is defined as “relevant evidence
that a reasonable mind could accept as adequate to support a conclusion.” Sims v. Sims,
1996-NMSC-078, ¶ 65, 122 N.M. 618, 930 P.2d 153. We resolve all disputed facts and
indulge all reasonable inferences in favor of the district court’s findings. Id. “[T]he district
court’s interpretation of Rule 1-023 is a question of law that is reviewed de novo, as are
other questions of law.” Davis, 2009-NMSC-048, ¶ 12 (citation omitted).
A. Plaintiff Met the Prerequisites of Rule 1-023(A)
{7} The district court found that Plaintiff failed to meet two of the initial prerequisites
under Rule 1-023(A): commonality under Rule 1-023(A)(2) and typicality under Rule 1-
023(A)(3). We address each in turn, and for reasons stated below, we reverse.
1. Commonality
{8} To satisfy the commonality requirement under Rule 1-023(A)(2), Plaintiff must
establish that “there are questions of law or fact common to the class[.]” Despite finding that
“[Plaintiff] has demonstrated that there are numerous common issues of both fact and law,”
the district court determined that commonality was not present. In so ruling, it found that
“the ramifications of the affirmative defense of voluntary payment and the related issue of
duress” rendered “[t]he class regarding the damage claim . . . very difficult to manage.” We
agree with Plaintiff’s contention that the district court “applied an incorrect legal standard[,]
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requir[ing] reversal.” In this regard, we note that Defendant does not argue otherwise on
appeal. See Santa Fe Pac. Gold Corp. v. United Nuclear Corp., 2007-NMCA-133, ¶ 41, 143
N.M. 215, 175 P.3d 309 (stating that where a party declines to address an issue in its answer
brief, we treat the party’s silence as a concession on the issue).
{9} In ruling as it did, it appears that the district court interjected the criteria under Rule
1-023(B)(3) into the commonality prerequisite of Rule 1-023(A) by considering issues of
management and predominance. Romero v. Philip Morris Inc., 2005-NMCA-035, ¶ 9, 137
N.M. 229, 233, 109 P.3d 768 (“The[] Rule 1-023(B)(3) prerequisites are commonly referred
to as the predominance and superiority requirements . . . . [T]he primary focus of the
superiority requirement is the suitability of the class action for management of the
litigation.”). Nonetheless, “[t]he commonality requirement of Rule 1-023(A)(2) is relatively
easily met because it is deemed to require only that a single issue be common to the class.”
Berry v. Fed. Kemper Life Assurance Co., 2004-NMCA-116, ¶ 42, 136 N.M. 454, 99 P.3d
1166. We note that “the commonality requirement is usually subsumed by the predominance
requirement of Rule 1-023(B)(3),” and not the other way around. Id.{10} The district court should therefore have found that the commonality prerequisite was
satisfied based on its finding “that there are numerous common issues of both fact and law.”
That finding is supported by substantial evidence, in that the central threshold issue of the
class, whether for injunctive or monetary relief, is whether Defendant’s rates were
unreasonable. We thus reverse the district court and conclude that commonality has been
satisfied.
2. Typicality
{11} In determining whether “the claims or defenses of the representative parties are
typical of the claims or defenses of the class,” Rule 1-023(A)(3), we assess the following:
“whether other members have the same or similar injury, whether the action is based on
conduct which is not unique to the named plaintiffs, and whether other class members have
been injured by the same conduct.” Armijo, 2007-NMCA-120, ¶ 28 (internal quotation
marks and citation omitted). This inquiry is meant to “gauge in general how well the
proposed class representative’s case matches the class factual allegations and legal theories.”
Berry, 2004-NMCA-116, ¶ 43. But “[t]he fit need not be perfect.” Id. In fact, our caselaw
holds that unless that fit varies so greatly as to create a conflict between the named parties
and the class, “varying fact patterns in individual claims will not usually defeat typicality.”
Id.{12} In this case, the district court made the following pertinent findings:
14. If the sewer and wastewater rates charged to [Plaintiff] are not
reasonable, then the sewer and wastewater rates charged to other members
of the class are similarly unreasonable, and thus the unreasonableness of rates
paid by [Plaintiff] is typical of the unreasonableness of rates paid by the
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class.
15. . . . [Plaintiff]’s equal protection claim is typical of that of the
class. . . .
18. The Village . . . treats [Plaintiff] as a typical residential sewer
and wastewater customer.
Despite those findings, the court concluded that Plaintiff failed to establish the typicality
prerequisite for the potential class’ monetary damages claims “based upon the evidence
presented, regarding the definition [of] the class as containing those customers who have city
water and those who do not; and, further concerning [Defendant’s] affirmative defenses of
voluntary payment, and the related issue of duress.”
{13} Yet, neither of those issues impacts the relevant criteria for typicality. Each member
of the class, with or without city water, has the same or similar asserted injury: payment of
unreasonable sewer and wastewater rates to Defendant. See Armijo, 2007-NMCA-120, ¶ 28
(typicality requires determination of “whether other members have the same or similar
injury, whether the action is based on conduct which is not unique to the named plaintiffs,
and whether other class members have been injured by the same conduct.” (internal
quotation marks and citation omitted)). The district court found that the unreasonableness
of the rates charged was typical among class members. It expressly found that although
“[s]ewer and wastewater rates charged to [Defendant’s] residential customers are not
necessarily uniform, depending on whether the customers also use[] Municipal water,” the
“distinction should not affect, in itself, the certification of the requested class action.”
Similarly, Defendant’s conduct in charging the rates was “not unique to the named
plaintiffs.” Rather, Defendant’s rates were uniform among service classes, as required by
law. See Apodaca v. Wilson, 86 N.M. 516, 524, 525 P.2d 876, 884 (1974) (holding that a
municipality’s sewer and wastewater rates must be uniform and non-discriminatory among
customers of the same class of services). Should Defendant’s rates be determined
unreasonable or discriminatory with respect to Plaintiff, other class members will also be
deemed to have been injured by the unreasonable rates. See Armijo, 2007-NMCA-120, ¶ 28
(stating that in “determining whether the typicality prerequisite is met we ask . . . whether
other class members have been injured by the same conduct” (internal quotation marks and
citation omitted)).
{14} The fact that Plaintiff and other class members with municipal water service pay a
slightly different rate than class members without municipal water service and that
affirmative defenses may affect the class members’ entitlement to damages differently, does
not impact the typicality of the class claims. The representative party’s claim does not have
to be identical to the claims possessed by every class member. See Starko v. Presbyterian
Health Plan, Inc., 2012-NMCA-053 ¶ 106, 276 P.3d 252 (affirming the district court’s
finding of typicality as a textbook example despite differences as to damages), cert. granted,
2012-NMCERT-003, __P.3d __ (Nos. 33,383 & 33,384, March 30, 2012); see also Armijo,
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2007-NMCA-120, ¶ 30 (affirming the district court’s finding of typicality despite unique
work environments of plaintiffs and factual differences between individual claims). The
slight difference in rates among classes of residential sewer and wastewater users and the
impact of any affirmative defenses do “not change the fact that the basic factual elements of
the named [plaintiffs’] claims were similar to that of the rest of the class.” Id. Essentially,
Plaintiff alleges that Defendant set unreasonable and discriminatory rates and Plaintiff is
entitled to any amount overpaid. The same can be said of all class members. We therefore
reverse the district court’s determination of typicality because it applied an overly strict
typicality standard.
{15} Having reversed the district court on commonality and typicality, we conclude that
Plaintiff has satisfied all the prerequisites listed under Rule 1-023(A) because the other
elements—numerosity and adequacy—were found by the district court to be satisfied. We
now address whether the damages class action was maintainable under Rule 1-023(B).
B. The District Court Erred in Determining that the Class Action for Damages
Was Not Maintainable Under Rule 1-023(B)
{16} Plaintiff must not only meet the basic requirements of Rule 1-023(A), but it must
additionally demonstrate that the class action is maintainable under Subsection (B). Armijo,
2007-NMCA-120, ¶¶ 25-26. In the district court, Plaintiff argued that the class action for
monetary damages could be maintained under Rules 1-023(B)(1)(a) or (B)(3). The district
court concluded that Plaintiff failed to satisfy either of these prongs under Subsection (B).
We address each subsection in turn.
1. Rule 1-023(B)(1)(a)
{17} To qualify as a class under Rule 1-023(B)(1)(a), Plaintiff must establish that “the
prosecution of separate actions by or against individual members of the class would create
a risk of . . . inconsistent or varying adjudications with respect to individual members of the
class which would establish incompatible standards of conduct for the party opposing the
class . . . .” Plaintiff maintains that denial of damages class certification would allow
individual suits to produce inconsistent damage awards based on the application of various
affirmative defenses, and that such divergent awards would violate Defendant’s obligation
to provide uniform utility rates among customers of the same class of services. See
Apodaca, 86 N.M. at 524, 525 P.2d at 884 (establishing uniformity of utility rates to like-
situated customers).
{18} We disagree with Plaintiff as a matter of law because the possibility of inconsistent
damage awards is an insufficient rationale for maintaining a class action under Rule 1-
023(B)(1)(a). By its express terms, the rule requires more than merely “inconsistent or
varying adjudications.” Rule 1-023(B)(1)(a). The inconsistency must establish
“incompatible standards of conduct,” id., that “would impair the opposing party’s ability to
pursue a uniform continuing course of conduct.” 7AA Charles Alan Wright, Arthur R.
6
Miller, Mary Kay Kane & Richard L. Marcus, Federal Practice and Procedure § 1773 (3d
ed. 2012) (footnote omitted); see also Mark A. Perry & Rachel S. Brass, “Rule 23(B)(2)
Certification of Employment Class Actions: A Return to First Principles,” 65 N.Y.U. Ann.
Surv. Am. L. 681, 686-687 (2010) (stating that under Rule 1-023(b)(1), “a class could be
certified if . . . a decision on the merits would inescapably . . . alter the substance of the
rights of others having similar claims.” (alteration in the original) (internal quotation marks
and citation omitted)).
{19} The inconsistencies in adjudication and the incompatible standards must be so
cumbersome “that individual adjudications would be impossible or unworkable.” Wal-Mart
Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2558 (2011). Certification under Rule 1-023(B)(1)(a)
requires more “than a risk that separate judgments would oblige the opposing party to pay
damages to some class members but not to others, or to pay them different amounts.” Zinser
v. Accufix Research Inst. Inc., 253 F.3d 1180, 1193 (9th Cir. 2001) (internal quotation marks
and citation omitted) (analyzing the federal equivalent of Rule 1-023(B)); see In re
Bendectin Prods. Liab. Litig., 749 F.2d 300, 305 (6th Cir. 1984). Furthermore, when
analyzing whether a class action for damages could be certified under the federal equivalent
of Rule 1-023(B), the United States Supreme Court explained why class certification for
monetary damages under Subsections (B)(1) and (B)(2) was inappropriate for practical,
policy, and due process reasons. Dukes, 131 S. Ct. 2541, 2558-59. The court concluded
that, “it [is] clear that individualized monetary claims belong in Rule 23(b)(3).” Id. at 2558;
see Zinser, 253 F.3d at 1193 (stating that certification under Rule 23(b)(1)(A) is generally
“not appropriate in an action for damages”).
{20} Here, Plaintiff solely relies on the argument that without class certification, different
customers would receive inconsistent damage awards. Plaintiff asserts that “awarding
damages to [Plaintiff] or to any other individual residential sewer and wastewater customer
of [Defendant] would result in discriminatory rates being charged in favor of the customer
receiving damages.” We disagree because Defendant’s legal obligation to set uniform rates
among defined classes of customers does not impede its ability to contest refunds based on
customer knowledge and behavior. And, as explained above, mere inconsistent damage
awards are insufficient to show that individual adjudications would be impossible or
unworkable. Inconsistent damage awards would not impair Defendant’s ability to pursue
a uniform continuing course of conduct in the future, as damages do not provide prospective
relief. Defendant’s continuing course of conduct would only be affected by the declaratory
and injunctive relief sought by Plaintiff, for which class certification has already been
granted. Furthermore, as explained by the United States Supreme Court, damages class
certification is best sought under Subsection (B)(3), not (B)(1)(a).
{21} For these reasons, we affirm the court in concluding that class certification for
monetary damages in this case is not appropriate under Rule 1-023(B)(1)(a).
2. Rule 1-023(B)(3)
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{22} Alternatively, Plaintiff moved for class certification for monetary damages under
Rule 1-023(B)(3). Rule 1-023(B)(3) requires that “questions of law or fact common to the
members of the class predominate over any questions affecting only individual members,
and that a class action is superior to other available methods for the fair and efficient
adjudication of the controversy.” Rule 1-023(B)(3) lists the following matters as pertinent
to those two findings:
(a) the interest of members of the class in individually controlling the
prosecution or defense of separate actions;
(b) the extent and nature of any litigation concerning the controversy already
commenced by or against members of the class;
(c) the desirability or undesirability of concentrating the litigation of the
claims in the particular forum;
(d) the difficulties likely to be encountered in [its] management. . . .
There are two competing policies embedded within these class action rules. The first is “to
provide a forum for plaintiffs with small claims who otherwise would be without any
practical remedy.” Brooks, 2004-NMCA-134, ¶ 9. The second embodies the goal that any
class action be efficient and “a fair method to all parties, including absent class members and
defendants.” Id. For that reason, “dismissal is warranted where individual issues
predominate to make the class action unmanageable, even if no alternative remedy exists.”
Id. ¶ 34.
{23} Due to those competing policies, district courts “must engage in a rigorous analysis
of whether the Rule’s requirements have actually been met.” Id. ¶ 9. It must “understand
the substantive law, proof elements of, and defenses to the asserted cause of action to
properly assess whether the certification criteria are met.” Id. ¶ 31. We have even
encouraged the district court to at times “probe behind the pleadings and forecast what kind
of evidence may be required or allowed at trial[,]” when the issues are not plain enough from
the pleadings. Id. ¶ 9. We have warned, however, that “plaintiffs are not required to prove
their case at the certification stage” and “certification is not an appropriate time to examine
the merits.” Id. Likewise, defendants are not required to prove their affirmative defenses
at the certification stage, but merely to demonstrate that they are well pled and are suitable
for consideration by the court.
{24} The district court denied Plaintiff’s motion for damages class certification based upon
Defendant’s contention that individual issues predominated in the class as a result of
Defendant’s asserted affirmative defenses of voluntary payment, estoppel, and latches, and
the related issue of duress. Its non-certification decision was specifically based on the
following findings: (1) “Individual inquiries would have to be made with regard to each
residential sewer customer to determine whether he, she, or it, voluntarily agreed to pay the
charges for wastewater and sewage services”; (2) “Duress cannot be inferred or found on a
class wide basis; rather it is a factual determination that would have to be made as to each
and every residential wastewater and sewage user”; and (3) “individual issues [relevant to
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estoppel and laches] will dominate any common issues of fact related to claims for monetary
damages.” Accordingly, the district court concluded that “[t]he requirement of
predominance ha[d] not been met.” The court did not enter a finding regarding whether the
class action was superior to other litigation methods.
{25} We note that, despite its denial of damages class certification, the district court made
several important findings favorable to certification, which relate directly to three of the four
factors under Rule 1-023(B)(3). Specifically, the court found that:
5. The damages claims of individual class members are not
significant enough to warrant individual suits by each class member[.]
....
38. Despite the Plaintiff’s request to other individuals to join the
litigation, no unnamed class members have come forward expressing any
interest in individually controlling the prosecution of their claims.
39. No other litigation has been commenced by or against any
unnamed members of the class concerning the issues involved in this case.
It is appropriate that the issues presented in this case be addressed in this
litigation, because the majority of the parties, witnesses, and documents
necessary to prosecute and defend the claims raised in this litigation are in
this district and because the Court has both personal and subject matter
jurisdiction over the parties and issues presented in this case.
{26} Plaintiff challenges the district court’s denial of damages class certification under
Rule 1-023(B)(3), arguing that it is unsupported by substantial evidence. Plaintiff also
contends that the district court improperly relied on Defendant’s assertion of affirmative
defenses in denying certification, and erroneously applied the voluntary payment rule to this
case.
{27} Initially, we address Plaintiff’s contention that the voluntary payment rule should not
apply and a right-to-refund should be implied based upon the municipality’s obligation to
charge reasonable rates pursuant to Section 3-18-1(H). “It is well established that in the
absence of a statute permitting a recovery, [fees] paid voluntarily and without compulsion
cannot be recovered.” Occidental Life of California v. State, 92 N.M. 433, 433, 589 P.2d
673, 673 (1979); Territory v. Newhall, 15 N.M. 141, 103 P. 982 (1909) overruled in part by
State ex rel. Callaway v. Axtell, 74 N.M. 339, 393 P.2d 451 (1964) (acknowledging an
identical rule in territorial times). Separately, Section 3-18-1(H) does not expressly include
any right-to-refund for the payment of excessive rates. See § 3-18-1(H) (stating merely that
a municipality may “establish rates for services provided by municipal utilities . . . ,
including amounts which the governing body determines to be reasonable and consistent
9
with amounts received by private enterprise in the operation of similar facilities”). And,
because the Legislature is adept at writing right-to-refund statutes when it intends to do so,
we will not imply one here. See, e.g., NMSA 1978, Section 7-1-26(A) (2007) (explicitly
creating a right to refund with regard to the payment of state taxes when a “person . . .
believes that an amount of tax has been paid . . . in excess of that for which the person was
liable”). We therefore decline to embrace Plaintiff’s request that we discard the voluntary
payment rule and replace it with a right-to-refund not legislatively enacted.
{28} We now turn our attention to whether the district court’s Rule 1-023(B)(3) analysis
is supported by substantial evidence. In making a Rule 1-023(B) determination, the district
court should consider anticipated affirmative defenses to “forecast what kind of evidence
may be required or allowed at trial.” Brooks, 2004-NMCA-134, ¶ 9. But the district court’s
findings with regard to these defenses, including voluntary payment, must be supported by
substantial evidence in the record. See id. ¶¶ 36-47 (searching the record for substantial
evidence that individual issues predominated). Here, the district court did not explain what
individual issues it foresaw would arise in assessing affirmative defenses, nor did it support
its conclusions with factual evidence from the record. “Although failure to be specific is not
necessarily reversible error, it is preferable for the court to identify the issues and ‘place on
record the circumstances and factors that were crucial to [its] determination . . . . so that
counsel and the reviewing court will know and be in a position to evaluate the soundness of
[its] decision.’” Id. ¶ 36 (alterations in original). Similarly, “it would have been helpful to
identify . . . [the] facts it relied on in reaching the decision.” Id. Nonetheless, we have
scoured the record independently in an effort to uncover factual support for the district
court’s findings. We have been unable to do so, and we must therefore conclude that the
district court has abused its discretion.
{29} First, the record fails to support a conclusion that individual inquiries predominate
with regard to Defendant’s defense of voluntary payment and Plaintiff’s argument of duress.
Duress is defined as an “intentional action by one person presenting such a serious business
or financial loss or injury to the other person to the contract that he or she has no reasonable
choice or alternative. . . .” UJI 13-838 NMRA. The only element of that definition that is
contested here is whether the potential class had any “reasonable choice or alternative” to
paying the increased rates. There is ample evidence in the record that Defendant
intentionally increased its rates after consulting with government advisors in order to pay for
the mandated wastewater treatment plant and to become financially solvent. Additionally,
the district court found below that “[a] residence without water, sewer or wastewater service
is unsanitary, unsafe, and unhealthy and, thus, is inhabitable.” The district court also found
that “Defendant has terminated water service to residential customers who fail to pay for
their sewer and wastewater services.” Neither finding is challenged on appeal and therefore
the increase in rates, if unreasonable, presents a “serious business or financial loss or injury”
to Plaintiff.
{30} With respect to the “reasonable alternative” element of duress, Defendant argued to
the district court that the proposed class could have filed “an injunction or temporary
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restraining order to avoid any purported injury by refusing to pay the sewage and wastewater
fees.” Defendant pointed out that Plaintiff engaged in negotiations with Defendant, and
Plaintiff could have simply paid the disputed amounts into the escrow account agreed upon
by the parties to avoid loss of services. That argument is supported by the district court’s
finding that “the negotiations between Plaintiff and Defendant regarding the claim of duress
are unique to Plaintiff.” Even so, two sets of alternatives to be applied among two
sub-groups of a class hardly seems like an unmanageable number of individual
determinations for the district court to make.
{31} In addition, it has yet to be determined whether an injunction or restraining order can
be considered a feasible legal remedy available to the proposed class. Other than termination
being a possible risk, the record is devoid of any specific evidence of Defendant’s policy for
terminating services. It is possible that termination results immediately after a customer
refuses to pay, or that the process lasts several months. Regardless, the question appears to
be a common one across the proposed class. We thus conclude that the district court failed
to support its finding that individual issues will predominate regarding the voluntary
payment defense and issue of duress with substantial evidence. To the contrary, the record
indicates to us the distinct possibility that questions common to the class regarding these
matters predominate.
{32} Lastly, the district court’s reliance on the remaining affirmative defenses of estoppel
and laches to deny class status is similarly unavailing. The only factually supported
difference among the class, with respect to these two defenses, is that Plaintiff engaged in
negotiations with Defendant and then did not avail itself of the resolution. Furthermore, all
three elements of equitable estoppel, and three of the four elements necessary to prove
laches, turn on Defendant’s knowledge, conduct, and prejudice. See Mayfield Smithson
Enters. v. Com-Quip, Inc., 120 N.M. 9, 12, 896 P.2d 1156, 1159 (1995) (listing the elements
of estoppel); and Garcia v. Garcia, 111 N.M. 581, 588, 808 P.2d 31, 38 (1991) (listing the
elements of laches). These defenses both involve questions regarding delays in bringing suit,
notice of Defendant’s conduct, and the opportunity to institute suit. Id. Because there is no
evidence in the record that any of the class members, other than Plaintiff, ever asserted their
rights against Defendant, all of these issues could be determined on a class-wide basis, with
the single exception of Plaintiff’s initially negotiated intervening manner of payment. In
addition, changes in the utility bills tendered notice uniformly to the potential class, and
Plaintiff never argued below that any member of the class was mistaken as to any fact
regarding the rate changes prior to paying the rates. And finally, the opportunity to institute
suit is the same determination to be made under the duress inquiry we discussed above.
Likewise, there is nothing in the record to suggest that any class member’s opportunity to
institute a suit differed amongst the class.
{33} Thus, there is no basis, either in law or in the record, that supports the conclusion that
application of the voluntary payment rule, duress, estoppel, or latches would require
individual inquiries, let alone individual inquiries voluminous enough to overwhelm the
common issues in this case. The record indicates that the class is simply a uniform group
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of customers who paid the same sewer and wastewater rates after receiving uniform
class-wide notice of pertinent increases. Furthermore, the list of users, their payment
history, and their utility bills appear to be easily ascertainable from an electronic database.
{34} Based on the dearth of evidence in the record to support the presence of individual
inquiries, we must reverse the district court’s determination on predominance. We conclude
that questions of law or fact common to the members of the class with regard to damages in
this case predominate over any questions affecting only individual members. Because the
district court did not enter a finding as to whether the proposed “class action is superior to
other available methods for the fair and efficient adjudication of the controversy[,]” we
remand for it to do so. See Rule 1-023(B)(3).
C. The Remaining Arguments Are Improperly Presented
{35} Defendant devotes well over half of its answer brief to issues of sovereign immunity
and the Tort Claims Act, NMSA 1978, Sections 41-4-1 to -27 (1976, as amended through
2010). Those arguments, however, were presented to and denied by the district court in the
context of a motion to dismiss. Our grant of review in this case is strictly confined by our
Appellate Rules to the consideration of the district court’s class certification. See Rule 1-
023(F) (“The Court of Appeals may in its discretion permit an appeal from an order of a
district court granting or denying class action certification . . . .”). Under Rule 1-023(F), our
interlocutory review is limited to the district court’s assessment of Rule 1-023(A)-(B), which
sets forth the certification criteria. Murken v. Solv-Ex Corp., 2006-NMCA-064, ¶ 30, 139
N.M. 625, 136 P.3d 1035 (analogizing to the federal interpretation that has been “scrupulous
about limiting [Fed. R. Civ. P.] 23(f) inquiries to class certification issues” (alteration in
original) (internal quotation marks and citation omitted)). Because Defendant did not seek
interlocutory review of the motion to dismiss, we decline to address the issue within the
narrow context of our review of class certification decisions pursuant to Rule 1-023(F) and
Murken, 2006-NMCA-064, ¶ 30.
{36} Plaintiff also failed to adhere to our appellate rules by requesting our review of issues
not “fairly invoked” before the district court. See Rule 12-216 NMRA. Plaintiff argues in
its brief-and-chief that we should advise the district court on remand “that monetary damages
are permissible in a class [action] certified under Rule 1-023(B)(2) NMRA[.]” It contends
that “the [d]istrict [c]ourt did not address whether [Plaintiff] could pursue monetary damages
under Rule 1-023(B)(2).” Yet, the court never addressed the issue because Plaintiff never
presented the argument below.
{37} In fact, Plaintiff explained in its motion for class certification that “[Plaintiff] needs
to satisfy Rule 1-023(B)(2) . . . in order for this case to be certified as a class action on the
claims for declaratory and injunctive relief[,]” and “must satisfy either Rule 1-023(B)(1) . . .
or Rule 1-023(B)(3) . . . for the class to maintain an action for damages.” (Emphasis added.)
It directed the district court to Davis, 2009-NMSC-048, ¶ 25, for the proposition that
“certification of a plaintiff’s claim for declaratory relief under Rule 1-023(B)(2) . . . [is]
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proper despite the presence of a class claim for damages.” (Emphasis added.) And under
Plaintiff’s analysis of Rule 1-023(B), it explained that “if the class prevails on the merits of
its claim for injunctive and declaratory relief, the Court will be able to . . . declar[e] that the
existing rate structure is invalid[,] . . . what are permissible rates, . . . [and] provide
prospective [injunctive] relief to the entire class.”
{38} Nowhere in any of the pleadings before the district court did Plaintiff request
monetary damages under Rule 1-023(B)(2) or explain that relief pursuant to Rule 1-
023(B)(2) could include monetary damages. Rather, Plaintiff consistently maintained its
view that “[Plaintiff] must satisfy either Rule 1-023(B)(1) or 1-023(B)(3) for the class to
maintain an action for damages,” and requested only injunctive and declaratory relief
pursuant to Rule 1-023(B)(2). Because Plaintiff did not request monetary damages under
Rule 1-023(B)(2) before the district court, we refuse to consider unpreserved arguments. See
Rule 12-216(A) (“To preserve a question for review it must appear that a ruling or decision
by the district court was fairly invoked . . . .”).
IV. CONCLUSION
{39} For the reasons stated above, we reverse the district court’s determinations as to Rule
1-023(A)(2) (commonality), and Rule 1-023(A)(3) (typicality), and hold that Plaintiff has
established that the requirements of Rule 1-023(A) are satisfied. We affirm the district
court’s denial of the class under Rule 1-023(B)(1). We reverse the court’s denial of damages
class certification under Rule 1-023(B)(3), and conclude that predominance has been
satisfied by the class. Lastly, we remand for findings regarding superiority under Rule
1-023(B)(3), which the court failed to consider when it disposed of the motion for class
certification based upon its predominance finding.
{40} IT IS SO ORDERED.
____________________________________
J. MILES HANISEE, Judge
WE CONCUR:
____________________________________
MICHAEL E. VIGIL, Judge
____________________________________
LINDA M. VANZI, Judge
Topic Index for Tierra Realty Trust, L.L.C. v. Vill. of Ruidoso, No. 31,190
APPEAL AND ERROR
Interlocutory Appeal
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Remand
Sufficient or Substantial Evidence
CIVIL PROCEDURE
Class Actions
Estoppel
Laches
FEDERAL LAW
Federal Law, General
GOVERNMENT
Environmental Law
Water and Waste Systems
JUDGMENT
Consent Decree
Declaratory Judgment
PUBLIC UTILITIES AND COMMUNICATIONS
Rate Making
REMEDIES
Damages, General
Injunctions
14