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12/18/75 NORTHVIEW CONSTRUCTION COMPANY v. CITY ST.

December 18, 1975

NORTHVIEW CONSTRUCTION COMPANY
v.
CITY OF ST. CLAIR SHORES



T. G. Kavanagh, C. J., and Williams and Levin, JJ., concurred. Fitzgerald, Lindemer, and Ryan, JJ., took no part in the decision of this case. Coleman, J. (dissent).

SYLLABUS BY THE COURT

Opinion of the Court

1. Parties -- Class Action -- Adequate Representation -- Building Permits.

Plaintiffs adequately represented the class of all persons who purchased building permits between the date a city's building code established an excessive building permit fee schedule and the date of bringing an action against the city to secure a refund of the excess fees paid where the representative plaintiffs possessed claims typical of the class of those persons required to pay excess building permit fees, and each claim raises a common issue concerning the legality of the building permit fees and can be satisfied by a monetary refund, and where, after accepting individual judgments, the plaintiffs proceeded to prosecute two appeals in the Court of Appeals, various proceedings in the circuit court and an appeal to the Supreme Court.

2. Parties -- Class Action -- Adequate Representation.

Implicit in every class action is the issue of adequacy of representation; since the representatives seek to litigate issues on behalf of the absent class members, the courts must determine if the representatives are members of the class and capable of representing it properly.

3. Parties -- Spurious Class Action -- Adequate Representation -- Judgment -- Binding Effect -- Due Process.

In a spurious class action, absent class members are not normally bound by the judgment of the court unless they affirmatively intervene in the suit and they have the benefit of "one-way intervention": they may silently await the final decision of the court and if it is favorable to their interests, they may then join in the class for the presentation of individual claims against the defendant, or if the decision is not favorable to their interests, and they have not joined the class suit, they are not legally bound by the findings of the court and are free to take legal action against the defendant in their individual capacities; therefore the adequacy of representation of the class does not take on due process dimensions, and the courts should limit themselves to a reasonable inquiry into the issue (GCR 1963, 208.1[3]).

4. Parties -- Spurious Class Action -- Adequate Representation.

There are two general requirements for adequate representation in a spurious class action: (1) the representatives must share common issues and interests with the unnamed class members, and (2) the representatives must vigorously prosecute the rights of the class through qualified counsel.

5. Parties -- Spurious Class Action -- Adequate Representation.

The single fact that the named plaintiffs in a spurious class action have accepted judgment does not lead to the Conclusion that they and their counsel are no longer adequate representatives; the inquiry should go in back of the individual judgments to determine if the representatives have, in fact, abandoned their representative role.

6. Parties -- Spurious Class Action -- Adequate Representation -- Counsel.

The professional obligation to represent the class together with the prospective monetary award for successfully doing so make counsel in a spurious class action an important force with a continuing interest in the litigation; the size of the claims of the named plaintiffs is not necessarily of importance in determining adequacy of representation where the amount of possible recovery by the class rather than by the individual plaintiffs furnishes the motivating force behind prosecution.

7. Parties -- Spurious Class Action -- Adequate Representation -- Intervention.

Failure of class members to intervene in a spurious class action prior to judgment is equally consistent with satisfaction with the representatives, dissatisfaction with the representatives, lack of interest in the action, or a lack of knowledge of its existence, and before a court concludes from the small number of intervenors that there is insufficient interest to continue the suit as a class action it must determine that it has an adequate factual basis for its Conclusion; there can be no such factual basis where the notice to absent class members was clearly inadequate.

8. Parties -- Class Action -- Notice.

A court seeking to measure the interest of a class and perhaps dismiss an action, thereby putting an end to a class claim, must first order adequate notice and convey to the class members their need to intervene to preserve the action.

Dissenting Opinion

Coleman, J.

9. Parties -- Class Action -- Adequate Representation -- Dismissal and Nonsuit.

Dismissal of a class action is not erroneous where the named plaintiffs secure judgment in their favor alone prior to the intervention of any other member of the class and the judgments are satisfied without an order continuing the litigation as a class action (GCR 1963, 208.1[3]).

10. Parties -- Class Action -- Adequate Representation.

A trial court could have determined that there was not adequate representation in a class action from the mere fact that the named plaintiffs had departed from the suit prior to the appearance of any other member of the class by seeking and accepting judgment in favor of themselves alone.

11. Parties -- Class Action -- Moot Claims.

A class action may continue where the named plaintiff's claim is moot and where a statute or procedure is challenged on grounds of constitutionality or misapplication; two reasons are usually present if a moot claim is continued as a class action: (1) possible recurrence of the alleged illegality and (2) prevention of defendant from stopping a class action and continuing unconstitutional or illegal practices by rendering the named plaintiff's claim moot.

12. Parties -- Class Action -- Adequate Representation -- Moot Claims.

A class action in which the collection of money is the focus and not an allegedly recurrent unconstitutional practice especially requires adequate representation for the class and not representation by withdrawn named plaintiffs who have received a satisfied judgment.

The opinion of the court was delivered by: Per Curiam

Northview Construction Company and other plaintiffs brought an action against the City of St. Clair Shores to secure a refund of excess building permit fees paid by them and also a refund of all excess fees paid by the class of all persons who purchased building permits between the date an unlawful amendment of the city building code established an excessive building permit fee schedule and the date of filing the action against the city. The Macomb Circuit Court, Edward J. Gallagher, J., dismissed the class action portion of the suit and granted plaintiffs' motion for summary judgment limited to the named plaintiffs. The dismissal of the class action was appealed to the Court of Appeals, Quinn, P. J., and T. G. Kavanagh and Corkin, JJ., which reversed and remanded for proper notice to the class members, and instructed the court to evaluate the question of adequacy of representation after the new notice had been served (12 Mich App 104; 162 NW2d 297 [1968] [Docket No. 3599]). On remand, plaintiffs moved for a partial summary judgment in favor of the class establishing the city's liability for all properly presented claims and requested a determination of the form of notice to class members. The circuit court entered an order for notice by publication only. Six builders responded. The circuit court again ruled that the action should be dismissed but in such form as not to affect the rights of the business entities that have made response and indicated their intent to file claims. The Court of Appeals, Lesinski, C. J., and J. W. Fitzgerald and Van Valkenburg, JJ., affirmed (Docket No. 11641). Plaintiffs appeal. Held:

1. The record does not support the Conclusion reached by the Court of Appeals and the circuit court that the named plaintiffs and their counsel have not adequately represented the class. The two requirements for adequate representation in a spurious class action, that the representatives share common issues and interests with the unnamed class members, and that the representatives vigorously prosecute the rights of the class, were met in this case:

a. The representative plaintiffs in the instant litigation had claims typical of the class of those persons required to pay excess building permit fees under the illegal amendments to the building code. Each claim raises a common issue concerning the legality of the building permit fees and can be satisfied by a monetary refund.

b. The named plaintiffs accepted the circuit court's award of individual judgments, but this fact alone does not make them inadequate representatives of the class. They did not, as far as the record reveals, thereafter reduce their efforts on behalf of the absent class members. The Court of Appeals and the circuit court erred when they relied on the small number of intervening class members to find that there was insufficient interest to continue this suit as a class action. Because the notice provided to the absent class members was clearly inadequate, the courts lacked a sufficient factual basis upon which to proceed when reviewing the interest of the absent class members in the suit.

2. The limited notice by publication on remand was not reasonably calculated to reach the absent class members and was inferior to other methods of ...


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