Source: https://supreme.justia.com/cases/federal/us/417/156/
Timestamp: 2019-04-19 04:49:23+00:00

Document:
A plaintiff planning to file a class action must provide notice to every individual in the class, unless it would create an unreasonable burden, and must bear any resulting cost.
Eisen alleged that Carlisle, a brokerage firm, had harmed odd-lot traders and other brokerage firms by monopolizing odd-lot trading on the New York Stock Exchange in violation of antitrust laws. The initial suit, Eisen I, was dismissed because it contained six million potential members. However, Eisen II eventually proceeded under a curious structure of providing notice. Eisen's claim was worth only $70, and the cost of notice was estimated at $250,000. To resolve this problem, the court ordered that individual notice would be provided to all brokerage firms, to 2,000 odd-lot traders who had 10 or more transactions during the relevant time period, and to 5,000 randomly identified odd-lot traders. However, the remaining 25,000 potential class members would receive only publication notice.
The cost still would be substantial even with this structure of providing notice, so the court held a hearing on the probability of Eisen succeeding in the claim. It found that he likely would prevail, so it ordered Carlisle to cover 90 percent of the costs of notice. The appellate court found that no class action could be maintained in Eisen III, but Eisen argued that the appellate court lacked jurisdiction to review the process to this point because no final judgment had been reached. On the other hand, Carlisle asserted that the notice procedure violated Federal Rule of Civil Procedure 23(a)(2) and its requirement of individual notice. It contended that it should not be forced to bear the cost of notice.
The notice requirement under FRCP 23(a)(2) is mandatory and cannot be discarded by a court. It requires individual notice to all class members who can be identified or reasonably ascertained. The district court's proposal does not meet this requirement, and publication notice may not be permitted in this situation. The court acted outside its discretion in conducting a prior hearing on the merits and requiring the defendant to bear some of the costs of notice, since there is no support in the Constitution or the Federal Rules for these actions. The assessment of costs allowed the appellate court to review the decision because this was a final judgment on a matter that was not related to the merits of the case, and an immediate appeal was appropriate.
Class actions are designed to hold defendants accountable for wrongs that a single plaintiff would not have the motivation to litigate. At the same time, when the class is as large as six million people, the logistical complications of providing individual notice to each class member are often impracticable for plaintiffs' attorneys who are responsible for the effort and expense.
Adjusting this figure to reflect the subsequent 4¢ increase in first class postage would yield a figure of $315,000.
complaint. See, e.g., Dolgow v. Anderson, supra at 491-493; Philadelphia Elec. Co. v. Anaconda American Brass Co., 43 F.R.D. 452, 462-463 (ED Pa.). See generally 7A C. Wright & A. Miller, Federal Practice and Procedure § 1790, p. 187; 3B J. Moore, Federal Practice ¦ 23.65. And, as Rule 23(c)(1) clearly indicates, the courts retain both the power and the duty to realign classes during the conduct of an action when appropriate. See, e.g., Carr v. Conoco Plastics, Inc., 423 F.2d 57, 58 (CA5), cert. denied, 400 U.S. 951; Johnson v. ITT-Thompson Industries, Inc., 323 F.Supp. 1258, 1262 (ND Miss.); Ostapowicz v. Johnson Bronze Co., 54 F.R.D. 465, 466 (WD Pa.); Baxter v. Savannah Sugar Refining Corp., 46 F.R.D. 56, 60 (SD Ga.). That discretion can be fully retained only if the full-class complaint is preserved when a subclass is defined to prosecute the action. The bounds of the subclass can then be narrowed or widened by order of the District Court as provided in Rule 23(c)(1), without need to amend the complaint and without the constraints which might exist if the complaint had earlier been amended pursuant to Rule 15 to include only the subclass.
If the subclass lost, it is argued that other investors not members of that subclass could not be precluded from prosecuting successful suits of their own, since they had never had their day in court or necessarily even been apprised of the subclass' action. See Hansberry v. Lee, 311 U. S. 32; F. James, Civil Procedure § 11.26 (1965); 1B J. Moore, Federal Practice ¦ 0.411 (1974). If the subclass won, strict application of the doctrine of mutuality of estoppel would limit the usefulness of that subclass victory in suits brought by investors not members of that subclass. See generally F. James, supra, § 11.31; 1B J. Moore, supra, ¦0.41 (and Supp 1973), and cases cited therein. And see Vestal, Preclusion/Res Judicata Variables: Parties, 50 Iowa L.Rev. 27, 55-59 (1964); Note, 35 Geo.Wash.L.Rev. 1010 (1967); Currie, Mutuality of Collateral Estoppel: Limits of the Bernhard Doctrine, 9 Stan.L.Rev. 281 (1957).

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