concluding, following the 1966 enactment of Rule 23 and its allowance of class actions with preclusive effect, that "a court must now carefully scrutinize the adequacy of representation in all class actions"
How later courts described this case
- concluding, following the 1966 enactment of Rule 23 and its allowance of class actions with preclusive effect, that "a court must now carefully scrutinize the adequacy of representation in all class actions"
- explaining that where "differences among the class members bear only on the computation of damages," it "can be adequately handled ... [by] divid[ing] the class into appropriate subclasses"
- noting “the desirability of providing small claimants with a forum in which to seek redress for alleged large scale anti-trust violations” and finding that common questions of law or fact predominate over individual questions even though “members of the proposed class might have had different motives when they entered into the odd-lot market”
- stating that "[Rule 23(b)(2)] . . . is only applicable where the relief sought is exclusively or predominantly injunctive or declaratory"
Written by the judges who cited it.
Later courts went against this
Overruled — as noted by a later court
First, Stephens argues that Gulf Of is no longer good law because the federal decision upon which Gulf Oil was based, or Eisen v. Carlisle and Jacquelin, (Eisen I) (1968), 2nd Cir., 391 F.2d 555, has since been overruled.
medium confidence
The opinion
LUMBARD, Chief Judge
(dissenting) :
It seems to me that we should affirm Judge Tyler’s ruling that this is not a proper class action because it is so clearly right on two counts: the impossibility of the plaintiff giving suitable notice and the unmanageability of this suit as a class action. I would not remand to the district court to do the obvious and the unnecessary.
What could be less of a class action than a suit where there are more than 3,750,000 potential plaintiffs living in every state of the union and in almost every foreign country? If this is a “class,” it is so large and indiscriminate that a substantial proportion of its membership will have no idea whatever that they belong to it. Just how a notice can be worded which could alert so large a “class” to the possibility that proceedings in the Sonthern District, if carried forward, would someday enrich each one by a few dollars, if there be anything left after expenses and attorneys’ fees, is a mystery to me.
Indeed, the question of how to give any notice which would be sufficient to meet constitutional requirements is so impossible of solution that my colleagues choose to ignore it.
*571 If the plaintiff, who has participated in some 47 transactions over a period of years, estimates his damages at only $70, is it not evident that the overwhelming majority of all possible plaintiffs would expect at best to receive considerably less than $70? And what is sufficiently interesting about the expectation of such a recovery, available if at all, only after several years of litigation, to lead us to suppose that any considerable number would bother to respond to the notice. Despite articles in the May 3, 1966 edition of the New York Times and the May 4, 1966 edition of the Wall Street Journal no one has joined Eisen in this action. See Berger v. Purolator Products, Inc., 41 F.R.D. 542, 544 (S.D.N.Y.1966). Obviously the only persons to gain from a class suit are not potential plaintiffs, but the attorneys who will represent them.
In any event, plaintiff suggests no way in which he can give notice to his 3,750,000 potential brothers-in-litigation which could conceivably attract the attention of any appreciable number of them. Who is to advise foreign class members who do not read or understand English, and how is this to be done? Who is to pay for class notice, and for the subsequent notice of any step in the action which the Rule says must be given?
To me, these illustrations of the practical and insurmountable difficulties that would be encountered in administering this action as a class suit underscore that Judge Tyler could only have exercised his discretion as he did. As a class action the claim is totally unmanageable. See School District of Philadelphia v. Harper & Row Publishers, Inc., 267 F.Supp. 1001 (E.D.Pa., 1967).
Even if all of the difficulties inherent in the administration of the suit were overcome, the amount expended in filing and processing claims would probably exceed any recovery. Illinois Bell Telephone Co. v. Slattery, 102 F.2d 58 (7th Cir.), cert. denied, 307 U.S. 648 , 59 S.Ct. 1045 , 83 L.Ed. 1527 (1939) is inapposite. In that case the telephone company had sought an interlocutory injunction against an Illinois Commerce Commission order requiring reduction of certain of its rates. The interlocutory injunction was granted, conditioned upon an undertaking by the telephone company to refund to its subscribers any sums paid by them in excess of the proposed reduced rates should the company lose its suit. The company had already collected the money and had laid it aside. The Supreme Court eventually ordered the injunction dissolved and that refunds be made in accordance with the terms of the injunction. Lindheimer v. Illinois Bell Telephone Company, 292 U.S. 151 , 54 S.Ct. 658 , 78 L.Ed. 1182 (1934). The telephone company .agreed to undertake the task of making refunds and to assume the costs of the distribution. The payments were not made by the Court, but by the company under the supervision of a representative of the court. 102 F.2d at 61 .
In this case, unlike Slattery , the potential claimants have no direct business dealings, with the parties which plaintiff seeks to hold liable, and therefore defendants are in no position to identify from their own records the potential claimants, let alone calculate the amounts of any refund that they may be found entitled to receive.
Here no one can ascertain whether any recovery will be due any particular plaintiff until the case has been litigated, and, if any recovery is decreed, there must follow an enormous number of calculations regarding the dealings of each plaintiff who is entitled to any recovery. And even after that the court would have to pass upon the expenses and fees to be deducted from any recovery.
Class actions were not meant to cover situations where almost everybody is a potential member of the class. Nor were they ever intended to compel any court to entertain an alleged controversy with so many potential parties, or to compel any court to entrust the interests of numerous plaintiffs to representation by one plaintiff whose interest is all of $70. Rule 23(b) (3) requires that a class ac *572 tion be superior to other available methods for the fair and efficient adjudication of the controversy, and requires that the court consider “the difficulties likely to be encountered in the management of a class action” in making its determination. See Berley v. Dreyfus & Co., 43 F.R.D. 397 (S.D.N.Y. Dec. 22, 1967). While this court has determined that dismissal of the class action “will for all practical purposes terminate the litigation,” 370 F.2d at 121, Rule 23 does not require or contemplate that courts will hear causes of action as class actions merely because they will not get to hear the case any other way. As the Advisory Committee’s Note suggests, “one or more actions agreed to by the parties as test or model actions may be preferred to a class action * * * ” If plaintiff’s case has any merit and his counsel are of excellent calibre, as he asserts, I see no insuperable barrier to organization by plaintiff, with the assistance of counsel, of a group of members of the purported class to sponsor this litigation as a test case with Mr. Eisen as the sole plaintiff. Even if a test case is not financially expedient from the viewpoint of plaintiff and his legal advisors, its obvious administrative advantages compel me to reject the unmanageable class action as an alternative. See Richland v. Cheatham, 272 F.Supp. 148 (S.D.N.Y. July 27, 1967).
Even if plaintiff is unable to maintain an action, when a controversy touches the interest of so many members of the public it is sufficient that Congress has provided a public agency whose duty it is to supervise and regulate such matters. Comment, Recovery of Damages in Class Actions, 32 U.Chi.L.Rev. 768, 785 (1965). The matter of proper commissions to be paid by those who engage in odd-lots transactions is within the jurisdiction of the SEC. It has been the subject of study and in due time the Commission will take appropriate action.
The appropriate action for this Court is to affirm the district court and put an end to this Frankenstein monster posing as a class action.