Petition — Mercedes-Benz of North America, Inc. v. Link
Supreme Court brief1977
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Supreme Court, U. S$,
~FILED «|
APR 4 1977,
IN THE
Supreme Court of the Unite
October Term, 1976.
No. ¢6* 1356
MERCEDES-BENZ OF NORTH AMERICA, INC.
N and DAIMLER-BENZ A. G.,
Petitioners,
hi v.
MICHAEL RODAK, JR., CLERK
JULES LINK and SOLOMON KATZ, on Behalf of Themselves
and All Others Similariy Situated,
Respondents.
—
PETITION FOR A WRIT OF STATUTORY
CERTIORARI, AND, IN THE ALTERNATIVE,
FOR A WRIT OF COMMON LAW CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT AND MOTION
FOR LEAVE TO FILE PETITION.
Ropert J. SPIEGEL,
SPENCER Ervin, JR.,
Wicsur Bourne RvuTHRAUFF,
1900 Two Girard Plaza,
Philadelphia, Pennsylvania, 19102
Attorneys for Petitioners.
Of Counsel:
R. Mark ARMBRUST,
Gratz, TATE, Sprecet, Ervin & RUTHRAUFF,
1900 Two Girard Plaza,
Philadelphia, Pennsylvania, 19102
Daten: April 4, 1977.
International Printing Co., 711 So, 60th St., Phila., Pa, 10143 — Tel, (215) 727-8711
INDEX.
Motion for Leave to File Petition for a Writ of Common Law
Gamthawamd oc ccccccccccccccccccccvscvecccccvcescces
Petition for a Writ of Statutory Certiorari, and, in the Alter-
native, for a Writ of Common Law Certiorari to the
United States Court of Appeals for the Third Circuit ...
Cofahoms BaW occcccccccccccccccccccceccccscccces
) | EPPPPETTTTTTTTTTTTITT TTT ee
Gopnstiems TOMMGMAGE occ ccccccccccccccccccccescccece
Constitutional Provision, Statutes and Rules ...........
PE Or OD so cddcccccnceccdccdcesccecess
Summary of Reasons for Granting the Writ ...........
Reasons for Granting the Writ .........66 cc cee eens
I. The Proper Construction of § 1292(b), the In-
terlocutory Appeals Act, Is an Important Federal
Question Which Should Be Promptly and Defi-
nitively Resolved by This Court .............
A. The Narrow Interpretation of “Controlling
Question of Law” in § 1292(b) by the Court
of Appeals Is Improper and Is in Conflict
With Other Circuits ........cccseeeeeees
B. Large Class Action Certifications Present
Controlling Questions of Law, Because of
Their Decisive Impact on the Future Course
of the Litigation and Unless Such Certifica-
cations Are, Reviewed Immediately, They Are
Effectively Insulated From Any Appellate
EF cccbivcccccctncceccepecnccocesés
Il. This Court Should Exercise Judicial Oversight
to Correct the Failure of the District Court
Both to Construe Properly the Requirements of
F. R. C. P. 23(b)(3) and to Require the
Proponents of the Class to Meet Their Burden
of Demonstrating Compliance With the Rule . .
Page
oft COON WN
10
10
14
18
INDEX (Continued).
Page
A. The District Court's “Contingent” Class Cer-
tification Is Impermissible Under F. R, C, P.
GREED codcceccccvasenscespcscsseeses 20
B. The District Court Improperly Interpreted
and Incorrectly Defined the Rule 23(b)(3)
Issues in This § 4 Clayton Act Case ....... 21
III. In a § 4 Clayton Act Case the Issues of Liability
and Damages Cannot Constitutionally Be
Severed and Tried Before Separate Juries ..... 25
DE vccucseuacouncesnsadenceseaseteannkeeneée6s 31
Appendix:
District Court Order (August 7, 1975) ...... 666 e cee ees Al
Court of Appeals Order (September 12, 1975) ......... A4
District Court Memorandum Opinion (September 25,
ET TTT TTT TT eTTT TTT TTT Tie A5
Court of Appeals Opinion (July 22, 1976) ...........5. Al8
Court of Appeals Judgment (July 22, 1976) ........... A26
Court of Appeals Opinion (February 11, 1977) ........ A27
Court of Appeals Judgment on Rehearing (February 11,
PPP PPPEPFOPOTTTTTTTTTTTIT TTT TIT TTT TT ee A63
Court of Appeals Order (February 28, 1977) .......... A64
Constitutional Provision, Statutes and Rules Involved ... A65
U. S. Constitution, Seventh Amendment .......... A65
Sherman Antitrust Act, Section 1 ......... 6.600005 A65
Clayton Act, Section 4 ......ccseceeeceeeeeeeenees A66
Interlocutory Appeals Act of 1958, Section 1292(b) A66
Federal Rules of Civil Procedure:
. SD ED cvocvcceccoccccccccscsocesceccecsce A67
PD GED ccccccvccncesscsccessscececseses A70
TABLE OF CITATIONS.
Cases: Page
Abbott Labs v. Portland Retail Druggists, 425 U. S. 1 (1976) 11
Al Barnett & Sons v. Outboard Marine Corp., 64 F, R. D. 43
CHA TRG BERS) ccncccccccccccccccoccccscccccsoccess 18
American Pipe and Construction Co, v. Utah, 414 U. S, 538
CRUE 6cdecedcceecencdeedoccceoucetccecedeseesess 10, 11
Anschul v. Sitmar Cruises, Inc., 544 F. 2d 1364 (7th Cir.
PUP Reccoecccccccoensevisvaccccsevecenscdccdeene 17
Arenson v. Board of Trade of Chicago, 372 F. Supp. 1349
Coes TA Bs BRPED snccccccccccescccccocccccsoccccccee 18
Bersch v. Drexel Firestone, Inc., 519 F. 2d 974 (2d Cir.
1975), cert. denied, 423 U. S, 1018 (1975) .........45. 12
Blackie v. Barrack, 524 F, 2d 891 (9th Cir, 1975) .......... 12, 21
Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723
ERE Kb adScdeancccecbccccevecsceceseeeeeseesssede 16
City of Philadelphia v. Am. Oil Co., 53 F. R. D, 45 (D.N. J.
BOE senecnccctecscccnscccovecsdscctccseveessaeee 18
Cohen v. Beneficial Industrial Loan Corporation, 337 U. S.
ee MED nen uducsedebbusevcedeuscesseusesonceses 14
Continental Grain Co, v. Barge FBL-585, 364 U. S. 19
DEE SG hee0eneteesdnseieesesdbeededecesesesesess 10
Dairy Queen v. Wood, 369 U. S, 469 (1962) ...........45. 27
DiBella v, United States, 369 U. S. 121 (1962) ............ ll
Eisen v. Carlisle & Jacquelin, 417 U. S, 156 (1974) ......... 20
Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U. S.
We ED Pek snntecdecenscdscsecesedesscoudbenes 11
Fortnightly Corp. v. United Artists Television Inc., 392 U. S.
Se ED nd cdnd neu desdbddesouccesddcececteescces ll
Gasoline Products v. Champlin Refining Co., 283 U. S, 494
SEE dhecbedosbeses oebeanadtdedeedesecéccececess 27, 28
Gulf Oil Corp. v. Copp Paving Co., 419 U. S. 186 (1974)... 11
Hadjipateras v. Pacifica, S. A., 200 F. 2d 697 (5th Cir.
Dy séshduaventadvesedsaabadatactdeuses 0b50s600% 13, 14
Hawaii v. Standard Oil Co,, 405 U. S. 251 (1972)
TABLE OF CITATIONS (Continued),
Cases (Continued): Page
Herbst v. International Telephone & Telegraph Corp., 495
P. 08 1008 (28 Cle. BOVE) 2. cccccccccsecsencscevcccs 15
Hosie v. Chicago and N. W. Ry. Co,, 282 F. 2d 639 (7th
Cir. 1960), cerf> denied, 365 U, S, 814 (1961) .......... 27
Illinois v. Harper & Row Publishers, Inc., 301 F. Supp. 484
(OE, BD. GR BOIDY ooccncvecccccucaususe 18
In re Hotel Telephone Charges, 500 F. 2d 86 (9th Cir,
BPE) ncccccccevesccccccccecceccsesesessennenees 15, 19, 30
In re 620 Church Street Bldg. Corp., 299 U. S, 24 (1936) ... i,2
In re Transit Co, Tire Litigation, 67 F. R. D. 59 (W. D. Mo.
BORE) 2000000000000000000600080ee Gnenneneenaeen 18
Katz v. Carte Blanche, 496 F, 2d 747, cert. denied, 419 U. S.
et | Mere 12, 13, 27
Kline v. Coldwell, Banker & Co., 508 F, 2d 226 (9th Cir,
1974), cert. denied, 421 U. S. 963 (1975) .........005. 15
Lear Siegler, Inc. v. Adkins, 330 F, 2d 595 (9th Cir, 1964) .. 12
Levin v. Mississippi River Fuel Corp., 386 U. S. 162 (1967) 11
Liberty Mutual Insurance Co. v. Wetzel, 424 U. S, 737
CEBMED cvcconsscsecsenes TITTITITTT Tir rr ll
Link & Katz v. Mercedes-Benz, N. A. & Daimler Benz A. G.,
Civil No. 75-2195 (Srd Cir., filed Feb. 11, 1977) ....... 2,6
Matthews v. Weber, 423 U. S, 261 (1976) ..........00000s ll
Milliken v. Bradiey, 418 U. S. 717 (1974) .. 0... cc ccc cece ll
Mills v, Electric Auto-Lite Co,, 396 U. S, 375 (1970) ....... ll
Minnesota Mining & Mfg. Co. v. New Jersey Wood Finishing
Oe, S33 U. G. SRR CERRE) oc ccvsccenssaussuueneen 10
Moragne v. States Marine Lines, Inc., 398 U, §, 375 (1970)... 11
Moss v. Associated Transport, Inc., 344 F. 2d 23 (6th Cir,
| JETT eee* 27
Parkinson v. April Ind, Inc., 520 F, 2d 650 (2d Cir, 1975)... 15
Pure Oil Co, v. Suarez, 384 U. S, 202 (1966) ............. ll
Ralston v. Volkswagenwerk A. G., 61 F. R. D. 427 (W. D.
Ble. BEVO) occcccccccsececconseucnneeesbeaneueennn 18
TABLE OF CITATIONS (Continued).
Cases (Continued): Page
Reliance Electric Co. v. Emerson Electric Co., 404 U. S. 418
EE TEPC TT TT TTT TTT TTLITT TELE ll
Ross v. Bernhard, 396 U. S. 531 (1970) .........--.e-e0es 11, 27
Sanders v. John Nuveen & Co., Inc., 463 F. 2d 1075 (7th Cir.
1972), cert. denied, 409 U. S. 1009 (1973) ............ 12
Schnell v. Eckrich & Sons, 365 U. S. 260 (1961) ........... rs
Shumate & Co. Inc. v. National Association of Securities
Dealers, Inc., 509 F. 2d 147 (1975), cert. denied, 423
iy ack eed ennddddeceusecocececosccccecs 18, 19
Swofford v. B & W, Inc., 336 F. 2d 406 (5th Cir. 1964), cert.
denied, 379 U. S. 962 (1965) ............seeeeeeeee. 27
Tcherepnin v. Knight, 389 U. S. 322 (1967) ............... ll
Tidewater Oil Co. v. United States, 409 U. S. 151 (1972) ... 10
Toilet Goods Ass’n., Inc. v. Gardner, 387 U. S. 158 (1967)... ll
TSC Industries, Inc. v. Northway, Inc., 426 U. S. 438 (1976) 11
Union Carbide and Carbon Corp. v. Nisley, 300 F. 2d 561
il ens ceeereescesvessocoeees 27
United A.rlines Inc. v. Wiener, 286 F. 2d 302 (9th Cir.), cert.
denied, 366 U. S. 924 (1961) ............eeceeeeeeee 27
Usner v. Luckenbach Overseas Corp., 400 U. S. 494 (1971).. ll
Windham v. American Brands, Inc., 539 F. 2d 1016 (4th Cir.
1976) (case sub judice, following reargument before the
court en banc, February 14, 1977) ...............005: 19, 28
Miscellaneous:
All Writs Act (28 U. S. C. § 1651) ..............20e ce eee i
Clayton Act, Section 4, 15 U. S.C. §15 ......... 3, 4, 9, 18, 22, 23,
24, 25, 27, 28, 29, 30
I EO GE, OUD o.oo ccccecccccccccccces 10
Federal Rules of Civil Procedure:
EE 3, 10, 13, 16, 18, 20, 21, 25
EEE 3, 6, 18, 20, 21
Nee ene sg . cedivescucceecs 20
ee sce cnecccecoveses 3, 28
TABLE OF CITATIONS (Continued).
Miscellaneous (Continued): Page
Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15
Ce GG, Se Be > Ei Bk Oe ccc cdccepcocccceccoccei 20, 29
Hearings Before Subcommittee No. 3 of the House Comm.
on the Judiciary on H. R. 6238, 85th Cong. 2d Sess.
GU GE GHD Se cdcosececcécécccsgncneensesnnccoess 14
Interlocutory Appeals Act of 1958, 28 U. S. C. § 1292(b) ..3,5,7,
9, 10, 12, 13, 16, 17, 30
Landers, Of Legalized Blackmail and Legalized Theft; Con-
sumer Class Actions and the Substance Procedure
Dilemma, 47 So. Calif. L. Rev. 842 (1974) ........... 15, 16
Letter of Transmission of the Judicial Conference of the
United States, Draft of Section 1292(b) .............. 13
S. Rep. No. 2434, 85th Cong., 2nd Sess. (1958) ........... 13
Sherman Act, Section 1, 15 U.S.C. §1.......... 3, 4, 8, 23, 24, 30
U. S. Cong. and Admin. News, 85th Congress, 2nd Sess.
SEED ateceessoresscdenssaninmeadssanididadebnas 13
United States Constitution, Seventh Amendment ........... 3, 27
Wright, Federal Courts (3rd ed. 1976) ................... 17
EP ah. ar Gs SUED. decnuasnsoncbecdenstédaesnsienetas 1,2
Oe ee .. .. .scccccasswenedeasieeen con Se
ae Ge We Ge WED Cescnnedendeseucdncissdansoseesaueuel i,1,2
IN THE
Supreme Court of the United States
Ocroser TERM, 1976
| No.
MERCEDES BENZ OF NORTH AMERICA, INC.
and DAIMLER BENZ, A. G.,
Petitioners,
ov.
JULES LINK and SOLOMON KATZ, On BEHALF oF
THEMSELVES AND ALL OTHERS SIMILARLY SITUATED,
Respondents.
MOTION FOR LEAVE TO FILE PETITION FOR A
WRIT OF COMMON LAW CERTIORARI.
Now come Mercedes Benz of North America, Inc.
(“Mercedes”) and Daimler Benz A. G. (“Daimler”) and
move for leave io file the annexed petition for writ of cer-
tiorari pursuant to the All Writs Act (28 U. S. C. § 1651)
(See, In re 620 Church Street Bldg. Corp., 299 U. S. 24
(1936) ) directed to the United States Court of Appeals
for the Third Circuit, to review an order and judgment
of that court entered February 11, 1977 wherein that court
refused to review the order of the United States District
Court for the Eastern District of Pennsylvania dated
August 7, 1975.
(i)
MERCEDES-BENz OF NorTH AMERICA, INC.
AND DAIMLER BEnz A. G.
Petitioners
By their attorneys,
RoBeERT J. SPIEGEL,
SPENCER ERVIN, JR.,
WiLsur BourNE RUTHRAUFF,
1900 Two Girard Plaza,
Philadelphia, Pa. 19102
Of Counsel:
R. Mark ARMBRUST,
Gratz, TATE, SPIEGEL, Ervin & RUTHRAUFF,
1900 Two Girard Plaza,
Philadelphia, Pa. 19102
Daten: April 4, 1977
(ii)
IN THE
Supreme Court of the United States
OcrosER TERM, 1976
No.
MERCEDES BENZ OF NORTH AMERICA, INC.
and DAIMLER BENZ, A. G.,
Petitioners,
vo.
JULES LINK and SOLOMON KATZ, On BEHALF OF
THEMSELVES AND ALL OTHERS SIMILARLY SITUATED,
Respondents.
PETITION FOR A WRIT OF STATUTORY CERTI-
ORARI, AND, IN THE ALTERNATIVE, FOR A WRIT
OF COMMON LAW CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE THIRD CIRCUIT.
To the Honorable Chief Justice and Associate Justices of
the Supreme Court of the United States:
Mercedes and Daimler respectfully petition the Court
to grant a Writ of Statutory Certiorari pursuant to 28
U. S.C. § 1254(1) or, in the alternative, to grant a Writ
of Common Law Certiorari pursuant to 28 U. S. C. § 1651
to review the judgment and opinion of the United States
Court of Appeals for the Third Circuit entered in this case
on February 11, 1977, which judgment and opinion refused
to review the order of the United States District Court for
the Eastern District of Pennsylvania dated August 7, 1975.
(1)
2 Petition for Writ of Certiorari
OPINIONS BELOW.
The opinion of the Court of Appeals, not yet reported,
is printed in the Appendix beginning at A27. The opin-
ion of a panel of the Court of Appeals, 1976 Trade Cases
¥ 61,002, previously rendered in this case but thereafter
vacated by the Court of Appeals en banc, Link & Katz v.
Mercedes-Benz, N. A. & Daimler Benz A. G., Civil No.
75-2195 (3rd Cir., filed Feb. 11, 1977) is printed in the
Appendix beginning at Al8. The order and opinion of the
District Court, 1975-2 Trade Cases, § 60,534, is printed in
the Appendix beginning at A5.
JURISDICTION.
The judgment of the Court of Appeals was entered on
February 11, 1977. This Court’s jurisdiction is invoked
under 28 U. S. C. § 1254(1), which provides in part that
“cases in courts of appeals may be reviewed by the Su-
preme Court by . . . writ of certiorari.” In the alterna-
tive, if this case is not “in” the Court of Appeals because
of the refusal of that court to review the order of the Dis-
trict Court, jurisdiction is invoked pursuant to the All
Writs section of the Judicial Code, 28 U. S. C. § 1651, and
a writ of common law certiorari is requested. See In re
620 Church Street Bldg. Corp., supra.
Petition for Writ of Certiorari 3
QUESTIONS PRESENTED.
1. Did the court of appeals misinterpret 28 U. S. C.
§ 1292(b) in refusing to review the order of the district
court or to answer the first controlling question of law cer-
tified by the district court on the ground that it involved
the discretion of the district court and was not attended by
“special factors” and “other overriding legal issues”?
2. Do all large antitrust class action certifications
under F. R. C. P. 23(b)(3) present “controlling questions
of law”, and is interlocutory review of such certifications
in large class actions required to prevent the insulation of
such orders from effective appellate review?
3. May a district court grant “contingent” class cer-
tification while specifically deferring the determination of
whether issues raised with regard to “damages” meet the
requirements of F. R. C. P. 23(b)(3)?
4. May a district court grant class certification under
F. R. C. P. 23(b)(3) when it has misdefined and ignored
the issues present in a § 4 Clayton Act class action?
5. In a claim under § 4 of the Clayton Act, do sepa-
rate trials of “liability” and “damages,” before different
juries violate the Seventh Amendment to the Constitution?
CONSTITUTIONAL PROVISION,
STATUTES AND RULES.
United States Constitution, Seventh Amendment
Interlocutory Appeals Act of 1958, 28 U. S. C. § 1292(b)
Sherman Act, Section 1, 15 U. S. C. §1
Clayton Act, Section 4, 15 U. S. C. § 15
Rule 23, Federal Rules of Civil Procedure
Rule 42(b), Federal Rules of Civil Procedure
The text of these are set forth in full in the Appendix
beginning at A65.
4 Petition for Writ of Certiorari
STATEMENT OF THE CASE.
This action was brought by two individuals on be-
half of a purported nationwide consumer class of 300,000
Mercedes owners and lessees seeking damages under Sec-
tion 4 of the Clayton Act and alleging that the defend-
ants, Mercedes and Daimler, conspired with 588 Mer-
cedes dealers,’ over a four year period, to artificially raise
and fix the prices of parts and labor time spent for all
“nonwarranty” repairs to plaintiffs’ automobiles in vio-
lation of Section 1 of the Sherman Act (R. 5a et seq.).
Plaintiffs and defendants demand a jury trial.
Plaintiffs moved before the district court for cer-
tification of the action as a class-action and for definition
of the class as “. . . all persons, firms or corporations who
have had nonwarranty auto repairs performed on Mer-
cedes-Benz automobiles, owned or leased by them . . .,
during the period March 27, 1970 to March 27, 1974”
(A6). Plaintiffs were granted full discovery to develop
facts in support of their motion. When the question of
certification was presented to the district court it was
undisputed that each of the approximately 300,000 poten-
tial claimants would have to make a separate factual pres-
entation on the issue of whether and to what extent he
was injured. Other facts relevant to class certification, as
developed during discovery or presented in unchallenged
affidavits of defendants, are as follows: (1) during the rel-
evant period the number of parts allegedly price fixed ex-
ceeded 26,000 and the number of labor operations allegedly
priced fixed number in the thousands; (2) the total num-
ber of documents which would be involved in an attempt
by all of the members of the class to establish whether and
to what extent they were damaged would be between
4,800,000 and 12,000,000 customer repair invoices; (3)
1. The dealers are named as “co-conspirators” but not as
defendants. See Appendix in the Third Circuit at 7a, certified to
this Court as the Record, and hereinafter cited as “R”.
ee oe et
Petition for Writ of Certiorari 5
tens of millions of different parts and labor operations
listed on the invoices; (4) thousands of different labor
rates for mechanics’ time set by each of the 588 dealers,
In the face of the foregoing record, the district court,
in August 1975, granted plaintiffs’ motion for certifica-
tion® (Al). In its Order the district court certified the
issue of class certification for immediate appellate review,’
stating that:
“The undersigned is of the opinion that an imme-
diate appeal from this Order is authorized by 28
U.S. C. § 1292(b), in that:
1. It involves controlling questions of law
as to which there is substantial ground for dif-
ference of opinion, namely,
A. Whether it is proper to certify a class
of approximately 300,000 members where the
proof of damages will vary for each member
of the class;
B. Whether there can be a bifurcated
trial in this case of liability and damages with
separate juries for each segment of the case;
and
2. An immediate appeal from this Order
may materially advance the ultimate termination
of this litigation.” (A2).
2. The district court also granted a stay of all proceedings in
the case, except Rule 12 Motions (A2-3), pending application to
the U. S. Court of Appeals for the Third Circuit for permission
to appeal. Successive stays have been thereafter granted by the
district court and the court of appeals, so that proceedings in the
case remain stayed pending the present petition (A64),.
3, On August 15, 1975, defendants also filed an appeal from
the Order of August 7, pursuant to 28 U. S. C. aT n view of
the Third Circuit’s order of September 12, 1975, permitting the
Bae -bd appeal, the § 1291 appeal was not docketed in the Third
ircuit and was dismissed by stipulation in the district court pur-
suant to F. R. A. P. 42(a) on February 17, 1976.
6 Petition for Writ of Certiorari
In its memorandum opinion, the district court
acknowledged the problems presented by certification of
such an “enormous” class (A9) where the proof of damages
will vary for each member of the class (A15), but con-
cluded that those problems could be dealt with by bifur-
cated trials (All). Acknowledging that different courts
had reached different conclusions on the question of cer-
tification where the class was so large, the district court
invited immediate review because certification was of
“tremendous import” to all parties since such certification
would of itself impose heavy burdens on them (A15),
A majority of the en banc court “ voted to vacate the
earlier order granting permission to appeal, and to remand
the case to the district court (A63),
Despite the certified questions, in which the district
court requested appellate review of the propriety under
Rule 23(b)(3) of its class action certification and its as-
sumed procedures for the conduct of the trial as a class
action,‘ the majority defined the sole issue in the appeal as:
“Whether an antitrust action with potentially 300,000
claimants is manageable as a class action . . .” Link
& Katz v. Mercedes Benz of N. A. Inc., and Daimler-
Benz, A. G., Civil No. 75-2195 (3rd Cir., filed Feb. 11,
1977) (hereinafter cited to appropriate Appendix ref-
erence as “Op. A28” )
and answered its own question:
3a. Permission to Appeal was granted (A4), but a second panel
declined to review the case and remanded it to the district court
(A26); thereafter, re-hearing en banc was granted.
4, Under Rule 23(b)(3), certification is only “proper” if two
questions are resolved by the district court. e questions are:
predominance of the common issues over individual issues and
whether a class action is superior to other means of adjudication.
“Manageability” is only one of four “matters pertinent” to the above
questions.
Petition for Writ of Certiorari 7
“We decline to answer on the ground that the matter
is one of fact subject to determination by the district
court.” Id.
The majority further stated:
“In affording immediate appellate review of ‘con-
trolling questions of law,’ § 1292(b) was not designed
to substitute wholesale appellate certainty for trial
court uncertainty . . .” (Op. A31)
The majority, treating the second certified question as
unrelated to the first, termed it: “. . . essentially a request
for an advisory opinion, which we may not honor” (Op.
A28), and noted that the case was at a “preliminary stage”
(Op. A33). The majority supported the refusal to hear the
matter by stating that if after certification the case proved
unmanageable, it could be decertified (Op. A33), so that
the question of certification might never have to be dealt
with.
In a concurring opinion, Chief Judge Seitz argued that
there was presented a “controlling question of law,” but
that there had been no showing that the issues presented
“substantial ground for difference of opinion.” (Op. A35-
36). Judge Seitz stated, however, that he might have
found that there was “substantial ground for difference of
opinion” if the district court’s decision had rested on the
assumption that it could later decertify the class (Op. A36).
In a dissenting opinion joined in by Judge Rosenn,
Judge Adams argued that “a serious and controlling legal
question has emerged with respect to the issue of separate
juries to try the liability and damage phases . . .” which
should be reviewed (Op. A39).
Judge Van Dusen also dissented on the basis that the
district court failed “to make findings or show considera-
tion” of seven key factors “among others” (Op. A41), with-
out which it could not have complied with the Rule
8 Petition for Writ of Certiorari
23(b)(3) requirement that it exercise “informed judgment”
as to the “superiority” of class treatment (A41 n.1). As to
the question of bifurcated jury trial, Judge Van Dusen con-
cluded that while in his opinion the Seventh Amendment
was no bar to a bifurcation of this trial, he did not believe
“that class action treatment is permissible on this record,
where a ‘$4 damage action charging price fixing’ is in-
volved.” (Op. A44).
Judge Gibbons in dissent agreed with Judge Van
Dusen that the district court misapprehended, inter alia,
“the nature of §4 liability in a Rule 23(b)(3) context
.. .” (Op. A48) and further observed:
“Assuming that such a price fixing conspiracy did exist,
its impact upon the various class members would in all
likelihood not present common questions of fact . . .
Given 588 individual dealers, and thousands of differ-
ent parts and labor rates, it is almost impossible to
iew the question of liability as being a common
question since such liability determinations necessarily
involve the question of impact of the conspiracy upon
each individual class member.” (Op. A49 n. 18).
Since in Judge Gibbons’ view the district court incor-
rectly concluded that a § 4 case could be bifurcated into
“liability” and “damages” for separate trials, and since
“(t]he decision to have separate juries for each segment of
the bifurcated trial was an essential postulate of the court's
reasoning in support of its order granting class certifica-
tion,” Judge Gibbons concluded that the appeal should
have been granted and the jury issue decided (Op. A51-2).
Reaching the merits, Judge Gibbons found “no statu-
tory or due process barrier” (Op. A58) to trying first before
one jury the “common” issue of whether the antitrust laws
(§ 1 Sherman Act) were violated by defendants, and then
having separate juries try for each complainant the issue
of whether and to what extent that complainant was
injured (Op. A56).
et ek ee Oe: see ne. LO
Petition for Writ of Certiorari 9
SUMMARY OF REASONS FOR GRANTING
THE WRIT.
The proper standards for granting interlocutory appeal
under Title 28 U. S. C. § 1292(b) in a purported class
action under § 4 of the Clayton Act, and the intercon-
nected question of whether there can be a bifurcated jury
trial in such cases have never been reviewed by this Court.
The restrictive interpretation of interlocutory appealability
enunciated by the majority puts the Third Circuit in con-
flict with the prior decisions of the Ninth, Seventh and
Second Circuits and with its own prior decisions. The
majority's improper approval of the device of “contingent”
certification upon which the district court’s decision was
premised places the Third Circuit in conflict with other
circuits and opens the door to improvident certifications
based on the erroneous belief that the matter can always
later be decertified without harm. However, the very fact
of certification with notice to consumers of defendants’
products imposes heavy and irreparable burdens on the
parties, as well as consuming needless district court time.
The majority refused to deal with the question of bi-
furcated jury trial; such procedure impinges upon the con-
stitutional right to jury trial, opens the door to devices not
authorized by any statutory or other authority and as a
practical matter, simply cannot work. Accordingly this
case calls for review by this Court.
10 Petition for Writ of Certiorari
REASONS FOR GRANTING THE WRIT.
I. The Proper Construction of § 1292(b), the Interlocutory
Appeals Act, Is an Important Federal Question Which
Should Be Promptly and Definitively Resolved by
This Court.
The court of appeals has improperly narrowed the
class of cases reviewable under the Interlocutory Appeals
Act of 1958, 28 U. S. C. § 1292(b) ° (see discussion pp. 12-
14, infra), the effect of which narrowing is to insulate Rule
23 class action certifications from any effective appellate
review. (See pp. 15-16, infra).
The Supreme Court has never had occasion to inter-
pret the scope of § 1292(b)°* and should now provide
definitive guidance.
This Court has made plain its determination that the
section should be used to alleviate the rigidity and harsh-
ness of the final judgment rule."
5. Section 1292(b) provides that the district judge may certify
for review an order which involves ( 1) “controlling question of
law,” (2) to which there is “substantial ground for difference of
inion,” and (3) the appeal of which “may materially advance the
timate termination of the litigation.” Acceptance of the «’ is
within the “discretion” cf the court of appeals, 28 U. S. C.
1292(b). The only issue in this case is the meaning of “control-
ing question of law” since certification of requirements (2) and
( 3) was not questioned by the court of appeals, except Judge Seitz,
concurring.
6. Tidewater Oil Co. v. United States, 409 U. S. 151 ae
oO with the Act’s relationship to the Expediting Act, 15 U. S, C,
29.
7. It is significant that this Court granted certiorari in at least
twenty-one cases which had been certified below under so ha
and thereby was enabled, before final judgment, to clarify the law
and shorten litigation on such issues as: transfer orders, Continental
Grain Co. v. Barge FBL — 585, 364 U. S. 19 (1960); the tolling
of the statute of limitations in both non class and class action
antitrust cases, Minnesota Mining & Mfg. Co. v. New Jersey Wood
Finishing Co., 381 U. S. 311 (1965) and American Pipe and
~~ - + tee Le ee Oe
ae
ee ——
Petition for Writ of Certiorari 11
“We believe that Congress, in enacting present §§ 1291
and 1292 of Title 28, has been well aware of the
dangers of an overly rigid insistence upon a ‘final de-
cision’ for appeal in every case, and has in those
sections made ample provision for appeal of orders
which are not ‘final’ so as to alleviate any possible
hardship.” Liberty Mutual Insurance Co. v. Wetzel,
424 U. S. 737, 746 (1976).
Mr. Justice Frankfurter, referring to § 1292(b) and
other interlocutory appeal statutes, stated:
“Since the procedural aspects of law deal with the
practical affairs of men and do not constitute an ab-
stract system of doctrinaire notions, Congress has
recognized the need of exceptions for interlocutory
orders in certain types of proceedings where the dam-
age of error unreviewed before the judgment is
definitive and complete, has been deemed greater
than the disruption caused by intermediate appeal.”
DiBella v. United States, 369 U. S. 121, 124-25 (1962)
(citations omitted ).
7. (Cont’d.)
Construction Co. v. Utah, 414 U. S. 538 (1974); the right to a
ury trial in a shareholders’ derivative suit, Ross v. Bernhard, 396
. 8. 531 (1970); whether a state can sue on behalf of its citizens
the antitrust laws, Hawaii v. Standard Oil Co., 405 U. S.
251 Baa and the jurisdictional reach of antitrust laws, Gulf
Oil Corp. v. C Paving Co., 419 U. S. 186 ww See also,
TSC Industries, Inc. v. Nort , Inc., 426 VU. S. 438 (1976
Abbott Labs v. Portland Retail s, 45 U.S. 1 ti9v8)
Matthews v. Weber, 423 U. S. 261 (1976); Milliken v. Bradley,
418 U. S. 717 (1974); Reliance Electric Co. v. Emerson Electric
Co., 404 U. S. 418 (1972); Usner v. Luckenbach Overseas Corp.,
400 U. S. 494 (er) + ~ v. States Marine Lines, Inc., 398
IF ills v. Electric Auto-Lite Co., 396 U. S. 375
we} : we. v. United — | aie Ine., 392
. S. ; Tcherepnin v. ' . S. 322 (1967);
Toilet Goods y~ a Inc. v. Gardner, U. S. 158 (1967); mil
mann Distilling Corp. v. Maier Brewing Co., 386 U. S. 714 (1967);
Levin v. Mississippi River Fuel a 386 U. S. 162 (1967); Pure
Oil Co. v. Suarez, 384 U. S. 202 (1966); Schnell v. Eckrich & Sons,
365 U. S. 260 (1961).
12 Petition for Writ of Certiorari
A. The Narrow Interpretation of “Controlling Ques-
tion of Law” in § 1292(b) by the Court of Appeals
Is Impropef and Is in Conflict With Other
Circuits.
The court of appeals has taken an impermissibly nar-
row approach to the interpretation and application of
§ 1292(b) by defining “controlling question of law” as
being limited to those issues in which no factual deter-
mination or exercise of discretion was involved, and re-
quiring that there be additional “special factors” and
“other overriding legal issues.” (Op. A30).
The refusal to review any issues containing factual
determinations or an exercise of discretion is contrary to
the interpretation of § 1292(b) followed by the courts of
appeals for the ninth, seventh and second circuits.
Blackie v. Barrack, 524 F. 2d 891, 900-01 (9th Cir. 1975);
Lear Siegler, Inc. v. Adkins, 330 F. 2d 595, 598 (9th Cir.
1964) “[t]he controlling question of law here involved is
whether the district court was in error or abused its dis-
cretion in granting the stay”); Bersch v. Drexel Firestone,
Inc., 519 F. 2d 974, 994 and n. 44a (2d Cir. 1975), cert.
denied, 423 U. S. 1018 (1975); Sanders v. John Nuveen &
Co., Inc., 463 F. 2d 1075, 1081-83 (7th Cir. 1972), cert.
denied, 409 U. S. 1009 (1973). In fact no better example
of the correct interpretation of § 1292(b) can be found
than Katz v. Carte Blanche, 496 F. 2d 747 (3rd Cir. ), cert.
denied, 419 U. S. 885 (1974), wherein the Third Circuit
said:
“The key consideration is not whether the order
involves the exercise of discretion, but whether it truly
implicates the policies favoring interlocutory appeal.
The determination of what orders are properly re-
viewable under § 1292(b) must be made by a prac-
tical application of those policies, not by a mechanical
ee
Cele ce ¥. S :
Petition for Writ of Certiorari 13
application of labels such as ‘discretionary’ or ‘non-
discretionary.” Katz v. Carte Blanche, supra at 756
(emphasis added).
By labeling Rule 23 requirements as “discretionary”
the court of appeals has refused to offer any guidelines or
supervision to the district courts for determination of Rule
23 class action motions. It has indicated that it will abide
by any district court determination if that court, as it did
in this case, merely pays lip service to the requirements of
Rule 23 by making conclusory statements that the require-
ments of the Rule have been met.
Furthermore, the court of appeals has improperly
engrafted onto “controlling question of law” the additional
requirement that such a question must also be attended
by special factors, overriding legal issues (Op. A30) or
what some courts have termed “exceptional circumstances.”
This interpretation has been specifically rejected by the
Fifth Circuit in Hadjipateras v. Pacifica, $8. A., 290 F. 2d
697, 703 (5th Cir. 1961), as a “Shibboleth,” frustrating
the policy in § 1292(b).
This restrictive interpretation of interlocutory appeal-
ability is in direct conflict with the expressions of this
Court as to the role of § 1292(b) in the appellate process
and ignores the meaning of the Act as illuminated by its
legislative history." That history demonstrates that the
8. The Interlocutory Appeals Act of 1958 resulted from the
“growing awareness of the need for ition of cases pendin
before District Courts.” S. Rep. No. 2434, 85th Cong., 2n
Sess. (1958), reprinted in U. S. Cong. and Admin. News, 85th
Cong., 2nd Sess. at 5256.
e provision is an attempt to remedy not only the injustice
and burden to a party from an erroneous decision of a determina-
tive issue early in the proceedings but also the subsequent waste
of judicial resources by the trial court after an erroneous decision.
Letter of Transmission of the Judicial Conference of the United
14 Petition for Writ of Certiorari
Act’s primary purpose was to provide immediate appellate
review of large and complicated lawsuits, the “exceptional
cases where a decision of the appeal may avoid protracted
and expensive litigation, as in antitrust and similar pro-
tracted cases . . .” Hearings before subcommittee No.
3 of The House Comm. on the Judiciary on H. R. 6238,
85th Cong. 2d Sess. ser. 11 (i858) (emphasis added). As
noted by Judge Brown,
“Moreover, it was a judge-sought, judge-made, judge-
sponsored enactment. Federal judges from . . . ex-
perience gained in the adjudication of today’s com-
plex litigation, were acutely aware . . . [that] there
are occasions . . . in which as a practical matter orderly
administration is frustrated by the necessity of a waste
of precious judicial time while the case grinds through
to final judgment as the sole medium through which
to test the correctness of some isolated identifiable
point of fact, of law, of substance or procedure, upon
which in a relative way the whole case or defense will
turn.” Hadjipateras v. Pacifica, S.A., supra, at 702-
703 (emphasis added).
B. Large Class Action Certifications Present Control-
ling Questions of Law, Because of Their Deci-
sive Impact on the Future Course of the Litiga-
tion and Unless Such Certifications Are Reviewed
Immediately, They Are Effectively Insulated
From Any Appellate Review.
Any large class action determination presents a “con-
trolling question of law” because of the decisive impact
8. (Cont'd.)
States, Draft of Section 1292(b), reprinted in U. S. Cong. and
Admin. News, supra, at 5258.
This act followed the judicially created exception to the final
judgment rule, the collateral order doctrine embodied in Cohen v.
Beneficial Industrial Loan Corporation, 337 U. S. 541 (1949).
Petition for Writ of Certiorari 15
which it necessarily has on the subsequent course of the
litigation and the requisite commitment of judicial re-
sources.
It is unarguable that a case claiming damages on be-
half of one or two individual plaintiffs will be conducted
in a markedly different manner from a case in which dam-
ages on behalf of a nationwide class are sought. For ex-
ample, the permitted scope of discovery and pre-trial pro-
ceedings in general may be considerably broader, more
costly and time consuming if a nationwide class is certified.
Furthermore, defendants in a nationwide class action suffer
irreparable harm to their business goodwill and reputation
by the sending of class action notice to the consumers of
its product. No later appellate review, no matter how
thorough, can ever undo the effect of the notice.
Now is the only time for meaningful appellate review
of the class certification question. As has been noted:
“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 this action.” Herbst v.
International Telephone & Telegraph Corp., 495 F. 2d
1308, 1313 (2d Cir. 1974).
Further, review of certification now is clearly appropriate
since there is growing recognition that class action certifica-
tions have an in terrorem effect on settlement. See Op.
A43, (Van Dusen, J., dissenting); Parkinson v. April Ind.
Inc., 520 F. 2d 650, 654 (2d Cir. 1975); Herbst v. Int'l. Tel.
& Telegraph Corp., supra at 1313; cf., Kline v. Coldwell,
Banker & Co., 508 F. 2d 226, 236-38 (9th Cir. 1974) (Dun-
way, J., concurring), cert. denied, 421 U. S. 963 (1975);
See also, In re Hotel Telephone Charges, 500 F. 2d 86 (9th
16 Petition for Writ of Certiorari
Cir. 1974); Landers, Of Legalized Blackmail and Legalized
Theft; Consumer Class Actions and the Substance Pro-
cedure Dilemma, 47 So. Cauir. L. Rev. 842 (1974).
As this Court noted in a 10(b)(5) securities class
action:
“even a complaint which by objective standards may
have very little chance of success at trial has a settle-
ment value to the plaintiff out of any proportion to its
prospect of success at trial so long as he may prevent
the suit from being resolved against him by dismissal
or summary judgment. The very pendency of the law-
suit may frustrate or delay normal business activity
of the defendant which is totally unrelated to the law-
suit.” Blue Chip Stamps v. Manor Drug Stores, 421
U. S. 723, 740 (1975) (citations omitted ).
Of course not every class action certification is review-
able under § 1292(b), since the district court also must
certify that “there is substantial ground for difference of
opinion [on the controlling question of law] and that an
immediate appeal from the order may materially advance
the ultimate termination of the litigation.” A district court
will be naturally hesitant to certify that it may have erred.
Furthermore if the circuit courts accept their responsibility
under § 1292(b) to provide concrete guidelines for Rule 23
determinations, the number of such determinations in
which district courts would certify that a “substantial
ground for difference of opinion” exists would greatly de-
crease. Finally, the appellate court has the discretion to
accept or reject the appeal.
Thus, acceptance by this Court of the proposition that
class certifications present “controlling questions of law”
would not result in a substantial increase in § 1292(b)
appeals.
Petition for Writ of Certiorari 17
The appellate court’s statement that“. . . § 1292(b)
was not designed to substitute wholesale appellate cer-
tainty for trial court uncertainty . . .” (Op. A31) is a
betrayal of the judicial maxim best enunciated by Lord
Coke that “the knowne certaintie of the law is the safetie of
all.” The court has abdicated a traditional appellate func-
tion of providing concrete guidelines to lower courts within
which to make factual determinations ® and has retreated
behind the excuse that:
“Our constantly increasing caseload reinforces the
other more philosophical reasons for that policy.”
(Op. A30).
Judge Gibbons in dissent termed that excuse “insup-
portable” (Op. A52), noting that “§ 1292(b) appeals from
class action determinations . . . are an insignificant part
of the appellate caseload.” *° (Op. A52).
The court of appeals has, thus, tacitly approved the
legal morass and total uncertainty which has proliferated
as a result of the irreconcilable decisions in the circuit and
district courts in large class actions to the detriment of both
plaintiffs and defendants.
9. The discretionary aspects of } 1292(b) should not be used
as a rationale for avoiding the difficult questions presented in class
certification. As has been noted:
“[The] spirit and purpose [of Rule 23] 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 determina-
tion may be mooted and difficult questions avoided.” Anschul
v. Sitmar Cruises, Inc., 544 F. 2d 1364, 1373 (7th Cir. 1976)
(Swygert & Bauer, J.J., dissenting).
10. According to Professor Wright, all the cases certified under
§ 1292(b) amount to about 100 per year of which appeal is allowed
by the Circuits in about half. Thus § 1292(b) appeals are not
any 2 Ty by A.» case =e of —: of appeals which
in amounted to 16,436 cases. Wright, Federal rts, 5
(3rd ed. 1978). eee
18 Petition for Writ of Certiorari
Il. This Court Should Exercise Judicial Oversight to Cor-
rect the Failure of the District Court Both to Construe
Properly the Requirements of F. R. C. P. 23(b)(3) and
to Require the Proponents of the Class to Meet Their
Burden of Demonstrating Compliance With the Rule.
The federal court system is presently in irreconcilable
conflict on the findings and analysis required of district
courts before certifying under Rule 23, particularly in § 4
Clayton Act cases. Therefore, it is imperative that in this
§4 Clayton Act action this Court resolve such conflict
and furnish definitive guidance to the lower courts.
The essential split in the analysis "' and application
of Rule 23 in Clayton Act cases is demonstrated by the
contrasting views expressed by the Ninth and Fifth Circuits
compared with that enunciated by the Fourth Circuit.
The Fifth Circuit has made the following analysis of
the interplay between the antitrust laws and Rule 23
requirements as a prerequisite to class certification:
“The district court denied Shumate class action status
because of its conclusion that, even if a conspiracy
were proved, the controlling question as to liability
was whether a class member had suffered injury . . .
[T]he proof of injury to business or property of each
class member is critical for the determination of de-
fendants’ liability to any individual.” Shumate & Co.,
Inc. v. National Association of Securities Dealers, Inc.,
1l. As might be expected in an area of the law which suffers
from lack of appellate peeve, the decisions in the district
courts are also irreconcilable and so varied they often cannot be
categorized except on the basis of the judge’s predilection towards
the social desirability of class actions.
Compare of In re Transit Co. Tire Litigation, 67 F. R. D. 59
W. D. Mo. 1975); Ralston v. Volkswagenwerk A. G., 61 F. R. D.
(W. D. Mo. 1973); Al Barnett v. Outboard Marine Corp.,
64 F. R. D. 43 (D. Del. 1974); with Arenson v. Board of Trade of
Chicago, 372 F. Supp. 1349 (N. D., Ill. 1974); City of P lphia
v. Am, Oil Co., 53 F. R. D. 45 (D. N. J. 1971); Illinois v. Harper &
Row Publishers, Inc., 301 F. Supp. (N. D. Ill. 1969).
Petition for Writ of Certiorari 19
509 F. 2d 147, 155 (1975), cert. denied, 423 U. S.
868 (1976) (citations omitted ).
Consistent with that view is the Ninth Circuit’s opinion:
“The appellee's attorneys have asserted that bur-
dening the already strained judicial resources with
this class action, which promises no real benefit to
class members, is nonetheless justified on the ground
that allowing the suit will serve to ‘punish’ and
‘deter’ antitrust violations. But the Congressional
scheme does not contemplate that private attorneys
are to act as prosecutors to force antitrust violators to
disgorge their illegal profits in the general interest of
society at large. The antitrust laws focus on the com-
pensation of parties actually injured, presupposing
that a plaintiff can prove that he was in fact injured
as a proximate result of an antitrust violation.” In Re
Hotel Telephone Charges, supra at 91-92 (citations
omitted ).
In contrast, a divided panel of the Fourth Circuit re-
cently took the position that the plaintiffs have the benefit
of a rebuttable presumption of class certification propriety:
“What we do say is that there is almost a rebuttable
presumption that such a class action should be al-
lowed where-there is a plausible claim of violation
of the Sherman Act.” Windham v. American Brands,
Inc., 539 F. 2d 1016, 1021 (4th Cir. 1976) (case sub
judice, following reargument before the court en
banc, February 14, 1977).
Similarly, the decision in the district court in this case,
although not adopting the “rebuttable presumption”
theory, had the same effect, by utilizing a “wait and see”
attitude.
20 Petition for Writ of Certiorari
The recent enactment of the Hart-Scott-Rodino Anti-
trust Improvements Act of 1976, 15 U. S. C. §§ 15¢ to
15h, 18a, 66, providing for vindication of the rights of
“society at large” not by class actions but by parens
patriae actions, eliminates any justification for expanding
the application of Rule 23, and the antitrust laws to ac-
commodate plaintiffs for whom class actions would have
been the only practical way that individual consumers
could recover.
A. The District Court’s “Contingent” Class Certifica-
tion Is Impermissible Under F. R. C. P. 23(b)(3).
The district court erred by holding that plaintiffs,
after class certification should “be given an opportunity to
develop a method of proving damages . . .” (A10)." The
court concluded by claiming that: “In any event the court
has the right to decertify the class following a determina-
tion of liability . . .” (A11).
This procedure violates the provision of Rule 23(c)
(1) that:
“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.” F. R. C. P. 23(c)(1).
The majority declined to review the district court's
order, observing that: “The district court therefore viewed
the scope of its order as limited and contingent.” (Op.
A32). Rule 23(c)(1), however, only permits “condi-
12. The requirement that plaintiffs must show compliance
with Rule 23 does not involve a mini trial on the merits, forbidden
this Court in Eisen v. Carlisle & Jacquelin, 417 U. S. 156 (1974),
ba simply how the trial will be conducted as a class action.
7
P
:
*
4
Petition for Writ of Certiorari 21
tional” certification, ie., certification after showing com-
pliance with all requirements of the Rule, conditioned
upon plaintiffs’ continued demonstration of compliance
therewith. But the rule does not permit “contingent”
certification, i.e., certification prior to a showing of com-
pliance with all requirements of the rule subject to later
showing of compliance."
Thus, the court of appeals distorted Rule 23(b) (3)
and authorized the district court to certify the action
as a class action in the face of known and unresolved
problems, anticipating that ultimate decertification—after
the parties and court have borne the burdens of class
action development—may likely be the only resolution of
those problems. This ruling completely distorts the law
governing class action certification and should now be
reviewed by this court. Furthermore the district court’s
contingent certification procedure permits the plaintiffs
another opportunity to concoct at their leisure a method
of proving damages, after plaintiffs have sent notice to the
consumers of defendants’ product and is a procedure which
is impermissible under Rule 23 and inherently unfair to
the defendants in this and any other consumer class action.
B. The District Court Improperly Interpreted and
Incorrectly Defined the Rule 23(b)(3) Issues in
This § 4 Clayton Act Case.
The district court’s formulation of seven “common
questions” “* (A7-8) demonstrates its misconception of the
13. “. . . the judge may not conditionally certify an improper
class action on the basis of a lative possibility that it may
later meet the requirements.” Blackie v. Barrack, supra at 901.
14, The district court's expression of the “common questions”
was as follows (A7-8):
“[1.] whether defendants combined and conspired to
establish retail parts prices to be charged to the class by the
22 Petition for Writ of Certiorari
issues and proof required, as the dissenting opinions of
both Judges Gibbons and Van Dusen demonstrate.
The district court’s questions [1], [2], and [5], ie.,
whether defendants conspired between themselves, or
with the National Dealer Council, to establish the retail
price of parts and labor, ignore the language of the com-
plaint which alleges a conspiracy between defendants and
588 dealers, and not one between defendants or between
defendants and a National Dealer Council (R. 5a, 7a).
The district court’s question [4] concerning enforced
compliance, is equally irrelevant since the plaintiffs have
alleged a conspiracy, or agreement, not coercion (R. lla).
The district court thus appears to have considered the
issue to be whether Mercedes and Daimler conspired with
a dealer-council, and then enforced that conspiracy on all
the dealers.
The district court’s question [6], whether the plain-
tiff class was harmed by the alleged acts of the defendants
“ __. demonstrates the court’s misapprehension
of the nature of § 4 liability in a Rule 23(b)(3) con-
14. (Cont'd. )
2.] whether defendants combined and co ired to estab-
lish designated labor times to be utilized by dealers in setting
prices to the class for nonwarranty repairs of Mercedes-Benz
vehicles;
(3.] whether documents establishing prices for parts and
= _— of designated labor times were circulated among
e ;
(4.] whether defendants enforced someenaase by the
gy in regard to the prices for parts for designated labor
(5.] whether the defendants conspired with the Mercedes-
Benz National Dealer Council in regard to establishment of
fixed prices for parts and designated labor time for repair
work in the performance of nonwarranty auto repairs;
(6.] whether the plaintiff class was harmed by the alleged
acts of the defendants and;
[7.] whether the alleged acts of the defendants, if proved,
violate the antitrust statutes of the United States.”
ee atin ih.
a
i
4
Petition for Writ of Certiorari 23
text, for obviously only individual members of the
class, not the class, can be injured in business or
property by a retail price fixing conspiracy . . .
[C]ertainly there is nothing in the district court opin-
ion, or in the affidavits which have been called to our
attention, suggesting that the conspiracy had a like
effect upon the business or property of every repair
customer of all 588 individual Mercedes dealers.”
(Op. A48-49) (Gibbons, J., dissenting ).
The district court’s question [7], whether defendants’
alleged acts if proved violate the antitrust laws, further
reflects the court’s “misapprehension of the nature of § 4
liability in a Rule 23(b)(3) context,” since whether a
part — conspiracy, if — violates § 1 [Sherman
ardly seems an open le uestion.” .
(Gibbons, J., eceiiiien! ). - sinensis
In addition to the above misdefinitions, the district
court failed to consider several other tactors present in a
§ 4 Clayton Act action.
As Judge Van Dusen noted in dissent below, the dis-
trict court ignored the following:
“(a) that the liability aspect of the trial required
a decision not only of violation of §§ 1 and 2 of the
Sherman Act, 15 U. S. C. §§ 1 and 2, but also deter-
mination under 15 U. S. C. § 15 of the fact of damage
(an element which would give rise to problems in
proving the latter item on a class basis where the class
consists of ‘potentially 300,000 claimants’ located in
all. 50 states, Puerto Rico, Guam,
Sead, uam, and the Virgin
(b) that there would be a substantial difference
in the quantum and character of liability proof under
§ 4 of the Clayton Act, 15 U. S. C. 15, if the plaintiffs
24 Petition for Writ of Certiorari
included all the above 300,000 individuals alleged to
comprise the class, rather than only the named plain-
tiffs;
(c) that determination of liability itself under § 1
of the Sherman Act might also vary as to each
class member, depending upon whether the particular
dealer-defendant participated in the conspiracy, so
that inquiry is required into whether the common
questions predominate over the individual questions
making a class action superior under F, R. Civ. P.
23(b) (3);
(d) that, on this record, there would appear to
be no theoretical or practical formula or method to aid
in the computation of damages sustained by different
individuals, potentially requiring each class member to
produce voluminous documentary evidence of his
transactions in order to secure judgment;
(e) that, in view of the above, there is a question
as to whether the named plaintiffs are typical as re-
quired by F. R. Civ. P. 23(a)(3);
(f) that, if more than one class is necessary, the
named plaintiffs might not adequately represent many
members of the group of 300,000 persons treated as
members of various classes and subclasses by the dis-
trict court, see F. R. Civ. P. 23(d)(4); and
(g) that class suits have an in terrorem effect in
forcing settlement (cf. Blue Chip Stamps v. Manor
Drug Stores, 421 U. S. 723, 740-42 (1975) ).” (Op.
A41-43) (footnotes omitted ).
The failure of the district court to perceive the
elements of § 4 Clayton Act liability is most aptly sum-
marized by Judge Gibbons:
ee ne ee ee ee
i
|
.
;
Petition for Writ of Certiorari 25
“The district court’s misconception of the sub-
stantive elements of § 4 liability are clearest in its
treatment of the distinction between § 4 ‘liability’ and
‘damages.’ Nowhere does the court show an aware-
ness that some degree of injury to business or prop-
erty—damages if you will—is a substantive element
of § 4 liability. (Op. A50) (dissentirg opinion).
III. In a § 4 Clayton Act Case the Issues of Liability and
Damages Cannot Constitutionally Be Severed and
Tried Before Separate Juries.
One of the most puzzling features of the opinion of the
majority of the court of appeals, was its refusal to answer
the question certified by the district court as to whether
there may be separate juries utilized during the liability
and damages phases of a bifurcated trial. There were two
grounds advanced for this refusal. First, the majority
found that since there was no “definitive order” on that
subject by the district court, “the inquiry is essentially a
request for an advisory opinion, which we may not honor.”
(Op. A28).
This conclusion is simply contrary to the plain lan-
guage and rationale of the district court’s decision. That
court was required by Rule 23 to find that the clas action
was superior to other procedures as a method ox solving
the controversy. However, the court was faced with the
acknowledged problem that proof of damages would vary
for each of the 300,000 potential claimants. Its premise
in granting certification was that this problem could be
solved by a bifurcated jury trial, i.e., a common trial on lia-
bility followed by a separate damage determination for
each claimant.
It was precisely because its conclusions on the issue of
bifurcated jury trial constituted a key premise for its deci-
26 Petition for Writ of Certiorari
sion to grant class action status that the district court cer-
tified this issue for review by the court of appeals. There-
fore, the majority was clearly wrong in finding that the
question as certified constituted merely a request for an
“advisory opinion.”
The dissenting judges had no difficulty perceiving this
fact. Judges Adams and Rosenn concluded that:
“. . . a fair reading of the district judge’s opinion
indicates that the assumed propriety of that mech-
anism [bifurcated trial and separate juries] appears to
have been one of the prime predicates of his decision
to certify the case as a class action, at least in the first
instance.” (Op. A40).
And Judge Gibbons, in a part of his opinion expressly
adopted by Judge Van Dusen, stated that:
“Despite the majority opinion of this court, it is
clear beyond dispute that the district court’s decision
in favor of Rule 23(b)(3) class action certification
was based upon a decision to try the liability and dam-
age issues before separate juries.” (Op. A50)
“The decision to have separate juries for each segment
of the bifurcated trial was an essential postulate of the
district court’s reasoning in support of its reasoning in
support of its order granting certification. It is clear
beyond peradventure that the district judge would not
have entered the class action order except for his belief
in the legal proposition that he could try liability and
damages in a Section 4 Clayton Act case before sepa-
rate juries.” (Op. A51).
The second reason advanced by the majority was that
the parties might later waive their right to jury trial, thus
making the question premature and speculative. Such rea-
F
4
2
:
Petition for Writ of Certiorari 27
soning ignores the decisions of this court in Dairy Queen v.
Wood, 369 U. S. 469 (1962) and Ross v. Bernhard, 396
U. S. 531 (1970), both of which reviewed, at the pleading
stage, district court rulings on demands for jury trial.
The Seventh Amendment to the Constitution does not
permit trial before separate juries of the “liability” and
“damages” questions in a Clayton Act case, and this court
should provide definitive guidance to that effect.’
This court has never ruled upon the availability of
separate juries in the initial trial of any case. In Gasoline
Products v. Champlin Refining Co., 283 U. S. 494 (1931),
this Court permitted a retrial of less than the entire case
but only if “it clearly appears that the issue to be retried
is so distinct and separable from the others that a trial
of it alone may be had without injustice.” 283 U. S. at 500.
The district court’s proposed division would thus be
improper. As Judge Gibbons noted, it is not possible to
divide a Clayton Act §4 class action into liability and
damage, since there can be no liability—no standing to
sue—without damage. If there is to be any preservation of
the constitutional right to jury trial, then the claims of dam-
age of each of the claimants must be subjected to such jury
15. The Third, Sixth, and Seventh Circuits have noted that
separate juries would raise substantial constitutional questions.
See Katz wv. Carte Blanche, at 761; Moss wv. Associated
Transport, Inc., 344 F. 2d 93 (6th Cir. 1965); Hosie v. Chicago
and N. W. Ry. Co., 282 F. 2d 639 (7th Cir. 1960), cert. denied,
365 U. S. 814 (1961). The Ninth Circuit has also reserved deci-
sion. United Airlines Inc. v. Wiener, 286 F. 2d 302 (9th Cir.),
cert. — Fy U. S. 924 a ~— Only - Fifth —— has
ro te trials; that appro i
tems and did mot involve iovucs as intertwined os those in a
Clayton Act case. Swofford v. B & W, Inc., 336 F. 2d 406 (5th
Cir. 1964), cert. denied, 379 U. S. 962 (1965). The Tenth Circuit
has noted its ible approval of separate juries. See, Union
Carbide and Carbon Corp. v. Nisley, 300 F. 2d 561, 589 (10th
Cir. 1962).
28 Petition for Writ of Certiorari
trial, which means hundreds of thousands of such trials.
_ As Judge Gibbons pointed out,
“Such a rule [Gasoline Products, supra] is dic-
tated for the very practical reason that if separate
juries are allowed to pass on issues involving over-
lapping legal and factual questions the verdicts ren-
dered by each jury could be inconsistent.” (Op.
A55).
Because the issues of liability and damage are in-
dividualized, and the issues of liability and damages over-
lap, the requirements of Gasoline Products, supra, and
F. R. C. P. 42(b) have not been met. The issues of lia-
bility and damages must be tried before the same jury,
the proof of “fact of injury” or “damage” to establish
liability, and the proof to establish the “amount of such
injury” or “damages” would so overlap that the second trial
would be but a retrial of the first with the risk of incon-
sistent verdicts.
Judge Gibbons’ answer to this problem was to endorse
the approach devised by Judge Wyzanski in Windham v.
American Brands, Inc., supra, under which a trial would
first be held to determine whether §1 of the Sherman
Act had been violated, i.e., was there a conspiracy among
the defendants to fix prices. In the event of an affirmative
finding, a second trial—or series of trials—would be held to
determine liability and damage under § 4 of the Clayton
Act.
The approach favored by Judges Wyzanski and Gib-
bons is, at first glance, ingenious. It has, however, its own
flaws. To begin with, it creates a remedy and procedure
which have no basis whatever in the laws passed by Con-
gress. Second it provides no more of a “solution” than did
the approach of the district court with respect to the
adjudication of individual claims.
« «eae tedse Ally
s .
ere i i 25
é
4
:
Petition for Writ of Certiorari 29
Judge Wyzanski found support for his approach in the
procedure under which a judgment in a government anti-
trust suit is prima facie evidence in a subsequent private
action. Yet, as Judge Gibbons candidly acknowledged,
the analogy is incomplete in two respects. First, the “vi-
olation determination” in this case would be not merely
prima facie evidence but the law of the case. Second, and
even more important in our view:
“Congress has not authorized a general roving com-
mission for the enforcement of the antitrust laws.
Instead, it has authorized private enforcement only
by persons suffering actual or threatened injury to
their business or property. Under Judge Wyzanski’s
approach, however, a party who never really suffered
any injury to his business or property might neverthe-
less obtain a violation determination having a more
significant effect than a decree in a government action.
Perhaps concern about such a possibility explains the
Fourth Circuit’s recent vote to rehear Windham v.
American Brands, Inc., supra, en banc.” (Op. A58).
Despite the foregoing reservations, Judge Gibbons
concluded that the Wyzanski approach is “consistent with
current Congressional intention with respect to antitrust
enforcement” (Op. A61). It is curious indeed that Judge
Gibbons found reinforcement for his conclusion in the
passage of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, supra, since it provides for aggregate dam-
ages without separate proof of individual claims. .
Further, Judge Gibbons finds in the passage of the
Act, evidence that “Congress would prefer an imaginative
approach to class action litigation in § 4 cases.” (Op. A62).
Yet, here again Judge Gibbons is candid in acknowledging
the counter arguments—“that the new § 301 cause of action
occupies the field and that its explicit nonretroactivity
30 Petition for Writ of Certiorari
shows an intention not to extend the utilization of Rule 23
in the antitrust field” (Op. A62).
In the end, Judge Gibbons is forced to conclude that:
“The message that one reads into the enactment prob-
ably will be essentially a product of his own convic-
tion as to the social desirability of consumer class
actions” (Op. A62).
The convictions of one or more judges as to the “social de-
sirability” of class actions is, we submit, not a sufficient
basis on which to create a novel remedy by judicial legis-
lation. As the Ninth Circuit observed on this point:
“Judges should not significantly tamper with legisia-
tive enactments simply to satisfy their own individual
notions as to sound public policy.” In re Hotel Tele-
phone Charges, supra at 92.
The Wyzanski-Gibbons approach, like that of the
district court does not solve the problems of individual
proof. Neither the opinion of Judge Wyzanski in Wind-
ham nor the dissent of Judge Gibbons in the present case
successfully addresses the question of how the § 4 Clayton
Act trials are to be carried out after a § 1 Sherman Act
violation has been established. Thereafter, a defendant
would still retain the right to a jury trial on any claim as
to which the fact or amount of injury was disputed. This
would mean in practical terms, successive juries to deter-
mine hundreds of thousands of claims, and is simply be-
yond the capacity of the district court. Even assuming a
certain grouping of claimants, perhaps by dealer, the liti-
gation could easily occupy the remaining judicial career
of the present district judge and that of his ultimate suc-
cessor.
Petition for Writ of Certiorari 31
CONCLUSION.
For the foregoing reasons, the Court should grant a
Petition for Certiorari in this case.
Respectfully submitted,
Rosert J. SPIEGEL,
SPENCER ERVIN, JR.,
Wiitpur Bourne RUvUTHRAUFF,
Attorneys for Petitioners.
Of Counsel:
R. Mark ARMBRUST,
Gratz, TATE, SPIEGEL, Ervin & RUTHRAUFF,
1900 Two Girard Plaza,
Philadelphia, Pennsylvania. 19102
Daten: April 4, 1977
APPENDIX.
IN THE
UNITED STATES DISTRICT COURT
For THE EASTERN DIsTRICT OF PENNSYLVANIA.
Crvit Action No. 74-771.
JULES LINK and SOLOMON KATZ, on Behalf of
Themselves and All Others Similarly Situated
v.
MERCEDES-BENZ OF NORTH AMERICA, INC.
DAIMLER-BENZ A.G.
ORDER.
Anp Now, this 7th day of August, 1975, upon con-
sideration of the record herein, including all papers filed
relating hereto, it is hereby OrpEnRep that:
1. The Order of July 8, 1975 is hereby vacated.
2. This action shall be maintained as a class action
pursuant to Fed. R. Civ. P. 23(b)(3).
3. The class herein is defined as all persons, firms or
corporations who have had nonwarranty auto repairs per-
formed on Mercedes-Benz automobiles, owned or leased
by them, by Mercedes-dealers, during the period March
27, 1970 to March 27, 1974.
(Al)
A2 District Court Order (8/7/75)
4. Plaintiffs, Jules Link and Solomon Katz, are hereby
designated as class representatives.
5. The firm of Harold E. Kohn, P. A., Attorneys at
Law, is hereby designated as counsel to the class for the
prosecution of this action.
6. Counsel for the class shall meet with counsel for
the defendants forthwith in order to attempt to obtain
agreement on the method of notifying the class and the
form of notice to be sent.
7. The undersigned is of the opinion that an immedi-
ate appeal from this Order is authorized by 28 U. S. C.
§ 1292(b), in that:
1. It involves controlling questions of law as to
which there is substantial ground for difference of
opinion, namely,
A. Whether it is proper to certify a class of
approximately 300,000 members where the proof
of damages will vary for each member of the
class;
B. Whether there can be a bifurcated trial
in this case of liability and damages with separate
juries for each segment of the case; and
2. An immediate appeal from this Order may
materially advance the ultimate termination of this
litigation.
8. It is Onperep that all proceedings in this case
(except those set forth in Paragraph 9, infra) be stayed
for ten (10) days from date of entry of this Order. If
within such ten (10) days, the defendants shall apply to
the United States Court of Appeals for the Third Circuit
for permission to appeal from this Order, the proceedings
District Court Order (8/7/75) AS
herein (except those stated in Paragraph 9, infra) shali p
stayed pending determination of such application or
the appeal, if it is allowed.
9. The Defendants’ Motions under Rule 12 (Docu-
ments 4, 5, 7 and 8 herein) are subject to the following
chedule:
A. By September 10, 1975 defendants shall have
completed their translation of the ae
viously selected and translated by plaintiffs, an
parties shall have met and endeavored to agree upon
a translation or summary for such documents;
B. Plaintiffs’ reply brief and affidavits, if any,
shall be served on September 19, 1975;
C. Defendants’ rebuttal brief and affidavits, if
any, shall be served on September 30, 1975;
D. A Pre-Trial Conference and argument on the
said Motions are scheduled for October 7, 1975, at
1] a.m. |
10. A Memorandum Opinion with the Court's findings
will be filed hereafter.
Epwarp N. CAHN
Edward N. Cahn, J.
A4 Court of Appeals Order (9/12/75)
UNITED STATES COURT OF APPEALS
For THE Tuirp Circuit
C. A. Misc. Record No. 75-8167
JULES LINK and SOLOMON KATZ, on behalf of
themselves and all others similarly situated
v.
MERCEDES-BENZ OF NORTH AMERICA, INC.
DAIMLER-BENZ A. G.
(D. C. Civil No. 74-771)
Present: KALODNER, VAN Dusen and HunTER,
Circuit Judges
ORDER.
It is Orperep that the PeTITION FoR PERMISSION TO
APPEAL is granted.
By THE COURT:—
Van Dusen
Circuit Judge
Dated: September 12, 1975
District Court Opinion (9/25/75) A5
IN THE
UNITED STATES DISTRICT COURT
For THE EASTERN DisTRICT OF PENNSYLVANIA
Civil Action No. 74-771
JULES LINK and SOLOMON KATZ, on behalf of
themselves and all others similarly situated
v.
MERCEDES-BENZ OF NORTH AMERICA, INC.,
DAIMLER-BENZ A. G.
MEMORANDUM OPINION.
Cann, J. September 25, 1975
The plaintiffs, Jules Link and Solomon Katz, are
owners of Mercedes-Benz automobiles. They have filed
a complaint containing class action allegations against
Daimler-Benz A. G., the manufacturer of Mercedes-Benz
automobiles and parts, and its agent and wholly-owned
subsidiary, Mercedes-Benz of North America, Inc., the
exclusive United States distributor of Mercedes-Benz auto-
mobiles and parts. The basis of the complaint, which
seeks treble damages and injunctive relief, is alleged price
fixing in regard to nonwarranty repair work on Mercedes-
Benz automobiles in violation of Section 1 of the Sher-
man Act (15 U. S. C. §1) and Sections 4 and 16 of the
Clayton Act (15 U. S. C. § 15 & § 26). On July 8, 1975,
an Order was entered certifying this case to class action
status. The class was defined:
A6 District Court Opinion (9/25/75)
. as all persons, firms or corporations who have
had nonwarranty auto repairs performed on Mer-
cedes-Benz automobiles, owned or leased by them,
by factory authorized Mercedes dealers, during the
period March 27, 1970, to March 27, 1974.”
The July 8 Order also provided for certification pursuant
to Fed. R. Civ. P. 23(b)(1), 23(b)(2) and 23(b)(3).
Thereafter, the defendants moved the court to amend the
iy 8, ee to stay all proceedings and certify
an immediate appeal is warran
potty ppe ted under 28 U. S. C.
Following a conference with counsel an Order was
entered on August 8, 1975, which vacated the Order of
July 8, 1975. The latter Order provided that the class
action shall be maintained pursuant to Fed. R. Civ. P
23(b)(3) only, eliminated the phrase “factory authorized”
from the definition of the class, certified that an immedi-
ate appeal is authorized in accordance with 28 U. S. C.
§ 1292(b), stayed proceedings if the defendants within
10 days apply to the United States Court of Appeals for
the Third Circuit for permission to appeal and stated that
a Memorandum Opinion would be filed.
1. gy C. § 1292(b) provides:
ccs When a distri ct . d . ] . . * * .
order not otherwise eqpestall . ‘aldee this ab hg S of
the opinion that such order involves a controlling question of
law as to which there is substantial ground for Giese of
opinion and that an immediate a from the order ma
materially advance the ultimate termination of the liti tion, S
Sat co Cate tn wetitn in such order. The Court of A
ay thereupon, in its discretion, it
- such order, if application tT X- it par bag yo
ifter the entry of the order: Provided, however, That pot ng
diotrit cout Salome the distice dons he Cane Pe
ess istrict j
or a judge thereof shall so —" a
District Court Opinion (9/25/75) A7
The first matter for consideration is whether the four
mandatory requirements of Fed. R. Civ. P. 23(a) have
been met. The test of this rule is as follows:
“(a) Prerequisites to Class Action. One or more
members of a class may sue or be sued as represent-
ative parties on behalf of all only if (1) the class is
so numerous that joinder of all members is imprac-
ticable, (2) there are questions of law or fact common
to the class, (3) the claims or defenses of the repre-
sentative parties are typical of the claims or defenses
of the class, and (4) the representative parties will
fairly and adequately protect the interests of the
class.”
The affidavits filed by the defendants state that the class
will number approximately 300,000. The class is suf-
ficiently numerous so that joinder of all members is not
practicable. Defendants do not contest this point.
The second prerequisite is the existence of questions
of law or fact common to the class. In this case the
plaintiffs allege a nationwide conspiracy involving the
two named defendants and Mercedes-Benz dealers * to fix
prices for nonwarranty repair work and replacement parts.
The plaintiffs contend that the defendants and dealers
have circulated and agreed to abide by certain price lists
pertaining to the prices to be charged for parts and the
prices to be charged for performing designated items of
repair work. The common questions for determination
include: whether defendants combined and conspired to
establish retail parts prices to be charged to the class by
the dealers; whether defendants eombined and conspired
to establish designated labor times to be utilized by
dealers in setting prices to the class for nonwarranty
repairs of Mercedes-Benz vehicles; whether documents
2. The dealers are not parties to this litigation.
A8 District Court Opinion (9/25/75)
establishing prices for parts and the amount of designated
labor time were circulated among the dealers; whether
defendants enforced compliance by the dealers in regard
to the prices for parts for designated labor time; whether
the defendants conspired with the Mercedes-Benz Na-
tional Dealer Council in regard to establishment of fixed
prices for parts and designated labor time for repair work
in the performance of nonwarranty auto repairs; whether
the plaintiff class was harmed by the alleged acts of the
defendants and whether the alleged acts of the defendants,
if proved, violate the antitrust statutes of the United
States. The defendants argue that commonality is lacking
because this class action will encompass a vast number
of separate transactions throughout the United States.
However, the foregoing issues are common to the class
and defendants’ argument will be considered, infra, on
the question of whether the common issues predominate
over separate issues.
The third requirement of typicality of claims and the
fourth requirement of adequacy of representation are
sometimes considered together. Ungar v. Dunkin’ Donuts
of America, Inc., — F. Supp. — (E. D. Pa. 1975), 1975-1
Trade Cases { 60,204 at 65,781. I find that the claim of
the plaintiffs as individuals is typical of the claims of the
class, especially on the liability issue. 1 further find that
the adequate representation requirement is met because
the plaintiffs do not have interests antagonistic to the
class and their attorney has a nationwide reputation for
outstanding competence in this type of litigation.’
3. The high standing of plaintiffs’ counsel is evident from a
review of the following cases: Aronson v. Board of Tr
City of Chicago, 372 F. Supp. 1349 (N. D. IIL. 1974), Philadephia
Electric Co. v. Anaconda American Brass Co., 47 F. R. D. 557
(E. D. Pa. 1969), and Lindy Brothers Builders, Inc., of Philadelphia
v. American Radiator and Standard Sanitary Corp., 341 F. Su
lor? (E. B Pa. 1972) vacated on other grounds 487 F. 2d 161 (3d
District Court Opinion (9/25/75) AQ
In addition to determining whether the four pre-
requisites of Fed. R. Civ. P. 23(a) are satisfied it must
be determined if the class action is maintainable under
the provisions of rule 23(b). Rule 23(b) has~three sub-
parts and if one of those subparts is applicable.the matter
may proceed as a class action. In the July 8, 1975, Order
it was held that the class action could be maintained
under all three subparts of rule 23(b). Initially this was
done to give the trial court greater flexibility in dealing
with an enormous class. However, since money dameges
are a substantial element of plaintiffs’ claim and since
declaratory and injunctive relief can be awarded in a
(b)(3) action, the August 8, 1975, Order was entered
to provide that the class action is maintainable only under
(b)(3). A similar approach was taken in Ungar u
Dunkin’ Donuts of America, Inc., supra:
“We agree with Judge VanArtsdalen and Pro-
fessor Moore. While there are very significant claims
for declaratory and injunctive relief involved in the
present case, we believe that the damage aspect is
so important that (b)(2) certification would be
inappropriate. Declaratory and injunctive relief can
be awarded in a (b)(3) action which also carries
with it greater safeguards.”
In order to find that a class action is maintainable
under rule 23(b)(3) the questions of law or fact common
to the members of the class must predominate over ques-
tions affecting individual class members, and the class
action must be a superior method for the fair and efficient
resolution of the controversy. Katz v. Carte Blanche
Corporation, 496 F. 2d 747 (3d Cir. 1974). It is on these
issues that the defendants raise their most serious objec-
tions to the class action determination. The contention
of the defendants is set forth in their brief as follows:
Al0 District Court Opinion (9/25/75)
“In summary, if the class action motion is granted
this Court at trial will be faced with proof supposedly
relating to a nationwide conspiracy between over 570
dealers and two companies, and the question of
damages to some 300,000 plaintiffs, no one of whom
has purchased more than a small amount of the mil-
lions of parts alleged to have been sold at fixed prices,
and each of whom has had his repairs done in a
different labor market.”
Defendants contend that the question of damages for each
individual class member is different in every case, and,
therefore, the individual damage issues predominate over
the common liability issue. Defendants further contend
that the class action is not a superior method for resolving
this dispute.
The most appropriate way to proceed in this case is
to bifurcate the issues of liability and damages. Discovery
on damages would be stayed pending a jury determination
on liability. Of course, if the defendants prevail on the
liability issue the case would terminate. If the plaintiffs
prevail, then the court would direct the plaintiffs to submit
proposals for the expeditious resolution of the damage
issues. Obviously, the court is not going to hold 300,000
separate jury trials to determine the damages for each
member of the class. What the court has in mind is
that the plaintiffs should be given an opportunity to
develop a method of proving damages which satisfies
constitutional and procedural safeguards and still permits
the efficient use of court time. For example, it may be
possible to utilize a Master to calculate damages of indi-
vidual class members. Connecticut Importing Co. v.
Frankfort Distilleries, Inc., 42 F. Supp. 225, 226-27 (D.
Conn. 1940). Also, plaintiffs may be able to utilize expert
District Court Opinion (9/25/75) All
testimony, statistical computations and computer analysis
to simplify the proof of damages. In any event, the court
has the right to decertify the class following a determina-
tion of liability against the defendants if the plaintiffs are
unable to develop a method of proving damages which
will permit the trial to proceed in an efficient manner.
The use of bifurcated trials in antitrust cases has been
approved in Ungar v. Dunkin’ Donuts of America, Inc.,
supra, and In re: Master Key Antitrust Litigation, — F.
Supp. — (D. Conn. 1975) 1975-1 Trade Cases { 60,377.
In 3B Moore’s Federal Practice § 23.45[2] at page 23-758
it states:
“The most frequently recurrent types of suits brought
under (b)(3) are private treble-damage antitrust
suits, and actions based on various types of securities
frauds. In both series of cases, courts as a rule
approach the problem of predominance from the
point of view of the severability of the issues of lia-
bility and damages—whether the asserted statutory
violations can be effectively adjudicated in a class
proceeding independent from the proceeding in
which individual damages would be assessed.
Here the defendants argument against class action cer-
tification is focused primarily on the problems of proving
4. 4 Wigmore, Evidence § 1230 (Chadbourn rev. 1972) states:
e a fact could be ascertained only by the inspection
of RP number of documents made up of very numerous
detailed statements—as, the net balance resulting from a year’s
vouchers of a treasurer or a year’s accounts in a bank ledger—
it is obvious that it would often be practically out of the ques-
tion to apply the present principle by requiring the aes om
of the entire mass of documents and entries to be peg y
the jury or read aloud to them. The convenience of trials de-
mands that other evidence be allowed to be offered, in |
shape of the testimony of a competent witness who has perus
the entire mass and will state summarily the net result. Such
a practice is well established to be proper.
Al2 District Court Opinion (9/25/75)
damages. Therefore, I find that questions of law or fact
common to the members of the class predominate on the
issue of liability, and in the event liability is found against
the defendant, a further determination will be made as
to the continuation of the class action on the damage issue.
In determining whether the class action is a superior
procedure for resolving the controversy, other possible
procedures must be examined. The possibility of utilizing
a test case, as was done in Katz v. Carte Blanche Corpora-
tion, supra, has been explored with counsel for plaintiffs
and defendants. The case sub judice does not lend itself
to test case treatment because the defendants insist on
the protection against one-way intervention. Also, a
nationwide conspiracy is alleged and to proceed on a test
case involving plaintiffs who reside in the Eastern District
of Pennsylvania may not necessarily encompass proof of
a nationwide conspiracy.
There does not seem to be any unfairness in proceed-
ing as suggested above. Unlike Katz v. Carte Blanche
Corporation, supra, the defendants and their dealers should
not be affected by a failure to pay repair bills, and the
defendants have not raised that argument. In regard to
efficiency, it would seem that a denial of the class action
would be efficient in the sense of clearing the docket of
this court, but that may. result in a multitude of separate
suits across the country. On the other hand, it is in the
public interest to discourage price fixing through private
antitrust litigation. In a case sustaining a national class
action, involving anticompetitive practices with respect
to library books, it was held that:
“Upholding the national class action will facilitate
private antitrust litigation and will discourage future
[price fixing] conspiracy violations.” State of Illinois
v. Harper and Row Publishers, Inc., 301 F. Supp.
484, 493 (N. D. Ill. 1969).
District Court Opinion (9/25/75) A13
As a ground for denying class action status defendants
assert that there is no pending action by the United States
on the antitrust issues and that this is a factor which
leads to the conclusion that class treatment is inappro-
priate. On this point, 3B Moore's Federal Practice
{ 23.45[2] at page 23-671 states:
“Where a private plaintiff elects to press a claim
without the benefit of a previous investigation—and
victory—by federal authorities, the genuine existence
of a class of parties allegedly injured should be clearly
shown. The matter of predominance of common
questions in these cases is, however, likely to be less
troublesome than other management problems, as the
occasions will probably be rare where a private party
seeks to represent a highly diverse group which was
not subject to relatively uniform treatment. Where
the claim to class status is more than colorable, courts
have properly tended to grant that status, while stress-
ing that the ruling can be modified, and making full
use of techniques available to streamline the litiga-
tion.”
Furthermore, there is no pending litigation involving
the issues sub judice, and the concentration of litigation
in the Eastern District of Pennsylvania is as convenient as
anywhere considering the proximity of the defendants’
main offices, the residences of the plaintiffs and the fact
that Philadelphia counsel for both plaintiffs and defendants
have expended considerable time in becoming familiar
with the issues in this case. Considering all of the fore-
going, the court finds that a class action proceeding, at
least on the liability issue, is superior to other possible
methods for resolving the controversy.
We now turn our attention to defendants’ motion for
authorization pursuant to 28 U. S. C. § 1292(b) for an
Al4 District Court Opinion (9/25/75)
interlocutory appeal. An affirmative class action deter-
mination is not a final order and, therefore, is not appeal-
able under 28 U. S. C. § 1291. Katz v. Carte Blanche
Corporation, »upra. While the grant of class action treat-
ment is not reviewable under Fed. R. Civ. P. 54(b), it
may be reviewable by mandamus if the District Court
has acted outside its jurisdiction or disregards procedural
safeguards. Assuming this court has acted within its
jurisdiction and complied with the requisite procedure,
then the grant of class action treatment under rule 23(b)
(3) is reviewable only pursuant to 28 U. S. C. § 1292(b).
As stated in Katz v. Carte Blanche Corporation, supra, at
page 752:
“Thus if there is any route open for the interlocutory
review of the grant of class action treatment under
rule 23(b)(3) in this circuit, it is only pursuant to
28 U.S. C. § 1292(b).”
Therefore, the question becomes should the case sub
judice be certified for appeal under 1292(b). The statute
sets forth the criteria to be considered by the District
Court in exercising discretion to grant a § 1292(b) cer-
tification. There must be “. . . a controlling question of
law as to which there is substantial ground for difference
of opinion and that an immediate appeal from the order
may materially advance the ultimate termination of the
litigation . . . .” The plaintiffs in resisting 1292(b) cer-
tification quote from the Katz case as follows:
“A controlling question of law must encompass
at the very least every order which, if erroneous,
would be reversible error on final appeal.” (496 F. 2d
747 at 755)
However, in the same paragraph which contains the above-
quoted sentence, Judge Gibbons rhetorically asks:
District Court Opinion (9/25/75) Al5
“What remains is the question whether in order for
one question to be ‘controlling’ must it be one which
if decided erroneously would lead to a reversal on
appeal?”
In answering this rhetorical question Judge Gibbons
stated:
“The key consideration is not whether the order in-
volves the exercise of discretion, but whether it truly
implicates the policies favoring interlocutory appeals.
The determination of what orders are properly re-
viewable under § 1292(b) must be made by a prac-
tical application of those policies, not by a mechanical
application of labels such as ‘discretionary’ or ‘non-
discretionary. Those policies, both before and since
the enactment of § 1292(b) have included the avoid-
ance of harm to a party pendente lite from a possible
erroneous interlocutory order and the avoidance of
possibly wasted trial time and litigation expense.”
From a practical standpoint I think the grant of class
action status is of tremendous import to the defendants
as well as to the class. There is considerable economic
significance to the individual plaintiffs since they have
agreed to underwrite the cost of notice to the 300,000
members of the class.> Therefore, the troublesome ques-
tion in certifying the class involves the problems antici-
pated in proving damages on behalf of 300,000 separate
class members. This argument was the basic contention
5. At oral ent on plaintiffs’ motion to grant class action
status, sleiattl’ counsel edvend the court that the names and ad-
dresses of the owners of Mercedes-Benz automobiles for the years
in question could be obtained from the Polk Company and that the
proposed class was identifiable by name and address from such
records. The court was impressed with the argument that the
pe class could be totally identified and that plaintiffs are
ing and able to pay for the cost of giving notice.
A16 District Court Opinion (9/25/75)
made by the defendants to resist the certification of the
class. The parties should not be subjected to the trial of
an antitrust matter involving a class of 300,000 members
if it is the judgment of the Third Circuit Court of Appeals
that anticipated problems in proving damages render the
certification inappropriate. Considering that question the
district court has decided the problem can best be ap-
proached by bifurcating the issues of liability and damages.
However, there is room for a substantial difference of
opinion on that question. Some courts have rejected class
action certification on the ground that a class of this type
is unmanageable. Ralston v. Volkswagenwerk, A. G., 61
F. R. D. 427 (W. D. Mo. 1973); Boshes v. General Motors
Corporation, 59 F, R. D. 589 (N. D. Ill. 1973). Another
instance where the huge size of a class has been a sig-
nificant factor in holding a proposed class action to be
unmanageable is Hackett v. General Host Corp., 455 F. 2d
618 (3d Cir. 1972). On the other hand, numerous cases
hold that sheer size of a class does not defeat the superior-
ity of a class action. In re: Master Key Antitrust Litiga-
tion, supra.
Finally, it appears that if this case is appealed imme-
diately the resolution of the dispute may be enhanced.
If it is determined on appeal that this case is not suitable
for class action treatment, the plaintiffs may elect not to
pursue their remedies with the same vigor they would
use if they were named class representatives. Even if
they did, the scope of the proceedings would be substan-
tially narrowed. On the other hand, if the grant of class
action treatment is upheld and the court’s comments on
resolving the damage issue approved, the chances for
settlement will be enhanced if defendants’ counsel become
convinced, following discovery, that the plaintiffs’ chances
of proving liability are good. In any event, it appears to
the trial court that the certification of the class is a close
District Court Opinion (9/25/75) Al7
question of tremendous signific.uce to the parties and
that it would be helpful for the appellate court to review
this decision. In certifying this appeal I have relied on
the tests established in Katz, supra, especially the state-
ment at 496 F. 2d 756 where it was held:
“Commentators on the rule 23 amendments sup-
port the view that appeals certified pursuant to
§ 1292(b) are appropriate for testing whether suit-
ability of class action treatment has been correctly
determined .. . . As the foregoing discussion indicates,
we agree with that view.”
For the foregoing reasons, I certified the class action deter-
mination for appeal pursuant to 28 U. S. C. § 1292(b).
Epwarp N. CAHN
Edward N. Cahn, J.
Al8 Court of Appeals Opinion (7/22/76)
UNITED STATES COURT OF APPEALS
For THE Tuirp Circuir
No. 75-2195
JULES LINK and SOLOMON KATZ, on behalf of
themselves and all others similarly situated,
Appellees
v.
MERCEDES-BENZ OF NORTH AMERICA, INC.,
AND
DAIMLER-BENZ AKTIENGESELLSCHAFT,
Appellants
APPEAL FROM THE UNITED STATES District COURT FOR THE
EASTERN DisTRICT OF PENNSYLVANIA
(D. C. Civil No. 74-771)
Argued April 22, 1976
Before: ALDISERT, FORMAN and Wels, Circuit Judges.
Robert J. Spiegel, Esq.
Spencer Ervin, Jr., Esq.
Wilbur Bourne Ruthrauff, Esq.
Gratz, Tate, Spiegel, Ervin &
Ruthrauff
1900 Two Girard Plaza
Philadelphia, Pa. 19102
Attorneys for Appellants
Court of Appeals Opinion (7/22/76) Al19
Harold E. Kohn, Esq.
Stuart H. Savett, Esq.
H. Kenneth Kudon, Esq.
Cecily A. Waterman, Esq.
Kohn, Savett, Marion & Graf, P. C.
1214 IVB Building
1700 Market Street
Philadelphia, Pa. 19103
Attorneys for Appellees
OPINION OF THE COURT.
(Filed July 22, 1976)
Wels, Circuit Judge.
Whether an antitrust action with potentially 300,000
claimants is manageable as a class action is the question
directed to us in this § 1292(b) appeal. We decline to
answer on the ground that the matter is one entrusted to
the discretion of the district court. A second query asks
whether there may be separate juries utilized during the
liability and damage phases of a bifurcated trial. In the
absence of a definitive order on that subject by the district
court, the inquiry is essentially a request tor an advisory
opinion, which we may not honor.
Plaintiffs Link and Katz owned Mercedes automobiles
which were repaired at various times by authorized dealers.
Believing the costs to be excessive, plaintiffs filed this suit
under the Sherman and Clayton Acts alleging a conspiracy
to fix prices. They requested a class action certification
and sought injunctive relief as well as treble damages and
attorneys fees.
The plaintiffs contend that defendant Daimler-Benz
A. G., the parent corporation located in West Germany,
A20 Court of Appeals Opinion (7/22/76)
and an American subsidiary, Mercedes-Benz of North
America, conspired with Mercedes dealers in the United
States to maintain high prices for nonwarranty repairs.
It is alleged that there was an illegal agreement to base
repair rates on artificially-maintained prices of parts and
flat labor repair times set out in the manufacturer's manual.
Pursuant to Fed. PR. Civ. P. 23(b)(3), the district
court certified the plaintiff class, consisting of some 300,000
persons in the United States who had Mercedes cars
repaired during the four years in question." The court
also stated two questions for appeal under 28 U. S. C.
§ 1292(b):
A. Whether it is proper to certify a class of approxi-
mately 300,000 members where the proof of dam-
ages will vary for each member of the class;
B. Whether there can be a bifurcated trial in this case
of liability and damages with separate juries for
each segment of the case.
A panel of this court allowed the appeal, and two
weeks later the district court filed its “Memorandum Opin-
ion” explaining the reasons for its belief that immediate
appellate review was indicated.
We have held that a grant or denial of class action
certification is not a final order and, hence, not appealable
under our general jurisdictional statute, 28 U. S. C. § 1291.
Kramer ». Scientific Control Corp., — F. 2d — (Nos.
75-1673, 75-1849, 3d Cir. April 20, 1976); Hackett v. Gen-
eral Host Corporation, 455 F. 2d 618 (3d Cir.), cert.
1. The court's original order described the class “. . . all per-
by
sons, firms or corporations who have had nonwarranty auto
performed on Mercedes-Benz automobiles, owned or |
them, by factory authorized Mercedes dealers, during the period
March 27, 1970 to March 27, 1974.” But this “definition” was later
amended by the deletion of the phrase “factory authorized.”
Court of Appeals Opinion (7/22/76) A21
denied, 407 U. S. 925 (1972). However, an interlocutory
order of this nature may qualify for accelerated appeal
under 28 U. S. C. § 1292(b):
“When a district judge, in making in a civil action an
order not otherwise appealable under this section,
shall be of the opinion that such order involves a con-
trolling question of law as to which there is substantial
ground for difference of opinion and that an imme-
diate appeal from the order may materially advance
the ultimate termination of the litigation, he shall so
state in writing in such order. The Court of Appeals
may thereupon, in its discretion, permit an appeal to
be taken from such order. . . .”
This Court does not follow a policy of freely accepting
an appeal from the grant of a class action certification
where such action is grounded in the discretionary power
of the district court. We have taken the position that
“[t]o qualify for interlocutory review in this circuit, a class
certification decision must be attended by special factors
which take it outside the ambit of the general rule. Katz
v. Carte Blanche Corp., 496 F. 2d 747, 756 (3d Cir.), cert.
denied, 419 U. S. 885 (1974).” Kramer v. Scientific Con-
trol Corp., supra, slip at 4; Ungar v. Dunkin’ Donuts of
America, Inc., 531 F. 2d 1211, 1213 (3d Cir.), petition for
cert. filed, 44 U. S. L. W. 3645 (U. S. Apr. 10, 1976).
We recognize that class action determination has sig-
nificant, practical effects on the litigation and an aggrieved
party may have a very real interest in securing early appel-
late review. But the same considerations apply to many
other types of interlocutory orders and we cannot sanction
an erosion of the prohibition against “piecemeal” appellate
review. Our constantly increasing caseload reinforces the
other more philosophical reasons for that policy.
A22 Court of Appeals Opinion (7/22/76)
Further, as we noted in Johnson v. Alldredge, 488 F.
2d 820 (3d Cir. 1973), cert. denied, 419 U. S. 882 (1974),
28 U.S. C. § 1292(b) is not designed for review of factual
matters but addresses itself to a “controlling question of
law.” In the cases which we have considered and reversed
class action certification, there were other overriding legal
issues: e.g., Ungar v. Dunkin’ Donuts, supra, (“individual
coercion” and tying arrangements ); Katz v. Carte Blanche,
supra, (superiority of test case in Trust in Lending con-
text); Kauffman v. Dreyfus Fund, Inc., 434 F. 2d 727 (3d
Cir. 1970), cert. denied, 401 U. S. 974 (1971), (eligibility
of class representative). Because Rule 23(c) provides
that the district court’s determination to permit a class
action “may be conditional, and may be altered or amended
before the decision on the merits,” that determination, in
and of itself, does not present a “controlling question of
law” to which this court should be hospitable under § 1292.
If the district court has qualms about determining a class,
because it has a serious question whether it is “apply[ing]
the correct criteria to the facts of the case,” Katz v. Carte
Blanche Corp., 496 F. 2d at 756, (a) it should hesitate de-
termining the class until reasonably assured of the correct-
ness of its ruling and (b) it should not certify for
§ 1292(b) consideration without stating persuasive reasons
why the particular class action question is so unusual as
to demand the intervention of an appellate court. In
affording immediate appellate review of “controlling ques-
tions of law,” § 1292(b) was not designed to substitute
wholesale appellate certainty for trial court uncertainty
under circumstances where, as here, the Rule gives broad
discretion to the district court to revise its class action
determination at any time prior to the decision on the
merits.
One other observation is in order. Section 1292(b)
is not intended to grant the appellate courts power to give
Court of Appeals Opinion (7/22/76) A23
advice on speculative matters. While counsel and the
district court might believe it helpful to have the appel-
late court’s view on proposed alternate courses of action,
our jurisdiction extends only to orders of the district court.
These orders must be definitive, effective, and in a posture
capable of affirmance or reversal. Requesting that the
Court of Appeals choose from a number of alternatives
submitted is not the type of appeal envisioned by
§ 1292(b).
With these concepts in mind, we turn to an analysis
of the case at hand. The district court’s memorandum
discusses the troublesome problems anticipated in prov-
ing the damages of 300,000 separate class members and
~ notes that a number of courts have held a class of that
size unmanageable. See Ralston v. Volkswagenwerk A. G.,
61 F. R. D. 427 (W. D. Mo. 1973), Boshes v. General
Motors Corp., 59 F. R. D. 589 (N. D. Ill. 1973). Contrary
authority is also cited for the position that sheer size does
not defeat the superiority of a class action. In re: Master
Key Antitrust Litigation, M. D. L. Docket No. 45 (D.
Conn., filed May 27, 1975), 1975-1 Trade Cases { 60,377.
However, earlier in the memorandum, the judge stated:
“, .. in the event liability is found against the defend-
ant, a further determination will be made as to the
continuation of the class action on the damage issue.”
The district court therefore has limited the scope of its
decision by ordering that there will be: (1) a bifurcated
trial on liability and damages, and (2) a re-examination
of class certification before the damage phase begins.
We have some doubt that the anticipated difficulties
of proving damages on behalf of the large class are actually
before us. In any event, we conclude that the issue is
not one which this Court should decide on interlocutory
review.
A24 Court of Appeals Opinion (7/22/76)
It is obvious that the district court’s concern—a justi-
fiable and serious one—is with manageability. This is a
practical problem, and primarily a factual one with which
a district court generally has a greater familiarity and
expertise than does a court of appeals. Consequently, it
is an area in which the trial court must of necessity be
granted a wide range of discretion. The housekeeping
problems involved in notifying an extremely large group
of people, reviewing replies, answering inquiries, and
processing of claims as well as the effect on other cases
on the court’s docket, are all matters which can best be
evaluated by the man on the scene. These are often
difficult judgments and that fact has not been overlooked
in the rules. |
Rule 23(c)(1) provides that the determination must
be made “as soon as practicable.” That does not neces-
sarily mean at the onset of the litigation. The designation
should be made at a time when the trial court has had
adequate opportunity to acquaint itself with the case and
the complexities likely to be encountered in its disposition.
Moreover, as we noted earlier, a class certification, once
made, is not irrevocable. The rule in a pragmatic approach
states that “an order under this section may be condi-
tional, and may be altered or amended before the decision
on the merits.” Thus, after a determination of liability,
the district court is free to decertify the class for a proper
reason, and unmanageability would be such a circumstance.
The district court also has the option of creating sub-
classes if that appears helpful in handling the litigation.
In short, the rule is flexible and recognizes that whether
the case can be managed must be left to the informed
discretion of the trial court which will manage it. There
are no circumstances in this case which make manage-
ability a controlling question of law, and we therefore will
not answer the question submitted.
Court of Appeals Opinion (7/22/76) A25
The second question certified by the district court is
the propriety of having separate juries for each segment
of the bifurcated trial. The court, however, entered no
order directing separate juries and whether it will is a
matter of pure speculation at this juncture. As the memo-
randum points out, the parties may be able to develop
a method of proving damages which both satisfies legal
standards and permits the efficient use of court time. The
utilization of a master is a possibility. A jury waiver would
not be unexpected in the damage phase of a trial where
the evidence consisted only of the mechanical application
of mathematical formulations. In short, the district court
has asked for an advisory opinion on an interesting legal
proposition but one which may never be invoked in this
case. We must decline the invitation.
Accordingly, we remand this case to the district court.
A26 Court of Appeals Judgment (7/22/76)
UNITED STATES COURT OF APPEALS
For THE Tuirp CrrcuiT
No. 75-2195
JULES LINK and SOLOMON KATZ, on behalf of
themselves and all others similarly situated
v.
MERCEDES-BENZ OF NORTH AMERICA, INC.
and DAIMLER-BENZ A. G.,
Appellants
(D. C. Civil Action No. 74-771)
On APPEAL FROM THE UNITED STATES Districr Court
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
Present: ALDISERT, FORMAN and Wels, Circuit Judges
JUDGMENT.
This cause came on to be heard on the record from
the United States District Court for the Eastern District
of Pennsylvania and was argued by counsel.
On consideration whereof, it is now here ordered and
adjudged by this Court that the cause is remanded to the
district court in accordance with the opinion of this Court.
ATTEST:
Tuomas F. Quinn
Clerk
July 22, 1976
Court of Appeals Opinion (2/11/77) A27
UNITED STATES COURT OF APPEALS
For tHe Turep Crmcuir
No. 75-2195
JULES LINK and SOLOMON KATZ, on behalf of
themselves and all others similarly situated,
Appellees
Vv.
MERCEDES-BENZ OF NORTH AMERICA, INC.,
AND
DAIMLER-BENZ AKTIENGESELLSCHAFT,
Appellants
AppgaL From tHe Unirep States District Court ror THE
Eastern District or PENNSYLVANIA
(D.C. Civil No. 74-771)
Argued April 22, 1976
Before: AupisErT, Forman and Wels, Circuit Judges.
Reargued November 4, 1976
Before: Srrrz, Chief Judge, Forman, Van Dusen, ALpIsERT,
Apams, Gresons, Rosenn, Hunrer, Weis and
GartH, Circuit Judges.
Robert J. Spiegel, Esq. Harold E. Kohn, Esq.
Spencer Ervin, Jr., Esq. Stuart H. Savett, Esq.
Wilbur Bourne Ruthrauff, §H. Kenneth Kudon, Esq.
Esq. Carole A. Broderick, Esq.
Gratz, Tate, Spiegel, Cecily A. Waterman, Esq.
Ervin & Ruthrauff Kohn, Savett, Marion &
1900 Two Girard Plaza Graf, P.C.
Philadelphia, Pa. 19102 1214 IVB Building
Attorneys for 1700 Market Street
Appellants Philadelphia, Pa. 19103
Attorneys for Appellees
A28 Court of Appeals Opinion (2/11/77)
OPINION OF THE COURT
(Filed February 11, 1977)
Weis, Circuit Judge.
Whether an antitrust action with potentially 300,000
claimants is manageable as a class action is the question
directed to us in this §1292(b) appeal. We decline to
answer on the ground that the matter is one of fact sub-
ject to determination by the district court. A second query ©
asks whether there may be separate juries utilized during
the liability and damage phases of a bifurcated trial. In
the absence of a definitive order on that subject by the
district court, the inquiry is essentially a request for an
advisory opinion, which we may not honor.
Plaintiffs Link and Katz owned Mercedes automobiles
which were repaired at various times by authorized dealers.
Believing the costs to be excessive, plaintiffs filed this suit
under the Sherman and Clayton Acts alleging a con-
spiracy to fix prices. They requested a class action cer-
tification and sought injunctive relief as well as treble
damages and attorneys’ fees. :
The plaintiffs contend that defendant Daimler-Benz
A.G., the parent corporation located in West Germany,
and an American subsidiary, Mercedes-Benz of North
America, conspired with Mercedes dealers in the United
States to maintain high prices for nonwarranty repairs.
It is alleged that there was an illegal agreement to base
repair rates on artificially-maintained prices of parts and
flat labor repair times set out in the manufacturer’s
manual.
Pursuant to Fed. R. Civ. P. 23(b) (3), the district court
certified the plaintiff class, consisting of some 300,000 per-
sons in the United States who had Mercedes cars repaired
during the four years in question. The court also listed
as controlling questions of law under 28 U.S.C. § 1292(b):
1. The court's original order described the class: “. . . all per-
sons, firms or corporations who have had nonwarranty auto repairs
Court of Appeals Opinion (2/11/77) A29
A. Whether it is proper to certify a class of approx-
imately 300,000 members where the proof of dam-
ages will vary for each member of the class;
B. Whether there can be a bifurcated trial in this case
of liability and damages with separate juries for
each segment of the case.
A panel of this court allowed the appeal, and two weeks
later the district court filed its ‘‘Memorandum Opinion’’
explaining the reasons for its belief that immediate appel-
late review was indicated.
We have held that a grant or denial of class action
certification is not a final order and, hence, not appealable
under our general jurisdictional statute, 28 U.S.C. § 1291.
Kramer v. Scientific Control Corp., 534 F.2d 1085 (3d Cir.
1976) ; Hackett v. General Host Corporation, 455 F.2d 618
(3d Cir.), cert. denied, 407 U.S. 925 (1972). However, an
interlocutory order of this nature may qualify for ac-
celerated appeal under 28 U.S.C. § 1292(b):
‘*When a district judge, in making in a civil action an
order not otherwise appealable under this section,
shall be of the opinion that such order involves a con-
trolling question of law as to which there is substan-
tial ground for difference of opinion and that an im-
mediate appeal from the order may materially advance
the ultimate termination of the litigation, he shall so
state in writing in such order. The Court of Appeals
may thereupon, in its discretion, permit an appeal to
be taken from such order... .”’
This Court does not follow a policy of freely accepting
an appeal from the grant of a class action certification
1. (Cont'd. )
performed on Mercedes-Benz automobiles, owned or leased by
them, by factory authorized Mercedes dealers, during the period
March 27, 1970 to March 27, 1974.” But this “definition” was later
amended by the deletion of the phrase “factory authorized.”
A30 Court of Appeals Opinion (2/11/77)
where such action is grounded in the discretionary power
of the district court. We have taken the position that
‘*[t]o qualify for interlocutory review in this circuit, a
class certification decision must be attended by special fac-
tors which take it outside the ambit of the general rule.
Katz v. Carte Blanche Corp., 496 F.2d 747, 756 (3d Cir.),
cert. denied, 419 U.S. 885 (1974).’’ Kramer v. Scientific
Control Corp., 535 F.2d at 1087; Ungar v. Dunkin’ Donuts
of America, Inc., 531 F.2d 1211, 1213 (3d Cir.), cert. denied,
45 U.S.L.W. 3250 (U.S. Oct. 4, 1976).
We recognize that class action determination has sig-
nificant, practical effects on the litigation and an aggrieved
party may have a very real interest in securing early ap-
pellate review. But the same considerations apply to many
other types of interlocutory orders and we cannot sanction
an erosion of the prohibition against ‘‘piecemeal’’ appel-
late review. Our constantly increasing caseload? rein-
forces the other more philosophical reasons for that policy.
Further, as we noted in Johnson v. Alldredge, 488
F.2d 820 (3d Cir. 1973), cert. denied, 419 U.S. 882 (1974),
28 U.S.C. § 1292(b) is not designed for review of factual
matters but addresses itself to a ‘‘controlling question of
law.’’ In the cases where we have considered and re-
versed class action certification, there were other over-
riding legal issues: e.g., Ungar v. Dunkin’ Donuts, supra,
(‘individual coercion’’ and tying arrangements) ; Katz v.
Carte Blanche, supra, (superiority of test case in Truth
in Lending context) ; Kauffman v. Dreyfus Fund, Inc., 434
F.2d 727 (3d Cir. 1970), cert. denied, 401 U.S. 974 (1971),
(eligibility of class representative). Because Rule 23(c)
provides that the district court’s determination to permit
a class action ‘‘may be conditional, and may be altered or
amended before the decision on the merits,’’ that deter-
mination, in and of itself, does not present a ‘‘controlling
2. In eight years, 1969 to 1976 inclusive, the filings in our court
have more doubled, although the number of authorized judge-
ships has remained the same. On a national average the experience
of the other courts of appeals has been similar.
Court of Appeals Opinion (2/11/77) A31
question of law’’ to which this court should be hospitable
under $1292(b). If the district court has qualms about
determining a class, because it has a serious question
whether it is ‘‘apply[ing] the correct criteria to the facts
of the case,’’ Katz v. Carte Blanche Corp., 496 F.2d at
756, (a) it should hesitate in determining the class until
reasonably assured of the correctness of its ruling, and
(b) it should not certify for 4 1292(b) consideration with-
out stating persuasive reasons why the particular class
action question is so unusual as to demand the intervention
of an appellate court. In affording immediate appellate
review of ‘‘controlling questions of law,’’ §1292(b) was
not designed to substitute wholesale appellate certainty for
trial court uncertainty under circumstances where, as here,
the Rule gives broad discretion to the district court to
revise its class action determination at any time prior to
the decision on the merits,
One other observation is in order. Section 1292(b) is
not intended to grant the appellate courts power to give
advice on speculative matters. While counsel and the dis-
trict court might believe it helpful to have the appellate
court’s view on proposed alternate courses of action, our
jurisdiction extends only to orders of the district court.
These orders must be definitive, effective, and in a posture
capable of affirmance or reversal. Requesting that the
Court of Appeals choose from a number of alternatives
submitted is not the type of appeal envisioned by § 1292(b).
With these concepts in mind, we turn to an analysis of
the case at hand. The district court’s memorandum dis-
cusses the troublesome problems anticipated in proving the
damages of 300,000 separate class members and notes that
a number of courts have held a class of that size unman-
ageable. See Ralston v. Volkswagenwerk A.G., 61 F.R.D.
427 (W.D. Mo. 1973), Boshes v. General Motors Corp., 59
F.R.D. 589 (N.D. Ill. 1973). Contrary authority is also
cited for the position that sheer size does not defeat the
superiority of a class action. In re: Master Key Antitrust
A32 Court of Appeals Opinion (2/11/77)
Litigation, M.D.L. Docket No. 45 (D. Conn., filed May 27,
1975), 1975-1 Trade Cases J 60,377. However, earlier in
the memorandum, the judge stated:
‘¢... in the event liability is found against the defend-
ant, a further determination will be made as to the
continuation of the class action on the damage issue.”’
The district court therefore viewed the scope of its order
as limited and contingent. It contemplated—but did not
order: (1) a bifurcated trial on liability, and (2) a re-
examination of class certification before the damage phase
begins.
We have some doubt that the anticipated difficulties of
proving damages on behalf of the large class are actually
before us. The district court mused that counsel might be
able to devise methods of solving the problem before that
time arrived, and listed several possibilities. In any event,
we conclude that the issue is not one which this court should
decide on interlocutory review.
It is obvious that the district court’s concern—a jus-
tifiable and serious one—is with manageability. This is a
practical problem, and primarily a factual one with which
a district court generally has a greater familiarity and
expertise than does a court of appeals. Consequently, it
is an area in which the trial court must of necessity be
granted a wide range of discretion. The housekeeping
problems involved in notifying an extremely large group
of people, reviewing replies, answering inquiries, and
processing of claims as well as the effect on other cases on
the court’s docket, are all matters which can best be eval-
uated by the man on the scene. These are often difficult
judgments and that fact has not been overlooked in the
rules.
Rule 23(c)(1) provides that the determination must be
made ‘‘as soon as practicable.’’ That does not necessarily
mean at the onset of the litigation. The designation should
es ee ee - -
Court of Appeals Opinion (2/11/77) A33
be made at a time when the trial court has had adequate
opportunity to acquaint itself with the case and the com-
plexities likely to be encountered in its disposition. More-
over, as we noted earlier, a class certification, once made,
ig not irrevocable. The rule in a pragmatic approach states
that ‘‘an order under this section may be conditional, and
may be altered or amended before the decision on the
merits.’’ Thus, after a determination of liability, the dis-
trict court is free to decertify the class for a proper rea-
son,® and unmanageability would be such a circumstance.
The district court also has the option of creating sub-
classes if that appears helpful in handling the litigation.
In short, the rule is flexible and recognizes that whether
the case can be managed must be left to the informed dis-
cretion of the trial court which will manage it. There are
no circumstances in this case which make manageability a
controlling question of law, and we therefore will not answer
the question submitted.
The second question certified by the district court is
the propriety of having separate juries for each segment of
the bifurcated trial. The court, however, entered no »rder
directing separate juries and whether it will is a matter of
pure speculation at this juncture. As the memorandum
points out, the parties may be able to develop a method of
proving damages which both satisfies legal standards and
permits the efficient use of court time. The utilization of a
master is a possibility. A jury waiver would not be un-
expected in the damage phase of a trial where the evidence
consisted only of the mechanical application of mathe-
matical formulations.
A consideration important to our decision is that the
case is in a preliminary stage. At the time the appeal was
taken, the defendants had not yet filed their answers, the
early skirmishing having been confined to discovery on
jurisdictional issues. Those matters have since been re-
solved against the defendants, and the parties are now in
3. See 3B Moore’s Feperat Practice { 23.01[11-4], { 23.65.
A34 Court of Appeals Opinion (2/11/77)
a position to prepare the case on the merits. We believe
that further development of the facts will aid the trial court
in choosing among the alternative procedures discussed in
its memorandum. By the time of the pretrial conference,
the issues should be more sharply defined, and the district
court may be in a better position to make positive rulings
—rather than merely ‘‘thinking out loud,’’ as its memoran-
dum may fairly be characterized.
The better appellate practice is to rule on those issues
which have been decided, and where a decision will ‘‘ma-
terially advance the ultimate termination of the litigation.’’
We read the district court’s order and memorandum as
failing to meet those criteria. In short, we have been
asked for an advisory opinion on an interesting legal
proposition but one which may never be invoked in this
case, see Nickert v. Puget Sound Tug ¢ Barge Co., 480
F.2d 1039 (9th Cir. 1973); Control Data Corp. v. Interna-
tional Business Mach. Corp., 421 F.2d 323 (8th Cir. 1970).
We must decline the invitation.‘
Accordingly, we remand this case to the district court.
Szrrz, Chief Judge, Concurring
I believe that the majority have not adequately ex-
plained their refusal to answer either of the questions cer-
4. The dissents would prefer to take up the jury issue at this
point rather than waiting for the district court to determine what
procedures it will follow. Although the dissents conclude that the
use of separate juries was a sine qua non of the class certification,
we think it clear that it was but one of several possibilities, none of
them finally determined, upon which the district judge speculated
before entering his order. The precise point in the case at which
the trial might be bifurcated is an important consideration, but not
one to which the district court has P adn» ed its attention.
The majority believes that the dissents’ discussion of these legal
issues is ature in this case, and on this procedural point we
differ. Therefore, even though some opinions are styled as dissents,
their reasoning on those issues is not necessarily at variance with
the views of a majority of this court.
Court of Appeals Opinion (2/11/77) A35
tified by the district court. It is not incumbent upon the
court to state reasons why it would or would not vote to
accept an appeal under §1292(b). Senate Report No.
2434, 85 Cong. 2d Sess., pp. 3, 4. However, I consider it
useful to do so in this case, especially as a prior panel of
our court granted permission to appeal.
There is an important distinction between the functions
of the panel passing on the original request to allow an
appeal under § 1292(b) and the panel which thereafter con-
siders an appeal which has been allowed. The original
panel is not required to do more than agree that the certi-
fied matter appears to be worthy of immediate appellate
consideration. On the other hand, the panel which con-
siders the matter after full briefing and consideration of
the issues may well be in a better position to determine
that what seemed proper for interlocutory review really
should not be so reviewed.’ I therefore do not consider
the majority’s present decision to be in impermissible con-
flict with the decision of the earlier panel. Nor do I say
this because the matter is now considered in banc.
L
The majority have refused to determine whether the
class was properly certified because they fail to discern a
‘controlling question of law.’’ I might agree with their
conclusion were we untrammeled by precedent. However,
in Katz v. Carte Blanche Corp., 496 F.2d 747 (3d Cir.),
cert. denied, 419 U.S. 885 (1974); a majority of this court
sitting in banc held that whether a district court has com-
mitted an abuse of discretion in certifying a class is a con-
trolling question of law for purposes of § 1292(b). I, never-
theless, concur in the majority’s refusal to discuss the
propriety of class certification, since there has not been a
1. The Court has now approved the following Internal Oper-
ating Procedure:
“The fact that a motion panel has permitted an a under
28 U.S.C. § 1292(b) does not, in any manner, bind or restrict
the merits panel in its subsequent disposition of the appeal.”
A36 Court of Appeals Opinion (2/11/77)
sufficient showing that the issues raised admit of a ‘‘sub-
stantial ground for difference of opinion.’’ As the ma-
jority noted in Katz, it is unlikely that a district court
would certify that there is ‘‘substantial ground for differ-
ence of opinion’’ as to the correctness of one of its orders
unless it thought so. But it can hardly be assumed that
district courts will always properly review the criteria
mentioned in §1292(b): as the majority stated in Katz,
‘*[dJenial of permission to appeal may be based upon a
different assessment than that of the district court as to
any of the three [mentioned] criteria.’’ 496 F.2d 747, 754.
Appellants have questioned the class certification order
on several grounds,’ including that the district court failed
to properly identify the factors relevant to the class cer-
tification decision and that it abused its discretion in evalu-
ating the factors which it did identify. But the only
allegation of error which poses a substantial and out of the
ordinary question is that the certification is invalid be-
cause it was premised on the assumption that the court
could decertify the class after the initial stage of the pro-
ceedings.
Were it clear that the court did rest its decision on
this assumption, I might conclude that there is ‘‘substantial
ground for difference of opinion’’ as to the propriety of the
class certification. But it is far from clear that the district
court was thinking of decertification under F.R. Civ. P.
23(c)(1) rather than the possibility of holding bifurcated
proceedings within the overall class action suit. The por-
tion of the court’s order which sets forth the ‘‘controlling
questions of law’’ mentions a ‘‘bifurcated trial in this case
of liability and damages,’’ and does not mention decerti-
fication, which would seem to relegate proof of any damages
to an entirely separate lawsuit. The court’s Memorandum
Opinion states that ‘‘[t]he most appropriate way to pro-
2. On a proper appeal under § 1292(b), we would consider any
issue Bt to our consideration of the order appealed from
which had been “properly put in dispute by the parties.” Johnson
v. Alldredge, 488 F.2d 820, 823 (3d Cir. 1973).
Court of Appeals Opinion (2/11/77) A37
ceed in this case is to bifurcate the issues of liability and
damages,’’ and indicates how discovery would proceed in
the event there was a finding of liability. While the court
also said that it had the ‘‘right to decertify the class fol-
lowing a determination of liability against the defendants,’’
it cited for this assertion Ungar v. Dunkin’ Donuts of
America, Inc., 68 F.R.D. 65 (E.D. Pa. 1975), rev’d on other
grounds, 531 F.2d 1211 (3d Cir.), cert. denied (1976),
which refers to a bifurcated trial, not decertification. He
also cites 3B Moore’s Federal Practice Para. 23.45[2],
which speaks generally of separate ‘‘proceeding[s]’’ for
assessing individual damages, and does not specifically dis-
cuss decertification.
In sum, the question of whether the district court could
decertify the class after the initial stage of the proceedings
is not clearly before the court. Since the other allegations
of error do not raise a ‘‘substantial ground for difference
of opinion’’ within the statutory meaning and since this
court has a legislative mandate to ensure that § 1292(b)
does not undermine the proper scope of the finality rule, I
conclude that we should not address the propriety of the
class certification, even though that question, if entertained,
might be easily disposed of. See Milbert v. Bison Labora-
tories, 260 F.2d 431 (3d Cir. 1958).
Il.
The majority also decline to discuss whether it is per-
missible under the Seventh Amendment to have a bifurcated
trial of liability and damages with separate juries for each
segment of the case. Their decision is based on the fact
that the district court has not at this point ordered such a
trial. But I do not think this is a complete response to the
issue posed, since one can still argue that the Seventh
Amendment claim may be entertained on this appeal be-
cause it is raised by the class certification order.
I conclude that the Seventh Amendment problem should
not be considered because it is not sufficiently implicated in
the class certification decision. We should not consider the
A38 Court of Appeals Opinion (2/11/77)
Seventh Amendment questions which might inhere in de-
certification procedures, since, as noted, it is not clear that
the court based its decision to certify on the assumption
that it could decertify before proof of individual damages.
Moreover, as to bifurcating the present action into liability
and damage stages, the court’s Memorandum Opinion men-
tions several techniques other than separate juries by which
the proof of damages might be handled in a bifurcated pro-
ceeding, such as using a Master to calculate damage to in-
dividual class members, or using ‘‘expert testimony, statis-
tical computations and computer analysis.’’
I therefore concur in the disposition by the majority if,
as I understand it, the majority is vacating the earlier order
of our court granting permission to appeal and remanding
the case to the district court.
Apams, Circuit Judge, dissenting:
Had I been a member of the panel that was presented
with the question whether to grant a certificate under
section 1292(b), I might have voted against entertaining an
interlocutory appeal. This is so because I believe that the
position of this Court has been one of reticence in reviewing
district court orders certifying suits as class actions, at
least in the absence of an intertwined controlling legal
issue.*
However, this case is now before us in a markedly dif-
ferent posture. Permission to appeal was in fact granted,
1. See, e.g., Kramer v. Scientific Control Corp., 534 F.2d 1085,
1087 (3d Cir. 1976); Ungar v. Dunkin’ Donuts of America, Inc., 531
F.2d 1211, 1213 (3d Cir.), cert. denied, 45 U.S.L.W. 3250 (Oct.
4, 1976); Katz v. Carte Blanche Corp., 496 F.2d 747, 756 (3d Cir. )
(en banc), cert. denied, 419 U.S. 885 (1974).
2. I thus agree with Chief Judge Seitz that “there is an impor-
tant distinction between the function of the panel passing on the
original request to allow an appeal under § 1292(b) and the panel
which thereafter considers an appeal which had been allowed.”
Concurring opinion at A35.
Court of Appeals Opinion (2/11/77) A39
a significant amount of time has elapsed since certification,*®
substantial efforts have been expended in proceedings be-
fore this Court, and it now appears that a serious and con-
trolling legal question has emerged with respect to the issue
of separate juries to try the liability and damage phases.
Given these factors, it would seem to me to be improper to
vacate, summarily, the grant of permission to appeal. Con-
sequently, I believe that the Court should proceed to a con-
sideration of the substantive points that have been tendered.
With respect to the first of appellants’ contentions, the
decision of the trial judge to certify this case as a class
action, in my judgment, would not appear to be, at least on
the facts available at this time, an abuse of discretion.
However, I believe that it would have been preferable if he
had undertaken the species of detailed analysis recom-
mended by Judge Van Dusen.‘
The thrust of the appellants’ claim that the order of
the district judge should be reversed appears to be that the
suit is unmanageable as a class action. Yet, a district judge
is ordinarily in a better position to determine whether class
action treatment is appropriate on grounds of manage-
ability, and his conclusion in that regard should not be dis-
turbed in the absence of compelling circumstances. It is
true that the contemplated class of 300,000 is an admittedly
large one, but other cases have approved classes of com-
parable numbers. Moreover, the size of the class does not
appear to make the substantive issues, at least in the lia-
3. The certificate by the district court was granted on August
7, 1975. ,
4. In Interpace Corp. v. City of Philadelphia, 438 F.2d 401,
404-07 (3d Cir. 1971) (dissenting opinion), I suggested that a dis-
trict court should be required to make findings of fact as a pre-
condition to the determination of a Rule 23 certification motion.
aa Interpace court held that such findings need not be
made, that opinion does not bar such a procedure. And I remain
convinced that it is the better practice for a district court to render
findings of fact in ruling on class certification motions. This would
seem especially so in a dispute as sizeable and vexing as the present
case appears to be.
A40 Court of Appeals Opinion (2/11/77)
bility stage of the case, intractable. This would seem to be
so because the central contention of the class representa-
tives, so far as the merits of the controversy are concerned,
is that the two principal defendants entered into a single
conspiracy with their dealers to fix the cost of repairs.
As to the jury issue, I am in accord with Judge Gibbons
that review of this problem would not, in the context of the
case at hand, constitute an advisory opinion.’ The trial
judge did not speculate about using the device of a bifur-
cated trial and separate juries. Instead, a fair reading of
the district judge’s opinion indicates that the assumed pro-
priety of that mechanism appears to have been one of the
prime predicates of his decision to certify the case as a
class action,° at least in the first instance. Inasmuch as the
trial judge’s determination turned in large measure on the
plan to use separate juries, I believe that this Court should
decide this issue.
Since the majority has chosen not to confront the jury
problem, I do not believe that it would be appropriate, at
5. Rather than presenting a request for an advisory opinion,
the jury issue poses a present, live controversy: The defendants
claim that the class is not manageable because the class action pro-
cedure would deprive them of their right to a jury trial as pre-
scribed by the Constitution. Plaintiffs contend that the class action
is manageable, since class treatment will not trench on the constitu-
tional right to a jury trial in view of the interpretation of that clause
by the Supreme Court in Gasoline Products Co. v. Champlin Re-
fining Co., 283 U.S. 494 (1931). This, then, is a “controversy of
sufficient concreteness” to warrant adjudication. McCahill v.
Borough of Fox Chapel, 438 F.2d 213, 217 (3d Cir. 1971). And
the parties appealing would appear to be “adversely affected” by a
decision that a bifurcated trial may take place and separate juries
used, as the trial court contemplates. Sierra Club v. Morton, 405
U.S. 227, 740 (1972).
6. See App. 159a, where the trial judge stated, “The most
HS mg way to a in this case is to bifurcate the issues
damages and liability.”
The latter portion of the district judge’s opinion arguably does
contain some indication that he might contemplate decertifying the
case if the proposed procedure proved too unwieldy. But it would
appear that use of the bifurcation device, with separate jury trials,
was the linchpin of the trial judge’s strategy for conducting the
litigation as a class action.
Court of Appeals Opinion (2/11/77) A41
least at this time, to set forth my views on the constitution-
ality of the separate jury procedure proposed by the dis-
trict judge. Under the disposition of the appeal made
today, it may well be that we will have to face this issue in
the future. At that juncture, there will be ample oppor-
tunity to resolve definitively this difficult and important
question, in light of the precise factual matrix in which the
matter will then arise. The thorny problems of waiver and
the possible designation of a master will by that time have
been stripped away, and a direct encounter with the issues
in a more pristine form will be possible.’
Judge Rosenn joins in this opinion.
Van Dusen, Circuit Judge, dissenting.
I respectfully dissent from the majority opinion’s hold-
ing that a district court order, which certifies a class and
adopts a bifurcated trial of a private civil antitrust action
for treble damages under 15 U.S.C. $15, does not qualify
under 28 U.S.C. §1292(b). My dissent is based on the
district court’s failure to make findings or show consider-
ation of these factors,’ among others:
7. Moreover, the Supreme Court has admonished that we
should not decide constitutional issues when it is not essential to
do so. See, e.g., Hagans v. Lavine, 415 U.S. 528, 543 (1974);
Alma Motor Co. v. Timken-Detroit Axle Co., 329 U.S. 129, 136-37
(o78). See also Allen v. Aytch, 535 F.2d 817, 819-20 (3d Cir.
1976).
1. The district court could not comply with the F.R. Civ. P.
23(b)(3) requirement that it exercise an “informed judgment” as
to the “superiority” of class treatment without considering these
factors. See Katz y. Carte Blanche Corporation, 496 F.2d 747,
756 Ba Cir. 1974). I believe that findings of the type made by
the district court in Windham v. American Brands, Inc., 68 F.R.D.
641 (D. S.C. 1975), appeal pending en bane (4th Cir., No. 75-2315,
order of 12/13/76), were required in order to certify the class in
this case. See pages 28-32 of the dissenting opinion of Judge
Gibbons and onthediiles there cited, including §4 of the Clayton
Act, 15 U.S.C. § 15.
A42 Court of Appeals Opinion (2/11/77)
(a) that the liability aspect of the trial required
a decision not only of violation of 441 and 2 of the
Sherman Act, 15 U.S.C. §§1 and 2, but also deter-
mination under 15 U.S.C. 415 of the fact of damage?
(an element which would give rise to problems in prov-
ing the latter item on a class basis where the class
consists of ‘‘potentially 300,000 claimants’’ located in
all 50 states, Puerto Rico, Guam, and the Virgin
Islands) ;
(b) that there would be a substantial difference
in the quantum and character of liability proof under
§ 4 of the Clayton Act, 15 U.S.C. § 15, if the plaintiffs
included all the above 300,000 individuals alleged to
comprise the class, rather than only the named plain-
tiffs ;
(c) that determination of liability itself under $1
of the Sherman Act might also vary as to each
class member, depending upon whether the particular
dealer-defendant participated in the conspiracy, so
that inquiry is required into whether the common ques-
tions predominate over the individual questions mak-
ing a class action superior under F.R. Civ. P. 23(b)
(3);
(d) that, on this record, there would appear to be
no theoretical or practical formula or method to aid
in the computation of damages sustained by different
individuals, potentially requiring each class member to
2. See 15 U.S.C. § 15; Pitchford v. Pepi, Inc., 531 F.2d 92,
98-99, 104-05 (3d Cir. 1976); Deaktor v. Fox Grocery Co., 475
F.2d 1112, 1116-17 (3d Cir. 1973); and cases in note 29 of Judge
Gibbons’ opinion. As noted by Judge Gibbons at page A60 of
his opinion, the Fifth and Ninth Circuits have ruled that class
tions may be improper in cases brought under §4 of the
Clayton Act, 15 U.S.C. §15. See Shumate & Co., Inc. v. National
Association of Securities Dealers, Inc., 509 F.2d 147, 155 (5th Cir.
1975), and In Re Hotel Telephone Charges, 500 F.2d 86, 89-90
(9th Cir. 1974).
a — |
Court of Appeals Opinion (2/11/77) A43
produce voluminous documentary evidence of his trans-
actions in order to secure judgment; .
(e) that, in view of the above, there is a question
as to whether the named plaintiffs are typical as re-
quired by F.R. Civ. P. 23(a)(3);°
(f) that, if more than one class is necessary, the
named plaintiffs might not adequately represent many
members of the group of 300,000 persons treated as
members of various classes and subclasses by the dis-
trict court, see F.R. Civ. P. 23(d) (4); and
(g) that class suits have an in terrorem effect in
forcing settlement (cf. Blue Chip Stamps v. Manor
Drug Stores, 421 U.S. 723, 740-42 (1975)).
This court has consistently recognized that if the dis-
trict court ‘‘has not properly identified the issues and not
properly evaluated which are common, the [district court
order] is not entitled to such deference.’’ Katz v. Carte
Blanche Corporation, 496 F.2d 747, 756-57 (3d Cir. 1974),
and cases there cited,* where Judge Gibbons also quoted
Professor Moore as follows (at 757):
‘* Tn determining whether an action brought as a
class action is to be so maintained the trial court should
carefully apply the criteria, set forth in Rule 23...,
to the facts in the case; and if it fails to do so its de-
termination is subject to reversal by the appellate court
when the issue is properly before the latter court.’ ’’
3. The district court apparently a ed the unlikely theory
of a single “co-conspirator”—the National Dealer Council—and did
not identify the “common” issues sufficiently to make a proper
——, etermination. It is t . ible there will be two
c ne being those who dealt with dealers who participated
in the conspiracy and the other being those who dealt with dealers
who did not participate in the conspiracy.
4. See note 1 above; compare, for example, Baerga v. Richard-
son, 500 F.2d 309, 312-13 (3d Cir. 1974).
A44 Court of Appeals Opinion (2/11/77)
I agree with part I of Judge Gibbons’ opinion.* As
to part II, I do not believe that class action treatment is
permissibie on this record, where a ‘‘§4 damage action
charging price fixing’’ is involved (see page 32 of Judge
Gibbons’ opinion), although I agree with Judge Gibbons
that the Seventh Amendment is no bar to a bifurcation of
the trial in this case. In view of Bruszewski v. United
States, 181 F.2d 419 (3d Cir. 1950), a bifurcated trial of
the §1 Sherman Act claim apparently can be more ap-
propriately tried in a test action brought by the named
plaintiffs. See Katz v. Carte Blanche Corporation, 496
F.2d 747, 759-61 (3d Cir. 1974) (en banc).
I would vacate the district court order and remand for
district court (1) consideration of the factors mentioned
above in light of the antitrust issues set forth in Judge
Gibbons’ opinion, and (2) appropriate findings and con-
clusions after such consideration.
Gissons, Circuit Judge, dissenting.
I. DismissaL oF THE APPEAL
This is an appeal, pursuant to 28 U.S.C. § 1292(b)," of
an order of the district court determining that the suit in
question could be maintained as a Fed. R. Civ. P. 23(b) (3)
class action. Plaintiffs seek to represent a class of all per-
sons, firms, or corporations who owned or leased a Mer-
cedes-Benz automobile during the period from March 1970
to March 1974, and had non-warranty repairs performed by
authorized Mercedes dealers during that period. The de-
fendants are Daimler-Benz A.G., the West German auto-
. The special factors contemplated by Ungar v. Dunkin
eee of America, Inc., 531 F.2d 1211, 1213 (3d Cir. 1976), in-
clude the district court's failure to apply the criteria in F.R. Civ. P.
23 to the antitrust law issues pointed out in e Gibbons’ opinion
and its failure to make findings of the type in
1. See note 8 supra.
indham, supra.
=
ee ey ee eee Pee ek re es eee
Court of Appeals Opinion (2/11/77) A45
mobile manufacturer, and its wholly-owned United States
distributor, Mercedes-Benz of North America, Inc. The
complaint charges that the defendants conspired with in-
dividual Mercedes retail dealers, referred to as co-con-
spirators but not named as defendants, to fix the retail
prices of parts and the flat labor .repair times for non-
warranty repairs, in violation of 41 of the Sherman Act.
15 U.S.C. $1. The complaint seeks on behalf of the class
both money damages under § 4 of the Clayton Act? and in-
junctive relief under § 16 of the Clayton Act.®
A substantive element of the § 4 cause of action is proof
of actual injury to the business or property of each plaintiff
resulting from the alleged violation.t Since the § 4 cause
of action is for money damages the defendant is entitled to,
2. Section 4 of the Clayton Act, 15 U.S.C. § 15 provides:
Any person who shall be injured in his business or prop-
erty by reason of anything forbidden in the antitrust laws may
sue therefor in any district court of the United States in the
district in which the defendant resides or is found or has an
agent, without respect to the amount in controversy, and shall
recover threefold the anes by him sustained, and the cost
of suit, including a reasonable attorney’s fee.
3. Section 16 of the Clayton Act, 15 U.S.C. § 26 provides:
'_ Any person, firm, corporation, or association shall be en-
titled to sue for and have injunctive relief, in any court of the
United States having jurisdiction over the parties, against
threatened loss or damage by a violation of the antitrust laws,
including sections 13, 14, 18 and 19 of this title, when and
under the same conditions and principles as injunctive relief
against threatened conduct that will cause loss or damage is
granted by courts of equity, under the rules governing such
ey and upon the execution of proper bond against
ages for an injunction improvidently granted and a show-
ing that the danger of irreparable loss or age is immediate,
a preliminary injunction may issue. . . .
4. E.g., Deakton v. Fox Grocery Co., 475 F.2d 1112, 1116 (3d
Cir. 1973), cert. denied, 414 U.S. 897 (1974); In re Hotel Tele-
hone Charges, 500 F.2d 86, 89-90 (9th Cir. 1974); Shumate & Co.,
Inc eee Ass'n of Sec. Dealers, Inc., 509 F.2d 147, 155 (5th
ir. 1 ‘
A46 Court of Appeals Opinion (2/11/77)
and has demanded, a jury trial.’ The injunctive remedy in
§ 16, on the other hand, requires only proof of threatened
loss or damage.* Since the 416 cause of action looks only
to equitable relief it presents no jury trial issue.’
On September 9, 1974, the plaintiffs moved, pursuant to
Fed. R. Civ. P. 23(c), for a class action determination.
Affidavits filed in opposition to that motion suggest that
there are approximately 300,600 members in the proposed
class, that the individual Mercedes dealers number about
588, and that the number of different parts, the prices of
which were allegedly fixed, is over 26,000. On July 8, 1975,
the district court, without making any distinction between
the § 4 damage claim and the § 16 claim for injunctive relief,
entered an order that the action ‘‘shall be mairtained as a
class action pursuant to Fed. R. Civ. P. 23(b) (1), 23(b) (2)
d 23(b)(3).’? Upon the entry of that order defendants
poche ly a wine amending the July 8, 1975 order, to
provide that in the district court’s opinion an immediate
appeal is warranted under 28 U.S.C. § 1292(b) as it would
materially advance the ultimate termination of the litiga-
tion.® Acting on that motion, on August 7, 1975, the district
. E.g., Beacon Theaters v. Westover, 359 U.S. 500, 504 (1959)
right * trial by jury applies to treble damages suits ot the
antitrust laws.” ).
6. See, e.g., Zenith Radio Corp. v. Hazeltine Research, 395
U.S. 100, 130-31 (1969). sind ——
. Id.; see, e.g., Florists’ Nationwide Te . Net. v. Flo
Tel. Del bo = 1 F.2d 263, 271 (7th Cir. 1967); Upjohn Co. v.
Schwartz, 117 F. Supp. 292, 293 (S.D. N.Y. 1953).
8. Section 1292(b) provides: “p
When a district judge, in making in a civil action an order
prealab
otherwise a e under this section, shall be of the
ain that such order involves a —-, question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation,
he shall so state in writing in such order. The Court of
Appeals may thereupon, in its discretion, permit an appeal to
be taken from such order, if application is made to it within
ten days after the entry of the order: Provided, however, That
Jnibts:
rane
Asntbainhaae ipaisactl ain
Court of Appeals Opinion (2/11/77) A47
court vacated the July 8, 1975 order and entered a new
order providing that the ‘‘action shall be maintained as a
class action pursuant to Fed. R. Civ. P. 23(b)(3) [only]’’
and that an immediate appeal is authorized in accordance
with § 1292(b).
In support of this August 7, 1975 order the district
court filed an opinion. This opinion set forth common ques-
tions of law and fact which, in the court’s belief, predomi-
nated over questions which were not common to the class
members.’
A prerequisite to a 23(b)(3) class action is the
existence of questions of law or fact common to the
class ....
The common questions for determination include:
[1] whether defendants combined and conspired to
establish retail parts prices to be charged to the class
by the dealers; [2] whether defendants combined and
conspired to establish designated labor times to be
utilized by dealers in setting prices to the class for non-
warranty repairs of Mercedes-Benz vehicles, [3]
whether documents establishing prices for parts and
the amount of designated labor time were circulated
among the dealers; [4] whether defendants enforced
compliance by the dealers in regard to the prices for
parts for designated labor time; [5] whether the de-
fendants conspired with the Mercedes-Benz National
Dealer Council in regard to establishment of fixed
prices for parts and designated labor time for repair
work in the performance of nonwarranty auto repairs;
[6] whether the plaintiff class was harmed by the al-
leged acts of the defendants and whether the alleged
8. (Cont'd. )
application for an appeal hereunder shall not stay proceedings
in the district court unless the district judge or Court of
Appeals or a judge thereof shall so order.
9. See Fed. R. Civ. P. 23(b)(3); Katz v. Carte Blanche Cor-
“ony F.2d 747, 756-57 (3d Cir.), cert. denied, 419 U‘S.
A48 Court of Appeals Opinion (2/11/77)
acts of the defendants, if proved, violate the antitrust
statutes of the United States.”
It can be seen immediately that questions (1) through
(5) go to the establishment of a § 1 Sherman Act violation.
But proof of such a violation does not establish civil lia-
bility under §4 or $16 of the Clayton Act. There ear
under § 4 be proof of injury to business or property, and
under $16 proof of threatened loss or damage. Aware-
ness of the distinction between acts which violate § 1 of the
Sherman Act, and the elements which establish liability in
private party litigation under 44 and § 16 of the Clayton
Act is vital. A conspiracy to establish maximum price rea
ing, for example, would clearly violate the Sherman Act,
but would not be a cognizable action under ¢ 4 on behalf of
retail consumers since they would have suffered no injury
result of such acts.
* . the district court opinion the only fact question re-
ferring to the essential element of either private cause of
action is question (6), ‘‘whether the plaintiff class was
harmed by the alleged acts.’’ The formulation of this ques-
tion, however, demonstrates the court’s misapprehension of
the nature of § 4 liability in a Rule 23(b)(3) context, for
obviously only individual members of the class, not the
class, can be injured in business or property by a retail
price fixing conspiracy. This misapprehension is further
reflected in the district court’s statement that a common
legal question included: ‘¢whether the alleged acts of the
defendants, if proved, violate the antitrust statutes of the
10. App. 157a.
1l. See note 4 supra.
12. See note 6 supra.
13. See, e.g., Kiefer-Stewart Co. v. Joseph E. Seagram & Sons,
Inc., 340 U.S. 211, 213 (1951).
Hotel Telephone Charges, supra, 500 F.2d at
80.90. ¥ noth. & Co. supra, 59 F.2d at 155; Eisen v. Carlisle and
uelin, 479 F.2d 1005, 1112-14 (2d Cir. 1974), vacated on other
grounds, 417 U.S. 156 (1974).
Court of Appeals Opinion (2/11/77) A49
United States.’’** The only substantive antitrust statute
alleged to have been violated is $1 of the Sherman Act.
That a price fixing conspiracy, if proved, violates $1,
hardly seems an open legal question.
The analytical deficiencies of the district court’s ap-
proach are further revealed later in its opinion, when it
writes : ‘‘I find that the claim of the plaintiffs as individuals
is typical of the claims of the class, especially on the lia-
bility issue.’’** This statement is interesting since the
court has never properly identified the liability issue. Pos-
sibly what was intended was a reference to the Sherman Act
§1 violation. Certainly there is nothing in the district
court opinion, or in the affidavits which have been called to
our attention, suggesting that the conspiracy had a like
effect upon the business or property of every repair cus-
tomer of all 588 individual Mercedes dealers."* It is argu-
able that proof of the mere existence of the conspiracy
might suffice to establish threatened loss or damage, and
15. App. at 157a.
16. See, e.g., Deakton v. Fox Grocery Co., supra, 475 F.2d at
1116 (collecting cases).
17. App. at 158a.
18. Assuming that such a price fixing conspiracy did exist, its
impact upon the various class members would in all likelihood not
present common questions of fact. To illustrate, assume that pur-
suant to the alleged op pe a given Mercedes dealer charged
standard labor times for all repair work and that these time charges
exceeded the actual time required > panne such repair work.
Assume also, that the dollar rate charg per unit of labor time was
such that when applied to the standard labor time the price actually
charged for a given ir was lower than the competitive price
charged within the er’s Ly 5 my market for the same repair
work. The customers of such a er would not have been injured
as a result of the conspiracy and therefore that dealer’s customers
could not assert a § 4 claim — the defendants. Given 588 in-
dividual dealers, and thousands of different parts and labor rates,
it is almost be to view the question of liability as being a
common question since such liability determinations necessarily in-
volve the — of impact of the conspiracy upon each individual
class member.
A50 Court of Appeals Opinion (2/11/77)
thus to sustain injunctive relief under $16. But the dis-
trict court opinion draws no such distinction, and its dis-
cussion is focused primarily on establishing liability under
§ 4 rather than §16. The district court’s misconception of
the substantive elements of § 4 liability are clearest in its
treatment of the distinction between ¢4 ‘‘liability’’ and
‘‘damages.’’ Nowhere does the court show an awareness
that some degree of injury to business or property—dam-
ages if you will—is a substantive element of § 4 liability.
The court, however, recognizing that some proof of the
amount of the overcharges resulting from the conspiracy
will have to be proved at some point, and that the necessity
for such proof has something to do with the class action
determination, concludes:
[T]he troublesome question in certifying the class in-
volves the problems [sic] anticipated in proving dam-
ages on behalf of 300,000 separate class members. This
argument was tie basic contention made by the defend-
ants to resist the certification of the class. The parties
should not be subjected to the trial of an antitrust
matter involving a class of 300,000 members if [the]
. . anticipated problems in proving damages render
the certification inappropriate. Considering the ques-
tion the district court has decided the problem can best
be approached by bifurcating the issues of liability and
damages.
Despite the majority opinion of this court, it is clear
beyond dispute that the district court’s decision in favor of
Rule 23(b)(3) class action certification was based upon &
decision to try the liability and damage issues before sepa-
rate juries. In its order of August 7, 1975—the order which
we are reviewing—the district court in certifying its class
action determination for § 1292(b) review, stated :
19. See note 6 supra.
a —
Court of Appeals Opinion (2/11/77) A51
7. The undersigned is of the opinion that an im-
mediate appeal from this Order i thori
U.S.C. § 1292(b), in that: ssi santos
1. It involves controlling questions of law as to
which there is substantial ground i
a ce ground for difference of
B. Whether there can be a bifurcated trial in
this case of liability and damages with separate
juries for each segment of the case; . .
Disingenuously, the majority suggests that becau i
trict court has not yet entered a formal order cet
a deny . —— juries our discussion of the pro-
pare My = a procedure would be an ‘advisory
The district judge will surely be surprised to learn that
this court’s review of his conclusion on a proposition of law
would amount to an advisory opinion. The decision to have
separate juries for each segment of the bifurcated trial was
an essential postulate of the district court’s reasoning in
support of its order granting class certification. It is clear
beyond peradventure that the district judge would not have
entered the class action order except for his belief in the
legal proposition that he could try liability and damages in
a § 4 Clayton Act case before separate juries.
Under 28 US.C. § 1292(b) this Court reviews an order
which because it is appealable, is a judgment. Fed. R. Civ.
P. 54(a). We do not review opinions or certified ques-
tions.* But when the district court advances a legal propo-
sition in support of its judgment this court’s review of the
correctness of that legal
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