A05-595

Richard Cavanaugh, et al.,

Respondents,

vs.

Hometown America, LLC,

f.k.a Chateau Communities, Inc.,

d/b/a Cimarron Manufactured Home Park,

Appellant.

Filed March 21, 2006

Affirmed

Worke, Judge

Washington County District Court

File No. C4-02-2886

Kay Nord Hunt, Barry A. O’Neil, Valerie Sims, Lommen, Nelson, Cole & Stageberg, P.A., 2000 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for respondents)

John F. Bonner, III, Thomas F. DeVincke, Bonner & Borhart, LLP, 1950 U.S. Bank Plaza, Suite 1950, 220 South Sixth Street, Minneapolis, MN 55402 (for appellant)

Considered and decided by Wright, Presiding Judge; Dietzen, Judge; and Worke, Judge.

U N P U B L I S H E D O P I N I O N

WORKE, Judge

On appeal in this class-action suit, appellant argues that (1) the district court should not have allowed this action to proceed as a class action when individualized questions existed regarding damages, and the record did not show typicality of circumstances of the class members; (2) the district court abused its discretion by disallowing certain expert testimony; (3) the district court erred in awarding attorney fees to respondents under Minn. Stat. § 8.31 (2004) (private attorney-general statute) when appellant’s conduct was a violation of Minn. Stat. § 327C.15 (2004) and directed at tenants rather than the public at large; and (4) the record does not support the damages awarded by the jury. We affirm.

D E C I S I O N

Class Certification

This issue was raised in Schaff v. Chateau Communities, Inc., No. A04-1246 (Minn. App. July 26, 2005), review denied (Minn. Sept. 28, 2005) a companion case to this matter. Under the same reasoning in Schaff, we conclude that the district court did not abuse its discretion in determining class certification was appropriate here.

Appellant argues that the district court abused its discretion because respondents cannot satisfy the class-certification requirements of Minn. R. Civ. P. 23 (1989) (amended 2006). District courts have considerable discretion when determining whether a class action is maintainable. Peterson v. BASF Corp., 618 N.W.2d 821, 825 (Minn. App. 2000), review denied (Minn. Jan. 26, 2001). A district court may not certify a class unless the class satisfies the requirements of rule 23. Lewy 1990 Trust ex rel. Lewy v. Inv. Advisors, Inc., 650 N.W.2d 445, 451 (Minn. App. 2002), review denied (Minn. Nov. 19, 2002). “Class certification under rule 23 is a two-step process.” Id. The class must satisfy all four mandatory requirements of rule 23.01, and the class must satisfy the requirements of one of the subdivisions of rule 23.02. Id. at 451-52.

Respondents argue that the class satisfies the typicality and representative requirements of Minn. R. Civ. P. 23.01. Rule 23.01 provides, in pertinent part:

One or more members of a class may sue or be sued as representative parties on behalf of all only if

. . .

(d) the representative parties will fairly and adequately protect the interests of the class.

The prerequisites of typicality and representivity exist “to insure that the claims of the class members are fully presented and vigorously prosecuted.” Streich v. Am. Family Mut. Ins. Co., 399 N.W.2d 210, 215 (Minn. App. 1987), review denied (Minn. Mar. 25, 1987). Typicality looks at whether the interests of the representative parties are compatible with those of the putative class that they seek to represent. Id. Representivity “means the representative parties’ interests must coincide with the interests of other class members and the parties and their counsel will competently and vigorously prosecute the lawsuit.” Id. Factors used to determine if the representivity requirement is satisfied include:

(1) whether the representatives’ interests are sufficiently identical to those of absent class members so that the representatives will vigorously prosecute the suit on their behalf; (2) whether the attorneys are qualified, experienced, and capable of conducting the litigation; and (3) whether the representatives have any interests in conflict with the objective of the class they represent.

Id.

Here, appellant allegedly injured all of the class members in the same manner. Therefore, respondents’ claims are based on the same legal theories. While the class members were not all injured to the same degree, their injuries arose from appellant’s unilateral change to the terms of the parties’ leases. All of the claims also involve the same legal determination: whether appellant violated Minn. Stat. § 327C (2004). Appellant offers no evidence to refute the assertion that the attorneys for the representative class members are capable of conducting a vigorous class-action litigation. Because respondents’ claims as the representative members of the class are compatible with those of the other class members and because appellants failed to show that the attorneys are not qualified, experienced, and capable of conducting the litigation, the requirements of typicality and representivity are met.

Respondents argue further that the requirement under Minn. R. Civ. P. 23.02 that common issues “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” has been met. “No bright-line rules determine whether common questions predominate.” Lewy 1990 Trust, 650 N.W.2d at 455. Instead, a district court must consider “whether the generalized evidence will prove or disprove an element on a simultaneous, class-wide basis that would not require examining each class member’s individual position. Id. Thus, a class action is appropriate when common questions representing a significant issue in a case can be resolved in a single action. Id.

Here, the district court was required to make a preliminary determination of whether class-action status was appropriate to resolve respondents’ claims that appellant violated Minn. Stat. § 327C. Under section 327C, “‘[s]ubstantial modification’ means any change in a rule which: (a) significantly diminishes or eliminates any material obligation of the park owner; (b) significantly diminishes or eliminates any material right, privilege or freedom of action of a resident; or (c) involves a significant new expense for a resident.” Minn. Stat. § 327C.01, subd. 11. There is no individualized proof requirement in subsection (a). The rule requires only that a material obligation of the park owner be significantly diminished or eliminated. Thus, because one of the elements here is common to the class and predominates, certification is appropriate. See Lewy 1990 Trust, 650 N.W.2d at 455.

In addition, respondents seek to remedy a common legal grievance. Appellant created a single, uniform change to the leases of all of the park tenants. The change was widespread and not limited to the named respondents. Thus, the common issues relating to respondents’ claim here predominate over questions affecting individual class members, and individualized proof is unnecessary to prove the elements of substantial modification, as defined by Minn. Stat. § 327C.01.

Finally, for certification under rule 23.02(c), a district court must find that a class action is “superior to other available methods for the fair and efficient adjudication of the controversy.” Factors to consider in a “superiority” analysis include “manageability, fairness, efficiency, and available alternatives.” Streich, 399 N.W.2d at 218. A class action is most often needed in litigation when the individual claims are small. Id. “When collective adjudication . . . makes it possible for class members with small claims to bring suit and enforce the substantive law, a class action is superior to other available methods for the fair adjudication of the controversy.” Lewy 1990 Trust, 650 N.W.2d at 457. We conclude that certifying the class action here (1) allows the issues raised to be given a meaningful hearing; (2) allows the common issues to be tried efficiently in a single action; and (3) avoids inundating the district courts with individual lawsuits that would burden the state’s judicial resources. Therefore, the district court did not abuse its discretion in determining class certification was appropriate.

Sufficiency of Evidence

Appellant argues that it is entitled to a new trial because the jury’s award of damages is not supported by sufficient evidence and is excessive and inconsistent. This court will set aside a damages award if it is “manifestly and palpably contrary to the evidence.” Levienn v. Metro. Transit Comm’n, 297 N.W.2d 272, 273 (Minn. 1980). But this court must consider the evidence in the light most favorable to the verdict. Rayford v. Metro. Transit Comm’n, 379 N.W.2d 161, 165 (Minn. App. 1985), review denied (Minn. Feb. 14, 1986). An award of damages is excessive when it “so greatly exceed[s] what is adequate as to be accountable on no other basis than passion and prejudice.” Dallum v. Farmers Union Cent. Exch., Inc., 462 N.W.2d 608, 614 (Minn. App. 1990), review denied (Minn. Jan. 14, 1991).

Here, the damages award was based on charges by appellant for sewer and water as a result of a change to metering and the imposition of monthly bills pursuant to this metering. A number of witnesses testified regarding the additional expense incurred as a result of appellant’s action, and documents were introduced regarding past billing amounts. During closing arguments, respondents presented their calculations of damages and asserted that they were entitled approximately $400,000 in damages. Because the record supports the jury’s award of damages, the district court did not abuse its discretion in denying appellant’s motion for a new trial.

Appellant next argues that the district court abused its discretion by excluding the expert testimony of Roger Skare. Evidentiary rulings are within the district court’s sound discretion and will be reversed only if there has been an abuse of discretion. Bahl v. Country Club Mkt., Inc., 410 N.W.2d 916, 919 (Minn. App. 1987). The admission of expert testimony is within the broad discretion of the district court. State v. Ritt, 599 N.W.2d 802, 810 (Minn. 1999). “If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.” Minn. R. Evid. 702. If the expert testimony is acceptable under rule 702, the testimony could still be excluded if its probative value is substantially outweighed by the danger of unfair prejudice. Minn. R. Evid. 403. To constitute reversible error, an evidentiary ruling must be prejudicial. Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 46 (Minn. 1997).

Roger Skare is a licensed real estate appraiser. Respondents objected to Skare’s testimony regarding rental rates at other manufactured-home parks as being irrelevant and potentially confusing to the jury. The district court reviewed Skare’s report and considered counsels’ arguments before precluding Skare’s testimony. The district court ruled that Skare’s report and testimony would be prejudical because it would tend to confuse the jury as to the true issue in the case “together with the fact that the testimony can come in through [appellant’s] witnesses first-hand without the necessity of an expert.” The district court also ruled that Skare’s proposed testimony, in part, be cumulative. The issue in this matter was whether appellant’s unilateral decision to impose water and sewer charges on residents per the installation of metering devices constituted a substantial modification of the residents’ lease agreements in violation of Minn. Stat. § 327C.02 (2004). Skare’s report and testimony went to the issue of rent, not utility charges. Skare’s testimony would likely confuse the jury about the true issue in the matter and, therefore, its prejudical effect would outweigh any purported probative value. The district court did not abuse its discretion in excluding Skare’s testimony.

Attorney Fees

Appellant argues that the district court erred in awarding respondents attorney fees and costs under the private attorney general statute because this action involves no state interest or public rights, and no public benefit was realized by its outcome. This is a legal issue, and a reviewing court is not bound by, and need not give deference to, a district court’s decision on a purely legal issue. Frost-Benco Elec. Ass’n v. Minn. Pub. Utils. Comm’n, 358 N.W.2d 639, 642 (Minn. 1984).

The attorney general is authorized to investigate and enforce violations of unfair and unlawful business and commerce practices, including violations of the Minnesota Consumer Fraud Act. Minn. Stat. § 8.31, subds. 1, 2 (2004). An individual injured by a violation of this law may also bring a private civil action for damages. Minn. Stat. § 8.31, subd. 3a (2004). Attorney fees are available under this statute to those private citizens who can demonstrate that their claim furthers the public interest. Ly v. Nystrom, 615 N.W.2d 302, 314 (Minn. 2000). This claim was brought under Minn. Stat. §§ 327C.01 to 327C. 15 (2004), which was enacted to protect manufactured homeowners, who are members of the public. Accordingly, the public interest is served here and the district court properly awarded attorney fees.

Respondents argue that the district court abused its discretion when it awarded respondents only one-half of the attorney fees incurred. “[A]ttorney fees are not recoverable in litigation unless there is a specific contract permitting or a statute authorizing such recovery.” Barr/Nelson, Inc. v. Tonto’s, Inc., 336 N.W.2d 46, 53 (Minn. 1983). Minn. Stat. § 327C.15 authorizes recovery of attorney fees and costs under Minn. Stat. § 8.31, subd. 3a. When awarding attorney fees, the court should take the following factors into consideration: “ time and labor required; the nature and difficulty of the responsibility assumed; the amount involved and the results obtained; the fees customarily charged for similar legal services; the experience, reputation, and ability of counsel; and the fee arrangement existing between counsel and the client.” State v. Paulson, 290 Minn. 371, 373, 188 N.W.2d 424, 426 (1971).

Respondents’ retainer agreement with counsel provided for a 33.3% contingency fee award in the event no fee award was made. Based on the jury verdict of $288,697.21, respondents’ counsel’s contingency fee would be $96,136.17 (the district court order reflects $96,232.40). Respondents’ counsel sought recovery of $356,820.35 in fees and costs. The district court found that “after examining the factors set forth in Paulson that the attorney’s fees charged by [respondents’] counsel are excessive. The fees are almost four times the amount to be paid under the contingency fee agreement.” Further, the district court found “that the $49,111.01 for fees and costs relating to [respondents’] unsuccessful appeal cannot be awarded unless authorized by the Appellate Court and since these fees were not awarded or authorized, they must be deducted prior to any attorney fee award by this Court ($356,820.35 - $49,111.01 = $307,709.34).”

If successful in bringing an action, a person may petition “the court” for reimbursement for reasonable attorney fees incurred in bringing the action. Minn. Stat. § 117.045 (2004). This court has concluded that there is conflicting authority on which is the proper court. Johnson v. City of Shorewood, 531 N.W.2d 509, 511 (Minn. App. 1995), review denied (Minn. July 7, 1995). But the court in Johnson held that when there is no delegation by the district court in order to avoid the problem of apportioning costs between trial and appeal, a claim for attorney fees on appeal is properly addressed to the appellate courts. Id. The district court did not abuse its discretion in failing to award respondents the attorney fees incurred on the interlocutory appeal.

After deducting the amount of fees and costs relating to the appeal, the district court determined that respondents’ attorney fees request was $307,709.34. The district court found “that based upon counsel’s experience and the time and labor involved[,] that [respondents’] counsel shall be awarded one-half of the applicable fees, or $153,854.67 ($307,709.34 divided by 2 = $153,854.67).” Respondents argue that the district court’s award was arbitrary and was unsupported by any reasoned explanation about what work was excessive or duplicative.

Respondents argue that this case is similar to Liess v. Lindemyer, 354 N.W.2d 556 (Minn. App. 1984). In Liess, this court vacated a district court’s award of attorney fees under the private attorney general statute when the district court set the award at a contingency rate of one-third of the recovery and ignored the attorney’s detailed hourly account of fees. The decision in Liess, however, provides that “[t]he record must reflect that the attorney’s fees award was arrived at after consideration of both the factors set forth in State v. Paulson and the policies that support the Minnesota private attorney general statute.” Id. at 558. Here, the district court took into consideration the contingency agreement in the retainer agreement, counsel’s experience, and the time and labor involved, as well as the policies that support Minn. Stat. § 8.31. The district court did not abuse its discretion in the amount of attorneys fees awarded to respondents.

Damages

Respondents argue that the district court erred in allowing appellant to assert an offset in damages despite respondents’ alleged objection. Respondents claim they objected to an offset during trial and again posttrial; but respondents fail to provide any citation to the record for their objections and the brief in support of the motion for a new trial does not contain any reference to this issue. This court generally considers “only those issues that the record shows were presented and considered by the [district] court in deciding the matter before it.” Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). An appellate court may exercise its discretion to consider a new theory on appeal if justice requires. Cohen v. Cowles Media Co., 479 N.W.2d 387, 390 (Minn.1992).

Respondents argue that the district court permitted appellant to argue, and the jury to consider, mitigation of respondents’ damages by the $5 per month rent reduction and the purported $21 per month rent increase. Respondents argue that the district court erred because no notice of the rent increase was given as required under Minn. Stat. § 327C.06 (2004). Respondents claim that it was only after this lawsuit had commenced that appellant claimed it had purportedly foregone a $21 per month rent increase. Respondents contend that without written notice, no such rent increase ever existed and could not be considered as a purported offset. Due to this, respondents maintain that as the nonbreaching party, they are entitled to receive the benefit of the bargain and be placed in the same position that they would have enjoyed if the contract had not been breached. See Lesmeister v. Dilly, 330 N.W.2d 95, 103 (Minn. 1983). The October 30, 2001 notice from appellant to respondents, however, specifically states, “In replace of a rent increase . . . .” This statement lends credence to the argument that appellant had foregone a monthly rent increase when it implemented the rule change. Further, while the notice does not specifically state that the rent increase was $21, the amount of the increase was an issue for the jury to decide. The district court did not err in allowing appellant to assert an offset to damages.

Affirmed.