Opinion ID: 2350879
Heading Depth: 2
Heading Rank: 1

Heading: C.R.C.P. 23(b)(3) Predominance

Text: To establish predominance, a plaintiff must demonstrate that questions of law or fact common to the class predominate over those issues that affect only individual members. C.R.C.P. 23(b)(3). The predominance inquiry is a fact-driven, pragmatic inquiry[,] Medina v. Conseco Annuity Assur. Co., 121 P.3d 345, 348 (Colo.App.2005), that requires a trial court to rigorously analyze the evidence presented, see Jackson, 262 P.3d at 881-82. Often, the issue most relevant to this inquiry is whether the plaintiff advances a theory by which to prove or disprove `an element on a simultaneous, class-wide basis, since such proof obviates the need to examine each class member's individual position.' Benzing, 206 P.3d at 820 (quoting Lockwood Motors, Inc. v. Gen. Motors Corp., 162 F.R.D. 569, 580 (D.Minn. 1995)). In this case, each Plaintiff must show that the statute of limitations was tolled by BP's fraudulent concealment of its use of the netback methodology. The five elements of fraudulent concealment are: (1) the concealment of a material existing fact that in equity and good conscience should be disclosed; (2) knowledge on the part of the party against whom the claim is asserted that such a fact is being concealed; (3) ignorance of that fact on the part of the one from whom the fact is concealed; (4) the intention that the concealment be acted upon; and (5) action on the concealment resulting in damages. First Interstate Bank of Fort Collins, N.A. v. Piper Aircraft Corp., 744 P.2d 1197, 1200 (Colo.1987). In addition, a limitation period should not be tolled for fraudulent concealment unless a plaintiff is unable, by reasonable diligence, to discover the facts necessary for determining the existence of a claim for relief. Id. at 1201. [B]ecause tolling is an equitable remedy, its application involves an examination of the facts and circumstances of individual cases to determine when equity requires such a remedy. Morrison v. Goff, 91 P.3d 1050, 1057 (Colo.2004); see also Garrett v. Arrowhead Imp. Ass'n, 826 P.2d 850, 855 (Colo.1992). The trial court explained it is undisputed that BP engaged in a systematic scheme to conceal the material facts from the Class, as is the case here. Thus, BP does not contest Plaintiffs' ability to establish the first, second, and fourth elements of their fraudulent concealment claim with class-wide proof. BP instead argues that there are individual questions regarding each Plaintiff's ignorance of BP's use of the netback methodology, the actions taken by each Plaintiff in reliance on BP's concealment of the netback methodology, and each Plaintiff's ability to discover the concealed information. Because these individualized determinations are paramount to Plaintiffs' ability to toll the statute of limitations based on fraudulent concealment, BP urges us to conclude that individual issues predominate over common issues for the purposes of C.R.C.P. 23(b)(3). In reply, Plaintiffs argue that the ignorance and reliance elements of a fraudulent concealment claim may be inferred from circumstantial evidence common to a class. In this case, Plaintiffs claim that they can prove ignorance and reliance on a class-wide basis with circumstantial evidence of BP's undisputed, systematic scheme of concealing its use of the netback methodology. They further claim that BP has failed to rebut these class-wide inferences with individual evidence. Thus framed, the legal issue at the core of the C.R.C.P. 23(b)(3) determination in this case is whether Colorado law permits Plaintiffs to establish ignorance, reliance, and diligence on a class-wide basis with circumstantial evidence. In Benzing, we specifically reserved the issue of whether an inference or presumption of reliance can be drawn from uniform, material misrepresentations or omissions in common law fraud or consumer protection claims. 206 P.3d at 823-24. The plaintiff in Benzing argued that he was entitled to at least an inference of causation or reliance where there is a material uniform misrepresentation or omission in such class actions. Id. at 823. In support of this proposition, the plaintiff cited to Colorado and out-of-state decisions. Id. (collecting cases). However, because this argument was articulated for the first time on appeal, we reached no opinion as to its merit. Id. at 824. Instead, we simply noted that there were arguments for and against applying such a presumption or inference as a class-wide theory of maintaining a consumer protection or common law fraud class action. Id. at 824 n. 9 (collecting cases). We now squarely address this issue. Our caselaw has recognized that the ignorance and reliance elements of a fraudulent concealment claim may be established with circumstantial evidence. In Kopeikin v. Merchants Mortgage & Trust Corp., we explained that a plaintiff is not required to present direct proof of reliance to prevail on a common-law fraud claim: We have repeatedly held that fraud may be inferred from circumstantial evidence. See, e.g., Zimmerman v. Loose, 162 Colo. 80, 425 P.2d 803 (1967); Hinshaw v. Hinshaw, 148 Colo. 262, 365 P.2d 815 (1961); In re Holmes' Estate, 98 Colo. 360, 56 P.2d 1333 (1936). See also Wilbourn v. Mostek Corp., 537 F.Supp. 302 (D.Colo.1982). Direct evidence of reliance, one of the elements of fraudulent concealment, is not required. Morrison v. Goodspeed, 100 Colo. 470, 68 P.2d 458 (Colo.1937). 679 P.2d 599, 602 (Colo.1984). We reversed the trial court's order which had directed a verdict for the defendants against those plaintiffs who failed to personally testify as to their reliance on defendants' fraudulent concealment of the material facts. Id. Kopeikin thus stands for the proposition that reliance may be inferred from circumstantial evidence where the defendant concealed a material fact from the plaintiff. It follows that the ignorance and reliance elements of fraudulent concealment may be established with circumstantial evidence common to a class. Out-of-state courts have recognized that a jury may presume reliance on a class-wide basis where there is sufficient, common evidence that the defendant concealed a material fact from class members. See, e.g., Cope v. Metro. Life Ins. Co., 82 Ohio St.3d 426, 696 N.E.2d 1001, 1008 (1998) (When there is nondisclosure of a material fact, courts permit inferences or presumptions of inducement and reliance. Thus, cases involving common omissions across the entire class are generally certified as class actions, notwithstanding the need for each class member to prove these elements.); Weinberg v. Hertz Corp., 116 A.D.2d 1, 499 N.Y.S.2d 693, 696 (N.Y.App. Div.1986) (holding that once it has been determined that the representations alleged are material and actionable, thus warranting certification, the issue of reliance may be presumed subject to such proof as is required on the trial), aff'd 69 N.Y.2d 979, 516 N.Y.S.2d 652, 509 N.E.2d 347 (1987); see also Murray v. Sevier, 156 F.R.D. 235, 249 (D.Kan.1994); Baughman v. State Farm Mut. Auto. Ins. Co., 88 Ohio St.3d 480, 727 N.E.2d 1265, 1275 (2000). Out-of-state courts have also recognized that a jury may infer reliance from circumstantial evidence common to a class. See, e.g., Klay v. Humana, Inc., 382 F.3d 1241, 1259 (11th Cir.2004) (indicating that while each plaintiff must prove reliance, he or she may do so through common evidence (that is, through legitimate inferences based on the nature of the alleged misrepresentations at issue)); Wiener v. Dannon Co., Inc., 255 F.R.D. 658, 669 (C.D.Cal.2009) (finding that the evidence presently before the Court allows for an inference of reliance in this case [and that, a]ccordingly, reliance may be established on a common basis); Vasquez v. Super. Ct., 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964, 973 (1971) (It is sufficient for our present purposes to hold that if the trial court finds material misrepresentations were made to the class members, at least an inference of reliance would arise as to the entire class.); Varacallo, 752 A.2d at 817 (explaining that a class-wide inference of reliance is particularly appropriate where a party makes false representations [] with the intent that they be communicated to others for the purpose of inducing the others to rely upon them (quotations omitted)). We thus hold that the ignorance and reliance elements of a fraudulent concealment claim may be inferred from circumstantial evidence common to a class. The same reasoning applies to the requirement that a plaintiff be diligent in discovering a claim for relief. When common evidence regarding the omission or non-disclosure of a material fact supports an inference of ignorance, a plaintiff's inability to discover the concealed information also may be inferred. Of course, the defendant may introduce individual evidence to rebut a class-wide inference. See Baughman, 727 N.E.2d at 1275; Vasquez, 94 Cal.Rptr. 796, 484 P.2d at 973. Accordingly, whether or not the inference applies depends on the facts and circumstances of each case. The trial court must therefore rigorously analyze the evidence presented to determine whether there is evidence common to the class to support such an inference. Compare Cope, 696 N.E.2d at 1008-09 (recognizing that a jury could infer reliance on a class-wide basis due to the use of form documents, standardized practices and procedures, common omissions spelled out in written contracts, and allegations of a widespread scheme to circumvent statutory and regulatory disclosure requirements, any one of which has been held to warrant class action treatment) with Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 694 (Tex.2003) (refusing to permit class members to proceed on a class-wide inference of reliance because there was no evidence that purchasers actually did rely on [defendant's] statements so uniformly that common issues of reliance predominate[d] over individual ones (emphasis in original)). The trial court must then determine whether the class-wide inference causes common issues to predominate over individual issues for the purposes of C.R.C.P. 23(b)(3). The purpose of a class-wide inference is to minimize the need for individual inquiries into each class member's reliance or ignorance. Baughman, 727 N.E.2d at 1276. In In re Flat Glass Antitrust Litigation the court explained, [T]he issue of the fact of concealment is the predominating question, even though other individual questions are present, because the inquiry necessarily focuses on defendants' conduct, that is, what defendants did, rather than what plaintiffs did. 191 F.R.D. 472, 487 (W.D.Pa.1999). The court then certified the class because the crucial common questions on the fraudulent concealment issues will relate to whether defendants successfully concealed the existence of the alleged conspiracy, which proof will be common among the class members in each class. Id. at 488; see also In re Linerboard Antitrust Litig., 305 F.3d 145, 163 (3d Cir. 2002) (Notwithstanding the individual determinations that will undoubtedly arise at trial, common issues of concealment predominate here because the inquiry necessarily focuses on defendants' conduct, that is, what defendants did rather than what plaintiffs did. (internal quotations omitted)); Fisher Bros. v. Mueller Brass Co., 102 F.R.D. 570, 578-79 (E.D.Pa.1984) (determining that common questions regarding defendants' alleged concealment of a conspiracy predominated over individual issues because there was no evidence that individual plaintiffs knew or should have known about conspiracy); In re Fine Paper Antitrust Litig., 82 F.R.D. 143, 154-55 (E.D.Pa.1979) (The key question on the issue of fraudulent concealment will relate to whether defendants successfully concealed the existence of the alleged conspiracy, and the proof of this contention [what defendants did] will necessarily be common among the class members.). In other circumstances, courts have refused to permit a class action to proceed on a class-wide inference due to the predominance of individual questions over common questions. See, e.g., McManus v. Fleetwood Enter. Inc., 320 F.3d 545, 550 (5th Cir.2003) (explaining that plaintiffs had failed to show that misrepresentations were sufficiently uniform to justify class treatment and thus concluding that the district court abused its discretion in finding that questions of fact common to the class were predominant); Petty v. Wal-Mart Stores, Inc., 148 Ohio App.3d 348, 773 N.E.2d 576, 581 (2002) (finding that individual issues regarding fraudulent concealment claim predominated over common issues due to the lack of a generalized body of evidence, common to the entire class, that could be relied upon to prove or disprove the claims of the class). Ultimately, the trial court must exercise its case management discretion to determine whether common issues predominate over individual issues and whether the claims can be managed as a class action. See Jackson, 262 P.3d at 880. In the instant case, the trial court determined that a jury could reasonably infer ignorance and reliance from circumstantial evidence common to the class. The trial court found it undisputed that BP began deducting post-production costs in the mid-1980s. BP, however, never notified the Plaintiffs that such costs were being deducted in royalty calculations, nor did BP's Royalty Reports or Royalty Brochures ever disclose any of the deductions at issue. The trial court further found it undisputed that none of the named Plaintiffs actually knew that BP was deducting post-production costs until after 2001. Moreover, the trial court found that purported evidence that Plaintiffs should have known of the netback methodology was common to the class. Finally, it was undisputed that BP intentionally concealed its deductions of post-production costs due to the risk of litigation, and in particular, claims against BP to limit its right to deduct costs. Based on this common evidence, the trial court determined that a jury could reasonably infer that the Plaintiffs had no knowledge of BP's improper royalty accounting methods, and that the Plaintiffs acted on that lack of knowledge by not disputing BP's calculations. As a result of these class-wide inferences, the trial court determined that common issues regarding fraudulent concealment predominated over individual issues. This determination was supported by a rigorous analysis of the evidence and thus did not constitute an abuse of discretion. See State Farm v. Reyher, ___ P.3d ___, ___, 2011 WL 5120836 (Colo.2011). Nonetheless, BP argues that the trial court abused its discretion in determining that common issues predominated over individual issues regarding Plaintiffs' fraudulent concealment claim. BP presents four arguments, none of which is persuasive. To begin with, BP argues that tolling is an equitable remedy and, as such, the trial court has a duty to examine the specific facts and circumstances of individual cases to determine when equity requires such a remedy. See Goff, 91 P.3d at 1057. BP claims that the trial court overlooked its duty to examine each individual case by erroneously accepting Plaintiffs' class-wide inferences of ignorance and reliance. Effectively, BP asks us to adopt a per se rule barring class actions involving the fraudulent concealment defense to the statute of limitations. Most courts have rejected this line of reasoning. See In re Linerboard, 305 F.3d at 162 (discussing cases). Instead, courts have reasoned that [a]s long as a sufficient constellation of common issues binds class members together, variations in the sources and application of statutes of limitations will not automatically foreclose class certification under Rule 23(b)(3). Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 296 (1st Cir.2000). So long as common issues predominate over individual issues, a fraudulent concealment claim is amenable to class-wide adjudication. Indeed, courts have recognized that any individual issues raised by a fraudulent concealment claim can be addressed in the context of the class action mechanism. See In re Flat Glass, 191 F.R.D. at 488 (With respect to the individual issues raised by fraudulent concealment, they may be adjudicated in the same fashion and at the same time as the individual damages issues, should they arise.). We thus affirm the trial court's determination that common issues of fraudulent concealment predominate over individual issues, and that Plaintiffs' fraudulent concealment claim is amenable to class-wide adjudication. BP also argues that the trial court erroneously relied on out-of-state cases in adopting class-wide presumptions of ignorance and reliance. BP explains that cases permitting class-wide presumptions typically involve a written misrepresentation of a material fact made to every class member or oral communications that followed a script, recited by rote with little deviation. See, e.g., Davis v. S. Bell Tel. & Tel. Co., 158 F.R.D. 173, 176, 178 (S.D.Fla.1994) (sales staff relied upon and did not vary from written scripts that contained all of the misrepresentations); Mayo v. Sears, Roebuck & Co., 148 F.R.D. 576, 583 (S.D.Ohio 1993) (Plaintiffs' allegations turn on Sears' use of identical forms, common sales techniques, and routinized procedures for creating and registering liens and extending credit.). BP claims that no such uniform misrepresentations existed here where BP communicated different information to different Plaintiffs and where Plaintiffs responded differently to BP's Division Orders disclosing BP's accounting methodology. BP thus claims that the trial court erred by relying on inapposite out-of-state cases to permit class-wide presumptions of ignorance and reliance in the instant case. BP's argument is based on an erroneous view of the trial court's factual findings. The trial court found that there was substantial evidence that BP fraudulently concealed its use of the netback methodology from the entire class. The trial court explained that this substantial body of evidence would have a common application to all of the Plaintiffs. For example, the trial court explained that BP used a common method to communicate with Plaintiffs, periodically sending Royalty Brochures, including Royalty Reports with each payment check, and requiring each Plaintiff to sign Division Orders. None of these common forms, however, disclosed BP's use of the netback methodology. The trial court further explained that BP never provided any subsequent notification to class members that it was discounting post-production costs. The trial court found unpersuasive BP's contention that individual issues regarding Plaintiffs' knowledge of and reliance on BP's concealment of the netback methodology predominate. The trial court was therefore satisfied that there was enough common evidence to allow a reasonable inference that BP obtained the result it wanted, namely, ensuring Plaintiffs' ignorance and preventing lawsuits from being filed. This finding was supported by the record and within the trial courts' discretion. State Farm, ___ P.3d at ___. Indeed, as the court of appeals noted, inferring reliance on a class-wide basis is particularly compelling where, as here, there is evidence that the defendant intentionally withheld information to induce the very action which plaintiff took. Patterson, 240 P.3d at 466 (citing Varacallo, 752 A.2d at 812). Therefore, BP's argument that the trial court improperly relied on out-of-state cases is without merit. Third, BP claims the trial court erred by inferring the elements of fraudulent concealment for the entire class in the face of contrary direct evidence. What is more, BP claims that such class-wide inferences become irrebuttable in the class action context, thereby infringing on BP's right to defend itself against Plaintiffs' claims. This argument misses the mark. Our caselaw requires a trial court to rigorously analyze all the evidence presented to satisfy itself that Plaintiffs have met the requirements for class certification. Jackson, 262 P.3d at 882. A trial court may not ignore evidence presented refuting a C.R.C.P. 23 requirement. Here, BP had the opportunity to present individual evidence demonstrating that Plaintiffs knew about BP's use of the netback methodology or did not rely on BP's concealment of that methodology. BP offered evidence suggesting that certain royalty owners disagreed with BP's proposal to use the netback methodology and thus modified the Division Orders they signed. The trial court, however, found this evidence unpersuasive because it did not demonstrate that BP actually informed these individual class members about its use of the netback methodology. The trial court concluded that BP had not presented evidence showing that individual Plaintiffs knew about BP's deduction of post-production costs. Due to the lack of individual evidence, the trial court concluded that Plaintiffs could rely on class-wide inferences of ignorance and reliance, and thus determined that common issues predominated over individual issues with respect to Plaintiffs' claim of fraudulent concealment. This determination did not constitute an abuse of discretion and thus will not be disturbed on appeal. See State Farm, ___ P.3d at ___. Moreover, this determination does not infringe on BP's right to present individual evidence given that the trial court's certification order remains subject to proof later discovered or presented at trial on the merits, and thus may be modified by the trial court. See Jackson, 262 P.3d at 883 (a trial court has a duty to monitor, and the flexibility to alter, the class certification decision in light of any new evidence); see also Mowbray, 208 F.3d at 297 n. 6 (In all events, should [the defendant] demonstrate in the future that individualized statute-of-limitations problems actually shift the balance and undercut the predominance of common issues, the district court may modify its class certification order (or even decertify the class).). Accordingly, we dismiss BP's arguments that the trial court overlooked any direct evidence it presented or that a class-wide inference becomes irrebuttable in the class context. Finally, BP argues that the trial court erred by failing to consider whether Plaintiffs should have known about BP's concealment of the netback methodology. A limitation period generally should be tolled for fraudulent concealment only so long as the plaintiff is unable, by reasonable diligence, to discover the facts necessary for determining the existence of a claim for relief. First Interstate Bank, 744 P.2d at 1201. Contrary to BP's argument, however, the trial court did consider BP's contention that Plaintiffs should have known about BP's use of the netback methodology. The trial court, however, determined that the evidence BP purported to use to demonstrate that Plaintiffs should have known that post-production costs were being deducted from their royalty payments, namely the Royalty Brochures and Royalty Reports, was common to the class as a whole. This common evidence thus bolstered the trial court's determination that common issues regarding fraudulent concealment predominated over individual issues for the purposes of C.R.C.P. 23(b)(3).