author: TERNUS, Justice. CARTER, Justice LARSON, J.

text:
    WINDWAY TECHNOLOGIES, INC., Welch Motels, Inc., Gregory Swecker, and Beverly Swecker, Appellees, v. MIDLAND POWER COOPERATIVE, Appellant.
    No. 02-1113.
    Supreme Court of Iowa.
    April 1, 2005.
    Rehearing Denied May 12, 2005.
    Thomas W. Polking and John A. Gerken of Wilcox, Polking, Gerken, Schwarzkopf & Copeland, P.C., Jefferson, for appellant.

      Wallace L. Taylor, Cedar Rapids, for appellees Windway Technologies, Inc. and Welch Motels, Inc.
    Gregory and Beverly Swecker, Dana, pro se.
    Christopher R. Cook, Arlington, Virginia, for amicus curiae Solar Energy Industries Association.
   TERNUS, Justice.

The primary issue in this case is whether a nonrate-regulated utility should be required to sell energy to alternate energy producers on a net metering basis. The district court ruled the appellant, Midland Power Cooperative, must connect to wind generators owned by the appellees, Gregory and Beverly Swecker and Welch Motels, Inc., using net metering. When this court first considered Midland’s appeal of the district court judgment, we agreed with the district court. Thereafter, we granted Midland’s petition for rehearing and withdrew our original opinion. Upon further consideration of the parties’ arguments and the pertinent legal authorities, we now reverse the district court’s ruling requiring net metering. We affirm, as modified, the court’s order requiring Midland to disclose avoided-costs data to the Sweckers and Welch Motels.

I. Background Facts and Proceedings.

The Sweckers and Welch Motels, plaintiffs in the action below, purchased wind-powered electric generators from the ap-pellee, Windway Technologies, Inc. They sought to reduce their energy expense by generating their own power. The plaintiffs also hoped to sell any excess energy they produced to Midland. Customers such as the plaintiffs who buy from and sell energy to a utility are known as cogen-erators or alternate energy producers (AEPs). The present dispute arose when the Sweckers and Welch Motels sought to connect their generators to the electric distribution system operated by Midland. Midland took the position that purchases and sales of energy by the ANPs should be separately measured and billed. The plaintiffs, on the other hand, wanted an arrangement they describe as “net metering” where only the net purchase or sale is billed.

There has been some confusion in this ease over the correct terminology to describe the parties’ respective positions. Midland has argued that the arrangement it seeks to impose is “net billing.” It appears, however, that the terms “net metering” and “net billing” are used interchangeably to refer to the same method of measuring the power used by a cogenerator over a specified period of time. The Federal Energy Regulatory Commission (FERC) has used the term “net billing” in the following sense:

“Net billing involves only one meter and one net transaction. Under net billing, the [cogenerator] produces power primarily for the owner’s needs. However, at times the [cogenerator] generates ‘excess’ power which is supplied to the utility through the single meter. Other times, the [cogenerator] may not generate sufficient power for the owner’s needs and [it] draws power from the utility through the single meter. Electricity flows through the meter in both directions and is netted out and one meter reading [is] made at the end of a billing period.”

MidAmerican Energy Co., 94 F.E.R.C. ¶ 61,340, at 62,262 (2001) (order denying request for declaratory order) (citation omitted). The term “net metering” has been used to describe the same process. See FirstEnergy Corp. v. Pub. Utils. Comm’n, 95 Ohio St.3d 401, 768 N.E.2d 648, 650 (2002) (defining “net metering” as “ ‘measuring the difference in an applicable billing period between the electricity supplied by an electric service provider and the electricity generated by a customer-generator which is fed back to the electric service provider’ ” (citation omitted)).

In contrast, under the approach urged by Midland, two separate measurements would be required — one to measure power flowing from Midland and the other to measure power flowing from the cogenerator. The applicable billing rates would then be separately applied to each measurement and the resulting dollar amounts would be offset against one another. A more appropriate description of Midland’s proposed billing system is separate or independent billing, which is the terminology we will use in this opinion. This type of billing is reflected in the tariffs Midland has filed with the Iowa Utilities Board (hereinafter “the utilities board”). See Iowa Code § 476.47(2)(b) (2003) (requiring a nonrate-regulated utility to file a tariff with the board outlining the utility’s alternate energy purchase program).

Midland advocates for separate billing of power usage because this system would allow Midland to collect its full retail rate for energy sold to the cogenerating customer but pay the customer a smaller sum for the electricity purchased from the co-generator based on Midland’s “avoided costs,” an incremental cost figure defined by federal law. See FERC Regulations Under the Public Utility Regulatory Policies Act of 1978, 18 C.F.R. § 292.304(a)(2) (2004) (providing utility shall not pay more than its avoided costs for energy purchased from AEPs), § 292.101(b)(6) (defining “avoided costs”). An example will illustrate the advantage to Midland of separate billing. Under the net metering or net billing approach, if each party, during a given billing period, provides the same amount of electricity to the other, their respective power usage would offset each other and neither party would owe any money to the other. Using the same example under the separate or independent billing approach, the cogenerating customer would owe Midland more than Midland owed the customer because the customer would pay Midland’s retail rate for power provided by Midland, while Midland would only pay the customer at its avoided costs for power provided by the customer, a rate that is considerably less than retail.

The plaintiffs originally filed this suit in federal court, alleging, in part, that Midland’s tariff setting the rate at which it would purchase energy from cogenerators violated a federal statute, the Public Utility Regulatory Policies Act (PURPA). See Public Utility Regulatory Policies Act of 1978, 16 U.S.C.,§ 824a-3 (2000). The federal court remanded the case to state court on the ground that federal courts lack subject matter jurisdiction of a suit involving a nonrate-regulated utility such as Midland. In the Iowa district court, the parties agreed to bifurcate the case for trial and submit some of the issues to the court, saving the balance of the issues for a jury trial. A bench trial was held on the plaintiffs’ claim that Midland’s tariff violated PURPA, and the district court held (1) the parties are required to use net metering, and (2) Midland must file periodic reports with FERC from which its avoided costs may be determined. Midland sought an interlocutory appeal, which we granted. Our review is for correction of errors of law. See Iowa R.App. P. 6.4.

II. Net Metering Requirement.

A. Arguments of parties. On appeal, Midland argues the trial court erred because (1) net metering is not required under PURPA or state law, and (2) the Iowa courts have no authority to impose requirements on Midland that are not required by federal or state law. In response, the plaintiffs claim “the district court had the discretion and authority to impose net metering.” They point out that net metering will provide incentives for alternate energy production sources, thereby advancing one of the goals of PURPA. See Am. Paper Inst, Inc. v. Am. Elec. Power Serv. Corp., 461 U.S. 402, 404-05, 103 S.Ct. 1921, 1924, 76 L.Ed.2d 22, 27 (1983) (stating PURPA “was designed to encourage the development of cogeneration and small power production facilities”). The plaintiffs also rely on FERC’s position that net metering .does not violate PURPA to support the trial court’s ruling.

B. Applicable law. We start with a brief examination of the statutory and regulatory framework. PURPA requires FERC to adopt “such rules as it determines necessary to encourage cogeneration and small power production,” including rules that require electric utilities to purchase electric energy from qualifying cogeneration facilities. 16 U.S.C. § 824a-3(a)(2). Rates for such purchases have two statutory restrictions: they must be “just and reasonable” to electric consumers of the utility and to the public, and they must “not discriminate against [AEPs].” 16 U.S.C. § 824a-3(b). Congress considered, but did not adopt, a requirement that utilities purchase energy from AEPs on a net metering basis. See, e.g., 145 Cong. Rec. S5291 (1999); 144 Cong. Rec. S7952 (1998).

The rules adopted by FERC require electric utilities to purchase energy from qualifying AEPs. 18 C.F.R. § 292.303. FERC’s rules-also parrot the two requirements for purchase rates set forth in PURPA and, in addition, state that utilities shall not be required to pay more than avoided costs for any excess energy produced , by an AEP. 18 C.F.R. § 292.304(a)(l)-(2). “Avoided costs means the incremental costs to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility or qualifying facilities, such utility would generate itself or purchase from another source.” 18 C.F.R. § 292.101(b)(6). State regulatory authorities and nonregulated electric utilities were given the responsibility to implement the rules adopted by FERC. 16 U.S.C. § 824a-3(f).

In Iowa the legislature enacted a law requiring all utilities to purchase energy from qualifying AEPs and to file tariffs with the utilities board explaining their program for doing so. See Iowa Code § 476.47(l)-(2). Although the legislature provided that rate-regulated utilities’ tariffs were subject to the requirements of rules adopted by the utilities board, the statute states that nonrate-regulated utilities’ tariffs are to be filed “for informational purposes only.” Id. § 476.47(2). One rule adopted by the utilities board requires net billing between rate-regulated utilities and AEPs. See Iowa Admin. Code r. 199 — 15(H)(5). Midland, as a nonrate-regulated utility, is not subject to this rule. Id. With these laws and regulations in mind, we turn to the net metering issue.

C. Discussion. To place our consideration of this issue- in context, we note that the underlying claim giving rise to this issue was the plaintiffs’ request in their petitions that Midland be ordered to comply with PURPA. Interestingly, the district court did not rule that Midland’s tariffs violated PURPA by not providing for net metering. Rather, the court held that net metering did not violate the PURPA provision that a utility could not pay more than its avoided costs for energy purchased from AEPs. The court then concluded that if net metering were not allowed, “PURPA’s purposeful passage to render alternative energy production reasonably attractive [would be] shelved.”

The implicit conclusion of the district court that net metering is not expressly required by law appears to be correct. The plaintiffs cite no statute, rule, or controlling decision that requires a nonregu-lated utility to use net metering. The FERC order upon which the plaintiffs rely is not to the contrary. In MidAmerican Energy Co., FERC simply held that state laws requiring rate-regulated utilities to use net metering are not inconsistent with PURPA. 94 F.E.R.C. at 62,263-64. We have found no federal case or regulatory decision holding that net metering is required by PURPA.

Having determined there is no express requirement for net metering, we consider whether there is an implied requirement in PURPA that net metering be used. We think the answer to this question is clearly “no.” FERC has repeatedly stated that it would leave the implementation of PURPA to state regulatory authorities and non-regulated utilities, including the determination as to whether to institute net energy billing for AEPs. See, e.g., Swecker v. Midland Power Coop., 87 F.E.R.C. ¶ 61,-187, at 61,721-22 (1999); Order No. 69, Small Power Production and Cogeneration Facilities, Regulations Implementing Section of the Public Utility Regulatory Policies Act of 1978, FERC Statutes and Regulations 1977-1982 ¶ 30,128, at 30,892 (1980), 45 Fed.Reg. 12,231 (1980) [hereinafter Order No. 69]; see also MidAmerican Energy Co., 94 F.E.R.C. at 62,263 (“In implementing PURPA, the Commission ... recognized that net billing arrangements ... would be appropriate in some situations, and left the decision of when to do so to. state regulatory authorities.” (Emphasis added.)). FERC has also stated that nonregulated electric utilities “are to be afforded ‘great latitude’ in determining ‘the manner of implementation’ ” of FERC’s regulations concerning AEPs. Co-generation Coalition of America, Inc., 61 F.E.R.C. ¶ 61, 252, at 61,925 (1992) (order denying petition for a nationwide investigation). Given the broad discretion granted to regulatory authorities and nonrate-regulated utilities to determine -whether and when to use net metering, we conclude it would be wrong to interpret PURPA to require Midland to offer net metering, to all AEPs in its tariffs.

Despite the absence of any authority that requires net metering, the plaintiffs argue the trial court had “discretion” to order Midland to use net metering. See generally Order No. 69, 45 Fed.Reg. 12,-231 (1980) (noting review of a nonregulated utility’s implementation of PURPA may be pursued in a state court forum pursuant to section 210(g) of PURPA); see also Policy Statement Regarding the Commission’s Enforcement Role Under Section 210 of the Public Utility Regulatory Policies Act of 1978, 23 F.E.R.C. ¶ 61,304, at 61,644. To exercise discretionary authority over a nonregulated utility’s implementation of PURPA would place the Iowa courts in the position of acting as a regulatory board for such utilities. We think this role is neither advisable nor necessary.

FERC itself has authority “to undertake an enforcement action to require a State regulatory authority or nonregulated electric utility to implement [FERC’s] regulations.” Tenn. Power Co., 77 F.E.R.C. ¶ 61,125, at 61,483 (1996) (order denying petition for enforcement under section 210 of PURPA) (citing 16 U.S.C. § 824a-3(h)(2)) (emphasis added). In the Tennessee Power decision, FERC stated that it would most likely use its enforcement power wheré claim is made that the nonregulated utility has not implemented FERC’s regulations or has implemented them in a manner contrary to PURPA. 77 F.E.R.C. ¶ 61,125, at 61,485. FERC would leave to the states and state judiciaries challenges to the utility’s application of implementing Regulations, i.e., fact-specific questions. Id.; Cogeneration Coalition of America, Inc., 61 F.E.R.C: ¶ 61,252, at 61,926.

The dispute here clearly falls in the category of an implementation, not an application, issue. The plaintiffs challenge Midland’s tariff, not Midland’s application of the tariff to particular customers. The arguments they advance in support of their position are not fact-specific to these plaintiffs or to this utility but instead rest on general principles of fairness and the desire to encourage alternate energy production. -In essence, a decision by our court upholding the district court’s decision-would mean that all nonrate-regulated utilities in Iowa would be required to use net metering for all AEPs. Yet neither Congress, FERC, our state legislature, nor the utilities board saw fit to impose a universal requirement on nonregulated utilities to implement net metering.

In conclusion, we decline the opportunity to make a policy decision on whether net metering would be preferable in the situation before us. There are several reasons that support our decision: (1) the specialized and technical nature of the net-metering issue, (2) the absence of any meaningful guidance for case-by-case determinations of when net metering is appropriate and when it is not, (3) the broad precedential effect of requiring net metering in this case, which would be contrary to FERC’s position that net metering is appropriate “in some situations,” (4) the authority of the Iowa legislature and the utilities board to require net metering for nonregulated utilities and their failure to do so, and (5) the authority of FERC to regulate the implementation of PURPA by nonrate-regulated utilities, including ordering net metering. Federal law gives nonregulated utilities broad discretion to implement PURPA, and we cannot say that Midland’s position on net metering is contrary to that law. Therefore, the district court erred when it ordered Midland to use net metering in selling energy to and buying energy from the plaintiffs.

III. Filing of Avoided-Costs Data.

The plaintiffs included in this action a request that Midland produce cost information so that the plaintiffs could compute the avoided-costs component of Midland’s billings. The district court ordered Midland to make available its avoided-costs data at least every two years and to file this information with FERC. Midland complains about both aspects of the court’s order.

We first reject Midland’s argument that the district court lacked authority to enter an order requiring disclosure of the requested information. Because the requested data is pertinent to Midland’s charges to the AEPs, it is likewise pertinent to its implementation of PURPA, which requires that rates be “just and reasonable.” Ordering the disclosure of this information is certainly within a state court’s authority to review a nonregulated utility’s implementation of PURPA.

Nonetheless, we think filing the requested data at FERC is unnecessary. FERC does not require any utility to file cost data with it. Moreover, FERC has made it clear that it will not use its enforcement power to determine whether cost data is adequate, but will leave such issues to state courts. It simply serves no purpose to have the data filed with FERC, as FERC does not want it or need it. We think the plaintiffs can obtain the information they need if we simply require Midland to make its cost data available at its office for review by the public, including AEPs. As ordered by the district court, this data shall be updated every two years.

IV. Conclusion and Disposition.

We conclude the district court erred in requiring Midland to use net metering in its dealings with the plaintiffs. Net metering is not required by state or federal law. Therefore, Midland’s tariffs do not violate PURPA. Accordingly, we reverse the district court’s order that Midland implement net metering.

We affirm the district court’s decision ordering Midland to produce cost data for the plaintiffs’ examination. We modify the court’s decision, however, to provide that this information may be made available at Midland’s principal place of business rather than filed with FERC.

This case comes before us on an interlocutory appeal. Therefore, we remand the matter for disposition of the plaintiffs’ remaining claims.

REVERSED IN PART AND AFFIRMED IN PART AS MODIFIED. CASE REMANDED FOR FURTHER PROCEEDINGS.

All justices concur except CARTER, J., who concurs specially, and LARSON, J., who dissents.

CARTER, Justice

(concurring specially).

I agree with the court’s conclusion that neither federal nor state law requires that Midland utilize net metering. I join in the court’s opinion. I also write separately to point out that federal law actually prohibits the use of net metering.

Section 210(b) of the Public Utility Regulatory Policies Act, 16 U.S.C. § 824a-3(b), provides:

No such rule prescribed [by the Federal Energy Regulatory Commission (FERC)] ... shall provide for a rate which exceeds the incremental cost to the electric utility of alternative electric energy.

The Supreme Court in American Paper Institute, Inc. v. American Electric Power Service Corp., 461 U.S. 402,103 S.Ct. 1921, 76 L.Ed.2d 22 (1983), has determined that the term “full avoided costs” as used in the regulations is the equivalent of the term “incremental cost of alternative electric energy, used in § 210(d) of [the Act].” Am. Paper Inst., Inc., 461 U.S. at 406,103 S.Ct. at 1924, 76 L.Ed.2d at 28.

In a regulation adopted to implement this provision, FERC has required that utilities purchase electricity from qualified cogenerators “at a rate equal to the utility’s full avoided cost.” 18 C.F.R. § 292.304(b)(2) (1982). The utility’s full avoided cost is defined as “the cost to the electric utility of the electric energy which, but for the. purchase from such cogenerator or small power producer, such utility would generate or purchase from another source.” Id. § 292.101(b)(6).

There is no way that net metering will produce a reimbursement to the cogenerator that is reflective of the utility’s full avoided cost. Instead, net metering in every instance reimburses the cogenerator on the basis of the utility’s retail rate for electricity. This is manifestly not the cost to the utility of the electric energy that, but for the purchase from such cogenerator, the utility would generate or purchase from another source.

LARSON, J.

(dissenting).

It is true, as the majority notes, that PURPA does not require net metering. It is certainly not true, however, that PURPA prohibits it as the special concurrence contends. The latter is obvious from the fact that both FERC and the Iowa Utilities Board (IUB) require net metering by all utilities under their jurisdiction. In fact, FERC has expressly ruled that net metering does not violate PURPA. MidAmerican Energy Co., Docket No. EL99-3-000, 94 F.E.R.C. ¶ 61,340 (Mar. 28, 2001).

Under 16 U.S.C. § 824a-3(a), state regulatory agencies are required to implement cogeneration rules' for all utilities for which they have “ratemaking authority.” Unfortunately for these plaintiffs, they live in an area served by an electric cooperative, and electric cooperatives are not subject to rate regulation by the IUB. A wind generator in an area served by a private utility could economically operate because the utility would be required to net meter. In those areas, net metering would make alternative generation economically feasible, while those in areas served by Midland would not.

The main purpose of PURPA was to encourage alternative sources, of energy and to reduce our dependence on fossil fuels. See Fed. Energy Regulatory Comm’n v. Mississippi, 456 U.S. 742, 745-51, 102 S.Ct. 2126, 2130-33, 72 L.Ed.2d 532, 537-42 (1982). Midland could, in keeping with the spirit of PURPA, use net metering to encourage alternative electric generation, but it has consistently .thwarted cogeneration development. As noted in a September 21, 2004 order (provided to this court by Midland after oral argument to support its rehearing petition), FERC noted it had previously initiated enforcement proceedings against Midland. It said that

initiating such a proceeding was appropriate because for over five years Midland has abused its role as a “nonregu-lated electric utility” under PURPA to frustrate Mr. Swecker’s attempts to exercise his rights as [an alternative generator].

As a practical matter, if Midland was to allow alternative generation, this would have a negligible impact on its income. Of its 6800 customers, only a small handful of cogenerators are proposed.

PURPA provides leverage on public utilities to accommodate alternative energy producers. 16 U.S.C. § 824a-3(a) provides:

Not later than 1 year after November 9, 1978, the Commission shall prescribe ... such rules as it determines necessary to encourage cogeneration and small power production ... which rules require electric utilities to offer to—
(1) sell electric energy to qualifying cogeneration facilities and qualifying small power production facilities and
(2) purchase electric energy from such facilities.

Under § 824a-3(b),

[t]he rules prescribed under subsection (a) of this section shall insure that, in requiring any electric utility to offer to purchase electric energy from any qualifying cogeneration facility or qualifying small power production facility, the rates for such purchase—
(1) shall be just and reasonable to the electric consumers of the electric utility and in the public interest, and
(2) shall not discriminate against qualifying cogenerators or qualifying small power producers.
No such rule prescribed under subsection (a) of this section shall provide for a rate which exceeds the incremental cost to the electric utility of alternative electric energy.

(Emphasis added.)

It should appear obvious that Midland’s charging a cogenerator such as the Sweck-ers three times what Midland pays the Sweckers for the same commodity is not “just and reasonable.” Further, Midland’s obstructiveness in encouraging alternative generation frustrates the purpose of PURPA and surely cannot be considered to be “in the public interest.”

Midland thumbs its nose at fairness and the goals of PURPA and claims, in effect, that no one can do anything about it. It has successfully dodged the bullet in federal court by claiming that court has no subject matter jurisdiction. See Windway Techs., Inc. v. Midland Power Coop., No. C00-3089MWB, 2001 WL 1248741 (N.D.Iowa Mar.5, 2001). Midland has further been immunized from any control by the IUB, which, if it had rate-making authority, would require net billing, as it does for its regulated utilities. Midland contends, in effect, that this court cannot grant relief to the plaintiffs without acting as a super utility regulator. However, when a federal court rejects a claim such as this one based on subject matter jurisdiction, that does not mean a utility is free from any judicial enforcement of the rules requiring compliance with PURPA. When a federal district court rejects a case on subject matter jurisdiction grounds, the case is properly heard in state court. See Greensboro Lumber Co. v. Ga. Power Co., 643 F.Supp. 1345, 1374 (N.D.Ga.1986) (“Any subsequent claim that a nonregulat-ed utility has failed to adhere to its own implementation plan in its dealings with a particular qualifying facility must be brought in state court, which has exclusive jurisdiction ⅛ enforce any requirement’ of a nonregulated utility’s implementation plan. That this is FERC’s interpretation of PURPA’s enforcement mechanism is clear.” (Citations omitted.)); see also Snow Mountain Pine Co. v. C.P. Nat’l Corp., Docket No. EL84-25-000, 30 F.E.R.C. ¶ 61,293 (Mar. 19, 1985) (“As the Commission has previously noted, complaints regarding an alleged refusal to purchase power from a qualifying facility and the rates for such purchases are matters properly brought in a State forum.’’ (Emphasis added.)); Roche Prods., Inc., 29 F.E.R.C. ¶ 61,098 (Oct. 26, 1984) (“Matters of application of [a utility’s] rules ... are properly brought' before State judicial forums.”); Policy.. Statement Regarding the Commission’s Enforcement Role Under Section 210 of the Public Utility Regulatory Policies Act, of 1978, 48 Fed.Reg. 29475, 29476, 23 F.E.R.C. ¶ 61,304, 61,645 (June 27,1983).

In this case, the plaintiffs do not ask that they be compensated for all electricity generated at the full market rate. That would clearly be contrary to PURPA and the regulations promulgated under it. However, they do ask for the right to make in-kind exchanges of electricity and to pay to Midland the full market rate only for the excess power used by the plaintiffs. Contrary to Midland’s assertion," and the majority’s holding, this-is a matter properly before an Iowa district court;

This is an interlocutory appeal, and the matter will have to be remanded to the district court on the remaining issues. I believe the district court should be permitted to make an assessment of. the evidence in this case regarding whether the rate structure imposed by Midland is just and reasonable under the circumstances and properly serves the public’s interests in light of PURPA and FERC rules. I would modify the district court judgment and remand for further proceedings.

      . The plaintiffs have argued on appeal that “it would be discriminatory to require rate-regulated utilities in Iowa to provide net metering pursuant to [state regulatory rules] and deny the same to customers of [nonrate-regulated utilities].” We do not think this claim was preserved for review, however. To bolster its conclusion that net metering was appropriate, the trial court mentioned that “[t]here may also be an equal protection of law consideration.” (Emphasis added.) We do not think the trial court squarely addressed an equal protection claim and therefore we give it no consideration on appeal.

      . Midland is a cooperative owned by its approximately 6800 member customers. As such, it is not subject to rate regulation by the utilities board. See Iowa Code § 476.1A (stating "electric cooperative corporations and associations are not subject to the rate regulation authority of the board”).

      . PURPA does not preclude state regulators from requiring net metering by a utility that is not rate-regulated. See Swecker v. Midland Power Coop., 105 F.E.R.C. ¶ 61,238, at 62,270 (2003) (order granting petition for enforcement action).


source: Caselaw Access Project

author: TERNUS, justice.

license: Public Domain

text:
    In The Matter of The ESTATE OF Ruby LAUGHEAD, Deceased. Health Management Systems, Inc., ex rel. Iowa Department of Human Services, Appellee, v. Charles Laughead, Administrator of the Estate of Ruby Laughead, Appellant.
    No. 04-0065.
    Supreme Court of Iowa.
    April 15, 2005.
    Rehearing Denied May 12, 2005.

      John A. Pabst of Pabst Law Firm, Albia, for appellant.
    Thomas J. Miller, Attorney General, and Barbara E.B.. Galloway, Assistant Attorney General, for appellee. ■
   TERNUS, justice.

This appeal concerns the scope of reimbursement authorized by Iowa Code section 249A.5(2) for payments made under the State’s medical assistance or Medicaid program. The appellee, Health Management Systems, Inc., acting on behalf of the Iowa Department of Human Services, filed a claim in the Estate of Ruby Laughead to recover Medicaid payments made on behalf of Laughead in the years prior to her death. Over the objections of the appellant, Charles Laughead, Administrator of the Estate of Ruby Laughead, the district court included in the probate estate a life estate held by Ruby Laughead immediately prior to her demise, and ordered the administrator to pay the appellee’s claim to the extent of the value of that life estate. Upon the administrator’s appeal, we affirm.

I. Background Facts and Proceedings.

Prior to-February 27, 1990, Ruby Laug-head owned a 338-acre farm in Monroe County. On that date, she transferred this property to her son, .Charles Laug-head, by quitclaim deed, reserving only a life estate.

In 1995, the Iowa Department of Human Services (the department) began providing medical assistance to Ruby, primarily in the form of nursing home care, through Iowa’s Medicaid program. See generally In re Estate of Kirk, 591 N.W.2d 630, 633 (Iowa 1999) (“Medicaid is a cooperative federal-state program designed to provide federal financial assistance to states that choose to reimburse certain costs of medical treatment for needy persons. It is the primary source of public assistance for the elderly who reside in nursing homes.”). Annual income attributable to Ruby’s life estate, le'ss taxes and expenses, was also used to pay for Ruby’s nursing home care.

Ruby died on July 29, 2002, and Charles was appointed the administrator of her estate. By the time of Ruby’s death, the department had provided medical assistance to her in the amount of $137,596.88. Consequently, Health Management Systems, Inc. filed a claim in Ruby’s estate on behalf of the department to recover these payments. The administrator disallowed the claim, and the matter was set for hearing.

At the hearing held on the department’s claim the parties stipulated that at the time of Ruby’s death the farm in which Ruby held a life estate had a value of $405,000, and Ruby’s life estate interest in that property had a value of $41,451.75. This life estate was the only potential source of payment for the department’s claim. The administrator argued the department should not be able to reach Ruby’s life estate because at the time the life estate was created Iowa law did not require Medicaid reimbursement. Alternatively, he contended that even if the estate recovery statute in effect when Ruby began receiving assistance applied, Iowa Code section 249A.5(2) (1995), it did not require that a recipient’s life estate be included in the recipient’s probate estate. Finally, the administrator asserted that to apply any version of the estate recovery statute would unconstitutionally impair his rights to the property as the remainder person. See U.S. Const, art. I, § 10; Iowa Const, art. I, § 21.

The district court ruled that the statute in effect at the time of Ruby’s death governed, and that applying the statute under the circumstances of this case was not an unconstitutional retroactive application. Therefore, the court held, Ruby’s life estate was an asset of her probate estate, and the department’s claim would be allowed to the extent of the value of that asset. The court directed the administrator to place in the estate the amount of $41,451.75, plus interest, as provided in Iowa Code section 535.3 (2003). See Iowa Code § 249A.5(2)(e) (stating interest accrues on debt owed by Medicaid recipient at the rate provided in section 535.3 commencing six months after the recipient’s death).

The administrator appealed. We review the district court’s ruling on this contested claim for correction of errors of law. See Iowa Code § 633.33 (2003). Our review of the court’s decision on the administrator’s constitutional claim is de novo. See In re Estate of Beck, 557 N.W.2d 270, 271 (Iowa 1996).

II. Statutory Framework.

At common law, the recipient of public assistance was not obligated to reimburse the State for payments made on the recipient’s behalf. See State ex rel. Dep’t of Human Servs. v. Brooks, 412 N.W.2d 613, 614 (Iowa 1987). The common law rule was modified with respect to Medicaid benefits in 1994 when Iowa adopted an estate recovery statute. . See 1994 Iowa Acts ch. 1120, § 10 (codified at Iowa Code § 249A.5(2) (1995)). As originally enacted, section 249A.5(2) stated that the “provision of medical assistance ... creates a debt due the department [of human services] from the individual’s estate for all medical assistance provided on the individual’s behalf, upon the individual’s death.” Iowa Code § 249A.5(2) (1995). This statute also provided that the estate of a medical assistance recipient “includes any real property ... in which the recipient ... had any .•. : interest at the time of the recipient’s ... death, to the extent of such interests, including but not limited to interests in jointly held property and interests in trusts.” Iowa Code § 249A.5(2)(c). Moreover, these assets were made subject to probate. Iowa Code § 249A.5(2)(d). This statute was the law at the time Ruby began receiving Medicaid benefits in 1995.

Effective April 2002, the final clause of section 249A.5(2)(c) was amended to reach interests in real property “including but not limited to interests in jointly held property, retained life estates, and interests in trusts.” 2002 Iowa Acts ch. 1086, § 2 (emphasis added). “Retained life estate” was defined to include any of the following:

a. A life estate created by the recipient or recipient’s spouse, in which either the recipient or the recipient’s spouse held any interest in the property at the time of the creation of the life estate.
b. A life estate created for the benefit of the recipient or the recipient’s spouse in property in which either the recipient or the recipient’s spouse held any interest in the property within five years prior to the creation of the life estate.

Iowa Code § 249A.2(11) (2003). The amended version of section 249A.5(2)(c) was in effect at the time of Ruby’s death.

III. Is Ruby’s Estate Liable for Medicaid Payments Made on Her Behalf?

As noted above, section 249A.5(2) provides that the “provision of medical assistance” to an individual creates a debt due the • department for such assistance “from the individual’s estate.” By the plain language of the statute, it is the receipt of benefits that gives rise to the repayment obligation. This statute was in effect when the department started paying Ruby’s medical and nursing home bills, and it continued in effect to her death. Clearly, then, her estate is liable for the Medicaid benefits paid on her behalf. See In re Estate of Thompson, 586 N.W.2d 847, 852 (N.D.1998) (holding obligation to repay medical assistance benefits arises when recipient receives benefits); The more troublesome question is what assets are includable in her estate for purposes of satisfying this debt. We turn to that question next.

IV. Is Ruby’s Life Estate Includable in Her Probate Estate For Purposes of Payment of the Debt Owed to the Department?

The department contends that Ruby’s life estate must be included in her probate estate under the original 1994 version of section 249A.5(2)(c) and under the amended 2002 version. The administrator argues that neither version can be constitutionally applied, and if they do apply, the original statute did not encompass life estates. The administrator’s constitutional defense is addressed below. As for the question of which version of the statute controls or whether both apply, we need not decide that issue because we conclude that under either statute Ruby’s life estate in the real estate transferred to Charles must be included in her probate estate.

Section 249A.5(2)(c) as originally enacted defined the estate of a medical assistance recipient to include “any real property ... in which the recipient ... had any.... interest at the time of the recipient’s ... death, to the extent of such interests, including but not limited to interests in jointly held property and interests in trusts.” Iowa Code § 249A.5(2)(c) (1995). Whether Ruby, “at the time of her death,” had an interest in the real property at issue here is determined as of a point in time immediately before her death. See In re Barkema Trust, 690 N.W.2d 50, 56 (Iowa 2004) (holding “the phrase ‘at the time of death’ means the time immediately before the Medicaid recipient’s death”). Immediately prior to her death, Ruby held a life estate in 338 acres of land. For reasons that follow, we hold her life estate constituted an interest in real property within the meaning of section 249A.5(2)(c).

When this court was called upon to interpret section 249A.5(2)(c) in Barkema Trust, we concluded “the legislature clearly intended to define ‘estate’ broadly, and to include more than legal title, because it defined [‘estate’] to include any ‘legal title or interest.’ ” Id. at 55 (quoting Iowa Code section 249A.5(2)(c) (2003)). Iowa law has long recognized a life estate in real estate as an interest in that property. See Beeman v. Stilwell, 194 Iowa 231, 237, 189 N.W. 969, 971 (1922) (stating “[a]n estate for life is a freehold interest in land”). Moreover, it is an. interest distinct from and independent of the remainder. See Holzhauser v. Iowa State Tax Comm’n, 245 Iowa 525, 535, 62 N.W.2d 229, 235 (1953). . Therefore, Ruby had an interest in the farm immediately prior to her death, and that interest — her life estate — was in-cludable in her probate estate under the original version of section 249A.5(2)(c).

As for the 2002 version of section 249A.5(2)(c), it specifically includes “retained life estates” in the deceased recipient’s estate. Moreover, Ruby’s life estate falls within the statutory definition of “retained life estate” because it was created by Ruby, the recipient, and Ruby held an interest in the farm — fee title — at the. time she created the life estate. -See Iowa Code § 249A.2(11) (2003) (defining “retained life estate” in part as “[a] life estate created by the recipient ... in which ... the recipient ... held any interest in the property at the time of the creation of the life estate”). Thus, the district court correctly ruled that section 249A.5(2)(c) required that Ruby’s life estate be included in her probate estate for purposes of satisfying her debt to the department. Cf. In re Estate of Gullberg, 652 N.W.2d 709, 713 (Minn.Ct.App.2002) (holding Minnesota’s estate recovery statute required that recipient’s interest in real property owned by his wife must be included in his estate for purposes of Medicaid reimbursement).

The administrator contends this conclusion contravenes federal law. He relies on a provision in the act that amended federal law governing eligibility for Medicaid benefits. See Omnibus Budget Reconciliation Act of 1993, Pub.L. No. 103-66, § 13611(e), 107 Stat. 312, 627 (1993). Section 13611(e) provided that “[t]he amendments made by this section shall not apply ... with respect to assets disposed of on or before the date of the enactment of this Act.” Id. § 13611(e)(2)(B), 107 Stat. at 627 (emphasis added). That date was August 10, 1993. This restriction did not apply to the amendments relating to Medicaid estate recovery, however, because those amendments were in a different section of the act. See id. § 13612, 107 Stat. at 627 (amending statutes pertaining to Medicaid estate recovery).

We also reject an argument by the administrator that this issue is controlled by Iowa’s probate code. The administrator argues probate law does not include a decedent’s life estate in the probate estate and does not permit the administrator to pay claims from other than estate assets. See Iowa Code §§ 633.3(15) (defining “estate” as “the real and personal property of a decedent”), 633.410-.450 (providing for payment of claims, debts, and charges against decedent’s estate). In contrast, the estate recovery statute provides that “ffjor purposes of collection of a debt created by [section 2U9A.5(2) ], all assets included in the estate of a medical assistance recipient ... pursuant to [section 249A.5(2)(c) ] are subject to probate.” Iowa Code § 249A.5(2)(d) (emphasis added). Thus, the general probate laws do not apply because there is a specific law that addresses the particular matter at issue. See Iowa Code § 4.7 (providing when irreconcilable conflict between general and special provisions exists, special provision “prevails as an exception to the general provision”). In addition, as this court noted in Barkema Trust, Iowa chose to define “estate” more broadly than required by federal law, including assets that would not otherwise be included within a recipient’s estate under state probate law. Barkema Trust, 690 N.W.2d at 55. Therefore, Iowa probate law does not control the determination of assets includable in a recipient’s estate for purposes of satisfying a Medicaid debt. We now consider the administrator’s constitutional defense.

V. Is the Application of Section 2k9A.5(2)(e) Unconstitutional Under the Circumstances of This ■ Case?

The administrator contends the district court improperly applied the estate recovery statute retroactively to Ruby’s 1990 transfer of a remainder interest to her son. More specifically, he argues allowance of the department’s claim impairs his vested remainder interest in the farm in violation of the state and federal constitutions. See U.S. Const, art. I, § 10, cl. 1 (“No State shall ... pass any ... Law impairing the Obligation of Contracts....”); Iowa Const, art. I, § 21 (“No ... law impairing the obligation of contracts, shall ever be passed.”). The impairment arises, he contends, from the fact that he will have to sell or mortgage the property in order to have sufficient funds to place the value of Ruby’s life estate in the probate estate. See generally Adair Benevolent Soc’y v. State, 489 N.W.2d 1, 5 (Iowa 1992) (stating person challenging statute under contract clause must show thé state law substantially impairs a contractual relationship).

The flaw in this argument is that the department did not seek to reach Charles’ remainder interest, nor did the district court order that the value of the remainder interest be included in Ruby’s estate. That Charles may receive less upon Ruby’s death than he anticipated can be attributed to the value of Ruby’s life estate, not to the court’s inclusion of his remainder interest in the probate estate. We conclude, therefore, that Charles’ remainder interest is not impaired by subjecting Ruby’s life estate to the department’s repayment claim. Consequently, section 249A.5(2)(c) is not unconstitutional as applied in this case.

VI. Summary.

The district court properly ruled the estate was liable for the department’s claim for reimbursement of medical assistance payments made to the decedent. In addition, the court did not err in including Ruby’s life estate in her probate estate for purposes of satisfying the estate’s debt to the department. Finally, the district court correctly held section 249A.5(2) did not have an unconstitutional retroactive effect. Therefore, we affirm the district court’s decision.

AFFIRMED.

      . In stipulating to the value of the life estate, the parties asked the court to rely on two "life estate tables” that calculate the relative values of a life estate and a remainder interest in property based on the age of the life tenant. Cf. In re Estate of Kirk, 591 N.W.2d at 634-35 (valuing recipient’s interest in joint tenancy property for purposes of Medicaid reimbursement in the same manner as required under Iowa’s inheritance tax statute). One table is from the Iowa Department of Revenue and Finance and is used for purposes of determining taxable value. The other table is from the Department of Human Services’ manual and is taken from the "unisex life estate or remainder table” found at 26 C.F.R. § 20.2031-7 (1994). Given the parties’ stipulation, the proper valuation of Ruby’s life estate is not an issue in this appeal.


author: LARSON, Justice.

text:
    Joe COMES and Riley Paint, Inc., an Iowa Corporation, Appellees, v. MICROSOFT CORPORATION, a Washington Corporation, Appellant.
    No. 03-1703.
    Supreme Court of Iowa.
    May 13, 2005.

      Edward W. Remsburg of Ahlers & Coo-ney, P.C., Des Moines, David B. Tulchin and Joseph E. Neuhaus of Sullivan & Cromwell LLP, New York, New York, Thomas W. Burt, Richard Wallis, and Steven J. Aeschbacher of Microsoft Corporation, Redmond, Washington, and Charles B. Casper of Montgomery, McCracken, Walker & Rhoads, LLP, Philadelphia, Pennsylvania, for appellant.
    Roxanne Barton Conlin of Roxanne Con-lin & Associates, P.C., 'Des Moines, and Richard M. Hagstrom of Zelle, Hofmann, Voelbel, Mason & Gette LLP, Minneapolis, Minnesota, for appellees.
   LARSON, Justice.

The plaintiffs in this antitrust case have been certified by the district court to represent two classes of purchasers of Microsoft products. See Iowa Rs. Civ. P. 1.261-1.279. Microsoft appealed, claiming the plaintiffs have not established the prerequisites for class certification. We affirm.

I.Facts and Prior Proceedings.

This suit was brought against Microsoft Corporation for violating the provisions of the Iowa competition law, Iowa Code §§ 553.4, 553.5 (1997). The plaintiffs, on behalf of themselves and the classes they seek to represent, claim that Microsoft engaged in monopolistic practices from 1994 to 2001 — specifically that Microsoft artificially inflated the cost of its products, including licenses for its operating systems software and its applications software. This is the second time this case has been before this court. See Comes v. Microsoft Corp., 646 N.W.2d 440 (Iowa 2002) [hereinafter Comes /]. The facts were set out fully in Comes I, and we need not repeat them in detail here.

The proposed classes have two named plaintiffs, Joe Comes and Riley Paint, Inc. Both plaintiffs purchased computers with preinstalled Microsoft operating systems and applications software. The named plaintiffs represent a class of “indirect purchasers” of Microsoft products. “Indirect purchasers” means parties to whom Microsoft did not directly sell its products, but who ultimately obtained the products through the stream of commerce. In Comes I we held, on a divided vote, that indirect purchasers may maintain an antitrust suit against Microsoft. Comes I, 646 N.W.2d at 451. That issue is not before us on this appeal.

Plaintiffs’ contention is that Microsoft overcharged the direct purchasers, and those purchasers in turn passed on the overcharges to the ultimate buyers. The plaintiffs initiated this action to recoup the overcharges on behalf of all Iowa end purchasers of Microsoft operating systems and applications software. Two indirect purchaser classes were approved by the court: an operating-systems software class and an applications software class.

II. Standard of Review.

A district court’s decision on class certification is reviewed for abuse of discretion. Vos v. Farm Bureau Life Ins. Co., 667 N.W.2d 36, 44 (Iowa 2003). Our class-action rules are remedial in nature and should be liberally construed to favor the maintenance of class actions. Lucas v. Pioneer, Inc., 256 N.W.2d 167, 175 (Iowa 1977).

[The class-action rule] continues to have as its objectives the efficient resolution of the claims or liabilities of many individuals in a single action, the elimination of repetitious litigation and possibly inconsistent adjudications involving common questions, related events, or requests for similar relief, and the establishment of an effective procedure for those whose economic position is. such that it is unrealistic to expect them to seek to vindicate their rights in separate lawsuits.

7A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1754, at 49 (2d ed.1986) [hereinafter Wright], After a class has been certified, the district court may decertify it if circumstances so require. Vos, 667 N.W.2d at 46.

III. General Requirements for Class Certification.

Members of a class may sue or be sued on behalf of their class if both of these are shown:

(1) The class is so numerous or so constituted that joinder of all members, whether or not otherwise required or permitted, is impracticable.
(2) There is a question of law or fact common to the class.

Iowa R. Civ. P. 1.261.

Before certifying a class, a court must make these specific findings:

a. The requirements of rule 1.261 have been met.
b. A class action should be permitted for the fair and efficient adjudication of the controversy.
c. The representative parties fairly and adequately will protect the interests of the class.

Iowa R. Civ. P. 1.262(2). Microsoft does not contest the court’s findings regarding element (a), but it does challenge its findings on (6) (fair and efficient adjudication) and (c) (fair and adequate representation).

A. The fair and efficient administration of justice. As noted, rule 1.262(2)(6) requires the court to find that a class action will promote a fair and efficient adjudication of the controversy. Rule 1.263(1), in turn, provides “a number of criteria the district court should consider in determining whether the prerequisite of rule 1.262(2)(b) ... has been met.” Vos, 667 N.W.2d at 45. Thirteen factors under rule 1.263(1) are to be considered by the court, but Microsoft challenges the court’s findings on only four:

1. “Whether common questions of law or fact predominate over any questions affecting only individual members,” Iowa R. Civ. P. 1.263(l)(e);
2. “[wjhether a class action offers the most appropriate means of adjudicating the claims and defenses,” id. 1.263(l)(p);
3. “[wjhether management of the class action poses unusual difficulties,” id. 1.263(1)(⅛); and
4. “[wjhether a joint or common interest exists among members of the class,” id. 1.263(l)(a).

“The factors in rule 1.263(1) center on .two broad considerations: achieving judicial economy by encouraging class' litigation while preserving, as much as possible, the rights of litigants — both those presently- in court and those who are only potential litigants.” Luttenegger v. Conseco Fin. Serv. Corp., 671 N.W.2d 425, 437 (Iowa 2003) (internal quotations omitted); accord Vos, 667 N.W.2d at 45; Stone v. Pirelli Armstrong Tire Corp., 497 N.W.2d 843, 846 (Iowa 1993); Vignaroli v. Blue Cross of Iowa, 360 N.W.2d 741, 744 (Iowa 1985). “The rule does not require the district court to assign weight to any of the criteria listed ... [njor does the rule require the court to make written findings as to each factor....” Vos, 667 N.W.2d, at 45; accord City of Dubuque v. Iowa Trust, 519 N.W.2d 786, 793 (Iowa 1994); Martin v. Amana Refrigeration, Inc., 435 N.W.2d 364, 369 (Iowa 1989). We will affirm the district court’s decision if it “weights] and considers] the factors and come[s] to a reasoned conclusion as to whether a class action should be permitted for a fair adjudication of the controversy.” Luttenegger, 671 N.W.2d at 437; accord Martin, 435 N.W.2d.at,369 (“[Tjhe court carefully considered all of the factors and then made a finding that a class action provided the best means for a fair and efficient adjudication of the controversy. Whether or not we agree with the decision arrived at by the trial court is not the issue. The issue is one of abuse of discretion.”); Vignaroli, 360 N.W.2d at 744 (“The district court’s ruling in this case reflects its consideration of those criteria.... The only question remaining for us is whether the trial court abused its discretion in making the favorable findings with regard to the class action certification.”).

The North Dakota Supreme Court, in applying class-action rules similar to ours, has said:

“In most cases some of the thirteen factors [regarding the fair-and-efficient-administration-of-justice test] "will weigh against certification and some will weigh in favor. It is for the trial court, employing its broad discretion, to weigh the competing factors and determine whether a class action will provide a fair and efficient adjudication of the controversy. Thus, even if [defendant] is correct in its assertion four of the factors weigh against certification, that does not preclude the court from certifying the class action if, in its opinion, those factors are outweighed by other factors supporting certification.”

Howe v. Microsoft Corp., 656 N.W.2d 285, 289 (N.D.2003) (quoting Peterson v. Dougherty Dawkins, Inc., 583 N.W.2d 626, 629 (N.D.1998)). With these general principles in mind, we address Microsoft’s specific challenges to the court’s findings on the criteria listed in rule 1.263.

1. Predominance of common questions of law or fact. Microsoft argues that the trial court abused its discretion in finding that common questions of law and fact predominate over individual issues under rule 1.263(l)(e). It contends a showing of predominance is a condition precedent to certification, but we disagree; this is only one of thirteen factors to be considered. In this case, the plaintiffs must prove that Microsoft violated the Iowa Competition Law, see Iowa Code § 553.5, and this violation caused class members to suffer identifiable harm and damages, see id. § 553.12.

Microsoft argues that:

On a motion for class certification in an antitrust action, the pivotal elements are impact and damages to the class members. Under well-established law, plaintiffs must demonstrate at the time class certification is sought' that they have devised a viable method that can show, through common proof, that each class member suffered impact and the amount of damages each sustained.

(Emphasis added.) Microsoft made the same argument to the North Dakota Supreme Court, which rejected it, saying:

We have never suggested a class plaintiff must show there will be common proof on each element of the claim. Rather, we have repeatedly noted that the existence of individual issues is not necessarily fatal to class certification.

Howe, 656 N.W.2d at 289. Further, in Luttenegger, we said:

Underlying the court’s inquiry into the predominance issue “is the recognition [that] the class action device is appropriate only where class members have common complaints that can be presented by designated representatives in the unified proceeding.” This does not mean, however, that “the individual claims be carbon copies of eaeh other.” Rather, ... the test for predominance
is a pragmatic one, which is in keeping with the basic objectives of the [class action rule]. When common questions represent a significant aspect of the case and they can be resolved for all members of the class in a single adjudication, there is a clear justification for handling the dispute on a representative rather than an individual basis .... [C]ourts have held that a [class action] can be brought ... even though there is not a complete identity of facts relating to all class members, as long as a “common nucleus of operative facts” is present. ...

671 N.W.2d at 437 (citations omitted).

2. The district' court’s finding that common issues predominate. The district court gave weight to the predominance factor and concluded that it favored certification. In analyzing this factor, the court highlighted five questions of law or fact that are common to all members:

[1] whether Microsoft is a monopolist in the markets for operating systems and applications software and the definition of those markets;
[2] whether Microsoft engaged in anti-competitive conduct in order to unlawfully maintain or acquire its monopoly power in those markets;
[3] whether Microsoft’s conduct violated the Iowa Competition Law;
[4] whether Microsoft’s conduct harmed the proposed class; [and]
[5] whether Plaintiffs and the putative class members are entitled to damages and the appropriate measure of such damages.

We believe the court’s findings on the first three issues, which Microsoft does not seriously challenge, are sufficient in themselves to justify a finding of predominate issues. These three issues involve alleged statutory violations, which are “clearly ... legal question[s]” and are “classic issue[s] that [are] considered common to a class.” Luttenegger, 671 N.W.2d at 440; accord Martin, 435 N.W.2d at 368 (holding that breach of implied warranty constituted common question); Vignaroli, 360 N.W.2d at 744^5 (holding that plaintiffs’ reliance on written provisions in defendant’s employment manual constituted the “gist of their claim”); see also In re Potash Antitrust Litig., 159 F.R.D. 682, 693 (D.Minn.1995) (“[C]onsidering the facts of the case presented, a claim will meet the predominance requirement when there exists generalized evidence which proves or disproves an element on a simultaneous, class-wide basis, since such proof obviates the need to examine each class member’s individual position.”); Potash, 159 F.R.D. at 693 (“[A]s a general rule in antitrust price-fixing cases, questions common to the members of the class will predominate over questions affecting only individual members.”); 7A Wright § 1778, at 529-30 (“[W]hen one or more of the central issues in the action are common to the class and can be said to predominate, the action will be considered proper ... even though other important matters will have to be tried separately. Typically, this situation arises in antitrust ... cases.” (Footnotes omitted.)). Because this case involves alleged statutory violations and damages common to all class members, the district court did not abuse its discretion by finding that common issues predominate.

3. Can harm and damages be proven on a class-wide basis? Microsoft contends that the district court’s determination that common issues predominate was based, in part, on its finding that the last two issues — impact-of-harm and damages — were also common to the class. Microsoft argues that the court abused its discretion because it employed too lax a standard, i.e., “ ‘whether or not the proposed methods [of proof] are so insubstantial as to amount to no standard at all’ ” Microsoft argues that the court abused its discretion on the predominance issue because it did not conduct a “rigorous analysis” of the evidence that was submitted.'

It is true the district court quoted the “no standard at all” language from Potash, 159 F.R.D. at.697, but the court did not adopt it as the basis for its finding. Rather, it concluded that the plaintiffs’ “proposed methods of proving injury-in-fact on a class-wide basis are based on sound and accepted economic theory” and presented

viable methods for establishing the difference between the prices that Microsoft would have been able to charge for the products at issue in a competitive environment and the prices Microsoft actually charged....

a. Burden of proof. Regarding the proof required at the class-certification stage, this court has stated that “as long as the court has before it sufficient information to form a reasonable judgment on the certification issue, it need not inquire further into the facts supporting plaintiffs’ petition.” City of Dubuque, 519 N.W.2d at 791 (citing 2 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 7.26, at 84 (3d ed.1992) [hereinafter Newberg ], and noting that when deciding a motion for class certification, the trial court should accept allegations in the complaint as true). Because Iowa is a notice-pleading state, this court has recognized that “ ‘it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question.’ ” Vos, 667 N.W.2d at 48 (emphasis added). However in most circumstances, “[ejxcept where the facts underlying the class are merely speculative, ... the proponent’s burden is light.” City of Dubuque, 519 N.W.2d at 791.

Iowa Rule of Civil Procedure 1.262(1) provides the rationale behind this policy. That rule directs courts to determine whether certification of a class is appropriate “as soon as practicable after the commencement of a class action.” Iowa R. Civ. P. 1.262(1). As one leading commentator recognized, the class action determination often occurs early in the proceedings, before significant discovery takes place. See 2 Newberg § 7.27 (explaining that, because of the need for an early class ruling, “usually at the pleading stage, ... traditional burden of proof concepts have limited applicability in the procedural context of class actions”). Further, a safety net is provided for cases in which certification is improvidently granted: the court may de-certify the class at a later time. Vos, 667 N.W.2d at 46.

b. Evidence presented in this case. The evidence relied on by the court included a detailed affidavit furnished by Jeffrey K. MacKie-Mason, a .professor of computer and information science and a professor of economics at the University of Michigan. Professor MacKie-Mason has given testimony regarding these issues in other indirect-purchaser cases against Microsoft in California, Massachusetts, Minnesota, and Wisconsin. In his affidavit, he states that the impact-of-harm prong is susceptible to class-wide proof and provides an economic theory whereby he claims he can show that, if wholesalers, distributors, and retailers are overcharged for a product, those increased costs will ultimately be passed on to the consumer. The professor concluded, based on his studies in these other states,

that Microsoft’s alleged violations would have had a common or class-wide impact upon all members of the classes proposed, and that computation of the damages suffered by the members of each class as a result of Microsoft’s alleged violations is susceptible to common proof on a formulaic basis.

Microsoft challenges this conclusion largely on the ground the professor’s studies were conducted in states other than Iowa. We fail to see, however, how the geographic residence of the affected purchasers has any bearing on the validity of the studies, and Microsoft shows us no basis for concluding otherwise.

Microsoft also attacks Professor MacK-ie-Mason’s analysis, theories, and methodology, claiming that his economic methodology will not produce an accurate measure of harm and, consequently, that the plaintiffs have failed to present “real world” evidence to establish damages. Microsoft argues that the plaintiffs’ proof is insufficient, claiming that Professor MacKie-Mason’s theories are inaccurate as a matter of fact and that the district court should have engaged in a rigorous analysis of this evidence to uncover its flaws. Specifically, it complains that the court abused its discretion because it

did not require plaintiffs to show that their proposed methods for proving with classwide evidence that each class member actually paid some portion of a passed-on overcharge — and the amount passed on — were workable in light of the real world facts Microsoft presented.

(Emphasis added.)

Microsoft’s argument fails because, in effect, it asks the court to make a class-certification ruling based on the merits of the case, something we have uniformly rejected. See, e.g., Kramersmeier v. R.G. Dickinson & Co., 440 N.W.2d 873, 879 (Iowa 1989) (“[A] reversal of the trial court’s certification order for failure of proof of reliance would be tantamount to requiring proof of plaintiffs’ ability to ‘win on the merits,’ a showing clearly not contemplated by [the rules] or prior decisions of this court.”). This court has instead consistently held that class certification does not involve an inquiry into the merits of a case. See, e.g., Lúttenegger, 671 N.W.2d at 438 (“In short, the question of certification is a procedural one ‘that does not ask whether an action is legally or factually meritorious.’ ”); Vos, 667 N.W.2d at 46 (“ ‘The appropriate inquiry is not the strength of each class member’s personal claim, but rather, whether they, as a class, have common complaints.’ For this reason, the court does not conduct a preliminary inquiry into the merits of a suit in a certification hearing.” (Citation omitted.)); Martin, 435 N.W.2d at 367-68 (“In a certification hearing, the court does not ‘conduct a preliminary inquiry into the merits of a suit.’ Obviously, that is not to say that the court may not require sufficient information to form a reasonable judgment in deciding whether to certify a class action. But the trial court’s focus is directed at whether ‘class members have common complaints that can be presented by designated representatives in a unified proceeding.’ ” (Citations omitted.)).

Microsoft presented contradicting evidence, but it is inappropriate at the certification stage to resolve battles between experts. Howe, 656 N.W.2d at 293 (citing Caridad v. Metro-North Commuter R.R., 191 F.3d 283, 292-93 (2d Cir.1999); In re Visa Check/MasterMoney Antitrust Litig., 192 F.R.D. 68, 79 (E.D.N.Y.2000), aff'd 280 F.3d 124 (2d Cir.2001)); see also Potash, 159 F.R.D. at 697.

We believe the appropriate test for consideration of expert testimony is that announced in Visa Check/MasterMoney Antitrust Litigation: “A district court must ensure that the basis of the expert opinion is not so flawed that it would be inadmissible as a matter of law.” 280 F.3d at 135. That standard was also adopted by the North Dakota Supreme Court. See Howe, 656 N.W.2d at 295-96 (“As long as the basis of the expert’s opinion is not so blatantly flawed that, on its face, it would be inadmissible as a mattér of law, the court may consider the expert’s evidence in determining whether to certify the class action.”). In view of this court’s liberal rules on the admission of expert testimony, we cannot say the plaintiffs’ testimony is inadmissible as a matter of law.

B. Adequacy of class representation. Microsoft contends that, even if a class action might otherwise be maintained, these plaintiffs do not qualify to bring the action because they are not true representatives of the class. It contends (1) Joseph Comes is not an adequate representative because he is not a member of either class, (2) Riley Paint is not an adequate representative because it will not act to protect the rights of the absent class members, and (3) the representative parties have not shown that they can acquire the financial resources needed to adequately represent the classes.

To find adequate representation, the court must be satisfied that the plaintiffs have established all of the following factors:

a. The attorney for the representative parties will adequately represent the interests of the class.
b. The representative parties do not have a conflict of interest in the maintenance of the class action.
c. The representative parties have or can acquire adequate financial resources, considering rule 1.276, to ensure that the interests of the class will not be harmed.

Iowa R. Civ. P. 1.268(2).

1. Joseph Comes as a representative party. The district court concluded that Joseph Comes is an adequate representative of the class, but Microsoft argues otherwise. It contends that Comes is not a class member- because, to be a member of either class, he must have purchased Microsoft products. It claims that Comes did not personally purchase any of its products, pointing to a deposition in which Comes stated that his former company— Comes Vending & Office Copy Systems, Inc. — was the actual purchaser of the computer products.

Although the record contains conflicting evidence on this issue, the district court concluded that Comes purchased the computer in a personal transaction. On appellate review, the question is whether there is any reasonable basis in the record to support the district court’s finding. See Stone, 497 N.W.2d at 846-49. We believe sufficient evidence supports the court’s finding that Comes was an adequate representative.

2. Riley Paint as a representative party. The district court found, based on testimony by a principal of Riley Paint, that Riley Paint “understands its obligations as a class representative and that it takes those obligations seriously.” Microsoft contends that this finding was erroneous because of certain contradicting responses the representative gave in his deposition. We disagree; based on all of the evidence, we conclude the district court did not abuse its discretion in finding that Riley Paint was an adequate representative.

3. Financial resources of the named plaintiffs. Before recognizing the plaintiffs as adequate representatives, the district court must find that they “have or can acquire adequate financial resources, considering rule 1.276, to ensure that the interests of the class will not be harmed.” Iowa R. Civ. P. 1.268(2)(c). Rule 1.276(2), in turn, provides:

Upon a determination that the costs and litigation expenses of the action cannot reasonably and fairly be defrayed by the representative parties or by other available sources, the court by order may authorize and control ... advances by the attorneys ... subject to reimbursement from any recovery obtained for the class.

(Emphasis added.)

In this case, the plaintiffs’ attorneys requested that the court issue an order under rule 1.276 approving their fee arrangement and their willingness to advance all costs. The district court entered an order granting that request. The court then considered that order when it determined that the plaintiffs have or can acquire adequate finances.

Microsoft . asserts that the district court’s consideration of the order was error. It argues that DR 5-103(B) of the Iowa Code of Professional Responsibility expressly prohibits attorneys from advancing litigation expenses unless the client remains ultimately liable for the expenses. It was therefore inappropriate for the district court to consider such advances when determining whether the named plaintiffs have sufficient financial resources. Microsoft cites in support of that argument our Stone case, which requires the plaintiffs to present evidence to show how they will reimburse their attorneys in the event they are unsuccessful. Stone, 497 N.W.2d at 848-49. However, in Stone we did not discuss the impact of rule 1.276, or its predecessor, and its specific approval of the procedure used here. We therefore must distinguish Stone. DR 5 — 103(B), on which Microsoft relies, is undergoing extensive change at this time. The new rule states:

A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that: (1) a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter....

Iowa R. of Prof 1 Conduct 32:1.8(e).

One federal court, in vacating a district court’s finding that a named plaintiff was inadequate because he was not willing to bear responsibility for all litigation costs, explained:

Class actions assemble small claims— usually too small to be worth litigating separately, but repaying the effort in the aggregate. A representative plaintiff gains nothing from the collective proceeding. Under the district court’s rationale, however, he could well lose, because filing the class suit would expose him to the entire costs of the case..:. The very feature that makes class treatment appropriate — small individual stakes and large aggregate ones — ensures that the representative will be unwilling to vouch for the entire costs. Only a lunatic would do so. A madman is not a good representative of the class!

Rand v. Monsanto Co., 926 F:2d 596, 599 (7th Cir.1991) (Easterbrook, J.).

In view of Iowa Rule of Civil Procedure 1.276, and its provision for advancement of costs in a class-certification case, we conclude that the plaintiffs have sufficiently established their ability to provide financial resources.

In conclusion, on the adequacy of class representation, we find that both Comes and Riley Paint are representative members of the class and that they have established sufficient financial resources to be certified to represent the class.

IV. Conclusion.

We have reviewed the remaining issues raised by Microsoft and find them to be without merit. We conclude that the district court did not abuse its discretion in certifying the two plaintiff classes. Therefore, we affirm.

AFFIRMED.

      . The new Iowa Rules of Professional Conduct were adopted April 20, 2005, and take effect July 1, 2005.


text:
    In re Petition for DISCIPLINARY ACTION AGAINST Bradley C. RHODES, a Minnesota Attorney, Registration No. 155913.
    No. A04-2252.
    Supreme Court of Minnesota.
    May 18, 2005.
   ORDER

The Director of the Office of Lawyers Professional Responsibility has filed a petition for disciplinary action alleging that respondent Bradley C. Rhodes has committed professional misconduct warranting public discipline, namely, failing to serve and file a brief during his representation of a client in a criminal matter, failing to timely serve and file another brief for that client, and failing to cooperate with the Director’s investigation of the matter, in violation of Minn. R. Prof. Conduct 1.3, 3.2, 3.4(c), 8.1(a)(3), and 8.4(d), and Rule 25, Rules on Lawyers Professional Responsibility (RLPR).

Respondent admits his conduct violated the Rules of Professional Conduct, waives his rights under Rule 14, RLPR, and has entered into a stipulation with the Director in which they jointly recommend that the appropriate discipline is a public reprimand, payment of $930 in costs and disbursements under Rule 24, RLPR, and two years of supervised probation subject to the following conditions:

a. Respondent shall cooperate fully with the Director’s Office in its efforts to monitor compliance with this probation and promptly respond to the Director’s correspondence by the due date. Respondent shall cooperate with the Director’s investigation of any allegations of unprofessional conduct which may come to the Director’s attention. Upon the Director’s request, respondent shall provide authorization for release of information and documentation to verify compliance with the terms of this probation.
b. Respondent shall abide by the Minnesota Rules of Professional Conduct.
c. Respondent shall be supervised by a licensed Minnesota attorney, appointed by the Director to monitor compliance with the terms of this probation. Respondent shall provide to the Director the names of four attorneys who have agreed to be nominated as respondent’s supervisor within two weeks from the date the stipulation was executed. If, after diligent effort, respondent is unable to locate a supervisor acceptable to the Director, the Director will seek to appoint a supervisor. Until a supervisor has signed a consent to supervise, the respondent shall on the first day of each month provide the Director with an inventory of active client files described in paragraph d. below. Respondent shall make active client files available to the Director upon request.
d. Respondent shall cooperate fully with the supervisor in his/her efforts to monitor compliance with this probation. Respondent shall contact the supervisor and schedule a minimum of one in-person meeting per calendar quarter. Respondent shall submit to the supervisor an inventory of all active client files by the first day of each month during the probation. With respect to each active file, the inventory shall disclose the client name, type of representation, date opened, most recent activity, next anticipated action, and anticipated closing date. Respondent’s supervisor shall file written reports with the Director at least quarterly, or at such more frequent intervals as may reasonably be requested by the Director.
e. Respondent shall initiate and maintain office procedures which ensure that there are prompt responses to correspondence, telephone calls, and other important communications from clients, courts and other persons interested in matters that respondent is handling, and which will ensure that respondent regularly reviews each and every file and completes legal matters on a timely basis.
f. Within thirty days from the execution of the stipulation, respondent shall provide to the Director and to the probation supervisor, if any, a written plan outlining office procedures designed to ensure that respondent is in compliance with probation requirements. Respondent shall provide progress reports as requested.

This court has independently reviewed the file and approves the jointly recommended disposition.

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that respondent Bradley C. Rhodes is publicly reprimanded and placed on supervised probation for two years from the date of this order subject to the agreed-upon conditions set forth above. Respondent shall pay $930 in costs and disbursements under Rule 24, RLPR.

BY THE COURT:

/s/Russell A. Anderson Associate Justice