U.S. COURT OF APPEALS, SECOND CIRCUIT
May 24, 1973
MORTON EISEN, ON BEHALF OF HIMSELF AND ALL OTHER PURCHASERS AND SELLERS OF "ODD-LOTS" ON THE NEW YORK STOCK EXCHANGE SIMILARLY SITUATED
CARLISLE & JACQUELIN AND DECOPPET & DOREMUS, EACH LIMITED PARTNERSHIPS UNDER NEW YORK PARTNERSHIP LAW, ARTICLE 8, AND NEW YORK STOCK EXCHANGE, AN UNINCORPORATED ASSOCIATION.
KAUFMAN, Circuit Judge, with whom Judges FRIENDLY, FEINBERG, MANSFIELD, and MULLIGAN, concur.
I vote against en banc, not because I believe this case is unimportant, but because the case is of such extraordinary consequence that I am confident the Supreme Court will take this matter under its certiorari jurisdiction. Judge Oakes's opinion, dissenting from the denial of en banc, illustrates some of the far-reaching implications the panel's opinion might have on the initiation and administration of certain class action litigation in the future. En banc consideration by this court, however, would merely serve as an instrument of delay. Moreover, the application for certiorari will not go to the Supreme Court barren of the views of the judges of this court as, for example, in the Pentagon Papers case, where the court convened en banc but, because of urgent time considerations, did not write opinions. Judge Oakes has set forth his views on the merits with vigor and Judge Medina's panel opinion articulates the opposing position. Our decision to decline en banc consideration of this case in no way implies, as my brother Oakes suggests, the demise of en banc in future cases of exceptional importance; nor does it threaten to turn this collegial court into a fragmented judicial body of panels of three, in which each panel's opinions speak only for the panel, and not for the whole Court. Instead, we wisely speed this case on its way to the Supreme Court as an exercise of sound, prudent and resourceful judicial administration.
MANSFIELD, Cir. J.: I concur in Judge Kaufman's opinion.
The issues raised by this appeal are of exceptional importance and therefore deserving of the most authoritative resolution possible. If the recent history of en banc proceedings in this Court is any indication, however, an en banc hearing would result in opinions expressing diverse views, necessitating ultimate resolution by the Supreme Court. See, e.g., Rodriguez v. McGinnis, 456 F.2d 79 (2d Cir. 1972), reversed sub nom. Preiser v. Rodriguez, 411 U.S. 475, 93 S. Ct. 1827, 36 L. Ed. 2d 439, 41 U.S.L.W. 4555 (May 7, 1973). In the meantime one year's delay would be added to this already protracted proceeding. This predicament might be avoided by granting the petition and, with the case then before us de novo, invoking the Supreme Court's jurisdiction through the rarely used procedure provided by 28 U.S.C. § 1254(3), which empowers us sua sponte to certify grave questions to it for final decision where we believe the answers to be in doubt. See 28 U.S.C. Rules 28-29, Revised Rules of the Supreme Court (1973 Supp.); Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 728-29, 73 L. Ed. 918, 49 S. Ct. 499 (1929). However, since I am persuaded that the Supreme Court, in view of the far-reaching significance of the issues, will in all likelihood grant certiorari, I believe that such a procedure is unnecessary. Otherwise I would agree with Judge Oakes' forceful plea for an en banc hearing.
HAYS, Cir. J. dissenting: I believe that this case should be reconsidered en banc .
OAKES, Cir. J. (dissenting from the denial of rehearing en banc), with whom Judge Timbers concurs:
For this court not to hear a matter of this significance is to render the en banc statute*fn1 a nullity. One may in this era of burgeoning appellate business quite plausibly take the view that the en banc procedure should not be used "merely" to correct individual injustices*fn2 or mistakes, but only in a case where the panel decision*fn3 is in serious conflict with prior decisions of the particular Circuit Court of Appeals or where it is of extreme importance. Even with that view, however, this case, if no other decided in recent years, qualifies for en banc treatment.I say this for the following reasons which I will enumerate, adding a few comments subsequently:
1. The case is extremely important and vitally affects class actions, particularly environmental and consumer actions, affecting large numbers of citizens.
2. The panel opinion reaches a result which is very doubtful to say the least; on its face the opinion appears to nullify much of Fed. R. Civ. P. 23.
3. The case should be heard en banc; the procedure is there and presumably is to serve some purpose, and the Supreme Court has admonished the Courts of Appeal to make use of it.
4. There are no compelling reasons for not hearing the case en banc.
The Case Is of Extreme Importance; It Vitally Affects Class Actions .
I would expect that the case would be conceded by each and every one of the judges voting to deny en banc treatment, if he were polled, to be of extreme importance. Judge Kaufman's opinion makes this concession.
The panel opinion defines as unmanageable any case involving a large class where actual notification of readily ascertainable members is expensive. It calls notice by publication to a large class a "farce" and casts constitutional doubts on any other construction of Rule 23. The case accordingly affects adversely much consumer and environmental litigation, as well as all anti-trust and other claims by numbers of little people for small amounts*fn4 The panel opinion seems on its face to give a green light to monopolies and conglomerates who deal in quantity items selling at small prices to proceed to violate the antitrust laws, unhampered by any realistic threat of private consumer civil proceedings, leaving it to some vague future act of Congress to protect the innocent consumer. The panel opinion as I read it tells polluters that they are pretty safe from class actions because even if a whole city is blanketed in smoke or its water supply contaminated, the plaintiffs can never advance the money for notices to, say, all the people in the city phone book, who certainly are identifiable. I will not belabor the point of importance.
The Panel Opinion Reaches a Very Doubtful Result .
To vote in favor of rehearing a case en banc should not necessarily mean that the judge is thereby committed to overturn the panel opinion as Judge Timbers pointed out dissenting from the denial of rehearing en banc in Zahn v. International Paper Co., 469 F.2d 1033 (2d Cir.), rehearing en banc denied, 469 F.2d 1033, 1041, n.1 (2d Cir. 1972) (dissenting opinion of Timbers, J., joined by Oakes, J. ), cert. granted, 410 U.S. 925, 93 S. Ct. 1370, 35 L. Ed. 2d 585 (1973). At the same time, if one agrees fully with the panel decision one does not generally vote to hear it en banc. I take the view that it is only when there is reasonable doubt on a point, or the question or questions are unresolved in the judge's mind, that he should vote for en banc, and then only in unusual or extremely important cases, or cases which conflict with prior decisions of this circuit or the Supreme Court.
Serious questions about the panel's conclusions as to the management of class actions exist. Class actions, I had thought, were "an invention of equity ... mothered by the practical necessity" of providing a practical procedure to enable large numbers of litigants to enforce their common rights. Montgomery Ward & Co. v. Langer, 168 F.2d 182, 187 (8th Cir. 1948). See C. Wright, Federal Courts 306 (2d ed. 1970); Kaplan, Continuing Work of the Civil Committee: 1966 Amendments of the Federal Rules of Civil Procedure (I), 81 Harv. L. Rev. 356, 375 et seq. (1967). The panel's decision seems utterly inconsistent with the flexible, equitable spirit that motivated the innovative 1966 amendments to Fed. R. Civ. P. 23.
The panel opinion is at the very least highly debatable on its face since it requires, without even considering division of a large class into a much smaller subclass under Rule 23(c) (4) (B), an individual plaintiff to pay the cost of actual notice to the identifiable members of the entire class which he seeks to represent and since it declares - I may add without any support or citation of authority whatsoever other than judicial fiat - that "Where there are millions of dispersed and unidentifiable members of the class notices by publication giving the essential information required by amended Rule 23 are a farce." Slip op. at 3239.
The view of Eisen II, 391 F.2d 555 (1968), that Rule 23(c) (2) requires individual notice to all members of Eisen's class who can be identified through "reasonable effort" has been criticized as "unnecessarily restrictive. ..." 7A C. Wright & A. Miller, Federal Practice and Procedure § 1786 at 148 (1972); see also Kaplan, supra, 81 Harv. L. Rev. at 396; Comment, Class Actions under Federal Rule 23(b) (3) - The Notice Requirement, 29 Md. L. Rev. 139 (1969). Certainly given the importance of the class action as a means for the little man to bring wealthy or powerful interests into court, Eisen's inability to bear the costs of mailing notice to those 2,000,000 or so "easily identifiable individuals" similarly situated, Eisen v. Carlisle & Jacquelin, 52 F.R.D. 253, 257 (S.D.N.Y. 1971), should not necessarily terminate the class action character of this suit. It may be appropriate, as Judge Tyler suggested below, to charge the defendants with a portion of the notification costs. See Dolgow v. Anderson, 43 F.R.D. 472, 498-500 (E.D.N.Y. 1968) (Weinstein, J. ); C. Wright, supra at 313-14. But even if these two questions were decided against the plaintiff, an en banc decision drawing sustenance from the flexible, still developing Rule 23 jurisprudence might embrace one of several other alternatives to the panel's burial of larger-number plaintiff class actions. These include the alternatives suggested by Judge Weinstein and others discarded in the panel opinion. But there are others, too.
The plaintiff class might, for example, be divided into much smaller subclasses, Fed. R. Civ. P. 23(c) (4) (B), of odd lot buyers for particular periods, and one subclass treated as a test case, with the other subclasses held in abeyance. Individual notice at what would probably be a reasonable cost could then be given to all members of the particular small subclass who can be easily identified.See Kaplan, supra, 81 Harv. L. Rev. at 390-91; Weinstein, Revision of Procedure: Some Problems in Class Actions, 9 Buffalo L. Rev. 433, 438-54 (1960).
The problem of individualized notice under Rule 23(c) (2) is so important to the future of class actions and the panel's resolution of it seems so inconsistent with the spirit of Rule 23, in short, that consideration by the full court seems essential.
At least as questionable is the panel's conclusion that this class action is unmanageable and should be dismissed because "no notice by publication could be devised by the ingenuity of man that could reasonably be expected to notify more than a relatively small proportion of the class." Slip op. at 3238. The panel seems to intimate in a footnote that individualized notice to all 6,000,000 members of the class borders on being a constitutional requirement. Slip op. at 3239, n.21. This intimation seems to me to be profoundly incorrect. In my view notice to class members who cannot be identified is not a constitutional requirement and not a prerequisite to a manageable class action. All that the due process clause requires is a procedure that "fairly insures the protection of the absent parties who are to be bound by the judgment." Hansberry v. Lee, 311 U.S. 32, 42, 85 L. Ed. 22, 61 S. Ct. 115 (1940) (not cited by panel decision.) See Mullane v. Central Hanover Bank and Trust Co., 339 U.S. 306, 313-14, 94 L. Ed. 865, 70 S. Ct. 652 (1950); Northern Natural Gas Co. v. Grounds, 292 F. Supp. 619, 636 (D. Kan. 1960). See also C. Wright, supra at 313; Kaplan supra, 81 Harv. L. Rev. at 391-92. But cf. Eisen II, 391 F.2d at 368-69. The Advisory Committee is a respectable body of procedural experts who did not consider individualized notice to all or a certain percentage of class members a prerequisite to the maintenance of a Rule 23 class action as a constitutional (or extraconstitutional) requirement. Advisory Committee Notes, 28 U.S.C.A., Rule 23 Supplementary Note at 302. The commentators generally agree. Assuming vigorous representation of the class's interests by the representative plaintiff (which is not in issue here), notice by publication to unidentifiable class members is constitutionally sufficient. Mullane v. Central Hanover Bank and Trust Co., supra, 339 U.S. at 314. A scheme of notice by publication (with costs perhaps taxed to the defendants) in financial journals of wide circulation - the Wall Street Journal, Business Week, Barron's, the New York Times financial section, and the like - would reach most of the class.
To say, as the panel opinion says, slip op. at 3239, that "[where] there are millions of dispersed and unidentifiable members of the class notices by publication ... are a farce," and to say it without any supporting data or authority, strikes me as, in the words of the panel opinion, a "rhetorical device," slip op. 3231. In this day and age of communications, why are such notices a "farce"? It may be that most people will not heed them - the sums may be too small to bother with, for example - but does this make the notices farcical? Probate notices published in small-town newspapers around the country are treated as notice to the whole world of possible creditors and heirs that an estate is being closed, and they are pretty effective for this purpose. Notice by publication of actions such as this in key, spot places can be, I should think, highly effective. If notice in the "Drug Cases," State of West Virginia v. Charles Pfizer & Co., 314 F. Supp. 710 (S.D.N.Y. 1970), aff'd 440 F.2d 1079 (2d Cir.), cert. denied sub nom. Cotler Drugs, Inc. v. Charles Pfizer & Co., 404 U.S. 871, 30 L. Ed. 2d 115, 92 S. Ct. 81 (1971), could work reasonably well, why can't it work with a somewhat more sophisticated group of consumers, odd lot buyers? Rule 23 was not looking toward perfect or total notification; it was - and I write of it in the past tense for this purpose - reaching out for a practical result that would permit numbers of little injured people to have their day, too, in court.
The panel opinion's suggestion, slip op. 3243, that it should "be possible for the Congress to create some public body to do justice in the matter of consumers' claims in such fashion as to afford compensation to the injured consumer" is in my view an abdication of judicial responsibility. It is as much as to say that the courts are insufficiently inventive to be capable of handling a matter - the distribution of unlawfully obtained money to a large number of people. I doubt this very much. I suspect that the courts can do the job.
All in all, it seems to me that the panel's decision not merely ossifies, but destroys, the development of what was becoming an important procedural device for the airing of grievances where large numbers of people were affected and one individual did not have the resources to pursue his own legal rights to conclusion. At the very least the panel opinion should not be allowed to stand without full and complete consideration by the full active bench of this circuit, aided as we would be by the consultation and vote of the two distinguished senior judges who sat on the panel in question.
The Case Should Be Heard En Banc .
One can argue, as many wiser minds than the writer's have argued, that a court of appeals should never use the en banc procedure. The Learned Hand court was apparently able never to sit en banc. See generally M. Schick, Learned Hand's Court 105-06, 116-22 (1970). But this was before the number of judges on the court was expanded to meet the court's burgeoning business. In other words, it was when the court and its business were small enough to enable a good deal more consultation before adjudication among the judges on the court than now does or can occur. Never to use the en banc procedure would tend to fragment a court of 14 or 15 judges into panels of three, enabling a given panel - which sometimes consists of judges not appointed to the particular circuit court - to determine cases for the whole court. If panel decisions absent an en banc procedure were to be binding on the other members of the court (as with an en banc procedure this court has always treated them in the past), there would be (A) an even greater burden on the Supreme Court than it now has to correct egregious error or to examine important cases and (B) an individual active circuit court judge vote would count, at least in the Second Circuit, in only the 160-220 cases per year on which he sits and be of no significance whatever in the remaining 1,000 cases*fn5 coming before the court.
In the event this court's tradition were to be broken and an individual panel's determination were not to be binding on the rest of the court, the Supreme Court's burden would be equally great and this court would be even more fragmented. Its decisions would merit only the support that the persuasiveness of the individual opinion writer or the prestige of the particular panel could muster. There would be no "law of the circuit" as such. The district judges and others who look to the Court of Appeals for guidance in their decision-making would find none.
Thus it seems to me that the en banc procedure, or some viable substitute for it, essential to ensure cohesion, a degree of uniformity and the promotion of appellate justice, in the Court of Appeals. The en banc power has received the imprimatur of an 8-1 Supreme Court, in a case that is still law, as "a necessary and useful power - indeed too useful that we should ever permit a court to ignore the possibilities of its use in cases where it might be appropriate." Western Pacific Railroad Corp. v. Western Pacific Railroad Co., 345 U.S. 247, 260, 97 L. Ed. 986, 73 S. Ct. 656 (1953). There are those of us, I suspect, who think the exercise of that power is one alternative preferable to the controversial national court of appeals which is receiving considerable attention these days.
The only viable alternative to the en banc procedure, if there is to be any genuine "court" position on a given case, is the prepublication circulation of all opinions for comment which is done in some circuits. This would be somewhat helpful but has the disadvantages of being advisory only, unless the en banc procedure is invoked; it also creates some work under the pressure of time deadlines additional to that which the en banc procedure permits. Prior circulation in seemingly important cases which is done in this circuit fairly frequently, with I think good result, but was not done in this particular case, has some merit, too; at least it may alert the whole court to an important case or the opinion writer or panel to some serious questions. Here even this alternative has been unavailable.
There Is No Good Reason for Not Hearing This Case En Banc .
There is no real pressure of time (the lapse of time since Eisen II is five years; the Supreme Court is unlikely to examine the inevitable petition for a writ of certiorari until four or five months from now)*fn6, that would, as to some extent it did in the Pentagon Papers case*fn7, make en banc rehearing or opinion writing unfeasible. There is no reason why the Supreme Court should not have before it some view, even if it is not a majority one, from this court, different from the panel's if, as I think is undoubtedly the case, an en banc vote would result in such.
It is said or suggested that this case is so important that it will surely result in a grant of certiorari. With all respect I do not know how we can be so prescient about the United States Supreme Court. It may decide that it wants to hear from other circuits, and have a more balanced view before it, than what is now the Second's, before it grants the all powerful writ. The Court may decide that it prefers to postpone the issue until another day, for reasons of internal administration or external policy.
I believe in short that our duty is to hear this case en banc. Since the panel opinion sounds the "death knell," see Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2d Cir. 1966), cert. denied, 386 U.S. 1035, 18 L. Ed. 2d 598, 87 S. Ct. 1487 (1967), for consumer and environmental class actions, the omission to do so is to my mind grievous. Perhaps, however, it will serve as a vehicle for a higher authority to tell us whether the admonitions of Western Pacific Railroad Corp. v. Western Pacific Railroad Co., supra, relative to the en banc procedure still have any meaning. If they do not, the world may not come to an end, but we will be an interesting court to watch as our eight active and six senior and numerous visiting and district judges go from decision to decision, guided 2 per cent*fn8 of the time by a grant of certiorari. We will at least be somewhat unpredictable, and this may create enough litigation on the chance that an individual panel may reverse that our calendar will become as unmanageable as the panel opinion felt the instant class action was.