Opposition — Young v. United States District Court for the Northern District of California

Supreme Court brief1977

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IN THE

Supreme Court of the Unit

OcTOBER TERM, 1976

No. 76-1709

ARTHUR Younc & Company and Ot1s CHANDLER,

Petitioners,

vs.

Unitep States District Court, NORTHERN DISTRICT OF

CaLIFoRNIA, HonoraBLeE WiLtiamM T. SWEIGERT,

United States SENIOR JUDGE PRESIDING;

ALBERT A. KAUFMAN; JOE EBNER; JAMES

HoweENstTINE; and THe 5-H INVESTMENT

CLUB,

Respondents.

RESPONDENTS’ BRIEF IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

FREDERICK P. FurRTH,

THomaS R. FAHRNER,

Rosert C. CaGEn,

FurtH, FAHRNER & WONG,

Suite 1330, Russ Building,

235 Montgomery Street,

San Francisco, California 94104,

RicHarp G. WILSON,

ALLEN, WILSON, GEORGE

& Epemon, INc.,

3728 Atlantic Avenue,

Long Beach, California 90807,

Counsel for Respondents.

PERNAU - WALSH PRINTING CO. - 562 MISSION STREET - SAN FRANCISCO, CA 94108

Page

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ies ab Sued s henbdabtb ingntad+ 0Saeds¥6s nen saks< nox 10

The controversy here is not ripe for review by the

I icp deed cctedhavgcietosct ous eee Uda de 10

The class action certification order does not abrogate

petitioners’ Seventh Amendment right to a jury trial 14

The district court’s bifureation of issues in the class

action order does not mean that the court has recog-

nized the existence of non-common issues ........... 19

Uncontradicted authority sanctions the “split trial” de-

vice ordered here by the district court .............. 22

There is nothing in the class action certification which

precludes the same jury from deciding both the com-

mon issues and the individual issues ............... 34

The court of appeals did not adopt an incorrect standard

for review of the district court’s orders ............. 37

Table of Authorities Cited

Cases Pages

Affiliated Ute Citizens v. United States, 406 U.S. 128 (1972) 32

American Construction Co. v. Jacksonville, T. & K. W. R.

See, Se Sete NEE IO d.din c:nndenes 04uscenneecndendes 13

Cereal Byproducts Co. v. Hall, 16 Ill App.2d 79, 147 N.E.

OR Se BED idence es ctedpeeseossentdekisntbiasbiace 33

Escott v. Bar Chris Construction Corp., 283 F.Supp. 643

(S.D.N.Y. 1968) ...... . cebensdackeséeesbenkethaitegs es 16

Gasoline Products Co. v. Champlin Refining, 283 U.S. 494

CD awnce'd sevtnuds dee cancodesspauen becéunena 23, 27, 28, 29

Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S.

OE GRE a cdc oe nnedneieetseeneeshantatasass sebavws 33 '

Hosie v. Chicago Western Railway Company, 282 F.2d 639

(7th Cir. 1960), cert. den. 365 U.S. 814 ................ 24, 25

In Re Master Key Antitrust Litigation, 528 F.2d 5 (2nd

Ce Sion a 05 bid oe on RRs wh b5 dak Con esd He 6 35

Igenito v. Bermae Corp., 376 F.Supp. 1154 (S.D. N.Y.

SUED... kk 3 cok bakin 65s RRS ES OE eek 31, 32

Link v. Mercedes-Benz of N. Am., Inc., 550 F.2d 860 (3rd

Cir. 1977), cert. den., 45 U.S.u.W. 3762 ............ 27, 28, 35

Matter of Walter Peterson, 253 U.S. 300 (1920) .......... 23

New Haven Inclusion Cases, 399 U.S. 392 (1970) ........ 11,12

O’Donnell v. Watson Bros. Transportation Co., 183 F.Supp.

OTS COLD. TR BOD ccnssconnecccsincchicteukasaccna 26

Rhode v. Hershberger Explorations Inc., 349 F.Supp. 993

C3 3 BPP irr re ee 33

State of Alabama v. Blue Bird Body Co., Inc., 71 F.R.D.

ee re ee ee rae 28

Swofford v. B & W, Inc., 34 F.R.D. 15 (S.D. Tex. 1963),

aff'd 336 F.2d 406 (5th Cir. 1964), cert. denied 379 U.S.

OB 5 ccvscvscpscccnchec gids ad eee 26, 27

TasLe or AUTHORITIES CITED iii

Pages

United Air Lines v. Wiener, 286 F.2d 302 (9th Cir. 1961),

C—O SK OEE EE 29, 33, 34

United States v. Nixon, 418 U.S. 683 (1974) ............ 11, 12

Constitutions

United States Constitution, Seventh Amendment ........

cennbemedhsésbeeedesneseddbeeséeceeked 2, 22, 24, 26, 29, 37, 38

Rules

Federal Rules of Civil Procedure:

EU aeddéendccadésedene teed sudeeecedes 2, 3, 4, 16, 18

i: ocvbcdn dhecdeubesedusencdieseasens 8, 11,19

i icenctiekbbhmhvbebodedens 6bbe0cbacntes 4

iin ied eid a gidihiad ais diaieatheee eeadaen 16

CT 2:1 cu cdidcskdhie duubcdhsteubb0cueus ver 22, 23

SE 24 ibd Sud bbd6 ds 6 Beca¥e 040% 6.00005 ovaceta 4

Securities Exchange Commission Rule 10b-5 ........... 6, 7, 8, 32

United States Supreme Court Rule 20 .................. 10, 11

Statutes

Securities Exchange Act of 1933:

Section 11 (15 U.S.C. Section 77k) ................. 5

Section 12(2) (15 U.S.C. Section 77(12)) ........... 5

Section 17(a) (15 U.S.C. Tiq(a)) .......cccccccccees 5

Securities Exchange Act of 1934, Section 10(b) (15 U.S.C.

PU TUNED waco sccsncscevscccccccvcccccscens 5, 6, 7,8

ee ED oc cccc cactc ceed coevscecesecees 3

de gbtceceeces +

Texts

C. A. Wright, Federal Courts, 1963 Ed., p. 378 .......... 25

Frankel, Some Preliminary Observation Concerning Civil

Die SE, G&S Pek GE, GT CORSE) oes cccccccccccccccccss 18

IN THE

Supreme Court of the United States

OctoBer TERM, 1976

No. 76-1709

ARTHUR YounG & Company and Ot1s CHANDLER,

Petitioners,

vs.

Unitep States District Court, NORTHERN DISTRICT OF

CaLiFoRNIA, HonoraBLeE WiLLiAM T. SWEIGERT,

Unitep States SENIOR JUDGE PRESIDING;

ALBERT A, KAUFMAN; JOE EBNER; JAMES

HOWENSTINE; and THE 5-H INVESTMENT

CLUB

Respondents.

RESPONDENTS’ BRIEF IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

The petitioners, Arthur Young & Company (“Ar-

thur Young”) and Otis Chandler (“Chandler”) seek

review of an order entered on March 4, 1977, pursu-

ant to the unanimous decision of the United States

Court of Appeals for the Ninth Circuit. That order

denied petitioners’ petition for a writ of mandamus

or prohibition, which sought to set aside an order

certifying as class actions three closely related se-

curities fraud actions. The class action certification

order was entered on April 21, 1975, by the United

States District Court for the Northern District of —

California.

Petitioners now claim that the class action order

violates their Seventh Amendment right to a jury

trial. This is the basis upon which the petitioners

seek review of the District Court’s class action certi-

fication order, and of the decision of the Court of

Appeals upholding that order.

Respondent respectfully request that the petition

be denied. The petition contains nothing which could

possibly merit the Court’s review of the class action

certification order. The petitioners portray the class

action order as a radical and unusual departure from

the normal order entered in class action securities

cases. On the contrary, the class action order is as

sound, practicable, and time tested as any class action

order is ever likely to be. Indeed, if petitioners’ argu-

ments were to be accepted here, Rule 23 of the Federal

Rules of Civil Procedure would cease to exist except

on paper. |

Petitioners argue that the substantive law and the

Seventh Amendment right to a trial by jury should

not be “twisted” to comport with Rule 23. Respond-

ents agree, although we strenuously disagree that any

of petitioners’ rights have been abrogated. On the

other hand, it is also imperative that the Seventh

Amendment right to a jury trial not be “twisted” and

tortured, as petitioners have done here, in a desperate

attempt to avoid the class certification order.

OPINIONS BELOW

The unanimous opinion and order of the United

States Court of Appeals for the Ninth Circuit is re-

ported at 549 F.2d 686. The class action certification

order entered by the United States District Court for

the Northern District of California, not reported, ap-

pears in the appendix attached to the petition at

pages A28 through A32.

JURISDICTION

Petitioners have invoked the provisions of 28 U.S.C.

§ 1254(1) in asserting jurisdiction.

QUESTION PRESENTED

Whether petitioners’ convoluted and untenable in-

terpretation of the Seventh Amendment right to a

jury trial is adequate reason for this Court to review

the class action certification order, which is interlocu-

tory and by its terms subject to modification by the

District Court as the litigation progresses, and which

complies in all respects with Rule 23 as interpreted

by this Court, by the District Court and by the Court

of Appeals.

STATUTORY PROVISIONS

Respondents will discuss where applicable the con-

stitutional and statutory provisions which petitioners

invoke in their petition. These provisions are the

Seventh Amendment to the United States Constitu-

tion, the Rules Enabling Act, 28 U.S.C. § 2072, and

Rule 23, Rule 38(a), and Rule 42(h) of the Federal

Rules of Civil Proeedure.

STATEMENT OF THE CASE

The petition relates to three separate but closely

related securities fraud class actions. These actions

are presently pending before the United States Dis-

trict Court for the Northern District of California.

They have been consolidated for trial and have been

certified as class actions. In each of the three suits,

the plaintiffs charge defendants with violations of the

federal securities law. The petitioners here are two of

the defendants in those three actions. The plaintiffs

in each of the three actions all purchased interests in

oil and gas ventures. The three named plaintiffs and

class representatives are Joe Ebner, James How-

enstine, and Albert Kaufman, the real parties in

interest and respondents to the petition. A brief

description of each of the three cases is as follows

below:

1. The Kaufman Action

The complaint in the Kaufman case was filed on

August 14, 1972. Plaintiff Albert A. Kaufman brought

the action on behalf of himself and all investors (a

class of approximately 1,215) who purchased interests

in the GeoTek limited partnership oil and gas pro-

grams, against the corporations which sold the limited

partnership interests, certain officers and directors of

the corporations, and the corporations’ independent

outside creditors. Otis Chandler, one of the corpora-

tion’s directors, and Arthur Young & Company, inde-

pendent auditors for the corporation, were named in

the complaint as defendants, and continue to remain

as defendants in the Kaufman action.

The class members purchased interests in five sep-

arate GeoTek limited partnerships, each named for

the year in which it was created:

GeoTek Resources Fund 1969-1, Ltd.

” ” 1970-1, ”

” ” ” 1970-2, ”

” ” ” 1971-1, ”

” ” ” 1971-2, ”

Participating interests in each of the GeoTek lim-

ited partnerships were solid pursuant to a registra-

tion statement filed in April, 1969 with the Securi-

ties and Exchange Commission, and declared effective

on September 15, 1969.

The Kaufman plaintiffs charge that the GeoTek

registration statement and prospectus, as periodically

amended, contained material misstatements and omis-

sions, and that the defendants are liable therefor

under Sections 11, 12(2) and 17(a) of the Securities

Act of 1933 (15 U.S.C. §§ 77k, 77(12) and 77q(a)),

and Section 10(b) of the Securities Exchange Act of

1934 (15 U.S.C. § 78j(b)), and SEC Rule 10b-5 there-

under. While the Kaufman complaint also pleads

claims for violations of the California Corporate Se-

eurities Law and common law fraud, plaintiffs have

withdrawn these claims. The complaint also alleges

certain oral misrepresentations. These allegations

have likewise been withdrawn. Accordingly, the class

action trial will be limited to the allegations of ma-

terial misstatements and omissions in the GeoTek

registration statement and prospectus, as amended.

2. The Ebner Action

The Ebner action was filed on February 1, 1973,

and was brought on behalf of plaintiff Ebner and all

other investors in one or more of four joint ventures

known as the J. B. Oil Company 1964, 1965, 1966 and

1967 Oil Exploration Programs. A total of 319 per-

sons invested in these four programs. Each investor

received a standardized printed offering circular,

signed a standard-form Oil Exploration Program

Agreement, and received certain financial statements

certified by petitioner Arthur Young, the independent

outside auditor for the programs.

In the fall of 1969, Petroleum 2000 Corporation

made an offer to all investors in the J. B. 1964

through 1967 Programs to exchange shares of its com-

mon stock for the investors’ participation interests in

the programs. [his exchange offer was made by a

printed offering circular distributed to all the inves-

tors. The requisite number of investors accepted the

offer, and from early 1970 to the present, the members

of the Ebner class have been shareholders of Petro-

leum 2000 Corporation.

The Ebner complaint charges seven defendants, in-

cluding petitioner Arthur Young and petitioner Chan-

dler, with material misrepresentations and omissions

in the J. B. Oil Program offering circulars, program

agreements and financial statements, and in the offer-

ing circular distributed in connection with the Petro-

leum 2000 Corporation exchange offer. The Hbner

action is based on Section 10(b) of the Securities

Exchange Act of 1934 and SEC Rule 10b-5. Although

certain oral misrepresentations are alleged in the com-

plaint, these allegations have been withdrawn by the

plaintiffs.

3. The Howenstine Action

The Howenstine action was filed on May 3, 1974.

Plaintiffs James Howenstine and The 5-H Investment

Club (an unincorporated association) brought the

action in behalf of themselves and all other investors

in a joint venture known as the J. B. Oil Company

1968 Oil Exploration Program. A total of 187 persons

invested in the 1968 Program. Each investor received

a standardized printed offering circular, signed a

standard-form Oil Exploration Program Agreement,

and received a financial statement certified by Arthur

Young, the independent outside auditor for the pro-

gram.

In the fall of 1970 Petroforce Corporation made

an offer to all investors in the J. B. 1968 Program to

exchange shares of its common stock for the investors’

participation interests in the program. The exchange

offer was made by a printed circular distributed to all

the investors. The requisite number of investors ac-

cepted the offer, and from early 1971 to the present,

the members of the Howenstine class have been share-

holders of Petroforce Corporation.

The Howenstine complaint charges eight defendants,

including petitioner Arthur Young and petitioner

Chandler, with material misrepresentations and omis-

sions in the J. B. 1968 Program offering circular,

the program agreement, the Arthur Young & Com-

pany financial statement, and in the offering circular

distributed in connection with the Petroforce Cor-

poration exchange offer, in violation of Section 10(b)

of the Securities Exchange Act of 1934, and SEC

Rule 10b-5. No oral misrepresentations are alleged

in the Howenstine complaint.

In the District Court, plaintiffs moved for an order,

pursuant to Rule 23(b)(3) of the Federal Rules of

Civil Procedure, certifying as class actions the Ebner,

Howenstine, and Kaufman actions. Defendants, in-

cluding the petitioners here, raised every conceivable

argument in their vigorous opposition to class certi-

fication. |

Few class action motions have been so thoroughly

serutinized by any court. The parties submitted vol-

uminous briefs and substantial evidenciary materials

in support of their positions. On at least three sep-

arate occasions, lengthy hearings were held before the

District Court, during which the parties had a full

opportunity to present evidence and argument.

On April 21, 1975 the District Court entered its

order certifying the Ebner, Howenstine and Kaufman

actions as class actions. Petitioners immediately filed

a petition for a writ of mandamus with the United

States Court of Appeals for the Ninth Circuit, seek-

ing to vacate and set aside the District Court’s class

action certification order. While the petition was

pending before the Court of Appeals, that tribunal

issued an order staying all proceedings before the

District Court.

In the Court of Appeals, all parties were once again

given a full opportunity to brief and orally argue

their positions. On March 4, 1977, the Court of Ap-

peals denied the petition, vacated the stay, and re-

manded the Ebner, Howenstine and Kaufman actions

to the District Court for further proceedings.

Upon remand, some of the parties brought motions

for summary judgment in each of the three class ac-

tions. These motions have been argued, and have been

taken under submission by the District Court. No

date has been set for trial in any of the three actions.

Nor have any class notices been mailed.

By means of the present petition, petitioners once

again seek interlocutory review of a class action order

already scrutinized and re-scrutinized by the District

Court and by the Court of Appeals.

We respectfully request that this Court now refuse

any further review of the class action certification

order entered by the District Court. The order has

already withstood intense judicial analysis by two

Courts. It is simply contrary to all notions of judi-

cial efficiency to now apply, while the three cases are

at an interlocutory stage, a third tribunal’s analysis

to an already microscopically examined class action

certification order. Most importantly, the class action

order is entireiy appropriate and does not abrogate

any of petitioners’ rights, Petitioners’ argument to

the contrary should be rejected.

ARGUMENT

THE CONTROVERSY HERE IS NOT RIPE FOR

REVIEW BY THE SUPREME COURT

Judicial efficiency and the need for prompt dis-

position of these cases in the District Court strongly

militates against granting the petition for a writ of

certiorari. Indeed, Rule 20 of the Rules of the Su-

preme Court of the United States compels a denial of

review of the class action certification order at this

time.

The Ebner, Howenstine and Kaufman actions are

still pending before the District Court. Judgment has

not been entered in any of these cases. In fact, no

trial date has even been set in any of the three cases.

Yet the petitioners now request this Court to bypass

the normal appellate procedure.

Rule 20 precludes petitioners from “short-cutting”

the normal appellate procedure, unless they can dem-

onstrate “. . . that the case is of such imperative pub-

lie importance as to justify the deviation from normal

appellate processes and to require immediate settle-

ment in this court .. .”* Rule 20 of Rules of the Su-

preme Court of the United States.

Respondents respectfully submit that the petition-

ers have fallen far short of making the showing a

need for immediate review by this Court. Indeed, the

issue here is simply the propriety of an ordinary,

interlocutory class action order entered by a District

Court pursuant to Rule 23(b)(3) of the Federal

Rules of Civil Procedure. Although petitioners have

exerted herculean efforts in an attempt to inject con-

stitutional issues into the certification of the class

action order, the fact remains that the issue here on

appeal is not of “such imperative public importance

as to justify the deviation from normal appellate

processes and to require immediate settlement in this

court.” If petitioners are now permitted to bypass the

normal appellate procedure, this Court’s docket may

weli become inundated with premature appeals alleg-

ing purported “Seventh Amendment issues” each time

a District Court certifies a case as a class action.

The cases in which this Court has permitted an

appeal, before judgment is given in the Court of Ap-

peals, are clearly and unmistakably ones of “impera-

tive public importance”. V.9., See United States v,

Nixon, 418 U.S. 683 (1974), and New Haven Inclu-

‘We recognize that Rule 20 literally speaks to cases “pending

in a court of appeals”. However, the principle underlying the

Rule should apply with at least equal foree to cases still pendi

before the District Court. The policy upon which Rule 20 is b

is to foster judicial efficiency and expediency, and to insure that

the court dockets are not clogged with interlocutory appeals.

These salutary considerations are undeniably present in the

instant case.

sion, Cases, 399 U.S. 392 (1970). In both of these

cases, there were issues so important to the entire

nation as to transcend the otherwise strict policy of

rejecting premature appeals. In the Nigon case, for

example, the Supreme Court granted certiorari before

judgment in a criminal case in which seven indict-

ments had been returned against members of the ex-

ecutive branch of the government and the Committee

for the Re-election of the President, and in which

the President of the United States had been named as

an. unindicted co-conspirator. In such a case, there is

an obvious and urgent need for immediate review by

the Supreme Court. In Nivon, the normal functioning

of the executive branch of the government—clearly

of imperative importance to the entire nation—de-

pended upon a speedy disposition of the issues raised

in the petition for certiorari made to the Supreme

Court.

Here, no such factors exist to compel interference

with the normal appellate procedure. The propriety

of the class action order certifying the Ebner, Howen-

stine, and Kaufman actions, is not a burning issue of

“imperative public importance” which eries out for

immediate disposition by this Court. In fact, the is-

sues presented in the petition are of imperative im-

portance primarily to the petitioners, and to no one

else. The petition does nothing to show otherwise.

This Court has long refused to grant certiorari over

interlocutory orders. Except in extraordinary cir-

cumstances, only a final decree will be reviewed by the

Court:

“Whether an interlocutory order may be sepa-

rately reviewed by the appellate court in the

progress of the suit, or only after and together

with the final decree, is matter of procedure

rather than of substantial right; and many orders

made in the progress of a suit become quite un-

important by reason of the final result, or of in-

tervening matters. Clearly, therefore, this court

should not issue a writ of certiorari to review a

decree of the circuit court of appeals or appeal

from an interlocutory order, unless it is necessary

to prevent extraordinary inconvenience and em-

barrassment in the conduct of the cause.” Ameri-

can Construction Co. v. Jacksonville, T. & K. W.

R. Co., 148 U.S. 372, 384 (1892).

The same considerations of judicial economy noted

in American Construction are applicable here. The

class action certification order may become “quite un-

important by reason of the final result, or of inter-

vening matters.” If, for example, petitioners prevail

in their defense on the merits before the District

Court, the class action certification order would be of

no concern to the petitioners.

A premature invocation of the appellate process

here would present a grave danger of interfering with

the proceedings now being held before the District

Court. For example, the class action notices have

not yet been mailed to class members. At a recent

status conference held before the District Court, the

petitioners’ attorneys urged the Court to further

stay the mailing of the notices, on the ground that

petitioners are now asking that the Supreme Court

review, by means of a writ of certiorari, the propri-

ety of the class action certification order. That peti-

tioners are able, over two and one half years after

these cases were certified as class actions, to point to

possible Supreme Court review of these orders as a

reason for staying the mailing of class notices, can

only result in further delay of cases which have al-

ready suffered far too much from that malady. Only

by promptly denying petitioners’ writ may this Court

insure that the proceedings before the District Court

go forward, and be terminated, in an expeditious

manner.

If orderly appellate procedures are to be the rule

of our judicial system, and if chaos and impossibly

overcrowded dockets are to be denied free rein

therein, this Court must deny the petition as prema-

ture. .

THE CLASS ACTION CERTIFICATION ORDER DOES NOT ABRO-

GATE PETITIONERS’ SEVENTH AMENDMENT RIGHT TO A

JURY TRIAL.

The class action order entered by the District

Court provides for trial on the “common” issues first,

excluding from the fact-triers consideration, at that

time, any so-called “individual issues”:

“(a) As to issues of liability of general appli-

cation, excluding the following issues: reliance or

causation, duty owed to the individual claimant

insofar as it may vary depending upon the status

of that claimant, knowledge of the claimant in-

vestor as to facts allegedly misrepresented or

omitted, statute of limitations, laches, waiver, es-

toppel, ratification, unclean hands and pari de-

licto ;

“(b) As to the issue of damages only to the

extent of determining the value of the interests

received by investors, together with loss of prof-

its, if any, within the meaning of California Civil

Code Section 3343, up to the time of trial.”

As provided in the same order, any “individual is-

sues” will be tried within 90 days after notice to the

class members of a decree or judgment, if such decree

or judgment is in favor of plaintiffs:

“6. As to all issues excluded from class action

maintenance herein, said excluded issues will be

reversed for future determination upon individ-

ual claims filed hereunder by any member of the

classes as above set forth, such claims to be made

within 90 days after notice of such class members

of the decree or judgment herein, if such decree

or judgment in favor of plaintiffs.”

The class action order, then, provides for a trial

which is bifurcated between those issues which are

common to all class members, and those issues, if

any, which are individual to the class members. The

Court of Appeals praised the District Court’s class

action certification order as “novel” and “innovative”.

Petitioners have seized upon the Court’s use of these

terms, in an attempt to make the order appear as a

grotesque and radical departure from any order which

could possibly be entered by a court enforcing the

laws of a civilized nation.

With all due respect to the Court of Appeals, the

Order entered by the District Court is neither novel

nor innovative. Instead, the order is a practicable,

sound, and time-tested method of dealing with class

action trials. Not only is bifureation of issues at trial

expressly permitted by Rules 23 and 42 of the Fed-

eral Rules of Civil Procedure, but the courts have ac-

tually entered class action certification orders which

provide for bifurcation of issues:

“We see no sound reason why the trial court,

if it determines individual reliance is an essen-

tial element of the proof, cannot order separate

trials on that particular issue, as on the question

of damages, if necessary. The effective admini-

stration of 23(b) (3) will often require the use

of the ‘sensible device’ of split trials. Green v.

Wolf Corp., 406 F.2d 291, 301 (2d Cir. 1968).

“Defendants have pleaded additional defenses

of estoppel, waiver, release and the statute of lim-

itations. The first three apply, if at all, only to

certain plaintiffs, not to every one. These issues,

therefore, are also deferred.

“T will treat the defense of the statute of limi-

tations in the same way. This may depend to

some extent upon the knowledge of individual

plaintiffs. Therefore, the question can more read-

ily be determined when the evidence with re-

spect to each separate plaintiff is reviewed.”

Escott v. Bar Chris Construction Corp., 283 F.

Supp. 643, 704 (S.D.N.Y. 1968).

As the late Judge Frankel observed, the “split

trial” procedure is a preferable, and sometimes re-

quired, method of dealing with class actions:

“In the cases to which I refer, assertedly under

(b)(3)—i.e., having both common issues and is-

sues affecting separately the individual members

of the class—district judges have apparently

thought that all members of the class would have

to be brought before the court—for discovery as

well as trial—before there could be any judgment

affecting the class as a whole. Insofar as this

premise lurks in the cited cases, it would appear

to be unwarranted. Take, for example, the sim-

ple model of the case by an alleged class of

securities purchasers charging fraudulent rep-

resentations. There are, supposedly, common ques-

tions as to the nature of the alleged representa-

tions, falsity, and materiality. If some or all such

questions are decided against the plaintiff class,

the complaint will be dismissed and, always as-

suming adequate representation of the class,

there will be a judgment binding the class with-

out requiring any but the representative members

to have been before the court.

“On the other hand, if the plaintiff class pre-

vails on the common questions, it will then—but

only then—become necessary to try or settle or

otherwise dispose of individual questions like re-

liance, damages, or the like. If the common ques-

tions have been aptly defined, there should be no

need at an earlier stage to have all the individual

class members before the court for discovery or

any other purpose.

“In other words, the effective administration

of (b)(3) actions will probably require wide use

of the already familiar device of split trials. And

I submit that a lively awareness of this sensible

device should serve to postpone or minimize some

of the excessively frightening complications that

seem overwhelming from a threshold view of

the case.” Frankel, Some Preliminary Observa-

tion Concerning Civil Rule 23, 43 F.R.D. 39, 47

(1966).

The above-quoted authorities make it clear, then,

that “split trials” are a useful and widely accepted

tool for simplifying class action trials.

Petitioners make three main argumcnts in support

of their contention that the order violates their Sev-

enth Amendment right to a jury trial. First, they

contend that there exist substantial numbers of issues

individual to each member of the class. Second, they

contend that these issues are so “inextricably inter-

twined” with issues common to all members of the

class as to require, as a matter of law, that the same

jury which acts as fact-finder on the common issues

must also do so with respect to the individual issues.

Third, petitioners claim that it would be impossible

for the same jury to hear both the individual and the

common issues, and that the class action order is

therefore violative of petitioners’ constitutional right

to a trial by jury.

None of these arguments has merit. If Rule 23 is

to have a continued meaningful existence, petitioners’

tortured analysis of the right to a jury trial, and of

the relationship of this right to Rule 23, must be sum-

marily rejected by this Court.

THE DISTRICT COURT'S BIFURCATION OF ISSUES IN THE

CLASS ACTION ORDER DOES NOT MEAN THAT THE COURT

HAS RECOGNIZED THE EXISTENCE OF NON-COMMON

ISSUES.

Petitioners contend that their Seventh Amendment

right to a jury trial is abrogated by the bifurcation

of common and individual issues. This contention is

based, of course, upon the assumption that there are

substantial numbers of individual issues to be tried

in the Ebner, Howenstine and Kaufman cases. This

assumption is incorrect.

The petitioners have long contended, to both the

District Court and the Court of Appeals, that the

three class actions abound with individual issues. Pe-

titioners’ purpose in so contending, of course, was to

persuade these tribunals that common questions of

law and fact do not predominate over individual ques-

tions, and hence that the plaintiffs had not met the

prerequisites of Rule 23(b)(3). However, while pe-

titioners have spent much effort in contending that

individual issues exist in great multitudes, they have

never seen fit to actually present evidence in support

of their contention.’ The petition is a prime example

of petitioners’ willingness to assert the existence of

individual issues, but their unwillingness to present

*By contrast, respondents presented to both the District Court

and the Court of Appeals abundant evidence to demonstrate

that the issues in these cases are common to the class members.

Among the evidence introduced by the respondents were the

GeoTek registration statement and prospectuses, the J. B. Oil

Company offering circulars, the J. B. Oil Company financial

statements, the J. B. Oil Company Program Agreements, the

Petroleum-2000 offering circular, and the Petroforce offering

circular. These are all identically worded documents which were

sent to each class member.

anything to the Court to support that assertion. For

example, on page 24 of their petition, the petitioners

point to a number of so-called individual issues, in-

cluding the “defenses of waiver, estoppel, laches,

ratification, unclean hands, statutes of limitations, and

part delicto”, Petition page 24. However, nowhere in

the record before this Court, or any other court, is

there evidence that anything in this impressive pa-

rade of “defenses” bars the claims made by any of

the class members. Petitioners evidently wish this

Court to accept, as an act of faith, their assertion

that “substantial numbers of the purported investor-

class are subject to [individual] defenses .. .” Peti-

tion page 24.

Petitioners contend that “The District Court cor-

rectly recognized the substantial nature of non-com-

mon issues raised by this evidence and that the three

actions could not possibly proceed as class actions

upon these issues” Petition page 10. This statement

is simply incorrect; the District Court has never

ruled that non-common issues are substantial, or

even that they exist at all. This is clear from the face

of class action certification order:

“4, In reserving issues for later determina-

tion, the Court does not intend to rule upon

either the legal or factual sufficiency or necessity

of such issues.” Appendix to Petition, page A31.

The Court of Appeals, in its decision, expressly

noted that petitioners had failed to show that indi-

vidual issues did in fact exist to any substantial

degree :

“Another issue reserved for later determination

by the district court’s order concerns the amount

of information which any particular claimant had

or learned about the J. B. Ventures, the GeoTek

partnerships, or any of the related corporations,

either at the time of the purchase of interests or

at some later date prior to the time of fraud

perpetrated by Burke and others was disclosed to

the public. Evidence of such knowledge, say the

petitioners, in [sic] relevant to their basic de-

fenses, of non-reliance and to such other defenses

as waiver, estoppel, laches, and statute of limita-

tions. To the extent these issues are not common

to the classes, see note 10, supra, we do not think

the district judge erred simply by separating

them out for individual adjudication at the close

of the class trial. The petitioners have again

failed to demonstrate that the existence of this

issue is so prevalent among the claimants that

they will present much proof on the issue at the

later trial. Absent such a showing, we deem it

entirely appropriate for the district judge to sep-

arate out those issues for later adjudication with

respect to the relatively few claims to which they

are pertinent.” Appendix to Petition, page A21.

Petitioners raise the specter of these “individual”

non-issues in a transparent and desperate attempt to

portray the Ebner, Howenstine, and Kaufman actions

as extraordinarily complex actions, in which it will be

necessary at trial for petitioners to examine hundreds

or thousands of investors, in order to properly deter-

mine whether such investors are subject to defenses

such as pari delicto. Petitioners have totally failed

to show the existence of “individual” issues applicable

to substantial numbers of the class. On that basis

alone, the Court should deny the petition.

UNCONTRADICTED AUTHORITY SANCTIONS THE “SPLIT

TRIAL” DEVICE ORDERED HERE BY THE DISTRICT COURT.

Petitioners contend that, under the Seventh Amend-

ment, they have an absolute right to a “unitary” jury

trial. According to petitioners, the Seventh Amend-

ment right to a jury trial will be abrogated unless all

issues, whether common or individual, are tried by

one jury at a single hearing.

Clearly, petitioners are entitled to a jury trial

under the Seventh Amendment. Respondents have no

quarrel with that proposition. It is petitioners’ extra-

ordinarily convoluted interpretation of the Seventh

Amendment to which respondents take complete ex-

ception.

The text of the Seventh Amendment itself does not

prohibit the submission of separate issues in the same

ease before different juries. Neither does the amend-

ment explicitly require that all issues be submitted

to a jury at “a single hearing” (petition page 17).

Rule 42(b) of the Federal Rules of Civil Procedure

specifically authorizes district courts to order sepa-

rate trials on “separate issues”:

“(b) SEPARATE TRIALS. The court, in

furtherance of convenience or to avoid prejudice,

or when separate trials will be conducive to expe-

dition and economy, may order a separate trial of

any claim, cross-claim, counterclaim, or third-

party claim, or of any separate issue or of any

number of claims, cross-claims, counterclaims, or

third-party claims, or issues, always preserving

inviolate the right of trial by jury as declared by

the Seventh Amendment to the Constitution or as

given by a statute of the United States.” Fed.

Rules Civ. Proc. 42(b) (emphasis added).

The leading case of Gasoline Products Co. v. Cham-

lin Refining, 283 U.S. 494 (1931), makes it clear that

the right to a trial by jury does not preclude courts

from employing innovative methods of effectuating

that right:

“All of vital significance in trial by jury is that

issues of fact be submitted for determination

with such instructions and guidance by the court

as will afford opportunity for that consideration

by the jury which was secured by the rules gov-

erning trials at common law. [Citations omitted].

Beyond this, the Seventh Amendment does not

exact the retention of old forms of procedure.”

283 U.S. at 498 (1931).

As Justice Brandeis stated in the Matter of Walter

Peterson, 253 U.S. 300 (1920) :

“New devices may be used to adapt the ancient

institution [the jury trial] to present needs and

to make of it an efficient instrument in the ad-

ministration of justice. Indeed, such changes are

essential to the preservation of the right. The

limitation imposed by the Amendment is merely

that enjoyment of the right of trial by jury be not

obstructed, and that the ultimate determination

ot ssues of fact by the jurv be not interfered

with.” 253 U.S. 300, 310.

Petitioners claim that the Seventh Amendment re-

quires that all issues be presented to the trier of fact

at a single hearing. The rationale behind this claim

is not evident to respondents. The courts have re-

peatedly held that the Seventh Amendment does not

require that all issues be submitited to the trier of

fact during a single hearing. The case of Hoste v.

Chicago Western Railway Company, 282 F.2d 639

(7th Cir. 1960), cert. den. 365 U.S. 814, squarely ruled

that issues need not be submitted to the trier of fact

at a single hearing:

“There remains for consideration the very im-

portant question of whether plaintiff was de-

prived of a jury trial in violation of the Seventh

Amendment of the Constitution of the United

States when the trial court sua sponte and over

the objection of plaintiff, ordered the case to pro-

ceed to trial solely on the issue of liability.

“We hold that in the trial of the instant case,

the essential character of a trial by jury was

preserved. In our view, the Seventh Amendment

does not require the retention of all the old forms

of procedure; nor does it prohibit the introduc-

tion of new methods for ascertaining what facts

are in issue. See Gasoline Products Co. Ine. vy.

Champlin Refining Co., 283 U.S. 494, 497-498, 51

S.Ct. 513, 75 L.Ed. 1188.

* * ”

“Many of the federal district courts of this

country are laboring under the heavy burden of

crowded trial dockets. The Northern District of

Illinois is no exception. The judges of that court

should be commended for their search for meth-

ods and means to expedite the disposition of cases

upon their calendars. There is no doubt that in

numerous cases, the severing of the issue of lia-

bility from the issue of damages will result in the

shortening of the time of trial. The instant case

is a good example. Without such severance, hours

or even a day or two might have been consumed

on the issue of damages.” 282 F.2d 639, 642-643.

Professor Wright has made the following observa-

tion:

“There is no doubt that the court can order sep-

arate trials of issues, with the same jury sitting

in each trial, and it seems to be accepted that the

better and preferred practice is to use the same

jury for all issues, even though it may hear the

issues at different times. The issue can thus be

narrowed to whether the admittedly preferred

procedure is consitutionally required. It has been

held, on sound ground, that the Seventh Amend-

ment is not violated by the separate submission

of the issues to a single jury.” Federal Courts,

1963 Ed. Charles Alan Wright, page 378 (cita-

tions omitted).

Petitioners also contend that the same jury which

decides the common issues must also decide the indi-

vidual issues. Petitioners claim, in an effort to con-

vince the Court that certiorari is appropriate here,

that the lower courts which have attempted to deal

with this issue need guidance because of “the un-

settled and contradictory opinions of judges of the

Courts of Appeals ...” Petition page 15.

Contrary to petitioners’ assertions, the lower courts

are not in the least “confused” by the issues presented

here. They have uniformly ruled that the Seventh

Amendment does not require all issues to be decided

by one jury.

The courts have often ordered bifurcation between

liability and damage issues at trial. Inevitably, Sev-

enth Amendment issues have been raised in some of

these cases. In the leading case of O’Donnell v. Wat-

son Bros. Transportation Co., 183 F.Supp. 577 (N.D.

Ill. 1960), the Court upheld the constitutionality of its

local rule authorizing separate trials, by different

juries, of the liability and damage issues in civil

Cases:

“The Rule provides that the trial judge may,

in his discretion, order one jury to decide upon

the liability of the defendant and the same or an-

other jury to determine the damages of the

plaintiffs. The judge may recess after a decision

of guilty on liability for pre-trial or settlement

conference or proceed with the trial. The right

to a trial by jury does not require that all issues

be determined by the same jury and severance of

the issues is not violative of any constitutional

guarantee.” 183 F.Supp. 585.

Similarly, in Swofford v. B & W, Inc., 34 F.R.D.

15 (S.D, Tex. 1963), aff'd 336 F.2d 406 (5th Cir.

1964), cert. denied 379 U.S. 962, it was held that

issues of liability and damages could be tried before

different juries without encroachment upon the Sev-

enth Amendment guarantee:

“[P]laintiffs suggest that to try the issues of

liability and damages to separate juries, requisite

in this case if separate trials should be ordered,

would be a deprivation of jury trial as contem-

plated by the Seventh Amendment, Although the

question has not yet been authoritatively settled,

the Court feels that there is no violation of the

Seventh Amendment by a separate submission of

issues to separate juries under proper cireum-

stances.” 34 F.R.D. at 20.

The issue of whether bifurcated trials violate a par-

ty’s right to a jury trial has also been raised by de-

fendants in other class action cases in vain attempts

to avoid class certification. In the case of Link v.

Mercedes-Benz of N. Am., lnc., 550 F.2d 860 (38rd

Cir. 1977), cert. den., 45 U.S.L.W. 3762, the Court

relied on Gasoline Products in rejecting an argument

identical to the one which petitioners make here:

“The legal issue which is inextricable from the

merits of the district court’s class action deter-

mination arises from the demand by defendants

for a unitary jury trial of the §4 Clayton Act

damage claim. In making that demand the de-

fendants rely upon the Seventh Amendment

which, they urge, guarantees a trial before a

single jury rather than separate juries as con-

templated by the district court. But defendants

somewhat overstate the reach of that Amend-

ment. In the seminal case, Gasoline Products v.

Champlin Refining Co., 283 U.S. 494, 51 S.Ct. 513,

75 L.Ed. 1188 (1931), the Supreme Court held

that the Seventh Amendment right to jury trial

is not abrogated when an appellate court orders

a new trial only on one of the issues originally

tried before a unitary jury in the court below.

The Court reasoned that the Seventh Amend-

ment guaranteed a unitary jury trial only of

issues, not of cases:

* *

“Gasoline Products does not suggest that its

distinction between issues as opposed to cases is

limited to retrials, and given the analysis which

the Court made, no Seventh Amendment policy

suggests such a limitation. Thus, I agree with

the Fifth and Tenth Circuits, and with the com-

mentators, that the Seventh Amendment guaran-

tees a unitary trial of issues, not of cases, even

in the first instance.” 550 F.2d 860, 874-875.

See also the discussion of the interaction between

bifurcated trials and the Seventh Amendment in the

case of State of Alabama v. Blue Bird Body Co., Inc.,

71 F.R.D. 606 at 613-615 (M.D. Ala. 1976). The

Court there concluded that bifurcation of issues did

not preclude class certification by virtue of the Sev-

enth Amendment:

“On the basis of the foregoing reasoning and

its conclusion that the issues of liability and

damages in this action are separable and distinct,

this Court holds, while recognizing that the matter

is not free from doubt, that Defendants’ right

to a jury trial would not be violated by trials

by separate juries of these two issues. The Court,

therefore, finds that a class action would be a

superior means of proceeding with this litigation

ae te by Rule 23(b)(3).” 71 F.R.D. 606,

The lower courts, then, have consistently followed

the principles enunciated in Gasoline Products in

holding that bifurcated trials, decided by more than

one jury, are not violative of the Seventh Amend-

ment. In view of the lower courts’ consistent ad-

herence to these principles, it is difficult to understand

how the granting of certiorari would provide valuable

guidance to the lower courts.

It is true that submission of different issues to

different juries may be impermissible in some cir-

cumstances. According to the opinion in Gasoline

Products (followed in United Aty Lines v. Wiener,

286 F.2d 302 (9th Cir. 1961), cert. den., 366 U.S. 924),

separate juries may decide separate issues only if

those issues are “so distinct and separable” from one

another that separate trials “may be had without

injustice.” 286 F.2d 302, 306. Or, as further stated in

the United Air Lines opinion, the question turns on

whether one issue is “so interwoven” with a second

issue that “the former cannot be submitted to the

jury independently of the latter without confusion

and uncertainty which would amount to a denial of a

fair trial.” 286 F.2d 302, 306.

Petitioners assert that the individual issues are

“so interwoven” with the common issues as to require

that one jury decide both the common and the in-

dividual issues. On pages 21 through 25 of the peti-

tion, the petitioners purportedly “analyze” the

individual issues, in an attempt to show that the

individual issues are inextricably interwoven with

the common issues. The effort is unavailing. Only

by indulging in complete fantasy, could one conclude

that the individual issues are inextricably interwoven

with the common issues. As we will demonstrate

below, the individual issues, if any, are separate and

distinct from the common issues.

Petitioners claim that four groups of individual

issues are inextricably intertwined with the common

issues. These groups of issues are described as fol-

lows:

(1) Whether the communications to investors

were misleading (petition p. 21);

(2) Whether the investor relied on the mis-

leading communications (petition p. 22) ;

(3) Whether the class members are barred

by the defenses of estoppel, laches, clean hands,

statutes of limitations, and pari delicto (petition

p. 24);

(4) Whether each class member suffered any

damage, and if so, how much (petition p. 25).

The Court of Appeals concluded that these “issues”

do not exist to any substantial degree, and the peti-

tion here does nothing to demonstrate that this con-

clusion was erroneous. However, even if it is assumed

that these defenses are applicable to a substantial

number of class members, such defenses are not “in-

extricably intertwined” with the common issuer. The

petitioners do not show otherwise, nor could +he-+

ever make such a showing.

The petitioners claim that the issue of whether a

particular written communication is misleading is not

separate and distinct from the common issues, and

therefore must be tried before the same jury which

also decides the common issues. This argument is

totally devoid of merit for at least two reasons. First,

the class action certification order does not reserve

for later determination the issue of whether the com-

munications were misleading. This is an issue com-

mon to the class which will be tried during the first

phase of the trial. Second, this issue is separate from

other issues in the case. Petitioners claim that:

“In determining whether communications to an

investor were misleading, the trier of fact must

analyze all of the contemporary oral and written

communications in their totality, rather than

focusing upon only one such communication, and

must consider the sophistication, motivations and

actual knowledge of each investor, derived from

sources other than the black and white of a

prospectus, at least here where direct personal

sales, entailing numerous oral communications by

salesmen, sophisticated investors and their ad-

visors, are involved, not broad, impersonal se-

curities market transactions.” Petition page 22.

Petitioners have often employed this argument, al-

ways unsuccessfully, in order to convince the District

Court and the Court of Appeals that class certifica-

tion would result in the “necessity” for thousands of

“mini trials.” In particular, petitioners claim that

evidence of oral statements made to the investors

influences the question of whether a written commu-

nication is misleading. This is simply not the law.

Igenito v. Bermac Corp., 376 F.Supp. 1154 (S.D.

N.Y. 1974) exposes the fallacy of petitioners’ argu-

ment:

“Since, as we have noted, reliance on the pros-

pectus need not be proven at trial, it is imma-

terial whether other, possibly non-misleading,

representations were made to the post-prospectus

herdowners in the course of the sales presenta-

tion. Proof that the prospectus was materially

misleading, and that defendants acted with the

requisite scienter . . . is enough to establish lia-

bility, even if plaintiffs bought solely on a tip

from the man in the moon.” 376 F.Supp. at 1169.

The argument that reliance is inextricably inter-

twined with other issues is equally specious. Under

this Court’s decision in Affiliated Ute Citizens v.

United States, 406 U.S. 128 (1972), reliance is not

an element of a Rule 10b-5 claim:

“Under the circumstances of this case, involving

primarily a failure to disclose, positive proof of

reliance is not a prerequisite to recovery. All that

is necessary is that the facts withheld be material

in the sense that a reasonable investor might

have considered them important in the making of

[his investment] decision [citations omitted].

This obligation to disclose and this withholding

of a material fact establish the requisite element

of causation in fact.” 406 U.S. 153-154 (emphasis

added).

As to the third so-called group of “individual is-

sues”—estoppel, laches, ratification, unclean hands,

statutes of limitations, and pari delicto—petitioners

have totally failed to show that they are inextricably

intertwined with any common issues. Petitioners

merely make the gratuitous claim, backed up by no

facts or law, that “the resolution of such issues can-

not be accomplished rationally without considering the

total circumstances involved”. Petition page 25.

Lastly, petitioners claim that damage issues are

somehow inseparable from the common issues. Here

again petitioners point to “the totality of the cireum-

stances applicable to each investor,” (petition page

25), including the “tax benefits” which each class

member supposedly received from his investment.

However, it has long been settled that tax savings

which a plaintiff realizes as a result of a defendant’s

wrongdoing are not to be considered in calculating

damages. See, e.g., Cereal Byproducts Co. v. Hall, 16

Til. App.2d 79, 147 N.E.2d 383 (1958) ; Hanover Shoe,

Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 503

(1968) ; Rhode v. Hershberger Explorations Inc., 349

F.Supp. 993, 994 (D.Minn. 1972).

The separability of these issues stands in sharp

contrast to the inseparable issues in United Airlines,

Inc. v. Wiener, supra. In the United case, the Court

held that the same jury which had decided liability

must also decide the amount of punitive damages to

be awarded. Without doubt, punitive damages are

inextricably intertwined with liability issues. The

amount of punitive damages which a jury may award

is dependent on various factors, such as the presence

or absence of malice and the degree of the outrageous

nature of the defendant’s acts. These damage issues

are also issues which must be proven during the lia-

bility phase of the case. Petitioners’ attempt to fit

the three class actions into the United mold is un-

availing; the facts are simply not similar to those

in United. |

The Court of Appeals concluded, after reviewing

all the evidence which was before the District Court,

that the individual issues were separable from the

common issues. We respectfully submit that this was

the only conclusion which the Court could have prop-

erly reached. This Court should not now review that

decision.

THERE IS NOTHING IN THE CLASS ACTION CERTIFICATION

WHICH PRECLUDES THE SAME JURY FROM DECIDING

BOTH THE COMMON ISSUES AND THE INDIVIDUAL ISSUES.

Even if it is assumed that there are individual is-

sues to be tried, and even if it is assumed that these

issues must be tried before the same jury which

decides the common issues, the class action certifica-

tion order does not abrogate petitioners’ Seventh

Amendment right to a jury trial. There is no reason

why one jury could not decide both the common issues

and the individual issues as well. The class action

certification order does not require that one jury

decide the common issues, and another jury the indi-

vidual issues. The class action certification order is

silent on this point.

It is premature, to say the least, for the petitioners

to complain of a contingency which may never occur.

As the Court of Appeals stated in its opinion:

“Petitioners characterize as ‘disingenuous’ the

suggestion that trial of all issues in these cases

will be had before one jury. There is nothing in

the district court order that would preclude such

a procedure, as a practical matter, and we find

nothing inherently wrong with such a procedure.

It may be that the district court does not con-

template this procedure, but it would be pre-

sumptuous of us to assume the district court’s

intention in this regard.” 549 F.2d 686, 693, foot-

note 9.

In the case of Link v. Mercedes-Benz of N. Am.,

Inc., 550 F.2d 860 (3rd Cir. 1977), cert. den., 45 U.S.

L.W. 3762, the Court also dealt with an argument

almost identical to that raised by the petitioners here.

In Link, the Court stated as follows:

“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 sep-

arate juries and whether it will is a matter of

pure speculation at this juncture.” 550 F.2d 860,

864.

In the case of In Re Master Key Antitrust Litiga-

tion, 528 F.2d 5 (2nd Cir. 1975), the Court of Appeals

refused to vacate a class action certification order

entered by the District Court. The Court responded

as follows to petitioners’ arguments that bifurcation

was offensive to the Seventh Amendment:

“Tt would plainly be premature for us to rule

on the appropriateness of using two juries where

only ene, in fact, may be involved. We should

only note that bifurcated trials have frequently

been employed with great success.” 528 F.2d 5,

15 (citations omitted).

Petitioners claim that as a practical matter, one

jury could not possibly decide both the common and

the individual issues, because by the terms of the

class certification order, there is at least a 90-day

lapse of time between the trial of the common issues

and the trial, if any, of the individual issues. There

are two simple answers to this contention.

First, a 90-day lapse between the trial of the com-

mon and the individual issues does not necessarily

preclude one jury from deciding issues presented

during both phases of the trial. One jury could well

decide one particular phase of a case, and then return

90 days later and decide the remaining issues. Second,

if the District Court decides that a 90-day interval

between the two phases of the trial is excessive, the

Court may modify its class action certification order

to provide for a shorter time interval. Here, as with

all class actions, the District Court has the power to

modify the class action certification order if such

modification is warranted. Because of the flexibility

which the Court has in altering class action orders,

the petitioners can easily move before the District

Court for a shortening of the 90-day interval set forth

in the District Court’s order, rather than making

matters of this nature the subject of a petition for

a writ of certiorari.

THE COURT OF APPEALS DID NOT ADOPT AN INCORRECT

STANDARD FOR REVIEW OF THE DISTRICT COURT'S

ORDERS.

Petitioners also argue that the Court of Appeals

adopted an incorrect standard for review by man-

damus. This argument is based on the premise that

the petitioners’ Seventh Amendment rights have been

abrogated, and that therefore the Court must employ

a standard of review by mandamus less stringent

than “clear and indisputable error.” The premise it-

self, though, is inaccurate; the petitioners’ right to a

jury trial has not been abrogated. Neither do any of

the authorities cited by petitioners hold that a more

liberal standard of review on mandamus must be

employed whenever a party claims that his right to

a jury trial has been abrogated. We submit that the

weak showing made by the petitioners both here and

before the Court of Appeals is insufficient reason to

deviate from the normal standards of mandamus re-

view.

CONCLUSION

It may be true, as petitioners contend, that the

substantive law has sometimes been altered to permit

elass certification. If this is an abuse which this

Court should not tolerate, it is equally important that

this Court reject petitioners’ arguments based on a

Seventh Amendment which has been tortured into

unrecognizable form in order to avoid class certifica-

tion. We respectfully submit that the petition is

premature and totally lacks merit, and should be de-

nied by this Court.

FREDERICK P. FuRTH,

THOMAS R, FAHRNER,

Rosert C. Cacen,

Furtu, FAHRNER & Wona,