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Brick v. CPC International Inc.

decided: December 14, 1976.


Appeal from order of Lloyd F. MacMahon, J., United States District Court for the Southern District of New York, denying plaintiff's motion for class action certification. Affirmed.

Feinberg and Meskill, Circuit Judges, and Brieant, District Judge.*fn* Meskill, Circuit Judge.

Author: Feinberg

FEINBERG, Circuit Judge:

Plaintiff Albert Brick, owner of 600 shares of Funk Seeds International, Inc. ("Funk"), appeals from an order of the United States District Court for the Southern District of New York, Lloyd F. MacMahon, J., denying Brick's motion for class action certification in his action against defendant CPC International, Inc. ("CPC"). Plaintiff's amended complaint alleges that when CPC made a public offering by prospectus in the summer of 1972 of 75 per cent of the common shares of Funk, CPC's then wholly-owned subsidiary, CPC engaged in securities act violations, common law fraud and common law negligence. The purported misrepresentations and omissions from CPC's prospectus at the time concerned the termination of franchise-type agreements by certain Funk "associate" companies. Brick also claimed that Funk's declaration of a $14-million dividend to CPC was illegal. Plaintiff, who purchased his stock in February 1973, was inspired to sue by an article in Forbes Magazine, which pointed out that CPC's spin-off of Funk gave CPC a "$50-million killing" even though the public value of the Funk stock then declined some $60 million in ten months. The article raised some sharp questions regarding the propriety of the spin-off.

In July 1973, plaintiff filed this suit as a class action in the United States District Court for the District of Columbia. The class, as defined in the amended complaint, includes "all of the shareholders of Funk." Plaintiff is an attorney and he and the purported class are represented in this action by Samuel Intrater, plaintiff's sole law partner in the firm of Brick and Intrater. After some preliminary procedural skirmishing in the District of Columbia, Judge Richey sua sponte transferred the action to the United States District Court for the Southern District of New York under 28 U.S.C. ยง 1404(a), primarily because a related action was pending there before Judge MacMahon.*fn1 In June 1975, plaintiff moved to retransfer the action to the District of Columbia, but Judge MacMahon denied the motion. And in February 1976, the judge also denied plaintiff's motion for class certification because of concern over the ethical problems posed by the attorney-plaintiff relationship in this case and plaintiff's "ability and diligence to prosecute the suit as a class action."

The appeal poses potentially significant issues concerning appealability and the criteria for proper class representation under Fed. R. Civ. P. 23. As to the former, it is not clear whether the appeal is allowable under our "death knell" doctrine, which has itself been the subject of controversy both within this circuit*fn2 and elsewhere.*fn3 From the record before us, cf. Jelfo v. Hickok Mfg. Co., 531 F.2d 680 (2d Cir. 1976), we cannot tell whether plaintiff's claim realistically amounts to $4,200, as both parties now contend in order to support appealability, or to some ten times more, as plaintiff originally alleged. Nor is it clear under our precedents that a claim of $4,200 would sound the death knell. Compare Shayne v. Madison Square Garden Corp., 491 F.2d 397 (2d Cir. 1974), with Korn v. Franchard Corp., 443 F.2d 1301, 1306 (2d Cir. 1971). And even if the claim were for far less money, there is a question whether failure to certify a particular person as a class representative justifies appealability under our "death knell" rule.

On the issue of class representation, district courts in this circuit have expressed concern over the propriety of a law partner relationship between the attorney for the class and its representative, but they have not invariably refused to certify the class when the relationship exists. Compare Stull v. Baker [1973 Transfer Binder] CCH Fed. Sec. L. Rep. para. 94,227, at 94,929 (S.D.N.Y. 1973) with Cotchett v. Avis Rent A Car System, Inc., 56 F.R.D. 549 (S.D.N.Y. 1972). And we have not yet ruled on whether, as appellee suggests here, there should be a per se rule prohibiting the practice. See Kramer v. Scientific Control Corp., 534 F.2d 1085 (3d Cir. 1976); Note, Developments in the Law - Class Actions, 89 Harv. L. Rev. 1318, 1577-86, 1585 n.29 (1976).

We do not think that this is a proper case for fuller consideration of these issues. It is clear from the record before us that Judge MacMahon did not abuse his discretion in denying class certification. Moreover, we note that his decision does not bar class certification with another person representing the class.*fn4 Under the circumstances, we will assume arguendo that the order is appealable and affirm the district court, leaving to another day fuller discussion of the issues presented here.*fn5

Judgment affirmed. We deny appellee's motion for attorneys fees and double costs.

MESKILL, Circuit Judge.

I respectfully dissent. The majority "assume [s] arguendo that the order [denying class action certification] is appealable," ante, at 187, and reaches the merits of this controversy, holding that Judge MacMahon did not abuse his discretion. I express no view on the merits, for I cannot agree that the order is appealable.

Under the "death knell" doctrine, the burden is upon the party who asks us to assume jurisdiction to show that the suit will end if class action status is denied. Jelfo v. Hickok Mfg. Co., Inc., 531 F.2d 680, 681 (2d Cir. 1976). Brick has not made the slightest attempt to carry that burden. Instead, he relies on CPC's concession to the effect that a $4,200 claim is sufficiently small to warrant the application of the "death knell" doctrine.*fn1 While it is true that "death knell" has been primarily a dollar-amount test, this Court has not ignored other factors, see Shayne v. Madison Square Garden Corp., 491 F.2d 397, 402 (2d Cir. 1974), and in this case it is a factor other than the dollar amount that is dispositive.

With due respect to the majority, and apologies to Ernest Hemingway and John Donne,*fn2 the appealability issue presented here can be resolved merely by deciding for whom the knell tolls. It does not toll for Brick or the class he seeks to represent. It tolls for Brick's law partner, Intrater. That may be a cataclysm for Intrater and his law firm, but it is only a minor set-back in terms of the viability of this multimillion-dollar lawsuit. Class action status is not foreclosed by Judge MacMahon's order. Nor is Brick foreclosed from representing the class. In practical effect, the order appealed from has done nothing more than require a change of counsel.*fn3 While that may raise other final order issues it certainly does not sound the death knell for this lawsuit.*fn4

The more difficult final order issue presented here is whether this order is, in effect, an order disqualifying counsel which would bring the case within the rule of Silver Chrysler Plymouth, Inc. v. Chrysler Motors Corp., 496 F.2d 800 (2d Cir. 1974) (en banc), which holds that orders granting or denying attorney disqualification are appealable under the doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949).*fn5 In my view, it is not such an order. Intrater has not been disqualified from representing his client, Brick, he has not been disqualified from litigating Brick's action against CPC, and he has not been disqualified from representing Brick personally as a member of the class, so long as the class is represented by someone ...

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