Court Opinion

ID: 9463269
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:02:05.000553+00
Date Added: 2024-06-11T17:38:00.563021
License: Public Domain

SWYGERT and BAUER, Circuit Judges
(dissenting).
There are two central questions dealing with class actions brought under Rule 23 of the Federal Rules of Civil Procedure in this' appeal: first, whether a denial of class status presents an appealable order; and, secondly, whether the district court was correct in its determination that notice of a claim, required under a passenger contract, was not effective to preserve or create a cause of action for all the other passengers.
As the per curiam opinion notes, the district court denied plaintiff’s motion for a determination of a class concluding that the *1370notice by the plaintiff “on behalf of himself and all others similarly situated” would not serve to circumvent the contract provision. Since only four passengers had complied with the fifteen-day notice requirement, the court found that the class was not so numerous as to make joinder impracticable, nor was there a showing that a class action was superior to other methods of adjudicating the controversy. We dissent from that part of the per curiam opinion which holds that decisions of the district courts which deny class action status do not fall within “that small class” of decisions as defined in Cohen v. Beneficial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949).1 This dissent will address only the appealability of determinations of class action status.
The question this court initially confronts in cases of this nature is whether the denial of the plaintiffs motion for a determination of a class is an appealable order and, accordingly, whether there is jurisdiction to review the action of the trial court.
The plaintiff here has argued that the Supreme Court’s decision in Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) (Eisen IV), supports his contention that the instant order denying class certification is appealable. Although Eisen IV may not be read as providing authority for a broad holding that all orders of class determination under Rule 23 are appealable under the collateral order doctrine as developed in Cohen v. Beneficial Loan Corp., supra, there is language in Mr. Justice Powell’s opinion which points in that direction. As the per curiam opinion notes, the specific question before the Court in Eisen IV was whether the defendants could lawfully be required to bear the costs of notice to members of a class and the question of appealability of class determination was therefore not directly confronted.2
The Court did state, however, when commenting on the finality requirement of 28 U.S.C. § 1291 that:
[wjhile the application of § 1291 in most cases is plain enough, determining the finality of a particular judicial order may pose a close question. No verbal formula yet devised can explain prior finality decisions with unerring accuracy or provide an utterly reliable guide for the future. We know, of course, that § 1291 does not limit appellate review to “those final judgments which terminate an action . .” Cohen v. Beneficial Loan Corp., 337 U.S. [541], 545, 69 S.Ct. [1221], at 1225 [93 L.Ed. 1528] (1949), but rather that the requirement of finality is to be given a “practical rather than a technical construction.” Id., at 546, 69 S.Ct. [1221], at 1226. The inquiry requires some evaluation of the competing considerations underlying all questions of finality — “the inconvenience and costs of piecemeal review on the one hand and the danger of denying justice by delay on the other.” Dickinson v. Petroleum Conversion Corp., 338 U.S. 507, 511, 70 S.Ct. 322, 324, 94 L.Ed. 299 (1950) (footnote omitted.) Eisen IV at 155-56, 94 S.Ct. at 2149, 40 L.Ed.2d at 744.
The collateral order doctrine has been applied recently by the Second Circuit in an opinion holding that an order allowing a class action was appealable. Judge Lumbard in Herbst v. ITT, 495 F.2d 1308 (2d Cir. 1974), reasoned:
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 *1371expend 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 eases. 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 resources 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. . . . Often these cases are settled even though the validity of plaintiff’s claims are doubtful. . [thus] 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.
The Herbst decision goes one step beyond the conclusion reached in Eisen IV since there was no question of costs of notice presented on that appeal. We believe it is a logical and necessary step in light of the Supreme Court’s decision. Moreover, we believe that orders disallowing such actions should also be appealable under the collateral order doctrine.3
By an interlocutory review of a disallowance of a class action a more just treatment is afforded not only the named plaintiff and the potential members of the class but also the defendant. For example, a denial of immediate appeal may represent, for the absent class members, a denial of the very right to be represented. A named plaintiff may not seek to appeal the class determination order after he has gotten a favorable verdict. See Judge Hays’ dissent in City of New York v. International Pipe & Ceramics Corp., 410 F.2d 295, 300-01 (2d Cir. 1969). Indeed the defendant may contend that the named plaintiff having won, no longer has standing to contest the issue since he has no further “stake” in the litigation. Or the plaintiff’s individual claim may be so small that he will choose to give up the ghost altogether if he is denied a class action. Thus, the absent members of the plaintiff class may be left with only the opportunity to pursue their individual claims, and the *1372purpose of Rule 23 may be frustrated, not by failure to satisfy the requirements of the rule itself, but by mere passage of time.
The finality rule places burdens on named plaintiffs also. The Court of Appeals for the Second Circuit, in Eisen I, developed the “death knell” doctrine to escape such hardships. This doctrine was used to allow an interlocutory appeal in cases wherein the plaintiff’s individual claim was so small that continued prosecution of the complaint was improbable. Green v. Wolf Corp., 406 F.2d 291 (2d Cir. 1968); Korn v. Franchard Corp., 443 F.2d 1301 (2d Cir. 1972). We rejected the “death knell” doctrine in King v. Kansas City Southern Industries, 479 F.2d 1259 (7th Cir. 1973), as did other circuits, Hackett v. General Host Corporation, 455 F.2d 618 (3d Cir.), cert. denied, 407 U.S. 928, 92 S.Ct. 2460, 32 L.Ed.2d 812 (1973); Graci v. United States, 472 F.2d 124 (5th Cir.), cert. denied, 412 U.S. 928, 93 S.Ct. 2752, 37 L.Ed.2d 155 (1973); Falk v. Dempsey-Tegeler & Co., Inc., 472 F.2d 142 (9th Cir. 1972). The per curiam opinion at page 1367 notes that “generally these decisions criticize the death knell doctrine as being too mechanical and having a discriminatory effect in that it does not permit appeals by defendants or by plaintiffs who had the economic ability or personal interest to prosecute the lawsuit on their own behalf.” We agree that there should be no distinction between the plaintiff who has such a small individual claim that an order denying a class action will sound the “death knell” of his action and the plaintiff whose claim is of such size that he is likely to pursue it despite the denial of a class action.
We disagree with the per curiam determination which would leave only interlocutory review under 28 U.S.C. § 1292(b)4 or a writ of mandamus under the All Writs Act as the recourse for a plaintiff who has been rebuffed in seeking to maintain a class action. These circuitous routes are uncertain and difficult and are likely to be counterproductive. See Note, Interlocutory Appeal from Orders Striking Class Action Allegations, 70 Col.L.Rev. 1292.
With respect to the defendant, a delay in the review of an order disallowing a class action until the suit is terminated may mean a pyrrhic victory. If the plaintiff is successful on the merits and a class certification is allowed on appeal, the defendant faces the one-way intervention problem with all its obvious consequences. See American Pipe & Construction Co. v. Utah, 414 U.S. 538, 545-49, 94 S.Ct. 756, 38 L.Ed.2d 713 (1974).
These factors, we believe, when balanced against the possible inconvenience and costs of piecemeal review noted by Mr. Justice Powell in Eisen IV, mandate that such determinations be appealable.5 Although an argument might be made should this be the case that, since Rule 23(c)(1) provides that orders regarding the maintenance of a class action may be “altered or amended before the decision on the merits,” the court of appeals would be faced with successive interlocutory appeals in class action cases, this theoretical possibility ought not deter *1373us from taking a clear stand on the appeal-ability of all orders relating to class determination. Experience teaches that it would be a rare case when the specter of multiple appeals in the same case became a reality.
As additional authority for this conclusion we would look to Rule 23(c)(1) itself which provides:
As soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained. An order under this subdivision may be conditional, and may be altered or amended before the decision on the merits.
We believe that this means not only that the district court should determine the class action certification before hearing the merits of the suit as we held in Peritz v. Liberty Loan Corp., 523 F.2d 349 (7th Cir. 1975), but also that such a determination should be subject to an interlocutory appellate review so that the class action question is finally settled at this stage of the litigation.
The spirit as well as the purpose of the rule would be better served by such interlocutory review. That spirit and purpose should not be frustrated by an unarticulated and perhaps subconscious hope on the part of appellate judges that if review of important class action determinations are delayed until the merits of the suit have been decided, the question of such class determination may be mooted and difficult questions avoided. The rights involved in the certification of a class action are simply too important to be left to chance. These rights fall within the rationale of Cohen v. Beneficial Loan Corp., supra, as affirmed in Eisen IV:
This decision appears to fall in that small class which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated. 337 U.S. at 546, 69 S.Ct. at 1225.
For the reasons stated above, we would proceed to a consideration of the plaintiff’s claim that the district court erred in holding that a class action was not maintainable.6

. See per curiam opinion, pp. 1367-1368.

. We are mindful that it might be argued that since the order relating to the costs was premised on an order of class determination, the Court, in order to reach the subsumed question relating to notice problems, recognized sub silentio the appealability of the district court’s original order denying class certification. If this original order was not appealable, then there was no jurisdictional basis for Eisen II and III, and any question of costs of notice would never have been reached.

. At least one state supreme court has reached the conclusion that order denying class action status possess “sufficiently practical aspects of finality to make them appealable.” Bell v. Beneficial Consumer Discount Co., 348 A.2d 734, 44 U.S.L.W. 2275, Pa.Sup.Ct., 1975.

. There is no doubt that certification of appeals under section 1292(b) is not a common practice encouraged in this circuit or in most others. Generally it is not used in determining the class question despite the fact that liberal use of section 1292(b) was recommended by the Advisory Committee which drafted Rule 23. See Hyatt v. United Aircraft, 50 F.R.D. 242, 248 (D.C.Conn.1970); Utah v. American Pipe and Constr. Co., 50 F.R.D. 99, 109 (C.D.Cal.1970); Weisman v. MCA, Inc., 45 F.R.D. 530, 531 (D.Del.1968). See also Hackett v. General Host Corp., 455 F.2d 618, 620 (3d Cir. 1973); Interpace Corp. v. Philadelphia, 438 F.2d 401, 403 (3d Cir. 1971); Caceres v. International Air Transport Ass’n, 422 F.2d 141, 144 (2d Cir. 1970); City of New York v. International Pipe and Ceramics Corp., 410 F.2d 295, 298 (2d Cir. 1969).

. The adoption of this analysis would overrule Thill Securities Corp. v. New York Stock Exchange, 469 F.2d 14 (7th Cir. 1972), where this court held that an order authorizing a class action was not appealable prior to a determination of the merits. In King v. Kansas City Southern Indus., Inc., 479 F.2d 1259 (7th Cir. 1973), we extend the holding in Thill by ruling that an order denying a motion to have the suit designated a class action was not appealable.

. We do not reach this issue in view of the resolution of the question concerning appealability of class actions.