Petition — Punta Gorda Isles, Inc. v. Livesay

IN THE

SUPREME COURT OF THE UNITED STATES =~

OCTOBER TERM, 1976 76-1837

EP

PUNTA GORDA ISLES, INC., WILBER H. COLE, ALFRED M. JOHNS,

ROBERT J. BARBEE, SAMUEL A. BURCHERS, JR., RUSSELL C. FABER,

JOHN MATARESE, ROBERT C. WADE, EARL DRAYTON FARR, JR., JOHN

W. DOUGLAS, 0.D.S.,

Petitioners,

against

CECIL LIVESAY and DOROTHY LIVESAY, for Themselves and on Behalf

of All Others Similarly Situated,

Respondents.

PETITION FOR WRIT OF CERTIORARI

To the United States Court of Appeals

for the Eighth Circuit

WILLIAM A. RICHTER

720 Olive Street, 24th Floor

St. Louis, Missouri 63101

Counsel for Petitioners Punta Gorda

Isles, Inc., Wilber H. Cole, Alfred

M. Johns, Robert J. Barbee, Samuel

A. Burchers, Jr., Russell C. Faber,

John Matarese, Robert C. Wade,

Earl Drayton Farr, Jr., and John W.

Douglas, D.D.S.

LEWISR. MILLS

PEPER, MARTIN, JENSEN,

MAICHEL and HETLAGE

Of Counsel

A

St. Louls Law Printing Co.. Inc., 812 Olive Street 63101 314-231-4477

2

e*

TABLE OF CONTENTS

Page

Citations to Opinions Below .............0.0.6.6 00a 2

Pe cceveasnv bus veers tba eUeN eueare Reese 2

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SD GEN HE SD «nwa cvevcwecsccvccesss 2

GPP GD a ccccccactncewescuwccuseneet 2

Reasons for Granting the Writ .... 0.0. ..00 0606s 5

The Court Should Grant the Writ to Reconcile Conflicts

Among the Circuits and to Resolve Questions of Im-

portance for the Administration of Justice in the Fed-

eral Judicial System That Should Be But Have Not

Been Decided by the Court, Because:

I. The Decision of the Court of Appeals in This

Case Conflicts With Decisions by the Courts of

Appeals for the Seventh, Third, Ninth and Fifth

GR Sccedeendccevevascanerenvesnens 5

Il. The Decision of the Court of Appeals in This

Case Adopts a Doctrine That Results in the Inef-

ficient Use of Judicial Manpower and an Im-

proper Allocation of Judicial Functions ...... 5,8

Ill. The Decision of the Court of Appeals in This

Case Permits Piecemeal Appeals and Relaxes

Congressionally-[mposed Restrictions on Ap-

peals From Interlocutory Orders ........ Te}

ES viicccecccvaswonecawesd oneness huscusese 11

SEED cc Rene ccdecGuacacésccunesAceonden 13

Appendix A—Statutes and Rules Involved ............ A-l

Appendix B—Order and Opinion of the District Court .. A-6

Appendix C—Opinion and Judgment of the Court of Ap-

SEED a ckerebebenecuncencctevacenesneseeeeecan A-9

Appendix D—Memorandum of the Court of Appeals De-

nying the Petition for Rehearing or Rehearing En Banc . A-24

TABLE OF AUTHORITIES

Cases:

Anschul v. Sitmar Cruises, Inc., 544 F.2d 1364 (7th Cir.),

cert. denied, — U.S. — (1976) ........ ccc eee nee 6

Bachowski v. Usery, 545 F.2d 363 (3d Cir. 1976) ...... 10

Cobbledick v, United States, 309 U.S. 323 (1940) ...... 10

Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2d Cir. 1966),

cert. denied, 386 U.S. 1035 (1967) .... 0.0... .0005. 7

Gosa v. Securities Investment Co., 449 F.2d 1330 (Sth

Se EE SUA WRC e Ada ee Cb CR Gw Sd CaN eeRan ee eNae 7

Graci v, United States, 472 F.2d 124 (Sth Cir.), cert. de-

BE, Sw Wes CP CRUTED ccc vvcerecenecccensence 7

Hackett v. General Host Corp., 455 F.2d 618 (3d Cir.),

cert, denied, 407 U.S. 925 (1972) ... 0... . cece 6

Hooley v. Red Carpet Corp. of America, 549 F.2d 643

Se GH GED NK GPUGVS CONG taco hoe kevetenee ec” 6,7

Katz v, Carte Blanche Corp., 496 F.2d 747 (3d Cir.), cert.

Gommes, SED UB. GES CGPS) onc ccccscccesesees 6

King v. Kansas City Southern Industries, Inc., 479 F.2d

FE CHD Ge GOED ce ccccccccsececesscecadess 6

Korn v. Franchard Corp., 443 F.2d 1301 (2d Cir. 1971).. 7

Ott v. Speedwriting Publishing Co., 518 F.2d 1143 (6th

Ee rrr ree Te TTT LT Ther 7

Parkinson v. April Industries, Inc., 520 F.2d 650 (2d Cir.

Pe cecuua la kviaSe bebe eeeeveseu sevens ses 8, 11

Share v. Air Properties G. Inc., 538 F.2d 279 (9th Cir.),

cert. denied sub nom. Woodruff v. Air Properties G. Inc.,

mee UID, mae CITED ccc ccc ccccccccccccccccsens 6

Williams v. Mumford, 511 F.2d 363 (D.C, Cir. 1975) .... 7

Statutes and Rules:

RSD URGE GERD ccs cccrccsccccccscccecsenes 3

ete BE, BH We BI Ge ccc cc ccccvecccceneces 3

Section 12(2), 15 U.S.C. §771(2) «0... eee 3

Section 17, 1S U.S.C. ET Tala) ..... ccc ercenvvvees 3

Beatie Be. 0S UE. GTGe ccc cc cvccessvvccvcens 3

Securities Exchange Act of 1934 ©... .. 0.56.56 e ues 3

Section 10(b), 15 U.S.C. §78j(b) «6 eee 3

Section 27, 1S U.S.C. GTBam .... www cecccnvvcvvees 3

Se SEED occa ccdnetvonscvesseouteeeenen 2

EEE ccc coceeeeceesecerecteseoseds 2, 4, 5,6

5S fk ere err eT Tet ee eke 2,10

EAE TTT TC TTT eT eR TET TT

F.R.Civ.P.

PT tt ceeun ses euSsstPSEVOSSLENES SE CEE SEE 1,2,9

CE SEED ccc ccccsensenceseceeecescncons 3, 5,9

Securities and Exchange Commission Rule 10b-5, 17 CFR

SEE coe cd nb ew ses cA Se sicevecvecverecees 3

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1976

a

PUNTA GORDA ISLES, INC., WILBER H. COLE, ALFRED M. JOHNS,

ROBERT J. BARBEE, SAMUEL A. BURCHERS, JR., RUSSELL C. FABER,

JOHN MATARESE, ROBERT C. WADE, EARL DRAYTON FARR, JR., JOHN

W. DOUGLAS, 0.D.S.,

Petitioners.

against

CECIL LIVESAY and DOROTHY LIVESAY, for Themselves and on Behalf

of All Others Similarly Situated,

Respondents.

PETITION FOR WRIT OF CERTIORARI

To the United States Court of Appeals

for the Eighth Circuit

Petitioners respectfu’ly pray that a writ of certiorari issue to

review the judgment of the United States Court of Appeals for

the Eighth Circuit entered in this action on March 4, 1977,

as to which rehearing was denied on March 28, 1977. That

judgment reversed an order of the United States District Court

for the Eastern District of Missouri, which ruled that this ac-

tion could not proceed as a class action pursuant to Rule 23

of the Federal Rules of Civil Procedure.

CITATIONS TO OPINIONS BELOW

The opinion and order of the United States District Court

for the Eastern District of Missouri (not yet officially reported)

are printed as Appendix B hereto. The opinion and judgment

of the United States Court of Appeals for the Eighth Circuit

(not yet officially reported), reversing the order of the District

Court, are printed as Appendix C hereto. The memorandum

of the Court of Appeals denying rehearing or rehearing en

banc is printed as Appendix D hereto.

JURISDICTION

The judgment of the Court of Appeals for the Eighth Cir-

cuit was entered on March 4, 1977. Petitioners’ timely petition

for rehearing was denied on March 28, 1977.

The jurisdiction of this Court is invoked pursuant to 28

U.S.C. §1254(1).

QUESTION PRESENTED

Is the order of the District Court determining that this ac-

tion cannot be maintained as a class action a “final order” that

can be appealed under 28 U.S.C. §1291?

STATUTES AND RULES INVOLVED

This case involves 28 U.S.C. §§1291, 1292 and Rule 23 of

the Federal Rules of Civil Procedure, the texts of which are

printed in Appendix A hereto.

STATEMENT OF THE CASE

The facts relevant to the issues presented by this petition are

uncomplicated and uncontroverted.

_

The complaint in this action was filed in the United States

District Court for the Eastern District of Missouri on July 27,

1973. The complaint asserts claims based on alleged violations

of Sections 11, 12(2), and 17 of the Securities Act of 1933'

and Section 10(b) of the Securities Exchange Act of 1934*

and Rule 10b-5.* The claim asserted on behalf of the named

plaintiffs is for approximately $2,650 plus interest; the com-

plaint also asserts claims on behalf of the class described therein

for several millions of dollars. The jurisdiction of the District

Court is based on Section 22 of the Securities Act of 1933+

and Section 27 of the Securities Exchange Act of 1934.°

On December 30, 1974, at the hearing on the plaintiffs’ mo-

tion for an order that the action could proceed as a class action,

the plaintiffs offered evidence that the class included, inter alia,

one member with a claim of approximately $500,000 and an-

other with a claim of approximately $140,000.

On June 19, 1975, pursuant to Rule 23(c)(1) of the Federal

Rules of Civil Procedure, the District Court entered its order

determining that the action could proceed as a class action.

On September 1, 1976, again pursuant to Rule 23(c)(1) of the

Federal Rules of Civil Procedure, the District Court entered its

order determining that the action could no longer be maintained

as a class action.

The plaintiffs did not seek to appeal that order as an inter-

locutory order pursuant to 28 U.S.C. § 1292(b). Rather, they

1 15 U.S.C. §§77k, 771(2), and 77q(a).

2 15 U.S.C. §78j(b).

3 17 C.F.R. §240.10b-5.

15 U.S.C. §77v.

15 U.S.C. §78aa.

—

qc

based their appeal to the United States Court of Appeals for

the Eighth Circuit on 28 U.S.C. § 1291, which applies only

to “final decisions.” The defendants filed a timely motion to dis-

miss the appeal for lack of jurisdiction, asserting that the order

of the District Court was not a finai decision.

The United States Court of Appeals for the Eighth Circuit

found as a matter of fact that the individual claim of the plain-

tiffs was so small that they would not continue to prosecute the

case unless the District Court’s order was reversed. On the

basis of this finding, it concluded that the order was a “final

decision” and that it therefore had jurisdiction to hear the appeal.

On the merits of the case, the Court of Appeals held that the

District Court had abused its discretion in determining that the

action could not be maintained as a class action, and it reversed

the District Court's order.

The defendants’ motion for rehearing or rehearing en banc

was denied.

re err rere Rem he. ete nae

REASONS FOR GRANTING THE WRIT

The Court Should Grant the Writ to Reconcile Conflicts

Among the Circuits and to Resolve Questions of Importance for

the Administration of Justice in the Federal Judicial System

That Should Be But Have Not Been Decided by the Court, Be-

cause:

1. The Decision of the Court of Appeals in This Case

Conflicts With Decisions by the Courts of Appeals for the

Seventh, Third, Ninth, and Fifth Circuits;

II. The Decision of the Court of Appeals in This Case

Adopts a Doctrine That Results in the Inefficient Use of Ju-

dicial Manpower and an Improper Allocation of Judicial

Functions; and

Ill. The Decision of the Court of Appeals in This Case

Permits Piecemeal Appeals and Relaxes Congressionally-

Imposed Restrictions on Appeals From Interlocutory Or-

ders.

I

The Decision of the Court of Appeals in This Case Conflicts

With Decisions by the Courts of Appeals for the Seventh, Third,

Ninth, and Fifth Circuits.

In an action brought as a class action, Rule 23(c)(1) requires

the District Court to enter an order determining whether or not

the action can be maintained as a class action. By the express

terms of that rule, those orders are “conditional” and subject to

subsequent change. Under the “death knell” doctrine, some or-

ders entered pursuant to that rule are nevertheless considered

to be “final decisions” that can be appealed under 28 U.S.C.

"i

§ 1291; if the Court of Appeals finds that the plaintiffs will aban-

don the litigation if the order is not reversed, it regards the order

as a “final decision.” In this case the Court of Appeals adopted

and applied the death knell doctrine.

The decision of the Court of Appeals in this case conflicts

squarely with decisions of the Courts of Appeals for the Seventh

and Third Circuits that unqualifiedly reject the death knell

doctrine. In King v. Kansas City Southern industries, Inc.®

the Court of Appeals for the Seventh Circuit held that an order

determining that an action could not proceed as a class action

was not a final order and therefore could not be appealed under

28 U.S.C. § 1291. In a subsequent en banc decision, that court

confirmed its rejection of the death knell doctrine.* In Hackett

v. General Host Corp.,* the doctrine was rejected by the Court

of Appeals for the Third Circuit, even though the claim of the

named plaintiff in that case was for only $9. That court also

confirmed its rejection of the doctrine in a subsequent en banc

decision.®

In determining that the order in this case was a “final decision,”

the Court of Appeals refused to consider the fact that some

members of the class (other than the named plaintiffs) had

individual claims that were large enough to support litigation.

Its decision, therefore, conflicts with the decision of the Court

of Appeals for the Ninth Circuit in Hooley v. Red Carpet Corp.

of America.'" There an appeal under 28 U.S.C. § 1291 was

® 479 F.2d 1259 (7th Cir. 1973).

* Anschul v. Sitmar Cruises, Inc., 544 F.2d 1364 (7th Cir.),

cert. denied, — U.S. — (1976).

* 455 F.2d 618 (3d Cir.), cert. denied, 407 U.S. 925 (1972).

” Katz v. Carte Blanche Corp., 496 F.2d 747 (3d Cir.), cert.

denied, 419 U.S. 885 (1974).

10 549 F.2d 643 (9th Cir. 1977); see also Share v. Air Proper-

ties G. Inc., 538 F.2d 279 (9th Cir.), cert. denied sub nom. Wood-

ruff v. Air Properties G. Inc., — U.S. — (1976).

on

denied because several members of the proposed class, other

than the narhed plaintiffs, had claims that were large enough

to be individually viable. The court held that: (1) the existence

of those claims created a real possibility that the claims of the

class would be litigated even if the named plaintiffs abandoned

their action; and (2) that possibility precluded a finding that the

order was final as to the claims of the class (as contrasted with

the claims of the named plaintiffs). In this case the Court of

Appeals declined to follow Hooley, even though the record

here clearly shows that other members of the proposed class

have very substantial claims (and the court's attention was di-

rected to the Hooley decision on the motion for rehearing).

In this case the Court of Appeals did not give the parties an

opportunity to offer evidence on the finality issue. The de-

cision of the Court of Appeals in this case, therefore, is in con-

flict with the decision of the Court of Appeals for the Fifth Cir-

cuit in Gosa v. Securities Investment Co." There the court

recognized the difficulties and dangers of an attempt by an ap-

pellate court to make the initial finding of fact on the issue of

finality. That issue was not before the trial court when it ruled

upon the class action issues, and the record on appeal there-

fore will not contain all the possible evidence relevant to that

issue. In Gosa the appeal was remanded to the District Court

with instructions to hear evidence on the finality issue. In this

case, the Court of Appeals expressly declined to follow Gosa.

Although the death knell doctrine has been rejected by the

Seventh and Third Circuits, and substantially modified in the

Ninth and Fifth Circuits, it has been adopted by the Second

and Sixth Circuits,'- as well as the Eighth Circuit in this case.

11 449 F.2d 1330 (Sth Cir. 1971); but see Graci v. United States,

-.,) F.2d 124 (Sth Cir.), cert. denied, 412 U.S. 928 (1973), in

whieh an evidentiary hearing was not required.

12 E.g., Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2d Cir.

1966), cert. denied, 386 U.S. 1035 (1967); Korn v. Franchard

Corp., 443 F.2d 1301 (2d Cir. 1971); Ott v. Speedwriting Publish-

ing Co., 518 ©.2d 1143 (6th Cir. 1975); cf. Williams v. Mumford,

511 F.2d 363 (D.C. Cir. 1975).

—

But even in the Second Circuit the doctrine has received harsh

criticism; in his concurring opinion in Parkinson v. April In-

dustries, Inc.,‘° Judge Friendly concluded that the doctrine

should be abandoned.

This Court should resolve these conflicts among the Circuits.

The Decision of the Court of Appeals in This Case Adopts

a Doctrine That Results in the Inefficient Use of Judicial Man-

power and an Improper Allocation of Judicial Functions.

As generally applied, and as applied by the Court of Appeals

in this case, the death knell doctrine requires the Court of Ap-

peals to make the initial finding of fact on the issue of finality:

“Will the plaintiffs decide not to prosecute if we do not reverse

the district court's order?” This is an inefficient use of judicial

manpower and an improper allocation of judicial functions; an

appellate court should not make the initial finding of fact on a

complex issue that was never considered by the District Court.

None of the issues before the District Court required evidence

on the finality issue, and the parties never had an appropriate

Opportunity to offer evidence on that issue. Consequently,

although the record may, by coincidence, contain some evidence

relevant to the finality issue, it will not contain all the evidence

relevant to that issue that the parties would have offered if they

had been given an opportunity.

The death knell doctrine requires the appellate court to pre-

dict whether the plaintiffs wil! continue the litigation if the trial

court’s order is not reversed. A realistic approach to this pre-

diction would require consideration of many factors, such as

'S $20 F.2d 650, 658 (2d Cir. 1975).

—

the plaintiffs’ estimate of the probability of success on the merits,

the possibility of intervention or other assistance by other mem-

bers of the class, the willingness of plaintiffs’ counsel to advance

the costs and expenses, and the amount of trial preparation that

had been accomplished before the decision on the class action

issues. In this case and in most cases the record simply does

not contain any evidence concerning these factors. An appel-

late court should not speculate about these factors in determin-

ing whether it has jurisdiction to hear an appeal from a Rule

23(c)(1) order. A better allocation of judicial functions—and

a more efficient use of manpower—would be for the trial court,

after a hearing, to make the initial finding on the issue of

finality. The procedures of the appellate court are ill-adapted

to make that finding correctly and efficiently.

The death knell doctrine may create judicial inefficiencies in

an additional way. As Judge Friendly observed,'* only plain-

tiffs can appeal from an order determining that an action should

not proceed as a class action; defendants generally cannot ap-

peal a decision that permits an action to proceed as a class action.

The one-sidedness permits immediate appellate control over too

grudging an application of the class action criteria of Rule 23,

but it defers any appellate control over too lenient an appli-

cation of those criteria. The imbalance tends to increase the

number of class actions pending in the federal court system.

The Decision of the Court of Appeals in This Case Permits

Piecemeal Appeals and Relaxes Congressionally-Imposed Re-

strictions on Appeals From Interlocutory Orders.

The death knell doctrine measures the finality of an order by

its effect on the plaintiffs’ willingness to litigate, rather than by

14 Jd. at 659,

—

the juridical effect of the order itself. If applied outside the class

action context, the doctrine would permit a plaintiff to appeal

from any order if he could convince the appellate court that

he would not continue to litigate unless his appeal was allowed.

The doctrine runs directly counter to the fundamental policy

against piecemeal appeals from interlocutory orders.

The classic expression of the principles that underlie that

policy is found in Mr. Justice Frankfurter’s opinion in Cobbdle-

dick v. United States.’* More recently Judge Adams thought-

fully examined those principles in Bachowski v. Usery:

[T)he wisdom of the final judgment rule lies in its insist-

ence that we focus on systemic, as well as particularistic im-

pacts. The appellate system has become increasingly over-

burdened and the future would appear to promise no relief

from the continuous increase in case loads. Accordingly,

it would seem to us to be a disservice to the Court, to liti-

gants in general and to the idea of speedy justice if we were

to succumb to enticing suggestions to abandon the deeply-

held distaste for piecemeal litigation in every instance of

temptation. Moreover, to find appealability in those close

cases where the merits of the dispute may attract the deep

interest of the court would lead, eventually, to a lack of

principled adjudication or perhaps the ultimate devitaliza-

tion of the finality rule as enacted by Congress.'®

Congress considered appellate review of interlocutory orders

when it enacted 28 U.S.C. § 1292. Subsection (a) of that

statute lists the kinds of interlocutory orders that can be ap-

pealed as a matter of right; the list is narrow and does not in-

clude class action determinations. Subsection (b) permits an

appeal, subject to certain conditions, from an interlocutory order

19 309 U.S, 323, 324-325 (1940).

1" $45 F.2d 363, 373-374 (3d Cir. 1976).

of a kind not listed in subsection (a). In many and perhaps

most cases in which a district court finds that an action should

not proceed as a class action, that finding could be appealed

under 28 U.S.C. § 1292(b). There is some risk that the dis-

trict judge wil! refuse in such a case to include the requisite

findings in his order. However, as Judge Friendly observed in

Parkinson vy. April Industries, Inc., mandamus may well be

available in such cases.'* Moreover, any member of the class

can seek to intervene individually after a decision that the action

cannot be maintained as a class action.

Appeals under 28 U.S.C. § 1292(b) are free from the defects

of the death knell doctrine. They require no fact finding at the

appellate level from inadequate and incomplete records. The

statutory procedure is not one-sided and creates no bias in

favor of class actions.

SUMMARY

In summary, the death knell doctrine produces inefficiencies

in the allocation of judicial manpower and functions within

the federal judicial system. It requires an appellate court to

make an initial finding of fact on a complex issue from a some-

times extensive record addressed to other issues. Because it

permits immediate appellate control of denials of class action

status but not of grants of class action status, the doctrine

may increase the number of class actions in the federal judicial

system.

The shortcomings of the doctrine resulted in its rejection by

two Courts of Appeals, both of which confirmed that rejection

in later en banc decisions. In addition, two other Courts of

1} §20 F.2d 650, 658 (2d Cir. 1975).

am 12 =

Appeals have attempted to avoid some of the problems in the

application of the doctrine by significantly modifying it. These

modifications have not been applied by other Courts of Ap-

peals, and the Court of Appeals for the Eighth Circuit in this

case expressly declined to adopt either of those modifications.

Because of \... increasing impact of class actions on the effi-

cient administration of justice, the long-standing antipathy of

the courts and Congress to piecemeal apepals, and the need for

uniformity in the federal system, the death knell doctrine is

ripe for review by this Court. We should not have one rule for

litigants in St. Louis and New York, and exactly the opposite

rule for litigants in Chicago and Philadelphia—with yet another

for litigants in Los Angeles and San Francisco, and perhaps a

fourth rule for litigants in Atlanta and New Orleans. This case

provides an opportunity for the Court to weigh the opposing

considerations that have caused some Courts of Appeals to

reject totally the death knell doctrine and that have caused

others to adopt it in significantly varying forms. The results of

that consideration by this Court will be uniformity and effi-

ciency in the administration of justice.

a= {3

CONCLUSION

For the reasons set forth above, a writ of certiorari should

issue to review the judgment and opinion of the United States

Court of Appeals for the Eighth Circuit.

Respectfully submitted,

WILLIAM R. RICHTER

720 Olive Street, 24th Floor

St. Louis, Missouri 63101

Counsel for Petitioners Punta Gorda

Isles, Inc., Wilbur H. Cole, Al-

fred M. Johns, Robert J. Barbee,

Samuel A. Burchers, Jr., Russell

C. Faber, John Matarese, Robert

C. Wade, Earl Drayton Farr, Jr.,

and John W. Douglas, D.D.S.

LEWIS R. MILLS

PEPER, MARTIN, JENSEN,

MAICHEL and HETLAGE

Of Counsel

APPENDIX

— =

APPENDIX A

28 U.S.C. § 1291.—Final decisions of district courts

The courts of appeals shall have jurisdiction of appeals from

al! final decisions of the district courts of the United States, the

United States District Court for the District of the Canal Zone,

the District Court of Guam, and the District Court of the Virgin

Islands, except where a direct review may be had in the Supreme

Court.

28 U.S.C. § 1292.—Interlocutory decisions

(a) The courts of appeals shall have jurisdiction of appeals

from:

(1) Interlocutory orders of the district courts of the United

States, the United States District Court for the District of the

Canal Zone, the District Court of Guam, and the District Court

of the Virgin Islands, or of the judges thereof, granting, con-

tinuing, modifying, refusing or dissolving injunctions, or refus-

ing to dissolve or modify injunctions, except where a direct re-

view may be had in the Supreme Court;

(2) Interlocutory orders appointing receivers, or refusing

orders to wind up receiverships or to take steps to accomplish

the purposes thereof, such as directing sales or other disposals

of property:

(3) Interlocutory decrees of such district courts or the judges

thereof determining the rights and liabilities of the parties to

admiralty cases in which appeals from final decrees are allowed:

(4) Judgments in civil actions for patent infringement which

are final except for accounting.

~~

(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 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, he shall so

state in writing in such order. The Court of Appeals may there-

upon, 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 application for an

appeal hereunder shall not stay proceedings in the district court

unless the district judge or the Court of Appeals or a judge

thereof shall so order.

Rule 23, F.R.Civ.P.—Class Actions

(a) Prerequisites to a Class Action. One or more members of

a class may sue or be sued as representative parties on behalf of

all only if (1) the class is so numerous that joinder of all mem-

bers is impracticable, (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.

(b) Class Actions Maintainable. An action may be maintained

as a class action if the prerequisites of subdivision (a) are satis-

fied, and in addition:

(1) the prosecution of separate actions by or against individual

members of the class would create a risk of

(A) inconsistent or varying adjudications with respect to in-

dividual members of the class which would establish incompati-

ble standards of conduct for the party opposing the class, or

— < oo

(B) adjudications with respect to individual members of the

class which would as a practical matter be dispositive of the

interests of the other members not parties to the adjudications

or substantially impair or impede their ability to protect their

interests; or

(2) the party opposing the class has acted or refused to act

on grounds generally applicable to the class, thereby making

appropriate final injunctive relief or corresponding declaratory

relief with respect to the class as a whole; or

(3) the court finds that the questions of law or fact common

to the members of the class predominate over any questions af-

fecting only individual members, and that a class action is su-

perior to other available methods for the fair and efficient ad-

judication of the controversy. The matters pertinent to the

findings include: (A) the interest of members of the class in in-

dividually controlling the prosecution or defense of separate ac-

tions; (B) the extent and nature of any litigation concerning the

controversy already commenced by or against members of the

class; (C) the desirability or undesirability of concentrating the

litigation of the claims in the particular forum; (D) the difficulties

likely to be encountered in the management of a class action.

(c) Determination by Order Whether Class Action to Be Main-

tained; Notice; Judgment; Actions Conducted Partially as Class

Actions.

(1) 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.

(2) In any class action maintained under subdivision (b) (3),

the court shall direct to the members of the class the best notice

practicable under the circumstances, including individual notice

yy

to all members who can be identified through reasonable effort.

The notice shall advise each member that (A) the court will ex-

clude him from the class if he so requests by a specified date;

(B) the judgment, whether favorable or not, will include all

members who do not request exclusion; and (C) any member

who does not request exclusion may, if he desires, enter an

appearance through his counsel.

(3) The judgment in an action maintained as a class action

under subdivision (b) (1) or (b) (2), whether or not favorable to

the class, shall include and describe those whom the court finds

to be members of the class. The judgment in an action main-

tained as a class action under subdivision (b) (3), whether or not

favorable to the class, shall include and specify or describe those

to whom the notice provided in subdivision (c) (2) was directed,

and who have not requested exclusion, and whom the court

finds to be members of the class.

(4) When appropriate (A) an action may be brought or main-

tained as a class action with respect to particular issues, or (B) a

class may be divided into subclasses and each subclass treated

as a class, and the provisions of this rule shall then be con-

strued and applied accordingly.

(d) Orders in Conduct of Actions. In the conduct of actions to

which this rule applies, the court may make appropriate orders:

(1) determining the course of proceedings or prescribing meas-

ures to prevent undue repetition or complication in the presenta-

tion of evidence or argument; (2) requiring, for the protection

of the members of the class or otherwise for the fair conduct of

the action, that notice be given in such manner as the court

may direct to some or all of the members of any step in the

action, or of the proposed extent of the judgment, or of the

opportunity of members to signify whether they consider the

representation fair and adequate, to intervene and present claims

or defenses, or otherwise to come into the action; (3) imposing

—

conditions on the representative parties or on intervenors: (4)

requiring that the pleadings be amended to eliminate therefrom

allegations as to representation of absent persons, and that the

action proceed accordingly; (5) dealing with similar procedural

matters. The orders may be combined with an order under

Rule 16, and may be altered or amended as may be desirable

from time to time.

(e) Dismissal or compromise. A class action shall not be dis-

missed or compromised without the approval of the court, and

notice of the proposed dismissal or compromise shall be given

to all members of the class in such manner as the court directs.

—_S

APPENDIX B

In the United States District Court for the

Eastern District of Missouri

Eastern Division

Cecil and Dorothy Livesay, :

Plaintiffs,

™ - No. 73 C $17 (3)

Punta Gorda Isles, Inc., et al.,

Defendants.

Order

(Filed September 1, 1976)

In accordance with the Memorandum of this Court filed this

date and incorporated herein,

IT IS HEREBY ORDERED that the motion of the various

defendants to decertify this case as a class action be and is

GRANTED; and

IT IS FURTHER ORDERED that this action be and is de-

certified as a class action; and

IT IS FURTHER ORDERED that this matter shall proceed

to trial only upon the individual claims of Cecil and Dorothy

Livesay; and

IT IS FURTHER ORDERED that this action shall be set

for trial at a later date; and

—_*

IT IS FURTHER ORDERED that all restrictions on dis-

covery shall be lifted, and that discovery with regards to the

individual claims of Cecil and Dorothy Livesay shall proceed

in a normal fashion,

Dated this Ist day of September, 1976.

s H. KENNETH WANGELIN

United States District Judge

Memorandum

(Filed September 1, 1976)

This matter is before the Court upon the motion of the vari-

ous defendants to decertify this lawsuit as a class action,

The basis of the various defendants’ motion is that the plain-

tiffs, as class representatives, are failing to prosecute this action,

and are therefore denying the defendants a right to a speedy

adjudication of the claims against them.

In order to deal with the defendants’ motion, a brief chro-

nology of events is required. This lawsuit was originally filed on

July 27, 1973. Plaintiffs’ original counsel did not seek a class

action hearing until April 9, 1974. On June 19, 1975, this

Court, in a Memorandum and Order, declared that the action

should proceed as a class action pursuant to Rule 23(b)(3) of the

Federal Rules of Civil Procedure. The delay between the class

action hearing, and this Court's certification was due to the

substitution of new counsel for plaintiffs. On October 23, 1975,

this Court partially dissolved its stay order regarding discovery,

and allowed discovery to proceed as to the names and addresses

of the members of the class so that the appropriate class action

notice could be sent. The plaintiffs did not institute discovery

Ce ere

—_*

to determine the names and addresses of the absent class mem-

bers until July 20, 1976.

It is the opinion of the Court that the plaintiffs have failed

to offer adequate excuses for their delay in prosecuting this ac-

tion as a class action. In response to the motion of the defend-

ants, the plaintiffs have alleged that it is anomalous for the de-

fendants to attempt to protect the interests of the members of

the class. The Court agrees that such concern on the part of

the defendants involves tears of the crocodilian variety, however,

the plaintiffs misjudged the true thrust of the defendants’ motion.

The defendants are merely seeking, as is their right, to have a

speedy adjudication of the claims against them. Since this law-

suit has been pending for approximately three years, and

class action notices have not gone out more than a year after

the action was certified as a class action, the Court is forced to

the conclusion that there has been a lack of prosecution on the

part of the plaintiffs as class representatives.

Since the plaintiffs seem to have no desire to prosecute this

matter as a class action, the Court will decertify this matter as

a class action, and the lawsuit shall proceed on the individual

claims of Cecil and Dorothy Livesay as stated in the accompany-

ing Order,

Dated this Ist day of September, 1976.

s H, KENNETH WANGELIN

United States District Judge

—_*

APPENDIX C

United States Court of Appeals

For the Eighth Circuit

No, 76-1881

Cecil Livesay and Dorothy Livesay, for Themselves and on

Behalf of All Others Similarly Situated,

Plaintiffs-Appellants,

Vv.

Punta Gorda Isles, Inc., Wilber H. Cole, Alfred M. Johns,

Robert J. Barbee, Samuel A. Burchers, Jr., Russell C. Faber,

John Matarese, Robert C. Wade, Earl Drayton Farr, Jr., John

W. Douglas, D.D.S., Coopers & Lybrand (Formerly Ly-

brand, Ross Bros. & Montgomery),

Defendants-Appellees.

Appeal from the United States District Court for the

Eastern District of Missouri

No. 76-1906

Cecil Livesay and Dorothy Livesay, for Themselves and on

Behalf of All Others Similarly Situated,

Petitioners,

Vv.

Punta Gorda Isles, Inc., Wilber H. Cole, Alfred M. Johns,

Robert J. Barbee, Samuel A. Burchers, Jr., Russell C. Faber,

John Matarese, Robert C. Wade, Earl Drayton Farr, Jr., John

— A-10—

W. Douglas, D.D.S., Coopers & Lybrand (Formerly Lybrand,

Ross Bros. & Montgomery),

and

Honorable H. Kenneth Wangelin, United States District Judge,

Respondents.

Petition for Writ of Mandamus

Submitted: January 13, 1977

Filed: March 4, 1977

Before HEANEY and STEPHENSON, Circuit Judges, and

STUART,* District Judge.

STEPHENSON, Circuit Judge.

In these consolidated cases, Cecil and Dorothy Livesay

(plaintiffs) seek review of the district court's order decertifying

their action as a class action. In No. 76-1881, plaintiffs appeal

from that order. In No. 76-1906, plaintiffs seek a writ of

mandamus compelling the district court to vacate its decertifica-

tion order.

On July 27, 1973, plaintiffs filed a complaint seeking approxi-

mately $2650 in individual damages resulting from their pur-

chase of $5000 worth of debentures and 100 shares of common

stock issued by Punta Gorda Isles, Inc. (Punta Gorda), a Florida

land development corporation, pursuant to a registration state-

ment and prospectus dated May 2, 1972. The essence of plain-

tiffs’ claim was that the prospectus and registration statement

contained materially misleading statements and omissions.' The

* The Honorable William C. Stuart, United States District Judge

for the Southern District of lowa, sitting by designation.

' Essentially, the complaint alleges: (1) a failure to disclose that

new accounting rules of the American Institute of Certified Public

—A-l1 —

named defendants were Punta Gorda, certain individuals who

were Officers and directors of Punta Gorda, and the accounting

firm of Coopers & Lybrand (Coopers), which had certified the

financial statements in the registration statement and prospectus.

Plaintiffs sought to represent a class of approximately 1,800 per-

sons who had purchased securities at the May 2, 1972, public

offering.

On April 9, 1974, plaintiffs moved pursuant to Fed. R. Civ.

P. 23 to have the action certified as a class action. On May 13,

1974, the district court granted Coopers’ motion for a stay of all

discovery except discovery relating to the class action determina-

tion. On June 24, 1974, oral argument on the class action

certification motion was held. On July 16, 1974, the district

court denied Coopers’ motion to strike the class action allega-

tions in the complaint, but did not at that time certify the class.

On September 23, 1974, the district court denied plaintiffs’

motion to lift the stay on substantive discovery.

On November |, 1974, plaintiffs filed a petition for a writ

of mandamus in this court, requesting that the district court

be ordered to lift the stay on substantive discovery. This court

denied the petition by order dated November 15, 1974, but

expressed the view that plaintiffs should request a prompt

ruling on their motion for class action certification and. that

the district court should promptly rule on the motion and

thereafter permit discovery on the merits. Livesay v. Punta

Gorda Isles, Inc., No, 74-1827 (8th Cir., November 15, 1974).

a

—-- —

Accountants would require an adverse restatement of carnings for

1967-1972; (2) a failure to disclose that the carnings consisted of

installment sale contracts where cash would not be received until

future dates; (3) a misleading statement of the ratio of e to

fixed charges because not based on actual cash flow; and (4) a

failure to disclose that certain Florida al regulations would

seriously impede Punta Gorda from developing artificial waterfront

property.

ee

On December 30, 1974, an evidentiary hearing on the class

action certification motion was held in the district court. On

June 19, 1975, the district court entered an order certifying the

action as a Rule 23(b)(3) class action, which order expressly

found plaintiffs to be adequate class representatives. The order

also held that plaintiffs’ counsel had a conflict of interest be-

cause he had represented one of the underwriters of the Punta

Gorda offering on unrelated matters. The order deemed this

conflict serious because none of the underwriters had been

joined as defendants in the plaintiffs’ suit. Plaintiffs’ counsel

withdrew, and on June 30, 1975, plaintiffs’ current counsel

entered its appearance.

On July 25, 1975, plaintiffs moved to dissolve the stay on

substantive discovery. Coopers opposed the motion and sought

a reconsideration of the order certifying the action as a class

action. On October 23, 1975, the district court denied plain-

tiffs’ motion to dissolve the stay. In its order, the district court

expressed concern about the adequacy of plaintiffs as class rep-

resentatives, based largely on plaintiffs’ failure to join any under-

writers as defendants. The court did not, however, decertify

the class action at that time, because it believed that such de-

certification might jeopardize the claims of absent class mem-

bers. The court directed the parties to prepare forms of notice

of the pendency of the class action to be mailed to the class

members and also lifted the stay on discovery to the extent that

plaintiffs could seek the names and addresses of the class mem-

bers. The parties submitted proposed forms of notice in Novem-

ber 1975.

On March 1, 1976, the district court mailed to the parties

its proposed form of notice. Both parties submitted suggested

changes, and on April 9, 1976, the district court mailed to the

parties the final form of notice.

On April 20, 1976, plaintiffs’ counsel telephoned counsel for

Punta Gorda and requested the names and addresses of the

— A-13 —

initial registered owners (after the underwriters) of the deben-

tures and common stock sold pursuant to the May 2, 1972,

registration statement. By letter dated April 21, 1976, Punta

Gorda’s counsel declined to furnish that information.

On July 9, 1976, plaintiffs requested the district court to

conduct a conference for the purpose of discussing the issues

involved in discovery of the names of class members. On July

20, 1976, plaintiffs served defendants with a motion to produce

the names and addresses of the initial registered owners of the

stock and debentures. On July 23, 1976, Coopers filed a mo-

tion to decertify the action as a class action. On July 26, 1976,

the conference requested by plaintiffs was held at which the

district court ordered the parties to submit briefs, etc. in support

of the various pending motions.

On September 1, 1976, the district court issued a memo-

randum and order decertifying the class action. The court found

that plaintiffs had inordinately delayed in prosecuting the case

and were thus not adequate class representatives. The order also

lifted the stay on substantive discovery. Subsequently, both

parties have engaged in some discovery on the merits. Plaintiffs

now seek review of the September | decertification order by

direct appeal (No. 76-1881) and by a petition for a writ of

mandamus (No. 76-1906).

We are confronted v..:h the threshold issue of our jurisdic-

tion to hear an appeal from the district court’s order decer-

tifying the lawsuit as a class action. Defendants allege that the

order is not a final order which is appealable under 28 U.S.C.

$ 1291. We disagree.

Orders denying class action certification are reviewable under

28 U.S.C. § 1291 if they sound the “death knell” of the action.

See, e.g., Share v. Air Properties G. Inc., 538 F.2d 279, 282

(9th Cir.), cert. denied sub nom., Woodruff v. Air Properties

— A-14 —

G. Inc., 97 S.Ct. 321 (1976); Ott v. Speedwriting Pub. Co.,

518 F.2d 1143, 1146-49 (6th Cir. 1975); Williams v. Mum-

ford, 511 F.2d 363, 366 (D.C. Cir.), cert. denied, 423 US.

828 (1975); Shayne v. Madison Square Garden Corp., 491

F.2d 397, 399-401 (2d Cir. 1974); Graci v. United States, 472

F.2d 124, 126 (Sth Cir.), cert. denied, 412 U.S. 928 (1973):

Eisen v. Carlisle & Jacquelin (Eisen 1), 370 F.2d 119, 120-21

(2d Cir. 1966), cert. denied, 386 U.S. 1035 (1967). See also

Hartmann v. Scott, 488 F.2d 1215, 1220 (8th Cir. 1973);

compare, In re Cessna Aircraft Distributorship Antitrust Litiga-

tion, 518 F.2d 213 (8th Cir.), cert. denied, 423 U.S. 947,

rehearing denied, 423 U.S. 1039 (1975). Contra, King v.

Kansas City Southern Industries, 479 F.2d 1259, 1260 (7th

Cir. 1973); Hackett v. General Host Co., 455 F.2d 618, 621-26

(3d Cir.), cert. denied, 407 U.S. 925 (1972).

To determine whether a decertification order sounds the

“death knell” of the action, we begin by examining the amount

of the class representatives’ individual claim.? Plaintiffs’ indi-

vidual claim for damages totals approximately $2,650. Because

this claim falls between those cases where the individual claim

is clearly not viable* and those cases where the individual claim

* Defendants allege that because the record reveals other members

of the purported class who have substantial individual claims, the

“death knell” doctrine should not apply. That was the result reached

in Share v. Air Properties G. Inc., supra, 538 F.2d at 283. We do

not consider the soundness of that holding, however, because the

case is distinguishable on its facts. In Share the court referred to

class members who were “actively engaged” in the litigation. Here,

the record reveals only that certain class members had indicated a

willingness to pay part of the expenses of suit, and even that tan-

— involvement ceased after the appearance of plaintiffs’ new

counsel.

* See, e.g., Ott v. Speedwriting Pub. Co., supra ($30); Korn v.

Franchard Corp., 443 F.2d 1301 (2d Cir. 1971) ($386); Green v.

Wolf Corp., 406 F.2d 291 (2d Cir. 1968), cert. denied, 395 U.S. 977

bana (“less than $1000”); Eisen v. Carlisle & Jacquelin, supra

($70).

— A-15 —

is viable,* we must examine the amount of plaintiffs’ claim in

relation to their financial resources and the probable cost and

complexity of the lawsuit. See, e.g., Share v. Air Properties G.

Inc., supra, 538 F.2d at 282; Graci v. United States, supra, 472

F.2d at 126; Korn v. Franchard Corp., 443 F.2d 1301, 1307

(2d Cir. 1971).

Plaintiffs, both of whom are employed, have an aggregate

yearly gross income of $26,000. Their total net worth is ap-

proximately $75,000, but only $4,000 of this sum is in cash.

The remainder consists of equity in their home and investments.

As of December 1974 plaintiffs had already incurred ex-

penses in excess of $1,200 in connection with this lawsuit.

Plaintiffs’ new counsel has estimated expenses of this lawsuit

to be $15,000. The nature of this case will require extensive

discovery, much of which must take place in Florida, where

most defendants reside. Moreover, the allegations regarding the

prospectus and financial statements will likely require expert

testimony at trial.

After considering all the relevant information in the record,

we are convinced that plaintiffs have sustained their burden®

+ See, e.g., Shayne v. Madison Square Garden Corp., supra

($7,482); Falk v. Dempsey-Tegeler & Co., 472 F.2d 142 (9th Cir.

1972) ($14,125); Milberg v. Western Pac. R.R., 443 F.2d 1301

(2d Cir. 1971) ($8,500).

5 Plaintiffs who seek to invoke the “death knell” doctrine have

the burden of developing, in the trial court, an uate factual rec-

ord upon which an appelat court may determine ther the action

will proceed absent class certificatia. Share v. Air Properties G.

Inc., supra, 538 F.2d at 282; Gosa v. Securities Investment Co., 449

F.2d 1330 (Sth Cir. 1971). As the Gosa court indicated, the pre-

ferable way to do this is in a post-ruling hearing where the district

court has the opportunity to enter appropriate findings of fact. No

such hearing was held in the instant case. However, we do not read

Gosa as requiring such a hearing in all cases. In the instant case, the

record of entire ing contains sufficient facts to allow us

to make an informed judgment on the matter.

= fpl§

of showing that they will not pursue their individual claim if

the decertification order stands. Although plaintiffs’ total net

worth could absorb the cost of this litigation, “it [takes] no

great understanding of the mysteries of high finance to make

obvious the futility of spending a thousand dollars to get a

thousand dollars—or even less.” Douglas, Protective Com-

mittees in Railroad Reorganizations, 47 Harv. L. Rev. 565,

567 (1934). We conclude we have jurisdiction to hear the

appeal.

The district court has wide latitude in determining whether

an action may be maintained as a class action. If the court

applies the proper criteria in making this determination, its

decision is reviewable only for an abuse of discretion. Wright

v. Stone Container Corp., 524 F.2d 1058, 1061 (8th Cir.

1975); Shumate v. Nat'l Ass'n of Securities Dealers, 509 F.2d

147, 155 (Sth Cir.), cert. denied, 423 U.S. 868 (1975); Kamm

v. California City Development Co., 509 F.2d 205, 210 (9th

Cir. 1975); Wetzel v. Liberty Mutual Ins. Co., 508 F.2d 239,

245 (3d Cir.), cert. denied, 421 U.S. 1011 (1975); City of

New York v. Int'l Pipe & Ceramics Corp., 410 F.2d 295, 298

(2d Cir. 1969).

Because the decertification order in this case was predicated

solely on the finding that plaintiffs were not adequate class

representatives because they had inordinately delayed in prose-

cuting the litigation,® the sole issue’ on this appeal may be

6 As plaintiffs correctly point out, the decertification order was

phrased in terms of a denial of defendants’ rights to a speedy ad-

judication of claims against them. This factor is not a proper cri-

terion to consider in determining whether plaintiffs will adequately

represent the members of the class. However, a review of the entire

record convinces us that the district court was concerned with plain-

tiffs’ failure to prosecute the case as it related to their adequacy as

class representatives.

* Plaintiffs also seek to raise the following issues: (1) that the

decertification order was erroneously predicated on plaintiffs’ failure

to join underwriters as defendants; (2) that the district court ex-

—_S ee

simply stated: was the district court's decertification order find-

ing plaintiffs to be inadequate class representatives so erro-

neous as to constitute an abuse of discretion? We answer the

question in the affirmative, and we reverse.

The decertification order was apparently based upon three

distinct periods of delay. The first period of delay was approxi-

mately eight months from the date of filing the complaint until

the plaintiffs moved to have the action certified as a class action.

The record indicates that this period of time was largely de-

voted to preparing and amending pleadings and engaging in

discovery. We note that plaintiffs filed their motion to certify

shortly after defendants filed their last responses to plaintiffs’

interrogatories. In these circumstances, we find little to support

a finding that plaintiffs were dilatory in moving for class action

certification. Furthermore, the general rule is that a delay

prior to moving for class action certification is not a basis for

refusing certification absent some showing of prejudice. See,

e.g., Bernstein v. National Liberty Int'l Corp., 407 F. Supp.

709, 714 (E.D. Pa. 1976); Souza v. Scalone, 64 F.R.D. 654,

656 (N.D. Cal. 1974); Boring v. Medusa Portland Cement

Co., 63 F.R.D. 78, 80 (M.D. Pa.), appeal dismissed without

opinion, 505 F.2d 729 (3d Cir. 1974); Feder v. Harrington,

52 F.R.D. 178, 181-82 (S.D.N.Y. 1970); Epstein v. Weiss,

50 F.R.D. 387, 392 (E.D. La. 1970). No showing of preju-

dice was made here.

hibited a lack of fair and impartial judicial procedure; (3) that the

district court ordered plaintiffs to follow class action procedures

which violate the federal rules; and (4) that the district court vio-

lated this court’s mandate by not promptly lifting the stay on substan-

tive discovery after certifying the class. The first two claims are de-

void of factual support in the record. The third claim is relevant to

the decertification order only insofar as it alleges that the class action

procedures authorized by the district court impeded the progress of

the litigation. As such, it merely restates the allegation that the delay

was not caused by plaintiffs. The final claim is moot because the

decertification order lifted the stay on substantive discovery. More-

over, as with the third claim, its only relevance to the decertification

order is the allegation that the stay of discovery was a contributing

cause of the delay.

— A-18 —

The second time period referred to in the decertification order

was the 14 month period between the motion for class action

certification and the order certifying the class. The district

court's decertification order attributed this delay to the appoint-

ment of new counsel for plaintiffs. However, it should be noted

that new counsel for plaintiffs did not appear until after the

order certifying the class was entered.

The defendants’ only colorable allegation of delay during

this second period is that plaintiffs were dilatory in moving for

an evidentiary hearing on the class action motion. The record

discloses that the district court indicated during oral argument

that an evidentiary hearing should be held if the court decided

that the issue of individual reliance did not bar maintaining

the suit as a class action. This decision was reached on July

16, 1975, and plaintiffs did not seek an evidentiary hearing

until September 20, 1975, a period of nine weeks. During this

nine-week period plaintiffs were not inactive. They moved to

enjoin the destruction of documents and also moved to lift

the stay on substantive discovery. We cannot say, and the

district court-did not find, that pursuing these avenues was a

sign of inaction, negligence, or a failure adequately to protect

the interests of other class members.

The third period of time mentioned in the decertification or-

der is the period from the district court order allowing discov-

ery of the names and addresses of class members until plaintiffs

first sought to discover that information.» This period runs

‘ A persuasive argument can be made that this is the only period

of delay upon which the decertification order could properly be

predicated. Because the first two periods of delay occurred prior to

the certification order, defendants could have raised the issue of

failure to prosecute at that time, but did not. They may now be

foreclosed from raising the issue based on these delays. Kramer v.

Scientific Control Corp., 67 F.R.D. 98, 99 (E.D. Pa. 1975), rev'd

in part on other grounds, 534 F.2d 1085 (3d Cir.), cert. denied sub

nom., Arthur Andersen & Co. v. Kramer, 97 S.Ct. 90 (1976). Cf.

In re Cessna Aircraft Distributorship Antitrust Litigation, 518 F.2d

213, 215 (8th Cir.), cert. denied, 423 U.S. 947, rehearing denied,

423 U.S. 1039 (1975).

— A-19 —

from October 23, 1975, to April 20, 1976, when plaintiffs first

requested Punta Gorda’s counsel to furnish the names and ad-

dresses of the initial registered owners of the securities. Defend-

ants contend that because plaintiffs have offered no compelling

excuse for failing to request this information more promptly,

this delay ipso facto justified the district court's finding that

plaintiffs are inadequate representatives. We disagree.

We begin by noting that there has been no showing that

plaintiffs’ failure to request production of this information at

an earlier date has prejudiced the class members. The notices

to the class members could not have gone out until the final

form of notice was approved by the court, which did not oc-

cur until April 9, 1976. Eleven days later, plaintiffs’ attorney

telephoned counsel for Punta Gorda and requested that Punta

Gorda furnish the names and addresses of the initial registered

owners of the securities in question. In a letter dated August

4, 1975, counsel for Punta Gorda had agreed to furnish this

information. However, in response to the telephone call, coun-

sel for Punta Gorda wrote a letter to plaintiffs’ counsel refus-

ing to furnish this information.*® In these circumstances we

cannot agree that plaintiffs were dilatory in seeking the names

and addresses of potential class members. They had every right

to expect that defendants would promptly furnish this infor-

mation. To hold that plaintiffs are inadequate class representa-

tives because they failed to anticipate defendants’ eventual ob-

jections to discovery would be tantamount to saying that class

representatives must be gifted with prescience. This we decline

to do.

That there has been undue delay in this lawsuit is beyond

question. From examination of the entire record of this pro-

® This refusal was later formalized in objections to plaintiffs’ mo-

tion to produce. One of the objections to this motion was that the

requested information was not in the possession of Punta Gorda, but

in the possession of Punta Gorda’s transfer agent. Because the trans-

fer agent could only release this information at the direction of

Punta Gorda, we find this objection little else than a delaying tactic.

— A-20 —

tracted proceeding, however, it becomes quite clear that much

of the delay in this case is directly attributable to defendants.

For example, defendants have been granted 14 extensions of

time, totalling approximately 190 days, in which to file plead-

ings, motions and other papers. In addition, defendants have

filed motions to reconsider or modify earlier court orders,

which motions have consistently alleged grounds previously

ruled upon by the court. The clear import of this course of

conduct is to make this lawsuit as time-consuming and costly

as possible.

In addition, the district court has on some occasions taken

action which did not advance the progress of this litigation.

The court took approximately five months to decide the class

action certification motion after the evidentiary hearing was

held. The court took approximately four months to approve the

form of notice to the class members. These delays appear to

have been justifiable due to the complex nature of the ques-

tions presented. However, during this time there was a stay of

substantive discovery in effect. The practical effect of this stay

was to prevent the parties from concurrently proceeding to the

merits while the court considered the various procedural ques-

tions. In these circumstances, virtually all the plaintiffs could

do to advance the course of this litigation was to attempt to lift

the stay on discovery. Plaintiffs twice sought to lift this stay

and were twice unsuccessful.

We conclude that the district court order decertifying the

action as a class action because of plaintiffs’ failure to prosecute

is wholly unsupported by the record, and we accordingly re-

verse. We do not disturb that portion of the order which lifted

the stay on substantive discovery.

The record in this case compels us to make certain further

comments. We are dismayed at the utter lack of cooperation

between opposing counsel. The record is replete with instances

— A-21 —

where relatively minor procedural matters have mushroomed

into full-scale confrontations, with the concomitant avalanche

of briefs, memoranda, etc. By and large, these matters could,

and should, have been settled informally by the parties or, if

necessary, in conference with the district court.

Even more disturbing is the tone with which these proceed-

ings have been conducted. All too often the parties have en-

gaged in personal attacks on opposing counsel and the district

court. These baseless allegations are not a substitute for advo-

cacy based on the facts and the law and they have no place in

our judicial system.

On remand, we anticipate that this conduct will not reoccur.

If it does, the district court will be forced to take a more active

role in managing this case to insure that it progresses as ex-

peditiously as possible consistent with fairness to the parties.

See Manual for Complex Litigation § 1.10 (1973).

a

In No. 76-1881, the order of the district court is reversed

and the cause remanded for further proceedings consistent here-

with. In No. 76-1906, the petition for writ of mandamus is

dismissed.

A true copy.

Attest:

Clerk, U. S. Court of Appeals, Eighth Circuit.

— A-22 —

United States Court of Appeals

for the Eighth Circuit

No. 76-1881 September Term, 1976

Cecil Livesay and Dorothy Livesay, for themselves and on be-

half of all others similarly situated,

Appellants,

VS.

Punta Gorda Isles, Inc., Wilber H. Cole, Alfred M. Johns,

Robert J. Barbee, Samuel A. Burchers, Jr., Russell C. Faber,

John Matarese, Robert C. Wade, Earl Drayton Farr, Jr.,

John W. Douglas, D.D.S., Coopers & Lybrand (formerly

Lybrand, Ross Bros. & Montgomery),

Appellees.

JUDGMENT

(Filed April 13, 1977)

Appeal From the United States District Court for the Eastern

District of Missouri.

This Cause came on to be heard on the record from the

United States District Court for the Eastern District of Mis-

souri and was argued by counsel.

On Consideration Whereof, it is now here ordered and ad-

judged by this Court, that the judgment of the said District

Court, in this cause, be, and the same is hereby, reversed.

— M0

And it is further ordered by this Court that this cause be and

is hereby remanded to the said District Court for proceedings

consistent with the opinion of this Court.

March 4, 1977

A true copy

Attest: /s/ Robert C. Tucker

Clerk, U. S. Court of Appeals, 8th Circuit

April 13, 1977

om 36 «

APPENDIX D

United States Court of Appeals

for the Eighth Circuit

76-1881 September Term, 1976

\

Cecil Livesay, et al., etc.,

Appellants,

VS.

Punta Gorda Isles, Inc., et al.,

Appellees. /

Appeal from the

United States Dis-

trict Court for the

Eastern District of

Missouri

The Court having considered petitions for rehearing en banc

filed by counsel for appellees and, being fully advised in the

premises, it is ordered that the petitions for rehearing en banc

be, and they are hereby, denied.

Considering the petitions for rehearing en banc as petitions

for rehearing, it is ordered that the petitions for rehearing also

be, and they are hereby, denied.

March 28, 1977