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Seventh Circuit Strikes Another Blow To Class Actions

Since the United States Supreme Court decided Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2451 (2011), plaintiffs in contamination cases have struggled to meet the raised bar for class certification.  And that bar was certainly not lowered by the Seventh Circuit in its decision in Parko v. Shell Oil Co., Nos. 13-8023 & 13-8024 (7th Cir. Jan 17, 2014).  Parko involved a putative class comprised of property owners in the town of Roxana, Illinois, who claimed that their property values had been diminished by benzene contamination of the groundwater from an adjacent oil refinery which had been in operation for nearly 100 years.  In checking off the certification requirements, the district court held that the question of whether the multiple defendants who owned and operated the refinery during the preceding 90 plus years failed to “contain petroleum byproduct [resulting] in contamination to Roxana property” predominated.   The Seventh Circuit panel unanimously disagreed.  Judge Posner, writing for the Court, described the opinion as necessary for clarification of a trial court’s responsibility to conduct a “rigorous analysis” of whether common issues predominate; in doing so, he did not hesitate to take the district judge to task for “treat[ing] predominance as a pleading requirement” rather than an evidentiary one. 

While emphasizing that in some toxic tort cases, liability for groundwater contamination may predominate over individual damage issues and thus warrant class treatment, in the instant case, it did not appear to do so.  The Court reaffirmed that “[p]redominance is a qualitative rather than a quantitative concept” such that “[i]f resolving a common issue will not greatly simplify the litigation to judgment or settlement of claims of hundreds or thousands of claimants, the complications, the unwieldiness, the delay and the danger that class treatment would expose the defendant or defendants to settlement-forcing risk are not costs with incurring.”  (Emphasis added).  Thus, “when factual disputes bear on issues . . . such as predominance, the court must ‘receive evidence . . . and resolve the disputes before deciding whether to certify the case’” including determining whether the plaintiffs’ “evidence and methodology are sound and convincing.”  (Quoting Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 676 (7th Cir. 2001)).   And the Court was clear that simply because such an inquiry might be “pertinent” to the merits was not a reason to avoid the obligation to make it.

Explaining why predominance was likely lacking (the Court remanded the case for the taking of evidence, but with a very clear indication of how the lower court should rule), Judge Posner noted that the plaintiffs’ drinking water came from an uncontaminated aquifer and not from private wells, and that “[b]enzene in the water supply is one thing; benzene in groundwater that does not feed into the water supply is quite another.”  As the Court stated, “[t]here are many things commonly found in soil beneath rural or suburban houses that homeowners would very much like not to enter their homes (such as earthworms, fungi, ants, beetles, slugs, radon, chemical residues, thousands of different types of microbe – and groundwater), but as long as there is no danger of such unwanted visitors [entering their homes,] their underground presence should not affect property values.” 

As a result, the trial court should have inquired into whether any of the homes had lost value as a result of the contamination and, even if so, whether all homes owned by the class members were equally affected.  Additional areas in which the plaintiffs might be differently situated included, according to Judge Posner, whether the level of benzene under any particular property was such that it would cause injury if the groundwater were were drunk and whether the source of contamination was the refinerary or any one of a number of other nearby industrial operations.  Finally, Judge Posner hinted that the trial judge should also have been cognizant that, unlike a situation where overcharges of pennies would make individual cases impractical, diminution cases generally allege damages that are “sizable enough for individual (or joined) suits to be a feasible alternative to a class action.

In summary, then, the Seventh Circuit has made clear that a trial court cannot accept as true mere allegations of predominance, or the assertion of class-wide injury, but instead must make both a factual and a legal inquiry into whether those allegations have real merit and, even if they do, whether they so predominate as to make class action treatment not just feasible, but sufficiently efficient to offset the risks posed by class action litigation to the defendants.