Case Name: Hilda HERBST, Plaintiff-Appellee, v. INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION et al., Defendants-Appellants
Court: United States Court of Appeals for the Second Circuit
Jurisdiction: United States
Decision Date: 1974-04-03
Citations: 495 F.2d 1308
Docket Number: No. 314, Docket 73-2062
Parties: Hilda HERBST, Plaintiff-Appellee, v. INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION et al., Defendants-Appellants.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 495
Pages: 1308–1325

Head Matter:
Hilda HERBST, Plaintiff-Appellee, v. INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION et al., Defendants-Appellants.
No. 314, Docket 73-2062.
United States Court of Appeals, Second Circuit.
Argued Jan. 9, 1974.
Decided April 3, 1974.
John H. Schafer, III, Washington, D. C. (Charles E. Lister, Covington & Bur-ling, Washington, D. C., Joseph P. Coo-ney, Cooney, Scully & Dowling, Hartford, Conn., on the brief), for defendants-appellants International Telephone and Telegraph Corp., Raymond L. Brit-tenham, Francis J. Dunleavy, Russell F. Erickson, Harold S. Geneen, R. Newton Laughlin, Hart Perry and Ted B. West-fall.
Samuel E. Gates, Robert L. King, De-bevoise, Plimpton, Lyons & Gates, New York City, John Q. Tilson, Wiggin & Dana, New Haven, Conn., on the brief, for defendants-appellants Eugene R. Black, George R. Brown, Alvin E. Friedman, J. Patrick Lannan, John A. Mc-Cone and Warren Lee Pierson.
James A. Wade, Robinson, Robinson & Cole, Hartford, Conn., Paul, Weiss, Rif-kind, Wharton & Garrison, New York City, on the brief, for defendant-appellant Felix G. Rohatyn.
Sidney B. Silverman, New York City, (Silverman & Harnes, New York City, James O’Connor Shea, New Haven, Conn., on the brief), for plaintiff-appel-lee.
Before DANAHER LUMBARD and MULLIGAN, Circuit Judges.
Senior Circuit Judge of tlie District of Columbia Circuit, sitting by designation. meneed, and plaintiff has chosen not to serve his estate.

Opinion:
LUMBARD, Circuit Judge:
This appeal from the District of Connecticut by the International Telephone and Telegraph Corporation (ITT) and its directors in May 1970 brings before us once again important questions concerning the administration of class actions. The first and more difficult issue is whether Chief Judge Blumenfeld's order of May 11, 1973, which held that this case may be maintained as a class action is appealable at this time. The second issue is whether the judge was correct in so holding. We hold that the order is appealable and that the district court correctly decided that a class action is proper.
I.
Alleging that ITT in its controversial acquisition of the Hartford Fire Insurance Company (Hartford) violated several provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as Rules 10b-5 and 15c-2 of the Securities and Exchange Commission, Hilda Herbst initiated this action in September 1972. The complaint, which sought damages or rescission, alleged that Herbst had owned 100 shares of Hartford common stock which she exchanged for 100 shares of ITT cumulative preferred stock, $2.25 convertible series N (with voting rights). In connection with this exchange, Herbst was given a prospectus dated May 26, 1970. Herbst admitted in a subsequent affidavit that on August 4, 1970, she sold the ITT preferred stock which she received in the exchange.
The prospectus stated that it was the opinion of counsel for ITT and Hartford that if ITT in its exchange offer acquired at least 80% of the outstanding Hartford common stock and if ITT acquired no Hartford common stock except in exchange for ITT voting stock, then no gain or loss to the Hartford shareholders would be recognized on their exchange for ITT preferred stock and their basis in the ITT stock would be their previous basis in the Hartford stock. ITT represented that it did not hold any Hartford common stock and that it would not acquire any Hartford common stock for cash or property other than ITT voting stock if that would affect the tax-free nature of the exchange. Herbst claims that these representations concerning the tax status of the exchange were false and misleading and that in fact ITT did own Hartford common stock which it had acquired by cash or property other than by its voting stock.
In April 1969 ITT entered into a merger agreement with Hartford. Several months prior to this agreement, ITT had purchased approximately 1.7 million shares or about 8% of the Hartford common stock. In connection with the proposed merger ITT sought from the Internal Revenue Service (IRS) a ruling that the merger would be a tax-free reorganization. The IRS held that the merger would be a valid reorganization, if prior to the merger's consummation, ITT unconditionally disposed of the shares of Hartford common stock it had acquired. On October 21, 1969, ITT received a supplemental IRS ruling, which stated that a proposed contract of sale between ITT and an Italian bank, Me-diobanca BancadiCredito Finanziaro-S. p.A. (Mediobanca), would result in ITT's unconditional disposition of its Hartford shares.
The contract between ITT and Me-diobanca was signed on November 3, 1969. At the same time Mediobanca and ITT's investment bankers, Lazard Freres & Co. (Lazard), signed an agreement, which Herbst alleges the IRS never saw before it made its ruling. Herbst claims that by reading the two contracts together it becomes apparent that ITT did not sell its Hartford stock to Medioban-ca but that in fact Mediobanca was holding ITT's stock for a fee, and that, while Mediobanca held the stock, ITT retained the risks and benefits of ownership including the right to dividends and profits or losses upon sale.
The ITT-Hartford merger never became effective, for in December 1969, the Insurance Commissioner of Connecticut disapproved the plan. ITT then made arrangements to offer Hartford shareholders a voluntary exchange of their stock for ITT preferred stock. This exchange was conditional upon at least 95% of the Hartford shares being exchanged unless ITT chose to declare the exchange effective after 80% was exchanged. Apparently because the tax consequences of this plan were identical to those of the aborted merger, no effort was made to obtain a further IRS ruling. On May 23, 1970, following hearings, the Insurance Commissioner held that the proposed offer was fair to Hartford shareholders and on May 26 the offer became effective. Subsequently, more than 99% of Hartford common stock shares were exchanged for ITT preferred.
Soon after this case was started, Herbst moved for an order pursuant to Fed.R.Civ.P. 23(c)(1) holding that she could maintain her action as a representative of all Hartford shareholders who exchanged their stock for ITT preferred. Chief Judge Blumenfeld held that the suit could be maintained as a class action, and from this order ITT appeals. '
II.
In the last few years, we have passed upon the appealability of district court orders which held that a class action could not be maintained but that the individual claim of the plaintiff could proceed to trial. We have developed the "death knell" doctrine, which makes such an order "final" for purposes of appeal under 28 U.S.C. § 1291 if the individual claim is so small that plaintiff will not proceed upon it alone. We first announced this doctrine in Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2d Cir. 1966), cert. denied, 386 U.S. 1035, 87 S.Ct. 1487, 18 L.Ed.2d 598 (1967) (Eisen I), where the district court dismissed the class action but allowed an individual claim of $70 to be continued. We said, "We can safely assume that no lawyer of competence is going to undertake this complex and costly case to recover $70 for Mr. Eisen. . If the appeal is dismissed, not only will Eisen's claims never be adjudicated, but no appellate court will be given the chance to decide if this class action was proper under the newly amended Rule 23." 370 F.2d at 120.
We followed this doctrine in Green v. Wolf Corp., 406 F.2d 291 (2d Cir. 1968), cert. denied, Troster, Singer & Co. v. Green, 395 U.S. 977, 89 S.Ct. 2131, 23 L.Ed.2d 766 (1969), where the individual claim was less than one thousand dollars. 406 F.2d at 295 n. 6. But in two cases where the individual claims were very substantial, we held that the dismissal of the class action was not appealable. City of New York v. International Pipe & Ceramics Corp., 410 F.2d 295 (2 Cir. 1969); Caceres v. International Air Transport Association, 422 F.2d 141 (2d Cir. 1970). In Korn v. Franchard Corp. (Korn I), and Milberg v. Western Pacific R. R., 443 F.2d 1301 (2d Cir. 1971), we clarified our holdings by ruling in Korn that the dismissal of the class action was appealable when the individual claim was for $386 and in Milberg that the dismissal was not ap-pealable when the individual claim was for $8500. Although the death knell doctrine has been criticized by courts that feel that no order dismissing' only the class action claim should be appealable and by commentators who feel all such orders should be appealable, we have reiterated our adherence to the doctrine. Consequently, we dismissed an appeal because the individual claim of $7,482 was so substantial that the plaintiff would sue on that claim alone. Shayne v. Madison Square Garden Corp., 491 F.2d 397 (2d Cir. 1974).
Here the defendant is appealing from an order holding that a class action can be maintained. Our most recent statement on whether such an order is appealable is found in Eisen v. Carlisle & Jacquelin, 479 F.2d 1005 (2d Cir.), cert. granted, 414 U.S. 908, 94 S.Ct. 235, 38 L.Ed.2d 146 (1973) (Eisen III).
Building on Judge Friendly's concurring opinion in Korn I, supra, 443 F.2d at 1307, in which he suggested that the court might wish to consider a rule that would "afford equality of treatment as between plaintiffs and defendants," we said that the district court's order allowing a class action to be maintained is appealable. 479 F.2d at 1007 n. 1.
In so saying we relied on Supreme Court cases that have given 28 U.S.C. § 1291 a "practical rather than a technical construction." Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1226, 93 L.Ed. 1528 (1949). See also Gillespie v. United States Steel Corp., 379 U.S. 148, 85 S.Ct. 308, 13 L.Ed.2d 199 (1964); Mercantile National Bank v. Langdeau, 371 U.S. 555, 83 S.Ct. 520, 9 L.Ed.2d 523 (1963). We stated that an order authorizing a class action is appealable under Cohen because
[it] clearly involves issues "fundamental to the further conduct of the case;" . . .
[and] is also separable from the merits of the case; and [the] irreparable harm to a defendant in terms of time and money spent in defending a huge class action when an appellate court may years later decide such an action does not conform to the requirements of Rule 23, is evident. .
Although other courts of appeals have held that orders authorizing class actions are not appealable, we believe that Ei-sen III reached the correct result and we adhere to it. This circuit has probably been plagued by more class actions than any other circuit. As of June 30, 1973, there were 679 class actions pending in this circuit. Only the Fifth Circuit had more and most of its class actions were civil rights suits which usually seek in-junctive relief and are easier to manage. Administrative Office of the United States Courts, 1973 Annual Report of the Director, table 36, at 11-44 to -45. The Southern District of New York alone had 523 class actions pending or almost 14% of those pending in all districts. Id. at 11-42. We believe that immediate review of orders authorizing class actions will aid the district courts in disposing of these cases and promote the sound administration of justice.
First, as noted in Eisen III defendants in litigating class actions are likely to expend much money and time in defending such actions because of the enormous damages sought by the representatives of the class. Also the representation features of class actions mean that both parties have to expend much effort and money in notifying members of the class, determining who is in and who has opted out, calculating damages, and the like. Furthermore, the district courts, if cases go beyond initial proceedings, themselves must exercise more effort in supervising such actions than they would in individual cases. See West Virginia v. Chas. Pfizer & Co., 314 F.Supp. 710 (S.D.N.Y.1970), aff'd, 440 F.2d 1079 (2d Cir.), cert. denied, 404 U. S. 871, 92 S.Ct. 81, 30 L.Ed.2d 115 (1971). Rule 23(e) requires them to approve any settlements and Rule 23(d) gives them the power and the responsibility of making orders determining the course of proceedings and protecting the members of the class. These gargantuan actions naturally take up infinitely more of the court's time than most other civil actions.
We believe that in the exercise of our supervisory powers over the administration of justice in the district courts it is desirable for us to review orders authorizing class actions before the parties and the district courts expend large amounts of time and money in managing them. Candor compels us to add that as appellate judges we would be reluctant to hold that a class action had been improper after the district court and the parties had expended much time and re-dburces although we might have had serious doubts if we had reviewed the question at the inception of the action. Judicial efficiency requires that appellate review be made before the parties and district courts have spent considerable time, effort, and money, on such actions. Reviewing orders allowing class actions to proceed would determine issues "fundamental to the further conduct of the case," United States v. General Motors Corp., 323 U.S. 373, 377, 65 S.Ct. 357, 89 L.Ed. 311 (1945), and would constitute a most effective way of exercising our supervisory powers.
Second, defendants in class actions often face potential damages in the millions of dollars. If damages in this case came to $5 a share, the judgment would be for approximately $110 million. As noted in Eisen III and as Judge Friendly noted in his Carpentier Lectures, the result is that such class actions are usually settled, often with settlements which run into the millions of dollars and are small only when compared to the potential liability. Eisen III, supra, 479 F.2d at 1019; H. Friendly, Federal Jurisdiction: A General View 119-20 (1973). Often these cases are settled even though the validity of plaintiff's claims are doubtful. See West Virginia v. Chas. Pfizer & Co., supra, 314 F.Supp. at 741-743; American College of Trial Lawyers, Report and Recommendations of the Special Committee on Rule 23 of the Federal Rules of Civil Procedure 15-17 (1972). Settlements, of course, lessen the district court's problems in administering class actions, but also mean .that no appellate court will ever review the question of whether a class action was proper unless immediate review is allowed. We, therefore, conclude that we have jurisdiction to hear this appeal.
III.
We now turn to the question of whether the district court properly authorized a class action here. For the sake of argument, we shall treat plaintiff's case as being grounded on § 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(e), and Rule 10b-5, 17 C.F.R. § 240. lOb-5. We do so only for the purpose of determining whether the district court properly authorized the maintenance of a class action and without prejudice to any other claims that plaintiff may plead.
Because some of ITT's arguments are based on what we perceive to be misunderstandings or misstatements of plaintiff's claim, it would be helpful at the outset to state our understanding of plaintiff's theory of the case. Herbst claims that ITT should have informed the holders of Hartford stock that there was a risk that the exchange might be a taxable event because of the fraud allegedly perpetrated by ITT in getting the favorable ruling from the IRS. (So far as we know, no shareholder has actually been taxed on the exchange.) Herbst claims that if the Hartford shareholders had known all the facts, a significant number of them would not have exchanged their shares, at least at the established rate of one Hartford common share for one ITT preferred, series N. ITT would then have been compelled to give more in exchange than one share of ITT $2.25 preferred if it wished to complete its acquisition. Since ITT was offering an equal amount for each share of Hartford common, regardless of the individual shareholder's tax status, all shareholders would have benefited equally if ITT had been forced to offer more for the Hartford shares. In short, even the shareholder who did not care about the tax status of the exchange would have received more for his Hartford stock if enough shareholders did care and compelled ITT to raise its offer.
Disposing of ITT's first contentions, the class here is precise enough for class action purposes and Herbst's claims are typical of the class. The complaint defined the class as all holders of Hartford common stock who exchanged their shares for ITT preferred, which clearly identifies class members. ITT claims that Herbst's claims are not typical, because she sold her ITT preferred in the same year that she received it. Therefore, the argument runs, she cannot represent those who cared about whether the exchange was tax-free. ITT also contends that Herbst cannot represent the large, tax-exempt, institutional shareholders. As noted above, all those who exchanged their shares would have benefited from a higher price. Under Herbst's claims all shareholders, large and small, tax-exempt or not, would benefit equally and so her claim is typical. Furthermore, we do not perceive any conflict of interest between those who have retained their ITT shares and those who have since sold them. The personal interest of those who still hold ITT stock in gaining more from the exchange than they did far outweighs their concern that any award could damage ITT. Herbst v. Able, 47 F.R.D. 11, 15 (S.D. N.Y.1969). Finally, we reject ITT's argument that the claim is not typical because no other class members have intervened on her side. See Korn v. Franchard Corp., 456 F.2d 1206, 1209 (2d Cir. 1972) (Korn II).
Citing our decision in List v. Fashion Park, Inc., 340 F.2d 457 (2d Cir.), cert. denied, 382 U.S. 811, 86 S.Ct. 23, 15 L.Ed.2d 60 (1965), ITT next argues that common issues of fact and law do not predominate over questions affecting only individual members for purposes of Rule 23(b)(3) because reliance by each shareholder is a necessary prerequisite to his recovery. We do not agree. The district court noted that this issue was "problematic," but said that requiring proof of individual reliance was no bar to a class action since the common issues could be tried as a class action and individual damages and reliance could be tried separately if necessary. ITT asks us to reconsider, Green v. Wolf Corp., swpra, 406 F.2d at 301, upon which the district court relied, but reconsideration is unnecessary since subsequent decisions of the Supreme Court and of this court have decisively disposed of ITT's argument that individual reliance is a prerequisite to recovery. In particular, we believe that our decision in Chris-Craft Industries, Inc. v. Piper Aircraft, Inc. Corp., 480 F.2d 431 (2d Cir. 1973), cert. denied 414 U.S. 910, 94 S.Ct. 232, 38 L.Ed.2d 148 (1973), governs here.
In Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970), minority shareholders brought a class action under § 14(a) of the 1934 Act, 15 U.S.C. § 78n(a), alleging that a proxy statement sent by the management of a company which urged shareholders to vote in favor of a merger contained a material omission. A significant number of minority shareholders had to approve the merger for it to gain the necessary votes of two thirds of the outstanding shares. Mr. Justice Harlan, speaking for the Court, said that the plaintiffs need not show that the merger would have not been approved if shareholders had known the fact omitted, but only that the omission was material:
Where there has been a finding of materiality, a shareholder has made a sufficient showing of causal relationship between the violation and the injury for which he seeks redress if, as here, he proves that the proxy solicitation itself, rather than the particular defect in the solicitation itself, was an essential link in the accomplishment of the transaction. This objective test will avoid the impracticalities of determining how many votes were affected, and, by resolving doubts in favor of those the statute is designed to protect, will effectuate the congressional policy of ensuring that the shareholders are able to make an informed choice when they are consulted on corporate transactions.
396 U.S. at 385, 90 S.Ct. at 622.
In Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), the Court applied this rule in a 10b-5 case which involved the failure to disclose information that shares which the class had sold were selling for a higher price elsewhere. Mr. Justice Blackmun said:
Under the circumstances of this case, involving primarily a failure to disclose, positive proof of reliance is not a prerequisite to recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in the making of this decision.
406 U.S. at 153-154, 92 S.Ct. at 1472.
We followed the Mills-Ute test in Chris-Craft Industries, Inc. v. Piper Aircraft Corp., supra, a ease involving a contest for control of Piper Aircraft between Chris-Craft and Bangor Punta Corporation. Chris-Craft claimed, and we found, that letters sent by the Piper family which managed Piper Aircraft to shareholders contained material misstatements and omissions and that a prospectus sent by Bangor Punta to Piper shareholders in connection with its exchange offer was misleading. The prospectus listed the book value of Bangor Punta's interest in a railroad at 18.4 million dollars but did not say that Bangor Punta had attempted to sell its interest and had received a serious bid of 5 million. We held that Bangor Punta was under an obligation to disclose this to Piper shareholders, 480 F.2d at 367-369, and since the misstatements and omissions were material we presumed that without them the Piper shareholders would not have exchanged their shares in such numbers that Bangor Punta gained majority control of Piper Aircraft.
Chris-Craft clearly governs the result here. Like Chris-Craft the misstate- merits here occurred in the context of an exchange offer and the misstatements in each case are similar. In Chris-Craft, Bangor Punta's statement of the book value of the railroad interest was true as far as it went but it neglected to add that there was evidence that the interest was greatly overvalued on the books and that there was a likelihood that it might be sold at a substantial loss. Here, ITT's statement of the tax consequences of the exchange and its representation that it held no Hartford common stock were true as far as they went, but they allegedly did not add that ITT, while departing with nominal ownership of its Hartford stock, had retained the equitable ownership and that there was a possibility that the IRS might consider the exchange to be a taxable event.
It makes no difference that here the plaintiff was a shareholder in the acquired company while in Chris-Craft the plaintiff was the corporation defeated in the contest for control. We did say in Chris-Craft that "[t]he fact that [Chris-Craft] was not directly deceived is what makes application of the Mills-Ute test appropriate and essential." 480 F.2d at 375. But we followed that sentence with
[i]t would be unduly burdensome to require an offeror to prove actual reliance when, as here, there are numerous shareholders who undoubtedly possess a wide range of expertise and knowledge. It would be impractical to require [Chris-Craft] to prove that each individual Piper shareholder who failed to trade for [Chris-Craft's] stock, or who traded for [Bangor Punta's] stock, relied upon defendants' misrepresentations in doing so.
480 F.2d at 375.
Here as in Chris-Craft and Mills the reliance of the individual shareholder is irrelevant. Here as in those cases plaintiff was damaged only if significant numbers of shareholders might have acted differently if they had known the truth. An individual shareholder here if he had known of the tax risk would have been forced to choose between accepting ITT's offer, which appears to have been very favorable, and turning it down and becoming a minority shareholder in a company controlled by ITT. But if significant numbers of Hartford shareholders would have been reluctant to exchange at the given rate if they had known the truth, then ITT might have been forced to increase its offer to all Hartford shareholders, and all Hartford shareholders would have been damaged by its failure to disclose.
As noted in Mills and Chris-Craft, it is extremely difficult to prove how shareholders in the aggregate would have reacted if they had known the whole truth. Therefore, it is appropriate for the district court to presume, as we did in Chris-Craft, that if there was a material misstatement, then Hartford shareholders would not have exchanged their shares at the rate offered if they had known the truth. Since individual reliance is not a part of plaintiff's case, the district court did not err in holding that common issues of law and fact were predominant.
In conclusion, we believe that Chief Judge Blumenfeld did not abuse his discretion in authorizing the maintenance of a class action. Accordingly, we affirm the district court's order and remand for further proceedings.
. One director, Charles T. Ireland, Jr., died at about the time this action was com-
. The Department of Justice tried unsuccessfully to gain a preliminary injunction against the Hartford Insurance-ITT merger. United States v. International Tel. & Tel. Corp., 306 F.Supp. 766 (D.Conn.1969) (Timbers, J.). This case together with the suits against ITT's mergers with the Canteen Corporation and the Grinnel Corporation were eventually settled by consent decree. See United States v. International Tel. & Tel. Corp., 349 F.Supp. 22 (D.Conn.1972), aff'd mem. sub nom., Nader v. United States, 410 U.S. 919, 93 S.Ct. 1363, 35 L.Ed.2d 582 (1973).
The complaint in this case appears to be based on a complaint filed on June 18, 1972 in the Southern District of New York by the Securities and Exchange Commission, which charged that ITT in the course of the Hartford merger sold unregistered securities by its arrangement (discussed below) with an Italian bank. Two days later ITT agreed to a permanent injunction. BNA Securities Regulation & Law Reporter, June 21, 1972, at A-6.
Subsequent to the argument in this case, the Internal Revenue Service revoked the revenue ruling that it gave in connection with the merger of ITT and the Hartford Fire Insurance Company. ITT says that it will seek judicial review of the revocation. N.Y.Times, March 7,1974, at 1, col. 1.
. The complaint stated that Herbst owned 200 shares. A later affidavit by Herbst stated that she only owned 100 shares.
. Apparently, the Hartford stock, which evidently had been acquired for cash, had to be sold so that the Hartford stock ITT owned after the merger would have been exchanged "solely" for"' ITT voting stock. Internal Revenue Code of 1954, § 368(a) (1) (B).
. The court also ordered the parties to notify the members of the class. The plaintiff will initially bear the cost of this notice. Evidently, no notice has been sent because of this appeal,
. King v. Kansas City Southern Industries, Inc., 479 F.2d 1259 (7th Cir. 1973); Hackett v. General Host Corp., 455 F.2d 618 (3d Cir.), cert. denied, 407 U.S. 925, 92 S.Ct. 2460, 32 L.Ed.2d 812 (1972).
. Note, Interlocutory Appeal from Orders Striking Class Action Allegations, 70 Col-um.L.Rev. 1292 (1970) ; Note, Appealability of a Glass Action Dismissal: The "Death Knell" doctrine, 39 U.Chi.L.Rev. 403 (1972).
. Thill Securities Corp. v. New York Stock Exchange, 469 F.2d 14 (7th Cir. 1972); Walsh v. City of Detroit, 412 F.2d 226 (6th Cir. 1969).
. We think that there ought to be a right to appeal rather than reliance on the discretion of the district court to grant the certificate under 28 U.S.C. § 1292(b).
. We do not decide whether defendants in general must appeal at this stage of the proceedings or whether they can wait until after judgment is entered to appeal the class action determination. See H. Hart & H. Wechsler, The Federal Courts and the Federal System 1154 (P. Bator, D. Shapiro, P. Mishkin & H. Wechsler 2d ed. 1973).
. The guiding principles of § 14(e) and Rule 10b-5 are the same. The difference is that § 14(e) applies only to tender offers. Chris-Craft Indus., Inc. v. Piper Aircraft Corp., 480 F.2d 341, 362 (2d Cir. 1973), cert. denied, 414 U.S. 910, 94 S.Ct. 232, 38 L.Ed.2d 148 (1973).
. Since there were some 18,000 shareholders in Hartford, clearly there are too many to be joined in individual actions. There is a claim that Herbst cannot be expected to protect the class adequately, but this is based on claims of inconsistent interests of which we have already disposed. No other claim is made that Herbst and her counsel will not fairly and adequately protect the class.
. A share of ITT convertible preferred , stock, series N, was to pay $2.25 a year in dividends. A share of Hartford common paid $1.40, $1.10, and $0.92 per share in 1969,1968, and 1967, respectively.
. Judge Mansfield in his separate opinion in Chris-Craft objected to the majority's statement that there would be "presumption of reasonable reliance" if the misstatement was material. He argued that neither Mills or Ute used this phrase and said that it raised the issue of whether defendants could rebut the presumption. He felt that the materiality of the misrepresentation established reliance as a matter of law. 480 F.2d at 399-400. Neither the majority in Chris-Craft nor the Supreme Court in Mills or Ute remanded those cases for the purpose of allowing defendants to raise such a defense.