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Macalister v. Guterma

December 30, 1958

ALEXANDER G. MACALISTER ET AL., PLAINTIFFS-APPELLEES,
v.
ALEXANDER. L. GUTERMA ET AL., DEFENDANTS, AND THE BON AMI COMPANY, DEFENDANT-APPELLANT; SAMUEL GREENBERG, PLAINTIFF-APPELLEE, V. ALEXANDER L. GUTERMA ET AL., DEFENDANTS, AND THE BON AMI COMPANY, DEFENDANT-APPELLANT; ANNE J. MATHES, PLAINTIFF-APPELLEE, V. NATHAN CUMMINGS ET AL., DEFENDANTS, AND THE BON AMI COMPANY, DEFENDANT-APPELLANT.



Author: Kaufman

Before SWAN and MOORE, Circuit Judges, and KAUFMAN, District Judge.

KAUFMAN, District Judge.

This is an appeal brought by The Bon Ami Company, defendant below, from an order of Judge Cashin denying (a) pretrial consolidation of three stockholders' derivative actions under a consolidated complaint; (b) the appointment of general counsel for the consolidated plaintiffs and (c) an injunction restraining other stockholders from commencing further suits in the federal court on the same causes of action.

The three actions now before us were all instituted by minority shareholders seeking recovery on behalf of The Bon Ami Company against its officers, directors and controlling shareholders for breach of their fiduciary duty. Faced with similar actions pending in the state courts of New York and Delaware, the appellants moved for consolidation for all purposes and other relief under Rule 42(a) Fed.R.Civ.P., 28 U.S.C.A., alleging that three similar and unconsolidated actions will precipitate duplicatory motion practice with its attendant waste of judicial time and effort. Two of the three plaintiffs below joined in the appellant's motion and consented to the requested consolidated. The third representing the MacAlister group strenuously opposed the motion. The trial court by the order dated June 9, 1958 consolidated the three actions for trial only, denying all other requested relief.

A. Appealability

Interesting questions concerning the scope and content of Rule 42 are presented by this appeal. However, preliminary to any discussion of the substantive merits of appellant's contentions we must ascertain whether our jurisdiction permits us at this time to entertain an appeal from the order below.

With certain notable exceptions not now material, interlocutory orders have generally not been appealable. 28 U.S.C.ยงยง 1291, 1292. But this rule of finality has not been mechanically applied in patent disregard of the practicalities of litigation. In many instances such so-called "interlocutory" orders relate to matters outside the "stream of main action" which are not subject to effective review upon final determination below. Accordingly, the Supreme Court has acknowledged a

"small class [of decisions] 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." Cohen v. Beneficial Industrial Loan Corp., 1949, 337 U.S. 541, 546, 69 S. Ct. 1221, 1225, 93 L. Ed. 1528.

The finality required by statute has therefore been judicially qualified to mean, not only decisions terminating litigation but also orders which are collateral and which are irreparable in their effect upon the rights of some party. See Underwood, Appeals in the Federal Practice From Collateral Orders, 36 Va.L.Rev. 731, 736 (1950); 6 Moore, Federal Practice, Para. 54.14 (2d Ed.1953).

This collateral order doctrine has long been applied by the federal judiciary. It was given prominence in the Cohen case where the Court upheld the appealability of an order denying a motion for security for costs in a stockholders' derivative suit.The doctrine has been subsequently applied in a variety of situations.*fn1 Whether an order denying pre-trial consolidation and the appointment of general counsel is of the same character as those which have merited review in the past under the Cohen rationale is a question not free from doubt.

In Johnson v. Manhattan Ry. Co., 2 Cir., 1932, 61 F.2d 934, 940, affirmed, 1932, 289 U.S. 479, 53 S. Ct. 721, 77 L. Ed. 1331, this court held an order of consolidation appealable on grounds that immediate appeal was the only effective means of correcting the error, if there be one, since after the final decree the damage "would have become moot and would not survive." On the other hand the Tenth Circuit in Skirvin v. Mesta, 10 Cir., 1944, 141 F.2d 668, has stated that an order of consolidation or a denial of a motion to vacate such consolidation is not appealable.

We do not attempt have to prescribe a rule of universal application to orders granting or denying consolidation. Suffice it to say that under the circumstances here presented we are satisfied that the order below sufficiently meets the test set out in Cohen v. Beneficial Industrial Loan Corp., supra. A denial of the consolidation sought bears no relation to the substantive claims in the case, is collateral thereto and is not merged in the final judgment. Furthermore, the duplication and confusion which appellant fears will ensue if the order below is permitted to stand, may prove oppressive. Under these circumstances such relief as appellant may now be entitled to will be unavailing if review were to be deferred until final judgment.

In reaching this conclusion we are not unmoved by the fact that serious and unsettled questions are presented for review. A search for relevant precedents reveals that this is the first time that the power of the courts to order consolidation for the pre-trial stages and the appointment of general counsel to supervise and coordinate the prosecution of plaintiffs' case has been presented to a federal appellate court. In view of this state of affairs direction from an appellate court would ...


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