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N.J. Appellate Division Applies "More Liberal" Certification Standards To Property Owner Class

In an unpublished opinion, Sutton v. Hoffmann-La Roche, Inc., No. A-5545-18T3 (N.J. App. Div. May 27, 2020), the Appellate Division of the New Jersey Superior Court recently affirmed a lower court’s certification of a class seeking damages due to lost property value premised upon the existence of contaminated groundwater.  Certification of similar homeowner classes has been illusive in federal courts, and thus of particular note here, the Appellate Division made clear that the while the language of New Jersey’s class certification rule is “textually similar” to the federal rule, New Jersey’s interpretation of its own rule is “far more liberal and permissive toward class certification.” Op. at 30, n. 6. Although the local nature of the case most likely made the Class Action Fairness Act inapplicable, this decision is further evidence of the importance to defendants in class action litigation of exercising removal jurisdiction whenever possible.

The plaintiff homeowners in Sutton alleged claims of trespass, nuisance and negligence against four defendants, as well as strict liability against two of them, Hoffmann-LaRoche (Roche) and Deluxe Corporation (Deluxe) seeking diminution damages due to contaminated groundwater which they claimed emanated primarily from Roche’s shuttered facility in Nutley and Clifton, New Jersey. The suit was initially brought in 2014 and, after several years of pleading practice, plaintiffs moved for class certification in 2018. In 2019, the trial court certified a class consisting of all residential property owners “whose property is located on or within 200 feet of the Roche Contamination or within the area of Roche’s proposed [Classification Exception Area where groundwater contamination exceeded the New Jersey groundwater quality standards].”

In the Appellate Division, Roche and the other defendants challenged the trial court’s certification, primarily arguing that the judge failed to consider evidence presented by the defendants disputing the hydrological model asserted by the plaintiffs. The Appellate Division agreed that, at class certification, the court could consider additional evidence if pertinent, but also emphasized that under New Jersey law both the pleadings and the additional evidence must still be viewed “in a light favorable to plaintiff” and provide a “deferential view to the plaintiff’s case as the class-certification stage.” Op. at 13 (citing Lee v. Carter-Reed Co., LLC., 203 N.J. 496 (2010)). The Appellate Division thus found that the trial judge appropriately applied his discretion in giving little or no weight to evidence that Roche’s facility was not the source of the groundwater contamination as it was not relevant to certification. The Appellate Division also found that to give such evidence weight would be improper given that merits discovery was stayed, NJDEP itself disagreed with defendants’ contention, and plaintiffs were not required to offer opposing expert evidence at the certification stage.

Having thus set the stage for the actual analysis, the Appellate Division then reviewed the trial court’s findings on the four standard requirements for class certification - numerosity, commonality, typicality, and adequacy of representation.   The appellate court found that the class easily cleared the hurdle for numerosity, with over 400 potential plaintiffs, despite Deluxe arguing that its contribution affected only a small portion of the homes at issue.  Discussing commonality, the Appellate Division also rejected Deluxe’s argument that the because the source and extent of the contamination differed between properties, this element was not met. Instead, the Appellate Division wrote, “[c]ommonality was properly found because the claims shared by the class arise out of a common set of circumstances: defendants’ chemical releases (even if mostly by Roche) were allegedly impacted by Roche’s production wells, commingled, and spread off the site in legal proximity to the class members ‘homes.” Op. at 20. The Appellate Division upheld the typicality determination in brushing aside arguments that damages would be different for each plaintiff and not capable of being proven by the class-wide mathematical approach proposed by the plaintiffs, stating “[i]n cases where the named plaintiffs and putative class members are impacted by the same unlawful conduct, typicality is generally satisfied.”  Op. at 22.   The Court added that individual proof of damages was normal in class actions and thus, even if the formula failed, it was not sufficient to defeat typicality.  Finally, the Court found that the named plaintiffs were representative of the class and thus adequate in their representation.  

The Appellate Division then considered whether the proposed class satisfied the requirements of New Jersey Rule 4:32-1(b)(3), which allows class certification where 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.  Applying the same logic as it did in the “commonality” and “typicality” prongs, the Court found that the individualization of certain issues, including the source and amount of contamination on each property and the damages arising therefrom, were insufficient to defeat the predominance of class issues over individual issues.  Rather, the existence of a “common nucleus of operative facts” for all class members’ claims overrode “comparatively minor individual issues, or potential sub-class issues, and defenses based on fragmentation of liability.” Op. at 31. The Appellate Division also upheld the lower court’s finding that class treatment was superior, and that the class was manageable.

Finally, the Court rejected the arguments that the description of the class by reference to geographic boundaries did not create an identifiable class because it arbitrarily decided which properties’ values were diminished and which were not, and that the trial court’s geographic boundaries tied to the Roche facility had created a “fail-safe” class which presumed that Roche was the source of the contamination.

In sum, the Appellate Division affirmed the certification of the class of landowners on their common law claims seeking damages in the form of diminution of property value based on contamination to groundwater. Most importantly, the Court made clear that even when federal and state laws appear to be nearly identical in word, state case law interpreting state statutory law may result in a very different outcome.