Petition — Windham v. American Brands, Inc.

Supreme Court U, &

Supreme Court of the United State’ [ | pp

OC SOBER TERM, 1977 ) ,

LC 6 977

‘4 ¢-925 WICMAEL ROD

ROY P. WINDHAM, HARDEN EVANS,

JOE SKIPPER, DAVID NEXSEN,

W. A. TURNER AND TOBY GASKINS, on behalf of

themselves and all others similarly situated,

Petitioners,

AK, IR, CLERK’

versus

AMERICAN BRANDS, INC, LIGGETT

& MYERS, INC, R, Jd. REYNOLDS,

INC,, (R. J. REYNOLDS TOBACCO CO,);

BROWN & WILLIAMSON TOBACCO

CORPORATION; THE IMPERIAL TOBACCO

COMPANY (OF GREAT BRITAIN AND

IRELAND)LTD,, MULLINS LEAF TOBACCO

COMPANY, INC, C. W. WALTERS

COMPANY, INC, EXPORT LEAF TOBACCO

COMPANY; LOEWS THEATERS, INC,,

(D/B/A LORILLARD); PHILIP MORRIS,

INC,, UNIVERSAL LEAF TOBACCO COMPANY,

INC,, THE AUSTIN COMPANY, INC,

(GREENVILLE, TENN.) J. P. TAYLOR

COMPANY, INC, DIBRELL BROTHERS, INC,;

AND EARL L, BUTZ, SECRETARY OF

AGRICULTURE OF THE UNITED STATES,

Respondents

PETITION FOR WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

BE. N. Zeigler J. Nat Hamrick

Pr. O. Drawer 150 P.O, Box 470

Florence, S. CC, 295038 Rutherfordton, N.C, BS1ae

‘ 1 OO

ROS /O62- S281 Robert C, Howison, Jr.

John A, Cochrane . O. Box 109

John E: Thomas Raleigh, N.C, 27602

ov Wabasha St. onsen Frank M, Wooten, Jr.

St. Paul, Minnesota 55102 P. 0. Box 5065

H. Page Dees Greenville, N, C, 27834

1114 Third Avenue |

Conway, 5. C, 29526 Attorneys for Petitoners

INDEX

RE a 8

a 3

QUESTIONS PRESENTED......................, 4

STATUTES INVOLVED..................00005,. 6

A PE ek = ee 6

A. Statement of Facts...................00005 6

B. Proceedings Before the United States

District Court of South Carolina.......... 10

C, Proceedings Before Panel of United States

Court of Appeals for the Fourth Circuit... . 11

D. Rehearing En Bane by Court of Appeals

for the Fourth Cireuit................., (3

REASONS FOR GRANTING WRIT OF

CERTIORARI..... Ah A Ra ae EE eee 12

1. The “test case” approach to antitrust class

action suits adopted by the Fourth Circuit

ignores tolling of the statute of limitations

and conflicts with decisions of the Supreme

Court and decisions of the Third Circuit... 13

2. The “test case” approach to antitrust class

action suits ignores the policy behind Rule

Be ccccccgeccensvescosccecesesecececes 16

8. The opinion of the Cireuit Court conflicts with

opinions of the Third, Ninth and Fifth Cir.

cuits in which similar class action suits were

certified under Rule 23... 06... 18

4. This Court's decision in /Uinois Brick makes it

clear that the crux of private enforcement of

the antitrust laws is not individual dam-

age

5. The intertwining of liability with individual

damages conflicts with other circuits and

; defeats the purpose of Rule 23 and private

enforcement of the antitrust laws......... 22

6. Both the Circuit and District Court rule the

class action unmanageable for lack of an

“easy” damage formula yet they both ap-

plied the traditional before and after anti:

trust damage formula to calculate easily

damages for the plaintiffs... ............, 26

7. When the Fourth Cireuit holds there would

have to be a deluge of mini-jury trials on

individual damages, it conflicts with the

Second and Seventh Circuits and presents

an important question to be decided by this

Court. . Luveeeeeereenocereeveeees 28

8 The ircuit Court repudiated the antitrust trial

experience of Judge Wyzanski in failing to

find an abuse of diseretion by a district

judge with little antitrust class action ex:

POTIONCE, 0 ccc rceeenens tresses

CONCLUSION,....... receeeeeeevesveeseses @E

APPENDICES:

Appendix A « En bane opinion of United States

‘ourt of Appeals for the Fourth circuit dated

October 11,1977........ la

Appendix B - United States Court of Appeals for

the Fourth Circuit Panel opinion by the Honor-

able Charles E. Wyzanski, Jr. dated July 16,

FOTO sv ccccccsccccccccscccccccccescecseces 26a

Appendix C - Order of the Honorable Robert F,

Chapman, District Court of South Carolina,

dated September 26, 1975.........0 0.0055, 40a

Appendix D - Statutes and Rules....... enenne TTa

Sherman Act, Section1,2.......... 6.65005, 17a

Clayton Act, Section 4, 4B, Section 5(a), Section

ie 606060060000000 c00n4%00 Be tduad sane 78a

Federal Rules of Civil Procedure, Rule 23, Class

rrr rrr erre rrr re 79a

ACTS AND REGULATIONS

ss 756 0g 6-65000eseesb ieeneensunt 6

15 U.S.C, is TrTTT pecsaneesebasseedehanl ym 6, 33

28 U.S. Code Section 1254(1)..............., ao

28 U.S. Code Section 2106, .00 0c 3

Manual for Complex Litigation, Part 1, Section 1,43

5 ] oF * |. BPPrerrrrrrer errr rrr 86

Rule 23 of Federal Rules of Civil Procedure.......

soveceehoveseneecceneecocecececeens 4, 6,17, 26

Supreme Court Rule Mecebovcccvuccesvesdvecece 6

OTHER AUTHORITIES

Developments - Class Actions, 89 Harv, L. Rev, No.

5 Ft PPro 22, 35

Supreme Court, 1976 Term, 91 Harv. L. Rev. 70,

24 fn. 26 (Nov. 1977), ccc cc eee 35

Litigating the Antitrust Conspiracy under Amend-

ed 23, 54 Va. L, Rev. No. 2, March 1968, 314, at

$26... 38

Antitrust Violations - Class Actions, é ALR Fed,

SA ven ass ben all ducted teen eon $1, 32

CITATIONS

American Pipe and Construction Co, v. Utah,

414 U, 8, 538, 94 S, Ct. 756, 38 L. Ed, 2d 713

SPO Us Ons Cudaceccensdsceunasace: 4, 13, 14, 15, 16

Armco Steel Corp. v, North Dakota,

376 F, 2d 206 (8th Cir, 1967)... .. eee eeueeeeens 33

Bogosian v, Gulf Oil Corp.,

661 F, 2d 484 (3rd Cir, 1977)... 15, 18, 33

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.

U.S. ,60L, Ed 2d 701 (1977).............,

Campus Cleaners, Inc. v. Dallas Tailor and Laundry

Supply, 1977-2 Trade Cases, Para, wed 714 (8. D,

Mn. + ob0%00% de0edudhedecseeeeceoes al 26, 34

DuPont Glore Forgan v. AT&T Co.,

69 F.R.D, 481 (S.D.N.Y. 19786). .0 cca 30

Esplin v. Hirsch,

402 F’, 2d 94 (10th Cir, 1968)........... 16, 17, 24, 26

Forbes v. Minneapolis Board of Realtors,

61 F.R.D, 416 (D, Minn, 1973), Appeal from the

Distriet Court was dismissed, 1973-2 Trade Cases.

Para. 74,651; 94,858 (8th Cir, 1978),............. 32

Hawaii v. Standard Oil Co.,

IUPUI s Se ebsecteceeecesesescess 17, 18

Illinois Brick Company v. Mtinois,

U.S, , 97S. Ct. 2061, 62 L. Ed. 707

Ee cécetecevececs , 5, 17, 21, 22, 34

In re Beef Industry Antitrust Litigation,

MDL Docket No, 248. . 7 ea ae

In re Master Key Antitrust Litigation,

70 F.R.D, 23 (D, Conn, 1975) denied review 528 F.

| | EPPPPTTTIP Terie eee 22, 29

In re Sugar Antitrust Litigation,

1977-2 Trade Cases para, 61,669 and 61,634 (9th

Cir, 6-7-77 and 8-23-77), .... | eA ee 19, 33

Jones v. Diamond,

519 F. 2d 1090, (6th Cir, 1975).................. 32

Katz v. Carte Blanch Corporation,

496 F, 2d 747 (3rd Cir, 1974), cert. denied 419 U.S.

TT hace eh be 5665 6.66.00006 6060000088 13

Knutson v, Daily Review, Inc,

548 F, 2d 795 cert. denied 97 8, Ct, 2977 (1977) (9th

UT SUSECCCReksGGebeebeoeterrsccesses 25

Miller v. Mackey International, Inc.

452 F’, 2d 424 (Sth Cir, 1971). . SA

Milonas v. Amerada Hess Corp.,

1976-2 Trade Cases para, 61,096 (S.D.N.Y. 1976). . 34

Poller v. Columbia Broadcasting System, Inc.,

368 U.S, 464 (1962). . soca

Presidio Golf Club v. National Linen Supply Corp.,

1976-2 Trade Cases on 61,221 (N.D. Cal. 1976)

7T . 25, 26

Roman v. ESB, Ine,

550 F, 2d 1943 (4th Cir, 1976). . : 14,15

Shelter Realty Corp. v, Allied Maintenance » Corp.

1977-2 Trade Cases para, 61,691. . 23, 36

Stavrides v. Mellon Bank N.A.,

69 F.R.D. 424 (W.D. Pa. 1975). ...........---5: 24

Story Parchment Co. v. Paterson P. Paper Co.,

SE PEs 5 dec cevercvesccscescvececs 25

United Air Lines, Inc. v. McDonald,

U.S. ,975S. Ct. 2464, 53 L. Ed. 423 (1977)....

Shavdeednsyensad eee tiueiueeaie 4, 13, 14, 15, 16

Ungar v. Dunkin’ Donuts of America, Inc.,

68 F.R.D. 65 (E.D. Pa. 1975), 531 F. 2d 1211 (1976),

cert. den. 429 U.S. 823 (1976)................ 19, 20

Vendo Company v. Lektro-Vend Corp.,

e.g EE OUD s a voc vcccceecees 17

Weeks v. Boreco Oil Co.,

re I, SD, gg. cc ccbecsveewces 30

Yoder Bros. Inc. v. Calif-Fla.

537 F. 2d 1347 (5th Cir. 1976), cert. denied, 97 S. Ct.

Ps ccc dnceccvesesctocescssnvesesates 19

IN THE

: SUPREME COURT OF THE UNITED STATES

y OCTOBER TERM, 1977

NO.

ROY P. WINDHAM et al., on behalf of themselves

and all other similarly situated,

Petitioners

veTsus

AMERICAN BRANDS, INC., et al.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

E. N. Zeigler, Attorney, on behalf of the peti-

- tioners, (hereinafter, “Tobacco Farmers”), petitions

this Court to issue a Writ of Certiorari to review the

rehearing En Banc decision of the United States

: Court of Appeals for the Fourth Circuit entered in

this case on October 11, 1977.

OPINIONS BELOW

The Fourth Circuit Rehearing En Banc opinion of

Judge Donald A. Russell has been reported in 1977-2

Trade Cases para. 61, 670. The Fourth Circuit Panel

opinion by Judge Charles E. Wyzanski, Jr. is repor-

ted in 593 F. 2d 1016. The District Court opinion by

Judge Robert F. Chapman is reported in 68 F.R.D.

641. A copy of eack opinion is appended hereto as

Appendix A, B, and C, respectively.

JURISDICTION

Jurisdiction of this Court is invoked under 28 U.S.

Code Section 1254 (1) for determination and relief as

provided in 28 U.S. Code Section 2106. The judgment

of the Court of Appeals was entered on October 11,

1977 (App. A). This petition was filed within ninety

days after entry of the Circuit Court decision.

QUESTIONS PRESENTED

1. Did the Circuit Court in its opinion erroneously

ignore or seek to reverse the holding of this Court in

American Pipe and Construction Co. vs. Utah, 414

U.S. 538, 94 S. Ct. 756, 38 L. Ed. 2d 713 (1974) and

United Air Lines, Inc. vs. McDonald, US. 97

S. Ct. 2464, 53 L. Ed. 2d 42% (1977) with regard to the

limited tolling of the statute of limitations fer absent

class members?

2. Did the Circuit Court err in ignoring the public

policy supporting Rule 23 and private enforcement of

antitrust laws by rejecting class action treatment of

this antitrust conspiracy case brought under Rule 23

and substituting instead a “test case” approach with

collateral estoppel and one-way intervention?

3. Does the opinion of the Circuit Court conflict

with the opinions of the Third and Ninth Circuits in

similar class action antitrust suits under Rule 23?

4. Did the Circuit Court erroneously hold that

individual damage is the crux of a private antitrust

action contrary to the holding of this Court in Jllinois

Brick Company vs. Illinois, US. , 97S. Ct.

2061, 52 L. Ed. 707 (1977) that direct purchasers (or

sellers) are elevated to a preferred position as private

attorneys general without proof of actual injury?

5. Did the Circuit Court err in holding that the

question of individual damages is so “intertwined”

with the issue of liability that impact from this

horizontal conspiracy to fix prices and rig bids could

never be presumed?

6. Did the Circuit Court err when it held this case

to be unmanageable because there was “no ‘easy

damage’ formula” to define individual damages while,

at the same time, applying the basic antitrust

“before-and-after” damage formula to disprove that

refusal of class action would constitute a “death

knell”?

7. Did the Circuit Court err in holding that as a

matter of law the Tobacco Companies would be able

to contest each individual claim for damages in a

“deluge of mini-trials” each by a jury?

8. Did the Circuit Court err when it repudiated

the antitrust class action expertise of Judge Charles

Wyzanski and failed to find an abuse of discretion by

a District Judge with little or no antitrust class action

experience?

STATUTES INVOLVED

The statutory provisions are: Sections 1 and 2 of

the Sherman Act (15 U.S.C. Secs. 1 and 2); Sections 4

and 5 of the Clayton Act (15 U.S.C. Secs. 4 and 5).

Also involved is Rule 23 of the Federal Rules of Civil

Procedure. In accordance with Supreme Court Rule

23 (d) the pertinent texts are set forth in the Appen-

dix, as Appendix D. |

STATEMENT

A. STATEMENT OF FACTS

This is an antitrust class action on behalf of all

South Carolina flue-cured Tobacco Farmers; i.e.,

owners of land with tobacéo allotments, lessees of

allotments, sharecroppers and tenants who sold to-

baceo produced in South Carolina in the years 1970

through 1975. They charge the fifteen (15) defendant

tobacco companies (hereinafter ‘Tobacco Compa-

nies”) and the Secretary of Agriculture of the United

States with a horizontal conspiracy to rig bids and fix

prices to force the sale of tobacco at prices lower than

they would have been, absent the conspiracy, in

violation of Sections 1 and 2 of the Sherman Act.

The six Tobacco Farmers who bring this action are

a part of a group of some 20,000 tobacco farmers who

have an economic interest in flue-cured tobacco sold

in South Carolina over the past six years. The

tobacco in which they have an economic interest was

sold by an auction system in some 36 warehouses in

11 “markets” designated by the Secretary of Agricul-

ture of the United States. The portion of the State in

which flue-cured tobacco is produced is a compact

geographical area bisected by the Pee Dee River

approximately 100 miles square. It is roughly conter-

minous with the Sixth Congressional District in

South Carolina.

The production of flue-cured tobacco is limited

through assignment by the United States Depart-

ment of Agriculture (hereinafter referred to as De-

partment of Agriculture) of quotas to individual

farms. The controlling factor is the number of acres

which can he planted or, since 1978, the number of

pounds of tobacco which a farmer may sell during a

given year. The size of this allotment is of such value

that it is calculated to as small a figure as a hundredth

of an acre. (Transcript of Record, Vol. V, October 25,

1974, pp. 51-52). The District Court by its refusal of

class action certification recognized that many small

farmers and sharecroppers would effectively be de-

nied relief. (Cir. App. 195).

Extensive and precise documentation exists for the

sale of tobacco in the years in question. (Transcript of

Record, Vol. V, October 25, 1974, particularly Exhi-

bits Px. 1-10 and Px. 15). This documentation is

primarily in the form of records kept by the Depart-

ment of Agriculture and an individual “Tobacco Sale

Bill” kept by the warehouse in which tobacco is sold.

This Tobacco Sale Bill consists of four sheets; ie. the

original “white” copy for the warehouse, the “yellow”

copy labeled “F.C. Copy”, the “pink” copy labeled

“Farmers Receipt”, and the heavy “buff” copy labeled

“Farmer's Copy.” (Transcript of Record, Vol. V. Px.

15, pp. 22-24). The “F.C. Copy” goes to the Flue-

e

Cured Tobacco Cooperative Stabilization Corporation

when tobacco is delivered to it to receive price

support, The “Farmers Receipt” and the “Farmer's

Copy" go to the tobacco farmer, On the copies which

the farmer gets, that portion of the form showing the

grades which the tobacco companies used in buying

the tobacco is blanked out, and the name of the

buying company is not revealed in the adjacent

column, (Transeript of Record, Vol, V, October 25,

1974, Exhibits Px. 1-6, and testimony of Roy

Windham, pp. 68-75),

The grading of tobacco is performed on two levels;

ie, the Department of Agriculture for price support

and Tobacco Companies for purchasing. The Depart.

ment of Agriculture through the Tobacco Inspection

Act places grades on tobacco when it is delivered by

farmers to the warehouse, The chief purpose of this

grading has become the administration of price sup-

port through the Commodity Credit Corporation and

has no relation to the Tobacco Companies’ grading

system, While there are 161 government grades of

tobaceo, these grades are merely an elaboration of 8

groups reflecting basically the location of the leaf on

the tobacco stalk; de, (Starting from the top of the

plant) A, wrappers; B, leaf; H, smoking leaf; C,

cutter; X, lugs; P, primings; N, nondescript; S, scrap.

(Exhibits Px. 11 and 12, Vol. V, Transcript of Testi-

mony, Octover 25, 1974). In addition, tobacco which

has been damaged is designated “U", and tobacco

Which has become wet ("in high order") is designated

“W". (Transcript of Hearing, October 10, 1975, pp.

39-40),

The Tobacco Companies, however, have their own

grading system which, according to the answers to

interrogatories filed after the District Court's Order

herein by several companies, has no relation to the

161 United States Government grades and is drasti-

cally fewer in number, The number of grades as

represented by grading symbols employed by the

various tobacco companies buying in South Carolina

varied from about 10 used by Loews Theaters, Ine.

d/b/a Lorillard in 1971, to 32 used by The Austin Co.,

Inc,, (Greeneville, Tenn,), The information necessary

to establish the identity of purchasing companies, the

grades by which they purchase, and the relationship,

if any, of company grades to Department of Agricul-

ture grades, was not available to Tobacco Farmers,

and could only be learned through discovery which

was denied by Judge Chapman as “going strongly

into the merits.” (See Transcript of Record, Vol. V,

October 25, 1974, pp. 71-72).

Because tobacco is a highly perishable commodity

and Tobacco Farmers have no means of storing

tobacco once it is “in order" for sale, Tobacco Farmers

have been at a terrible disadvantage in dealing with

Tobacco Companies on the tobacco auction floor, This

has facilitated the fixing of prices and rigging of bids

by Tobacco Companies, one of the most conspicuous

facets of which has been the universal use of tied

bidding. Tied bidding is a system by which buyers for

the Tobacco Companies bid the same price for the

tobacco offered on the market thereby tying the bid,

and then receive a portion of the offerings by alloca-

tion, The practice of using tied bidding by Tobacco

Companies has become so flagrant that in many

instances their buyers merely stood at the end of long

rows of tobacco offered for sale and without going

through the motion of passing down the rows and

bidding on the individual piles of tobacco (generally

200 to 250 lbs.) agreed on an allocation of the entire

offering among themselves, (Transcript of Record,

Deposition of David Nexsen, November 7, 1974, pp,

43-44), Tobacco Companies admit that fifty (50%)

percent of the tobacco purchased is acquired through

Lied bidding and allocation. Tobacco Farmers esti

mate an even higher percentage is sold under tied

bidding.

The abuse of the auction system by Tobacco Com.

panies became intolerable at the opening of the

marketing season in 1974 when, despite the increased

cost of producing tobacco for market, they used the

tied bidding system to offer Tobacco Farmers less for

their crop than in the previous year, The matter

became gn issue for debate in the general election for

Congressman in the Sixth Congressional District and

received extensive media coverage, Both candidates

charged Tobacco Companies with violation of the

antitrust law, the Democratic candidate advocating a

civil suit, and the Republican candidate advocating

investigation by agencies of the United States gov-

ernment, (Petition for Mandamus, March 15, 1975,

App. X. 44-45), Out of the storm of protest by

Tobacco Farmers, Footnote 41 of the Circuit opinion

(App. A, p, 25a) is not a correct reflection of the evid-

ence in the record and indicates a misapprehension by

the Circuit of the depth of feeling among Tobacco

Farmers,

the record and indicates a misapprehension by the

Circuit of the depth of feeling among Tobacco Far-

mers,

B, PROCEEDINGS BEFORE THE UNITED

STATES DISTRICT COURT OF SOUTH

CAROLINA

This action was filed July 29, 1974. On October 17,

1974, the District Court, on affidavit of plaintiffs’

counsel, issued a Rule to Show Cause, returnable on

October 25, 1974, why an order should not be entered

determining that this action be maintained as a class

action under Rule 23 (b) (3) of the Federal Rules of

Civil Procedure, On June 19, 1975, the District Court

heard the concluding oral argument on the class

action issue,

On September 26, 1975, the District Court filed its

Order denying class action status, Judge Chapman

found for the plaintiffs under all four of the criteria of

Rule 23(a); ie. numerosity under Rule 23(a) (1);

commonality under Rule 23(a) (2); typicality under

Rule 23(a) (8); and representativeness under Rule

23\a) (4), However, he went on to deny class action

status under Rule 23(b) (3) “because the trial of this

suit would be totally unmanageable.” (App. C, p.

64a), Judge Chapman certified his Order for immedi-

ate appeal under Rule 54(b), (App. C, p. 75a), In the

same order, the District Court denied the motion of

the Secretary of Agriculture for a dismissal or in the

alternative for summary judgment, On October 21,

1975, plaintiffs filed their Notice of Appeal to the

Court of Appeals for the Fourth Circuit,

C, PROCEEDINGS BEFORE PANEL OF

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

The appeal came on for oral argument on May 6,

1975 before a three judge Panel consisting of Senior

Cireuit Judge Albert V. Bryan, the late Judge J.

Braxton Craven, Jr. and Judge Charles E, Wyzanski,

Jr., Senior District Judge, District Court of Massa-

chusetts, sitting by designation. From the bench,

Judge Wyzanski repeatedly and persistently asked

counsel for the Tobacco Companies, during the course

10

of oral argument, what the differnce in the quantum

or character of the requisite proof at a bifurcated trial

on the issue of conspiracy would be if there were

20,000 plaintiffs or six. Counsel for the Tobacco

Companies could not answer the question then, hor

have they answered it since that time, On July 16,

1976, the Panel's decision was filed reversing the

District Court as “plainly wrong” and as “an abuse of

diseretion.” Judge Craven joined in the decision, and

Judge Bryan dissented,

D, REHEARING EN BANC BY COURT OF

APPEALS FOR THE FOURTH CIRCUIT,

Tobaceo Companies filed a Petition for Rehearing

and Suggestion for Rehearing En Bane on July 30,

1976. Later, the Secretary of Agriculture filed a

similar petition, On December 13, 1976, the Circuit

Court of Appeals granted the petition for Rehearing

En Bane, Oral arguments on rehearing were heard

on February 14, 1977 before Chief Judge

Haynsworth, Senior Judge Bryan, and Judges

Craven, Butzner, Russell, Widener, and Field, Judge

Harrison L. Winter recused himself. Before an

opinion by the en bane court was reached, Judge

Braxton Craven died May 4, 1977, On October 12,

1977, a majority of the Court of Appeals speaking

through Judge Russell, affirmed the District Court's

opinion, Judge Butzner dissented giving as his

grounds those contained in the opinion of Judge

Wyzanski speaking for the Panel,

REASONS FOR GRANTING

WRIT OF CERTIORARI

1. THE “TEST CASE” APPROACH TO ANTI-

11

TRUST CLASS ACTION SUITS ADOPTED BY

THE FOURTH CIRCUIT IGNORES TOLLING OF

THE STATUTE OF LIMITATIONS AND CON.

FLICTS WITH DECISIONS OF THE SUPREME

pal AND DECISIONS OF THE THIRD CIR-

CUIT.

Exposing its lack of expertise in the law of anti-

trust class actions, the Circuit adopts the “Test Case”

procedure in place of the class action (App. A, p. 17a).

The Fourth Circuit's “approach” apparently is that if

these named plaintiffs go forward and prove their

individual claims at trial, thereafter the Tobacco

Companies will be collaterally estopped as against the

absent Tobacco Farmers who may then decide to file

their own suits. (App. A, pp. 17a and 18a, fns, 30 and

82). The problems arising from this ruling are as

follows:

First, this Court has repudiated the practice of

“one-way intervention” in American Pipe and Con-

struction Co, vs, Utah, 414 U.S, 538, 547 (1974), ef.

United Air Lines vs. McDonald, US, , 9758.

Ct, 2464, 53 L. Ed, 2d 423 (1977), The Fourth Circuit

seeks to revive it.

Second, the Fourth Circuit (App. A, p. 17a, fn. 30)

erroneously relies on the “bellwether case” of Katz v,

Carte Blanche Corporation, 496 F, 2d 747, 755-761

(3rd Cir, 1974), cert. denied 419 U.S, 885 (1974). It

fails to recognize that in Katz the defendants express-

ly agreed to one-way intervention, as a consequence

of the delay of class determination, until after trial on

the merits. The Third Circuit recognized that by

reason of defendants’ agreeing to the delay the sta-

tute of limitations was tolled in favor of the class,

Katz, supra at 762. Since the class action status there

12

remained undetermined, the statute of limitations

remained tolled under American Pipe. Here the class

is denied after a rule 54(b) appeal; so the statute will

commence to run against absent Tobacco Farmers

immediately should their appeal! be unsuccessful, and

their damages will be barred forever as it continues

to run. United Air Lines, supra.

Third, the Cireuit Court inexplicably ignores its

previous view of the effect of the statute of limita-

tions in class actions. In a closely related en banc

affirmance of a denial of a civil rights class after a

trial on the merits of the conditional class by the same

District Court Judge Robert F, Chapman, Roman v.

OSD, lic,, 560 ™, 24 1843 (4th Cir, 1976), \'.2 Fourth

Circuit first emphasized that res judicata would not

apply to absent class members. Roman, supra at

1355. Then the Circuit notes as follows:

Prejudice to dismissed parties in such cases

may be in such forms as the running of the

statute of limitations.... Roman v. ESB, Inc.,

supra at 1356,

The Circuit Court in Roman, supra at 1357, des-

cribes the tolling under American Pipe, and finds no

such apparent prejudice to the dismissed class in

Roman, however, because “the alleged discrimina-

tory practices would be continuing in nature.”

Roman, supra at 1356, The Court specifically pointed

out that no such prejudice had been brought to the

Court's attention. Roman, supra at 1356, In contrast,

the Tobacco Farmers brought such prejudice to the

attention of the Circuit Court, both in briefs and in

pointed response to a “Test Case” approach question

from the Court at the rehearing oral argument. The

13

American Pipe decision held that the statute of

limitations is tolled only until the Court “has found

the suit inappropriate for class action status”, supra

at 553. Thereafter, in the case sub judice, it is only

those Tobacco Farmers who make timely motions to

intervene who will be able to avoid the statutory bar

to damages each and every day that passes after final

disposition of this appeal. United Air Lines, Supra.

Fourth, the Circuit Court compounds its statute of

limitations oversight by adopting the dissenting opin-

ion of Judge Aldisert in Bogosian v. Gulf Oil Corp.,

561 F. 2d 434, (8rd Cir. 1977). The Fourth Circuit

does recognize its conflict (App. A, p. 21a fn. 35a)

with the Third Circuit where the majority opinion in

Bogosian, supra, 455-456, had adopted Judge

Wyzanski's approach. Judge Aldisert concluded this

dissent in Bogosian with a statement of his view of

the law as follows:

If the district court saw fit to reconsider its

class action decision at a later point in the liti-

gation, that would be within its power under

Rule 23(c) (1). Bogosian, supra at 462.

The statement cited above not only fails to recognize

the cessation of tolling under American Pipe, supra at

561, but also gives no authority for such reconsidera-

tion, especially after an appeal has affirmed the denial

of certification. United Air Lines, supra. Ifa district

court can always reconsider under Rule 23(c) (1) its

class action denial, then the suit retains its “class

action character” and the tolling of the statute of

limitations should of course continue. For such a rule

of law as now apparently proclaimed by the Fourth

Circuit, it will obviously be necessary for this Court

to overrule both American Pipe, supra at 561, which

14

held that the statute is suspended “only during the

pendency of the motion to strip the suit of its class

action character”, and United Air Lines which ex-

tended tolling only for purposes of appeal.

2. THE“TEST CASE” APPROACH TO ANTI-

TRUST CLASS ACTION SUITS IGNORES TH.

POLICY BEHIND RULE23.

The Circuit Court does violence to the principal

function of a class suit as explained in American Pipe,

supra at 551: viz, the avoidance of a “multiplicity of

activity”. The District Court (App. C, p. 73a) ex-

pressly invited mass intervention which, in the in-

stant case, could lead to some 19,994 individual mo-

tions or individual suits being filed in the District of

South Carolina, each Tobacco Farmer then wanting

to control his own action. This one-way intervention

creates just such a multiplicity of activity. The

Circuit Court thus rejects the efficiency and economy

of litigation which Rule 23 promotes.

It is significant that American Pipe, supra fn. 20 at

551, adopted the decision in Esplin v. Hirschi, 402 F.

2d 94 (10th Cir. 1968). That case stands for the

principal of going forward with a class action to give

effect to the policy of efficiency and judicial economy

behind Rule 23 and to avoid prejudice to absent class

members by the limitations time bar. Frequently

quoted from that opinion is a passage as follows:

It cannot be denied that the resolution of the

class action issue in suits of this type places an

onerous burden on the trial court. But if there

is to be an error made, let it be in favor and not

against the maintenance of the class action, for

it is always subject to modification should later

15

developments during the course of the trial so

require. Esplin v. Hirschi, supra at 99.

In strong policy language, this Court has repeat-

edly proclaimed the policy of encouraging private

enforcement of the antitrust laws. Jllinois Brick and

Hawaii v. Standard Oil Co., 405 U.S. 251 (1972). In

Brunswick Corp. vs. Pueblo Bowl-O-Mat, Inc.,

US. , 50 L. Ed. 2d 701, 710 fn. 10 (1977), this

Court noted that treble damage actions were con-

ceived primarily as a remedy for the “people of the

United States.” This Court has recognized its own

“desire for more vigorous antitrust enforcement” in

Vendo Company v. Lektro-Vend Corp., US.

, 97 S. Ct. 2881 (1977). The dissenting justices in

that case quote from earlier Supreme Court opinions

that private damage remedies are not merely to

provide private relief but also “to serve as well the

high purpose of enforcing antitrust laws”. Vendo,

supra at 1029 fn. 10. They also characterized the

Sherman Act as a “charter of economic liberty”.

Vendo, supra at 1027 fn. 5. Likewise, the antitrust

laws in general and the Sherman Act in particular

were denominated as the “magna carta of free enter-

prise” and said to be as important to economic

freedom as the bill of rizhts is to personal freedom.

Vendo, supra at 1038 fn. 39.

It is time for this Court to put some teeth into its

salutary policy statements, reaffirm its stand on the

importance of Rule 23 to the private enforcement of

the antitrust laws, and make judicial economy work

for the ordinary litigant. This case has already

dragged on for three and one-half years without even

scratching the merits. Printing costs of appeal pa-

pers for both sides alone far exceed what a notice to

the class members would have cost. (They equal the

16

$30,000 figure that concerned the Circuit). Attor-

neys’ fees to the Tobacco Companies and the Govern-

ment easily must exceed a hundred thousand dollars.

This suit by Tobacco Farmers is vested with a

special public interest, particularly so since the Dis-

trict Court has refused to dismiss the Secretary of

Agriculture as a party defendant. It should go

forward in as strong a posture as possible. The

Circuit Court is in conflict with the concluding posi-

tion taken by this Court in Hawaii, supra at 266 that

class actions are “definitely preferable in the anti-

trust area.”

3. THE OPINION OF THE CIRCUIT COURT

CONFLICTS WITH OPINIONS OF THE THIRD,

NINTH AND FIFTH CIRCUITS IN WHICH SIMI-

LAR CLASS ACTION SUITS WERE CERTIFIED

UNDER RULE 23.

It appears on the face of the Circuit Court’s opinion

that there is a conflict between its view of antitrust

class action suits and that of the Third Circuit. In

footnote 35a (App. A, p. 21a) the court observed as

follows:

The panel opinion was approved in the majority

opinion in Bogosian v. Gulf Oil Corp. (8rd Cir.

1977) F. 2d , 46 L.W. 2105. We,

however, for reasons hereafter stated, find the

reasoning in Judge Aldisert’s dissenting opinion

more persuasive.

The majority opinion in Bogosian, speaking through

Chief Judge Spietz, expressly adopted the Panel

opinion written by Judge Wyzanski in this case.

Bogosian, supra 1977-2 Trade Cases 61,568 at page

72,304.

ad

17

(Emphasis added).

Likewise the Ninth Circuit has twice followed the

Panel decision written by Judge Wyzanski. Jn re

Sugar Antitrust Litigation, 1977-2Trade Cases para.

61,669 and 61,634 (9th Cir. 6-7-77 and 8-23-77). Inex-

plicably the Fourth Circuit omits reference to these

cases although the opinion of June 7, 1977 was

brought to the Court’s attention. Two Judges of the

Ninth Circuit first denied mandamus of Judge Boldt

for having certified nation-wide class actions and in

doing so adopted Judge Wyzanski’s opinion. Those

defendants then Jn re Sugar Antitrust Litigation,

told the Ninth Circuit that the Fourth Circuit had

ordered a rehearing. The first two Judges plus a

third Judge refused the mandamus rehearing and

concluded by noting that the Fourth Circuit had not

withdrawn the Panel opinion by Judge Wyzanski and

by implication reafirmed their belief in the validity of

its reasoning.

The Fourth Circuit’s opinion conflicts with the

Fifth Circuit which recently stated in Yoder Bros.

Inc, vs. Calif-Fla., 537 F. 2d 1347 (5th Cir. 1976), cert.

denied, 97 S. Ct. 1108 (1976), as follows:

Particularly, the overriding importance of the

private treble damage action in the antitrust

enforcement scheme should be kept in mind.

Yoder, supra, at 1375. (Emphasis added).

The Fourth Circuit is also in conflict, in this regard,

with the Third and Seventh Circuits, particularly as

seen in the well-known antitrust class action opinion

of Judge Becker in the case of Ungar v. Dunkin’

Donuts of America, Inc., 68 F.R.D. 65 (E.D. Pa. 1975),

reversed by Third Circuit on a narrow point of

antitrust “tying” law, 531 F. 2d 1211 (1976), cert. den.

18

429 U.S. 823 (1976). The Third Circuit did not disturb

Judge Becker's rejection of alternative methods of

adjudication wherein he strongly endorsed the public

interest purpose of Rule 23, and stated as follows:

As we analyze the case in terms, of the Katz

criteria, the alternative methods of adjudication

of each class issue are a multitude of duplica-

tive, expensive and time consuming suits. Con-

versely, the class action approach represents a

fair and efficient accomodation of the interests

of the plaintiffs, the potential class members, as

well as the defendant, which will have the

multifarious claims against it adjudicated in one

lawsuit. While the litigation will be onerous to

this Court and to counsel, the total burden on

the judicial system will be less than in the case

of a series of protracted suits against the defen-

dant. Finally, we believe the public interest will

be served by a class adjudication. As the Court

of Appeals noted in Hackett v. General Host

Corp. (1972 Trade Cases para. 73,800), 455 F. 2d

313,623 (3rd Cir. 1972): ‘The chief policy argu-

ment in favor of a hospitable attitude toward

such class actions is that they tend to reenforce

the regulatory scheme by providing an addition-

al deterrent beyond that afforded either by

public enforcement or by single-party private

enforcement. Viewed in this light the revised

Rule 23 may be seen as an extension by the

Supreme Court, acquiesced in by Congress, of

the deterrent policies of such statutes as Sec. 4

of the Clayton Act.’ Ungar, supra, 149-150.

4. THIS COURT'S DECISION IN ILLINOIS

BRICK MAKES IT CLEAR THAT THE CRUX OF

19

PRIVATE ENFORCEMENT OF THE ANTITRUST

LAWS IS NOT INDIVIDUAL DAMAGE.

The Fourth Circuit says that the “gravaman of the

Complaint is not the conspiracy; the crux of the action

is injury, individual injury.” (App. A, p. 10a). Again,

in fn. 3, the Circuit Court cites Jllinois Brick and says

“that conspiracy to violate is not the crux of the

private action.” (App. A, fn. 37, p. 22a). That is an

egregious misunderstanding of the result reached in

Illinois Brick for reasons given as follows:

First, this Court recognized it was “elevating”

those who deal directly with the violators “to a

preferred pdsition as private attorneys general.” /lli-

nois Brick, supra at 725. The Tobacco Farmers here

were direct sellers to the Tobacco Companies, and as

such are elevated to a preferred position in invoking

Rule 23 in their favor. Especially is this true where

certification has been denied on the slim thread of

lack of an “easy formula” for determining individual

damages. (App. A, pp. 24a and 25a).

Second, Illinois Brick expressly recognized that

those individuals “actually injured” may be denied

recovery and that those who do recover may well

have passed it on and then some, supra at 725. Proof

of individual damage is not the crux of the action now

under /llinois Brick. Damage is assumed thereunder

for those who deal directly with the violators. The

expressed basis for the result behind Jllinois Brick is

to facilitate private enforcement by removing compli-

cated “pass-on” proof of individual damages from the

courtroom. The Tobacco Farmers are elevated and

preferred under the holding in /llinois Brick, and Rule

23 should facilitate, not inhibit, their recovery from

the violators. In contrast to the direct-selling To-

20

bacco Farmers here, the Court for the Northern

District of Texas, Dallas Division, has very recently

dismissed under /llinois Brick, cattle farmers who

were held to be indirect sellers to defendant super-

markets, Jn re Beef Industry Antitrust Litigation,

MDL Docket No, 248,

Third, the Circuit Court cites pre-Jllinois Brick

articles by Milton Handler on the importance of

individual damages, but those are outdated and inap-

plicable, The Circuit clearly has not understood the

result of /Uinois Brick and has ignored the fact that

the Tobacco Farmers as direct sellers are merely on

the other side of /llinois Brick. The result of /ldinois

Brick clearly pushes to the forefront the policy of

Section 4 to deter violators and deprive them of the

fruits of their illegality. Accord, Developments-Class

Actions, 89 Harv. L. Rev. No. 7, 1318, 1536 (1976),

supra at 725. If the class is not certified here, the

Tobacco Companies will forever keep the fruits of

their illegality garnered from the 19,994 absent To-

bacco Farmers whose damage recovery will be bar-

red as the statute of limitations runs.

5, THE INTERTWINING OF LIABILITY WITH

INDIVIDUAL DAMAGES CONFLICTS WITH

OTHER CIRCUITS AND DEFEATS THE PUR.

POSE OF RULE 23 AND PRIVATE ENFORCE.

MENT OF THE ANTITRUST LAWS.

Both the District and Circuit Courts below bought

the “red herring” argument which was adroitly ex-

posed and repudiated by the District Court in Jn re

Master Key Antitrust Litigation, 70 F.R.D. 23, 26 (D.

Conn. 1975), denied review 528 F. 2d 5 (2d Cir. 1975),

where Judge Blumenfeld in footnote 3 said as follows:

21

The defendants argue that there is no liability

without injury, and that a crucial element of the

plaintiffs’ case will, therefore, be proving dam-

age. The argument continues: as the complexi-

ties of showing damage to each plaintiff are in-

volved at the liability stage, it may be seen that

common issues do not predominate even as to

this portion of the case,

I believe this classic defense argument, cf.

‘Eisen IV, Class Actions One Year Later,’ 711

ATRR, Apr. 29, 1975, at B-1, B-4, to be a red

herring, notwithstanding its acceptance by

some courts. See, e.g., In re Transit Co. Tire

Antitrust Litigation, 1975 TRADE CASES 60,

144 (W.D. Mo, 1975), at 65, 418-19. If the plain-

tiffs introduce proof (or if it may be stipulated)

at the liability stage that they bought master

key systems and that the defendants engaged in

a pervasive nationwide course of action that had

the effect of stabilizing prices at supracompeti-

tive levels, the jury may conclude that the

defendants’ conduct caused injury to each plain-

tiff. The amount of that injury may be com-

puted at a separate trial on the damage issues.

In the Southern District of New York, Judge

Frankel has recognized and disparaged this red her-

ring argument in Shelter Realty Corp. v. Allied Main-

tenance Corp., 1977-2 Trade Cases para, 61,691 p.

72,829, and said as follows:

If defendants’ argument were uncritically ac-

cepted, there would be little if any place for the

class action device in the adjudication of anti-

trust claims. Such a result should not be and

22

has not been readily embraced by the various

courts confronted with the same argument,

Judge Chapman's “crucial finding” was that insur-

mountable difficulties would be encountered if the

case was litigated as a class action, (App. C, p. 65a),

determinations would be just as great. Counsel for

damages would “require thousands of individual de.

terminations” to be coupled with “voluminous trans-

action data"; so he was convinced the action was

unmanageable (Cir, App. 188), On this he erred

against rather than in favor of the class action as

directed by Esplin, supra. It is bevildering to read

his comments later on in his opinion where he said the

now absent Tobacco Farmers could intervene as

named plaintiffs, If they all did this the damage

determinations would be just as great. (Counsel for

defendants admitted this in oral argument. (Cir.

App. 79 L. 16-24 and App, 80 L. 1-5). Yet Judge

Chapman said such mass intervention was not an

unrealistic statement in view of the widespread pub-

licity this case has received from its inception. It is

naive to believe, as Judge Chapman suggests (App.

C, p. 73a), that a “sharecropper” might intervene,

because he would have to seek out and retain his own

counsel and then be amenable to all discovery and

other demands of defendants as the litigation pro-

gresses, This is an abuse because it attempts to

rewrite Rule 23; the effect is to require the absent

class members to opt in rather than opt out. See

Stavrides v. Mellon Bank N.A., 69 F.R.D. 424, 437

(W.D, Pa, 1975) where that court certified an anti-

trust class and said:

A class action here is definitely preferable to

a consolidated trial with the prospect of massive

intervention or the separate trial of each of the

23

named plaintiffs’ claims.

Rather than attempting to rewrite Rule 23 as

Judge Chapman has tried to do by requiring the

“opt-in” procedure via mass intervention, the policy

behind Rule 23 begs giving it effect. To require

otherwise puts the Fourth Circuit in conflict with the

Tenth circuit in Esplin v, Hirshi, supra, cited by this

Court in United Air Lines, supra, fn. 14. The Fourth

Circuit was not swayed by the judicial restraint

exercised by the Fifth Circuit where it said in Miller

v. Mackey International, Inc., 452 F. 2d 424, 428 (5th

Cir. 1971) that, “This Court cannot, however, rewrite

the Federal Rules of Civil Procedure and seriously

undermine the class action device.”

This Circuit is in dramatic conflict with the Ninth

Circuit's antitrust opinion in Knutson v. Daily Re-

view, Inc., 548 F, 2d 795, 811, cert. denied 97 S. Ct,

2977 (1977) (9th Cir. 1976) where that Court noted the

close intertwining of fact of damage with causation

but distinguished proof of fact of damage from proof

of amount and made a detailed analysis of this Court's

opinions applicable and concluded with the statement

that: “The assumption merely amounts to a recogni-

tion that a ‘restraint’ in fact restrains.” Knutson,

supra at 812. Story Parchment Co. v. Paterson P.

Paper Co., 282 U.S. 555, 561 (1931). See also Presidio

Golf Club v. National Linen Supply Corp., 1976-2

Trade Cases para, 61,221 (N.D. Cal. 1976), where the

Court considered and answered every question raised

by Tobacco Companies favorable to the position of the

Tobacco Farmers.

Contrary to defendants’ contention, part of

plaintiffs’ prima facie case will not require proof

that overcharges were imposed upon the rental

of each item rented to plaintiffs. ‘(T]he impact

24

element necessitates only an illustration of gen-

eralized injury. In re Sugar Antitrust Litiga-

tion, supra at 36, and cases cited therein, To

hold otherwise would permit sophisticated con-

spirators, who agree to fix prices but cloak the

implementation of such an agreement in com.

plex formulae and price differentials, to run

afoul of the antitrust laws with impunity. Such

a potential hiatus in enforcement of the anti-

trust laws is not to be countenanced, Presidio,

supra, page 70,630,

Similarly, interpreting the law of the Fifth Circuit, is

the recent opinion of Campus Cleaners, Inc. v. Dallas

Tailor and Laundry Supply, i977-2 Trade Cases,

Para, 61,714 (S.D, Tex. 1977),

6. BOTH THE CIRCUIT AND DISTRICT

COURTS RULE THE CLASS ACTION UNMAN.-

AGEABLE FOR LACK OF AN “EASY” DAMAGE

FORMULA YET THEY BOTH APPLIED THE

TRADITIONAL BEFORE AND AFTER ANTI.

TRUST DAMAGE FORMULA TO CALCULATE

EASILY DAMAGES FOR THE PLAINTIFFS.

Both the Circuit and District Courts say no easy or

workable formula for determining individual dam-

ages is shown, (App. A, pp. 24a and 25a; App. C, p.

63a) but each with a stroke of the pen easily caleu-

lates individual damages for the named plaintiffs.

(App. A, p. 18a, fn. 31; App. C, p. 72a and 73a). In-

congruously both then “bootstrap” this position and

argue that there is no “death knell.” Both Courts are

not as naive as they would appear to be. The hidden

reason behind this argument is their desire to save

time by denying justice to almost all of the injured

25

Tobacco Farmers. Judge Chapman noted during oral

argument the existence here of the classic Vefore and

after formula for calculating damages (Cir. App. Vol.

I, p. 87, lines 4-8) after having noted it was claimed to

be ten cents a pound (Cir. App. Vol. I, p. 17 lines 4-7),

The Complaint had alleged damages at ten cents -r

pound times the number of pounds sold (C_— »). I,

p. 3-4 para, 8-9 et seq.), That is the classic wutitrust

damage formula and to deny class certification by

saying there is no “easy formula” belies the real

reason behind the denial which was an obvious capitu-

lation to the “terror tactics” of the Tobacco Com-

panies,

The Tobacco Companies have raised a great dust

cloud of statistics and the spectre of multitudinous

individual damage determinations for the obvious

purpose of convincing the court that neither fact of

damage nor amount of damage can be proved. This,

too, is another red herring. Not only have the

Tobacco Companies failed to refute the applicability

of the classic “Before and After" damage formula

already put forward by Tobacco Farmers, but their

own brief below reinforces plaintiffs’ position. They

conceded that tobacco prices rose dramatically, parti:

cularly during the six week period in 1974 following

the filing of this suit. (Df. Cir. Br., p. 18). When

defendants deposed Robert M. Floyd he testified, “...

I know that within just a few days after this lawsuit

was filed that prices did take a dramatic increase.”

(Cir. App. 808, L, 21-22). It is interesting to note that

the Tobacco Companies have not only paraphrased

Mr. Floyd but have accepted his assertion that there

was in fact a dramatic price increase following within

several days upon the filing of the suit. (Df. Cir. Br.

18). Judge Chapman noted this price increase when

commenting on plaintiffs’ position. “The only thing

26

they got into that they say indicates a conspiracy is

the fact that the prices all went up after the lawsuit |

was brought...” (Cir. App. p. 87, L. 4-6). (Emphasis

added),

Discovery on the merits, which has been barred to

date (Cir. App. Vol I, p. 71, L. 10-15), may additionally

substantiate the before and after arithmetic of the

ten cents per pound allegation. The exact details of

the operation of the conspiracy vis-a-vis the practice

of tied bids with attendant allocations is largely in the

hands of the conspirators. This Court has noted that

in complex antitrust litigation, “...[T]he proof is large-

ly in the hands of the alleged conspirators, and hostile

witnesses thicken the plot..." Poller v. Colunbia

Broadcasting System, Inc., 368 U.S, 464, 473 (1962).

If the “easy formula” lies within the secret knowledge

of the Tobacco Companies, then the class action

should go forward and the violators should not bene-

fit from their secrecy. See Judge Chapman's own

remark about a meeting somewhere up in “the Adir-

ondack Mountains.” (Cir. App. Vol. I, p. 82, L. 14-17).

The policy of this Court should be to discourge anti-

trust conspiracies, not reward them.

7. WHEN THE FOURTH CIRCUIT HOLDS

THERE WOULD HAVE TO BE A DELUGE OF

MINI-JURY TRIALS ON INDIVIDUAL DAM.-

AGES, IT CONFLICTS WITH THE SECOND AND

SEVENTH CIRCUITS AND PRESENTS AN IM-

PORTANT QUESTION TO BE DECIDED BY THIS

COURT.

The Fourth Circuit is in conflict with the Second

Circuit on the issue of individual jury trials for

damages. The Fourth Circuit says that, “...[T]he

court would be swamped by an overwhelming deluge

27

of mini-trials, in which the potential claimants would

be entitled to a jury trial...” (App. A, pp. 13a and 14a).

It should be noted that in its anxiety to justify its

conclusion, the Circuit obviously misapprehends the

appropriate procedures by using the word “claim-

ants”. It certainly must have meant “violators” for

they only would benefit by demanding a jury trial for

each claimant. The Second Circuit has expressed its

view very clearly on this question in Jn Re: Master

Key Antitrust Litigation, 528 F. 2d 5, 15 (2nd Cir.

1975) the Court said as follows:

Appellants’ final argument is that they will be

prejudiced in their defense if the same jury does

not hear both the liability and damage portions

of the action. They also suggest that use of

separate juries in those two trial might infringe

their Seventh Amendment rights. Without in

any way commenting on the validity of these

argumei.ts, we merely note that they are whol-

ly speculative at this point. Judge Blumenfeld

has indicated that one jury may hear both the

liability and damage claims in this action. Cf.

Swofford v. B. & W., Inc., 336 F. 2d 406, 415 (5th

“ur. 1964), cert. denied, 379 U.S. 962 (1965). It

would plainly be premature for us to rule on the

appropriateness of using two juries where only

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

note that bifurcated trials have frequently been

employed with great success, (citations) even in

antitrust suits, see Goldfarb v. Virginia State

Bar, supra. (Emphasis added).

Similarly, the Seventh Circuit has refused to close

the “door of justice.”

To permit the defendants to contest liability

28

with each claimant in a single, separate suit,

would, in many cases give defendants an advan-

tage which would be almost equivalent to clos-

ing the door of justice to all small claimants.

This is what we think the class suit practice was

to prevent. Weeks v. Bareco Oil Co., 125 F. 2d

84, 90 (7th Cir. 1941).

If individual jury trials are an indispensible essential,

then, as a practical matter, antitrust class actions are

dead.

The defendants fight the class so vigorously be-

cause they well know the importance of Rule 23 to

effective enforcement of the antitrust laws. Any

experienced antitrust judge will agree with this.

Judge Wyzanski expressed this view during oral

argument before the Panel. Judge Weinfeld expres-

sed this view even where it applied to a large

corporate class representative in Du Pont Glore

Forgon v. AT&T Co., 69 F.R.D. 481, 487, (S.D.N.Y.

1975), where he said, as follows:

The sheer disparity of economic forces suggest

the death knell of those claims if individual

actions are required.

Judge Weinfeld’s words show how unreasonable

and unfair the approach of Judge Chapman is in his

suggestion that the Tobacco Farmers can maintain

separate actions on their own behalf or intervene in

this suit. (App. C, pp. 72a, 73a). A third possibility

Judge Chapman recognized is that, “...[E]ven if many

small claimants are effectively precluded from as-

serting their claims, this is not a valid reason to

ignore the provisions of Rule 23” (App. C, p. 74a).

29

The anomaly of this statement is apparent when con-

trasted with an earlier observation by Judge

Chapman that, “The present case does not represent

a situation that exists in many class actions where

denial of the class sounded ‘death knell’ to the claims

of the named plaintiffs and the class as a whole.”

(App. C, p. 72a).

A recent comment entitled Antitrust Violations -

Class Actions, exposes the real motive of Tobacco

Companies who, in resisting class certification, reject

the protection of res judicata under Rule 23 (c) (2)B.

*COMMENT: Defendants have apparently not

sought to avail themselves of this theoretical

benefit, and it has been suggested that this

theoretical benefit is illusory to the extent that

claims other than that of the representative

party would be barred by the statute of limita-

tions or be unlikely to be presented if no class

action were maintained. 6 ALR Fed. 19,53.

(Emphasis Added).

The above annotation concludes with the following

comment of particular prescience of what might occur

by reason of Judge Chapman's inviting mass inter-

vention and the Circuit adopting one-way interven-

tion:

“COMMENT: It would appear that in the

above case many of the court’s objections to the

maintenance of a class action constituted a

general attack upon the new procedures estab-

lished by Rule 23 as amended in 1966; that such

objections were not limited to the applicability

of Rule 23 to the particular facts of the instant

case; and that similar objections would be appli-

cable to virtually all class action proceedings

30

while Rule 23 was designed to authorize. In any

event, several months later, after many addi-

tional plaintiffs had joined the action, and after

more than 40 separate antitrust actions involv-

ing the same alleged conspiracy had been trans-

ferred to a different district pursuant to 28 USC

1407, a contrary result was reached in Illinois v.

Harper & Row Publishers, Inc. (1969, DC III.)

301 F. Supp. 484, 6 ALR Fed. 1, supra 12b, 6

ALR Fed. 19, 59-60.

Even here the Fourth Circuit conflicts with the

Fifth and the Eighth Circuits. The Fifth Circuit said

in the case of Jones v. Diamond, 519 F. 2d 1090, 1099,

(5th Cir. 1975) as follows:

Far from being the scourge of modern jurispru-

dence, class actions contribute to its salubrity

and vitality. The modern manifestation of the

class action is an efficacious jurisprudential tool,

whose applicability is neither universal nor

monocentric.

A well respected antitrust Judge in the District

Court in Minnesota considered the manageability of a

large antitrust class under Rule 23 (b) (3) when he

certified a class action in Forbes v. Minneapolis Board

of Realtors, 61 F.R.D. 416, 417 (D. Minn. 1973).

Appeal from the District Court was dismissed. 1973-2

Trade Cases, Para. 74,651, 94,858, (8th Cir. 1973). In

Forbes, Judge Larsen said as follows:

Rather, the Court shall state its broad view that

Rule 23, in particular Rule 23(d), directly im-

poses upon the Court an obligation to proceed

unth flexibility and imagination in structuring

the course of a class action. (Emphasis added).

31

8. THE CIRCUIT COURT REPUDIATED THE

ANTIT®UST TRIAL EXPERIENCE OF JUDGE

WYZANSKIIN FAILING TO FIND AN ABUSE OF

DISCRETION BY A DISTRICT JUDGE WITH LIT-

TLE ANTITRUST CLASS ACTION EXPERIENCE.

Under heading number 3, supra pp. 18-20, it was

pointed out that the Third and Ninth Circuits had

adopted the opinion by Judge Charles E. Wyzanski,

Jr. viz: Bogosian v. Gulf Oil Corp., supra, and In re

Sugar Antitrust Litigation, supra. This conflict is dis-

cussed fully under that heading.

In deferring to the “greater familiarity and expert-

ise” of the District Court (App. A, p. 9a), the Fourth

Circuit rejects the trial court expertise of Judge

Wyzanski, a well recognized trial judge in the field of

antitrust law, and reveals its own lack of expertise in

this area. In footnote 32 (App. A, pp. 18a and 19a) the

Circuit Court denigrates his reliance on the public

policy beamed from Section 5 of the Clayton Act,

(et seq.), and says that collateral estoppel is a more

potent argument in favor of the “test case route”

following denial of class certification. (App. A, 18a

and 19a, fn. 32). This approach indicates a blindness

to the second half of Section 5; ze. 5(a), now 5(i),

which provides for a tolling of the statute of limita-

tions during the pendency of the government action.

The Fourth Circuit also conflicts with the Eighth

Circuit which, like Judge Wyzanski, had seen the

“cross light” of policy beamed from Section 5. Armco

Steel Corp. v. North Dakota, 376 F. 2d 206, 210 (8th

Cir. 1967). The record reveals that Judge Chapman

has tried few, if any, antitrust actions and no cases

where class action notices were sent out. Large

antitrust class actions are indeed certified by well-

32

known experienced antitrust judges around the coun-

try; e.g. Judge Wyzanski, Judge Boldt, Judge Miles

Lord, Judge Weinfeld, et al. Justice under Rule 23

for absent class members should not be defeated by

the view of a Judge, inexperienced in the antitrust

class action field, that the suit is unmanageable (App.

A, p. 90a) or that there is no “easy formula” to

calculate damages. (App. A, p. 24a). Antitrust

violators should not get to keep the “fruits of their

illegality”, JUmois Brick, 52 L. Ed. 2d at 725, simply

because the district where they happen to be sued

assigns the case to a judge with little antitrust

experience. Relief therefrom should be provided

either by reassignment or by guidance from the

Appeals Court as Judge Wyzanski did here for this

inexperienced District Judge.

Judge Wyzanski believed that a court could readily

manage this class action and pointed out the way to

do it was by going forward on the overriding common

core conspiracy issue. It is a reasonable inference

that he sat on the Panel because of his antitrust class

action expertise.

Trial judges in other courts, recognizing the trial

experience of Judge Wyzanski, have relied on the

Panel decision in Windham in other antitrust class

actions. Judge Cannella in Milonas v. Amerada Hess

Corp., 1976-2 Trade Cases para. 61,069 at page 69,820

(S.D.N.Y. 1976) adopted and quoted from Judge

Wyzanski’s opinion for the Panel. Also J udge Bue in

Campus Cleaners, Inc. et al v. Dallas Tailor and

Laundry Supply, supra at pages 72,916 through

72,918, cites with approval the Panel decision.

It has been authoritatively stated by legal scholars

that manageability concerns per se should be reori-

33

ented in affirmative terms “as an obligation imposed

upon courts to look for the least cumbersome class

procedures.” Developments - Class Actions, 89 Harv.

L. Rev. 1318, 1504 (1976). An earlier comment, to the

same effect, is as follows:

As many commentators point out, the short

four-year statute of limitations, 15 U.S.C. §15b

[1970], together with the often protracted na-

ture of antitrust litigation, makes chances of a

treble damage suit being filed after an earlier

one has been completed quite small. See, eg. In

re Master Key Antitrust Litigation, 1973-2

Trade Cases, Para. 74,680 at 94, 979 [D. Conn.

1973]; Berger and Bernstein, supra note 11, at

875. Supreme Court, 1976 Term, 91 Harv. L.

Rev. 70, 224 fn. 26 (Nov. 1977).

Concern with the effect of the resoluteness of a

trial judge to make an antitrust class action manage-

able is reflected in the Hearings before the “Subcom-

mittee on Antitrust and Monopoly” of the United

States Senate Judiciary Committee in J uly and Sep-

tember, 1977. John H. Shenefield, Acting Assistant

Attorney General, Antitrust Division, Department of

Justice testified in response to questions as follows:

MR. SHENEFIELD. I am happy to be able to

report that the office for the Improvement of

the Administration of Justice, under Professor

Meador of the University of Virginia Law

School, is working toward not only rehabilita-

tion or revision of Rule 23 of the class action

procedures, but looking toward the wholesale

revision of the Federal rules to make, as J udge

Bell told you in the oversight hearings, our judi-

cial system more efficient and more responsive.

34

I gather thai Chief Justice Burger is making the

same effort.

I have one additional point that I think might be

made in this connection. There is no substitute

for a judge who is determined to reach justice

and who is determined to do so by the shortest

line between his present position and that end.

A judge in remarkably efficient manner, if he is

determined to do so, can take control of the liti-

gation and make the procedure a manageable

one even under the existing rules. Hearings on

Fair and Effective Enforcement of the Anti-

trust laws, S. 1874, July 21, 22 and September

9, 1977, p. 23.

Judge Frankel of the Southern District of New

York recently took on management of an antitrust

class action in Shelter Realty Corp. v. Allied Mainten-

ance Corp., 1977-2 Trade Cases para. $1,691, p. 72,830

(S.D.N.Y., 1977). With regard to the resoluteness

with which a trial judge should approach the ques-

tions of manageability, he said as follows:

This court joins with the numerous judges and

commentators who have deprecated the idea of

blocking class suits on threshold predictions of

unmanageability. The position was aptly ex-

pressed by Judge Coffin in Yaffe v. Powers, 454

F. 2d 1362, 1365 (1st Cir. 1972):... .

In the same opinion, Judge Frankel cites and quotes

from the Manual for Complex Litigation, Part I,

section 1.43 N. 36 (rev. ed. 1973) as follows:

Dismissal for management reasons, in view of

the public interest involved in class actions,

35

should be the exception rather than the rule.

The same caveat appears in the new revision (1977) of

the Manual as footnote 72 and with even stronger

supporting authority.

During oral argument, Judge Chapman seemed to

be joining the judges and commentators referred to

by Judge Frankel when he said as follows:

Well, I think that’s true, and that’s the reason I

was concerned about manageability. But the

overriding issue about conspiracy or not con-

spiracy runs through all the claims. (Cir. App.

Vol. I, p. 80, L. 6-9; and p. 82, L. 14-25 et seq.).

And in the same vein he stated, “They have got to

prove the conspiracy; and if they prove it, then

manageability is a problem, but it’s a problem that

can be handled.” (Emphasis added). (Cir. App. Vol, I,

p. 83, L. 13-15).

The District Judge was affected by the “terror

tactics” of the Tobacco Companies to the extent that

he shunned proceeding with a class action. The

echoes of the “terror” argument reverberate through

the Circuit Court opinion when it speaks of being

“swamped by an overwhelming deluge of mini-trials”

(App. A, p. 13a-14a); which might “consume ten years

of its time”, (App. A, p. 19a), and (App. C, p. 69a-70a).

There is nothing in the record itself to substantiate

this exaggerated notion of the amount of time which

determination of this class action would require. Nor

does it represent the factual base upon which the

sound discretion of the District Judge might stand.

The possibility of the degeneration of the lawsuit

36 37

into unmanageable mini-trials has been dealt with in counties where tobacco is —_ in .,

articles by legal scholars, one of which sees no danger lina. If I certify your class, don’t you thin a

which the District Judge envisioned. Judge Dupree is immediately going to unload

the whole tobacco case on me, the other three

Antitrust conspiracy actions present a signifi-

cant opportunity to realize the potential of rule

23 because they frequently involve prolonged,

complex trials. The issues involved in such ac-

tions indicate that a class action will rarely fail

to achieve the economies which justify its utili-

zation. The existence and illegality of a conspir-

acy are the core of each class member's claim,

and proof of the conspiracy issue will involve

questions which do not vary among the class

members. Consequently, class litigation of this

issue is not likely to degenerate into separate

trials by each class member. Furthermore, a

class action seems a superior method for litiga-

tion since the bulk of the claims can be concen-

trated in one forum where the court has broad

powers to administer the action. Intelligent

application of the court’s discretion can guaran-

tee an efficient resolution of the claims, and rule

23 provides the means to ensure fair treatment

of the interests of absent class members. Liti-

gating the Antitrust Conspiracy under Amen-

ded Rule 23, 54 Va. L. Rev. No. 2, March 1968,

314, at 326.

states?

MR. ZEIGLER: Judge, I don't think so. (Off

the record.)

THE COURT: As soon as I certify a class, if I

certify a class in this case, he’s going to write to

Judge Murrah, of the Multidistrict Panel, and

say, “Why try the tobacco cases twice” Let's try

them once down in Florence,” and that’s going

to be the end of it for him.

MR. ZEIGLER: I don't know Judge Dupree

that weil, your Honor.

THE COURT: I would do the same thing to

him.

MR. ZEIGLER: Well, do it to him first, your

Honor, and send it up there. Show that we are

only a small segment and it should go to the

larger end, and not have the tail wagging the

dog.

THE COURT: No, he’s going to take the posi-

tion that we have been in it a year and he’s just

got in, so you are not going to have seven

District Judge Chapman revealed his chief reason

counties; you are going to have four states.

for denying the class in a colloquy with counsel for the

Tobacco Farmers during final argument, as follows: MR. ZEIGLER: But, of course, your Honor is

THE COURT: Well, that would be on the assuming that we will prevail in the North

merits. Let me ask you a question. You say you Carolina case, and there are many hazards in

represent a very small geographic area of seven that.

38

THE COURT: You mean you think that if there

was a conspiracy, it only operated in South

Carolina?

MR. ZEIGLER: No, there are other things that

you have to consider; and quite honestly, your

Honor, in all candor, when I initially drew this

complaint and read the Eisen case, I was struck

with the fact that I had to do what I thought I

could manage alone, representing these people;

because, as I read the Eisen case, it had to be a

manageable group, and you had to have suffi-

cient logistical power as counsel to guide this

group. I don’t regard myself as any new Moses

or anything, but it’s like coming up against

Pharaoh and his army when you start some-

thing like this. And I knew these seven coun-

ties; I know these people are a homogeneous

group; I know these tobacco warehouses; and |

know this is a manageable group of people in

this kind of case. And at that moment, I stood

alone; I didn't know what I was getting my

teeth into, frankly, but that was the real reason

we cut off this segment, because my reading of

the Eisen case was that we needed to do that, in

order to do just what your Honor said, to make

it a manageable area, a manageable group with

typical people in this group. Now, with a larger

array of talent mustered for the plaintiffs, I can

see that the other case can be manageable, but I

don't think your Honor should say that the one

reason for not certifying the class here is the

fear that Judge Dupree might dump that large

burden on your Honor. I just don’t think —

THE COURT: I was just saying that you have

always talked about a small, manageable,

39

seven-county area; and you have gone to North

Carolina and brought a suit covering three

other states, and somebody is going to wind up

with the whole case, because I am sure that the

Multidistrict Panel is going to assign it to one

judge and he’s going to handle it all.

The Tobacco Farmers of South Carolina should not

be denied class action relief by Judge Chapman

simply because of speculation as to what some other

District Judge or Multidistrict Panel may “unload” on

him. The Multidistrict Panel exists for judicial econ-

omy and is known to make transfers only to receptive

judges with sufficient expertise to manage the con-

solidated litigation in the public interest of judicial

economy.

CONCLUSION

Not infrequently and not without reason, this

Court is currently being accused of “closing the court-

house doors” to the ordinary citizens of this country.

Petitioners, as ordinary citizens who happen to be

farmers, sharecroppers and tenants, have dared to

challenge some of the most powerful corporations in

this nation. After an exhausting three and one half

years of litigation on the procedural issue which alone

can make their cause viable, they are knocking on the

courthouse door of the highest court in the land. This

Court has the opportunity to show that it means what

it says; the opportunity to strengthen what it recent-

ly proclaimed, that private enforcement of the anti-

trust laws, through effective application of Rule 23, is

like a magna carta for the ordinary citizen liberating

him from economic serfdom. If this petition is not

granted, then the last state of the ordinary man is

40

worse than his first. He is left with a doubly

ambiguous situation. The decisions of this Court in

American Pipe and United Air Lines will have been

effectively reversed by a Court of Appeal and the

Courts of Appeal will give different relief and varying

qualities of justice in administering the same law.

Respectfully submitted.

E. N. Zeigler

P. O. Drawer 150

Florence, S. C. 29503

Of Counsel for Petitioners

Of Counsel:

John A. Cochrane

John E. Thomas

360 Wahasha St.

Saint Paul, Minnesota 55102

H. Page Dees

1114 Third Avenue

Conway, South Carolina 29526

J. Nat Hamrick

P. O. Box 470

Rutherfordton, North Carolina 28139

Robert C. Howison, Jr.

P. O. Box 109

Raleigh, North Carolina 27602

Frank M. Wooten, Jr.

P. O. Box 5063

Greenville, North Carolina 27834

APPENDIX A

UNITED STATES COURT OF APPEALS

For The Fourth Circuit

No. 75-2315

Roy P. Windham, Harden Evans,

Joe Skipper, David Nexsen,

W. A. Turner and Toby Gaskins, Appellants

versus

American Brands, Inc.; Liggett

& Myers, Inc.; R. J. Reynolds,

Inc., (R. J. Reynolds Tobacco Co.);

Brown & Williamson Tobacco

Corporation; The Imperial Tobacco

Company (of Great Britain and

Ireland) Ltd.; Mullins Leaf Tobacco

Company, Inc.; C. W. Walters

Company, Inc.; Export Leaf Tobacco

Company; Loews Theaters, Inc.,

d/b/a Lorillard); Philip Morris,

Inc.; Universal Leaf Tobacco Company,

Inc.; The Austin Campany, Inc.

(Greenville, Tenn.); J. P. Taylor

Company, Inc.; Dibrell Brothers, Inc.;

and Earl L. Butz, Secretary of

Agriculture of the United States, Appellees

Un Rehearing En Banc

(Argued: February 14,1977. Decided: Oct. 11, 1977)

Before Haynsworth, Chief Judge, Bryan, Senior Cir-

cuit Judge, Craven,* Butzner, Russell, Widener and

Hall, Circuit Judges, en banc.

2a

E. N. Ziegler (Page Dees; John A. Cochrane and John

E. Thomas; J. Nat Hamrick; Robert C. Howison, Jr.;

and Frank M. Wooten, Jr. on brief) for Appellants;

Murray Bring (Arnold and Porter on brief) for Appel-

lee Philip Morris Incorporated; (Willcox, Hardee,

Paimer, O'Farrell, McLeod & Buyck on brief) for

Appellee Philip Morris Incorporated; Robinson,

McFadden, Moore & Pope; Davis Polk & Wardwell on

brief) for Appellee R. J. Reynolds Tobacco Company;

Raymond W. Fullerton, Attorney, U. S. Department

of Agriculture (James D. Keast, General Counsel;

Harold Carter, Assistant General Counsel; John C.

Chernauskas, Director Marketing Division; Edward

M. Silverstein, Attorney, Marketing Division, Office

of General Counsel, U. S. Department of Agriculture

on brief) for Appellee Secretary of Agriculture of the

United States; (Mark W. Buyck, United States At-

torney; Wm. Reynolds Williams, Assistant United

States Attorney on brief) for Appellee Secretary of

Agriculture of the United States.

*The opinion in this case was not prepared until

after Judge Craven's death.

RUSSELL, Circuit Judge:

This is an interlocutory appeal, pursuant to Rule 54

(b), Fed. R. Civ. P., from an order denying class

certification under Rule 23 (b) (3), Fed. R. Civ. P., ina

private action brought by certain South Carolina

tobacco growers, who allege that the defendant tobac-

co companies and the Secretary of Agriculture vio-

lated Sections 1 and 2 of the Sherman Anti-trust Act !

1 15 U.S.C. §§ 1 and 2.

3a

during the years 1970 through 1974.° When the

appeal was initially heard, the majority of the panel

thought that the district court should have allowed

the suit to proceed as a class action, at least on the

issue of “violation.” > However, we now conclude that

the denial of class certification was not an abuse of

discretion on the part of the district court. We

therefore affirm.

This action concerns the sale at auction of flue-cured

tobacco on the South Carolina markets. Flue-cured

tobacco is a non-standardized or non-fungible com-

modity. It is raised in the Pee Dee section of South.

Carolina. Under a long esiablished pattern of market-

ing, it is sold, when ready for market, at auctions

conducted at some 36 warehouses in 11 geographic

markets distributed throughout that section. All

tobacco, before being offered for sale at auction, must

be graded by government inspectors for the informa-

tion of both sellers and buyers. These inspectors

classify the tobacco within the rage of 161 grades,

depending upon the location of the leaf on the tobacco

stalk, beginning with the top of the plant. Every

buyer, however, has his own grading system. His

classifications of grades are considerably less than

those used by the government inspectors and vary

from 10 to 32.

All tobacco is grouped, according to government

2 The district court's opinion is reported at 68 F.R.D. 641. For a

comment on this opinion, see Note, The Predominance Requirement:

Antitrust Class Actions and the “Commercially Unique” Product, 27

Syracuse L. Rev. 1257 (1976).

3 The panel majority's opinion, along with Judge Bryan's dissent, is

reported at 539 F. 2d 1016. For a critique of the majority opinion, see

62 Cornell L. Rev. 1 (1977).

4a

grades, in individual piles weighing approximately 200

pounds each, and is offered for sale by an auctioneer at

competitive bidding. The warehouses where the

tobacco is brought, graded and sold are owned by

independent individuals or concerns having no con-

nection with the defendants. The auctioneer at the

sales is employed by the warehouses and likewise has

ne connection with the defendants. Under the estab-

lisued procedure fer bidding, a representative of the

.. arehouse (known as a “starter”) begins the bidding

1s each pile is offered for sale at the warehouse and

the auctioneer proceeds from that point to receive

bids in the normal auction manner from the prospec-

‘ive buyers present at the sale.

The defendants are buyers of flue-cured tobacco.

Some purchase tobacco at all of the warehouses in the

several South Carolina markets; others participate in

the sales at only some of such markets and ware-

houses. There are other buyers than the defendants

who are present and bidding at some or all of the

South Carolina markets.

The prices which prevail at the auctions vary from

day to day and are not uniform, even for tobacco

which may be graded alike by government inspectors.

Normally, these prices increase as the season pro-

gresses. To some extent this is because the early

marketing generally consists of the lower grades

commanding lower prices. As the marketing season

continues, the grades generally increase in quality and

market demand. Because of short supply, the price

range between the lower and higher grades, however,

had narrowed in the 1970's, which is the period

involved in this lawsuit. Thus, in 1970, the average

price on the South Carolina markets was 71.88 cents

per pound; in 1974 it was 103.96 cents.

——

5a

Just as there is a variation in price from market to

market, from day to day, and from governmental

grade to governmental grade, and even among

grades, during a season, so there may be a consider-

able variation in the governmental grades for which

the various buyers compete and in the quantities

purchased by the different buyers from day to day on

the various markets. Some buyers, for instance, do

not bid on certain grades, because their principals do

not use such grades in their processing, or they may

already have purchased as much as they wish of those

grades at that particular market. In such cases, the

buyers either withdraw from the bidding or sharply

curtail their bidding. An illustration of this situation

is the experience at the Pamplico market during the

marketing season of 1973. One of the defendants did

not buy any tobacco at this market in 1973; another

did not buy during a quarter of the sales days at such

market in this period. A further indication of the

fluctuations in purchases at this market is evidenced

by the record of purchases during this same 1973

season by the defendant Reynolds at this market. Its

percentage of purchases, on a daily basis, fluctuated

widely between 1 per cent and 27 per cent of the

sales. It is interesting, too, that the largest buyer at

the market during that season, is not a defendant in

this action.

At the bidding, it was not infrequent that the ware-

houseman would intervene to bid up the price of a

particular pile of tobacco. He would do this to

“stabilize” the market, as one warehouseman phrased

it, that is, to stimulate the bidding. Should a seller,

on the other hand, feel that his tobacco was being sold

too cheaply he could withdraw it from sale and later

reoffer it or put it under the support loan program to

the Stabilization Fund, operated under the authoriza-

6a

tion of §1445, 7 U.S.C. From time to time, the bidding

for a particular pile of tobacco, particularly if of high

quality, would end with a tie-bid from two or more of

the buyers. Occasionally, this tie-bid might be broken

by another buyer, who would intervene with a higher

bid. More often, though, the auctioneer would, in

case the tie was not broken, make a choice between

the bidders and award the tobacco to one of the tie-

bidders. In selecting the tie-bidder to whom to assign

the tobacco, the auctioneer would in many cases favor

the bidder who had bid higher on the lower quality

tobacco at that warehouse. The plaintiffs have dis-

claimed any intention of charging that the auctioneer

participated in any way in any conspiracy to fix prices

or to allot the tobacco according to any plan or

agreement among the buyers; his complete imparti-

ality is conceded. 4

In their complaint seeking both individual and class

relief, the plaintiffs set forth three separate causes of

action under the anti-trust laws: The first asserted a

conspiracy of the defendant companies, “with the

knowledge, consent and acquiesence” of the Secre-

tary of Agriculture to fix prices and rig bids on

flue-cured tobacco at the South Carolina tobacco auc-

tion markets; the second, a conspiracy of the defen-

4 The plaintiffs describe tie-bidding in their brief as follows:

“***Tied bidding is a system by which buyers for the tobacco

companies bid the same price for the tobacco offered on the

market thereby tying the bid, and then receive a portion of the

offerings by allocation.”

This is inaccurate insofar as it suggests that the auctioneer makes

his allocation pursuant to any conspiracy. As we have said, the

record is clear and conceded by the parties that the auctioneer acts

with complete impartiality and without any agreement with any

defendant in choosing the successful bidder in connection with tied

bids.

7a

dant companies, “with the knowledge, consent and

acquiescence” of the Secretary of Agriculture, to

monopolize these same markets by percentage pur-

chase agreements and collusive bidding; and, finally,

in conjuction with the Secretary of Agriculture, a

conspiracy “to fix, control, and restrict” unreasonably

“the amount of flue-cured tobacco which could be sold

per day and per week in the auction warehouses,”

primarily by an inequitable assignment of inspectors

to such warehouses as opposed to those assigned to

warehouses in the Georgia market. To this complaint,

all parties filed answers. In addition, the Secretary of

Agriculture moved to dismiss but the motion was

denied.

After joinder of issues, the plaintiffs moved to

certify the action as a class action under Rule 23.

Before passing on the certification issue, the district

judge permitted full discovery on that issue alone,

presided at the depositions of more than twenty

witnesses heard during that discovery, and examined

extensive documentary evidence produced.> On the

basis of the record thus developed, he filed a compre-

hensive opinion containing what was described in the

5 In Doctor v. Seaboard Coast Line R. Co. (4th Cir. 1976) 540 F. 2d

699, 707, we said, quoting from Huff v. N.D. Cass Company (5th Cir.

1973) 485 F. 2d 710, 713:

“***The court may, and often does, permit discovery relating to

the issues involved in maintainability, [of the action as a class

action] and a preliminary evidentiary hearing may be appropriate

or essential as a part of the vital management role which the trial

judge must exercise in class actions to assure that they are both

meaningful and manageable.”

See, also, Neely v. United States (3d Cir. 1976) 546 F. 2d 1059, 1071:

“***Before a ruling is made denying class action certification on

unmanageability grounds, hard data should be presented to the

district court as to the actual difficulty--or ease-involved in

determining class membership and managing this proceeding.”

8a

panel opinion as “full, precise, and apposite findings.”

In these findings, he concluded that the plaintiffs had

not borne their burden,® that while the standards of

Rule 23 (a) for class certification had been satisfied

the requirements of 23 (b) (3) that “the questions of

law or fact common to the members of the class

predominate over any questions affecting only indivi-

dual members” and that a class action would be

“superior to other available methods for the fair and

efficient adjudication of the controversy” were not

satisfied. Included as a part of his findings under 23

(b) (3), was the finding that, if certified as a class

action, the action would become unmanageable, be-

cause of the complexity of proof of injury and dam-

age. For those reasons, he concluded that the

6 It is well settled in this jurisdiction that the proponent of class

certification has the burden of establishing the right to such certifica-

tion under Rule 23. Doctor v. Seaboard Coast Line R. Co., supra, 540

F. 2d at 706; Carracter v. Morgan (4th Cir. 1973) 491 F. 2d 458, 459,

Poindexter v. Teubert (4th Cir. 1972) 462 F. 2d 1096, 1097.

The panel opinion stated that there was “almost a rebuttable

presumption” in favor of class action treatment for anti-trust suits.

539 F. 2d at 1021. This rule, if adopted, would operate to remove the

burden of establishing right to class action treatment from the

plaintiff in an anti-trust suit and impose it on the defendant or

defendants. This would place anti-trust suits in a preferred position

over even plaintiffs in discrimination cases. Cf., East Texas Motor

Freight System, Inc. v. Rodriguez (1977) US. , pp. 3-4 slip

opinion, U.S.L.W. We do not find this proposed rule supported

by either authority or reason and do not adopt it. For a criticism of

this panel ruling, see, 62 Cornell L. Rev. at 5-7.

7 Rule 23 (b) (3) sets forth four nonexclusive factors to be considered

in making findings on predominance and superiority:

(A) the interest of members of the class in individually controll-

ing the prosecution or defense of separate actions; (B) the extent

and nature of any litigation concerning the controversy already

commenced by or against members of the class; (C) the desirabi-

lity or understandability of concentrating the lit’zation of the

claims in the particular forum; (D) the difficulties likely to be

encountered in the management of a class action.” (Emphasis

added)

9a

standards for certification as set forth in (b) (3) of

Rule 23 could not be met and he denied certification.

Primarily, the decision of the district judge turned

upon a finding of the unmanageability of the action as

a class action considered under the requirements of

Rule 23 (b) (3). In any review of either a grant of

denial of class certification on grounds of manage-

ability under Rule 23 (b) (3), we must begin by

recognizing the firmly established principle that the

issue of manageability of a proposed class action is

always a matter of “justifiable and serious” concern

for the trial court and peculiarly within its discre-

tion.® This is so because the issue is one of fact,

subject to determination by the district court; it is “a

practical problem, and primarily a factual one with

which a district court generally has a greater famili-

arity and expertise than does a court of appeals.

Consequently, it is an area in which the trial court

must of necessity be granted a wide range of discre-

See, also, ibid. 27 Syracuse L. Rev. at 1261, n. 26: “Predominance

and superiority are considered jointly in assessing the manageability

of actions under rule 23 (b) (3).”

8 Link v. Mercedes-Benz of N. Am.., Inc. (3d Cir. 1977) 550 F. 2d 860,

864 (U.S. appeal pending).

See Note, 62 Carnell L. Rev. at 4:

“Whether the individual issues in a given class action are so

extensive as to render the casi too combersome for the court is a

matter that rests in the discretion of the trial judge.”

To that effect: Barnett v. W. T. Grant Company (4th Cir. 1975) 518

F. 2d 543, 547; Cypress v. Newport News General & Nonsectarian

Hosp. Ass'n. (4th cir. 1967) 375 F. 2d 648, 653. And see Frankel, Some

Preliminary Observations Concerning Civil Rule 23, 43 F.R.D. 39

(1967):

“***Tt [Rule 23] is neither a set of prescriptions nor a blue print. It

is rather, a broad outline of general policies and discretions. s**t

confides to the district judges a broad range of discretion.

10a

tion.”* And this is particularly true in actions gov-

erned by Rule 23 (b) (3).!° Accordingly, the plaintiffs

in this appeal have the burden of establishing that the

exercise of discretion by the district judge in denying,

as he did, class certification was clearly wrong.

It must be borne in mind, too, that there are three

essential elements in every private anti-trust action:

They are (1) a violation of the anti-trust law, (2) direct

injury to the plaintiff from such violations, and (3)

damages sustained by the plaintiff.!! It follows,

therefore, that a mere finding of violation does not

result in liability. The statute gives a right of action

only to the extent that one has been “injured in his

business or property by reason of anything forbidden

in the anti-trust laws.” '* The gravamen of the

complaint is not the conspiracy; the crux of the action

is injury, individual injury. 13 While a case may

present a common question of violation, the issues of

injury and damage remain the critical issues in such a

case and are always strictly individualized.14 As

Professor Handler has aptly declared:

9 Link v. Mercedes-Benz of N. Am., Inc., supra, 550 F. 2d at 864.

10 Rule 23, Fed. R. Civ. P., Advisory Committee's Note, 39 F.R.D.

98. 102 (1966).

11 See, e.g., Zenith Corp. v. Hazeltine (1969) 395 U.S. 100, reversed

on other grounds, 401 U.S. 321 (1971); Miller Motors, Inc. v. Ford

Motor Company (4th Cir. 1958) 252 F. 2d 441, 448; and Kline v.

Coldwell, Banker & Co. (9th Cir. 1974) 508 F. 2d 226, 230-1, cert.

denied 421 U.S. 263 (1975).

12 15 U.S.C. § 15; Handler, Twenty-fourth Annual Anti-trust

Review, 72 Col. L. Rev. 1, 37 (1972).

13 Burnham Chemical Co. v. Brax Consolidated (9th Cir. 1948) 170 F.

2d 569, 571, cert. denied 336 U.S. 924 (1949).

14 It has been suggested that the two issues of injury and damage

require a different standard of proof. Thus, Professor Areeda in

lla

“(The treble-damage remedy provided by Clayton

Act § 4, 15 U.S.C. § 15] is . . . limited by its [own]

terms, the only person who may recover damages

is one who had been ‘injured in his business or

property by reason of a violation. The amount of

his recovery, except for costs, is limited to ‘three-

fold the damges by him sustained.’ The language

that Congress used in this statute . . . leaves no

room for awarding damages to some amorphous

‘fluid class’ rather than, or in addition, to one or

more actually injured persons. It likewise does

not permit any person to recover damages sus-

tained not by him, but by someone else who

happens to be a member of such class.” (Italics

author’s) (p. 37).

Generalized or class-wide proof of damages in a pri-

vate anti-trust action would, in addition, contravene

the mandate of the Rules Enabling Act! that the

Rules of Civil Procedure “shall not abridge, enlarge or

modify any substantive right.” It follows that in

determining manageability, the District Court must

have in mind these essential elements of a private

anti-trust action and the proof that may be required to

establish these elements. !®

“Antitrust Violations without Damage Recoveries,” 89 Harv. L. Rev.

1127, 1128 (1976) states that Courts “will insist upon a greater degree

of proof of the fact of injury than would suffice for proof of the

quantum of damages.” (Italics author's).

15 28 U.S.C. § 2072.

16 In addition to Professor Handler's article, see Link v. Mercedes-

Benz of N. Am., Inc., supra, 550 F. 2d at 871-72 (Gibbons, Jr.,

dissenting from refusal to hear interlocutory appeal); Kline v.

Coldwell, Banker & Co., supra, 508 F. 2d at 236, N. 8; In re Hotel

Telephone Charges, (9th Cir. 1974) 500 F. 2d 86, 89-90; and Eisen v.

Carlisle & Jacquelin (2d Cir. 1973) 479 F. 2d 1005, 1112-14 (Eisen III),

vacated on other grounds, 417 U.S. 156 (1974). But see In Re Sugar

Antitrust Litigation (E.D. Pa. 1976) 22 FR Serv2d 634, 662-68 and

Note, Developments in the law - Class Actions, 89 Harv. L. Rev. 1318,

1532-36 (1976).

12a

As we have already stated, the district judge care-

fully and thoughtfully reviewed the facts and con-

. cluded that the issue of anti-trust violation did not

predominate, that class action treatment was not

superior to other available remedies in the case and,

under the required standards of proof of the plaintiffs’

action, class certification would render it unmanage-

able. He referred to the multiplicity of claimants who

might be involved, the complexity of their claims as

they would relate to injury and damages, and the

highly individualized character the proof of injury and

damages would assume, making necessary a mini-trial

in all the individual claims, probably with a separate

jury. He noted the numerous potential parties that

might be injected into the action by class certification.

Parties to whom notice would have to be given if class

certification were allowed would, it seems, be above

20,000. The sheer cost of preparing a list of these

potential parties was estimated at $30,000. The claims

of the parties would involve thousands upon thou-

sands of sales during four separate annual marketing

seasons. Moreover, the claims could not be proved by

any set method of mathematical or formula calculation

but would require individual proof and trial, necessi-

tating the examination of countless invoices, ware-

house records, etc. In some cases, the calculation

might be complicated, the district judge found, by the

need to allow off-sets against the claims.!7 This

problem is also increased not simply by the necessity

o! individual proof and calculation but also by the

variety of claims as asserted by the various plaintiffs

themselves arising out of the several violations al-

leged by the plaintiffs. Some of the plaintiffs complain

only of tie-bids in connection with the court's finding

on price-fixing and would restrict their damage claim

17 That such an offset is appropriate in this connection, see Areeda,

ibid., at 1136.

13a

accordingly. They express no objection to the auction

system as conducted except as it results in a tie-bid,

which they criticize as illegal because the tie-bid

improperly converts, in their opinion, the auction into

an allocation system. Others would predicate a claim

upon the fact that the same government grade of

tobacco may have sold at auction at different prices.

Still others find price-fixing because the prices bid do

not allow properly for increased costs of production.

The monopoly charge, on the other hand, had to do, it

may be assumed, more with the relative quantities

purchased by several defendants at either one market

or at all markets as evidence going to establish an

allocation of the product on some agreed basis. The

third count dealing with an alleged conspiracy to

restrict the number of inspectors at any warehouse,

thereby impeding orderly sales of tobacco as it ma-

tured, would involve proof that, as a result of the

delays in marketing occasioned thereby, the quality of

the grower’s tobacco, which, so far as quality is

concerned, is a perishable commodity, deteriorated,

and the grower was forced to sell his tobacco at

depressed prices because of its reduced grade. There

is, also, some basis for assuming, as did the district

judge, that, in some instances at least, any alleged

conspiracy would relate, not to the over-all market

area but to a single market in the area. In calculating

any potential party’s claim, the court thus would be

required not simply to consider his individual sales on

an individual basis, but to relate those sales to one of

the conspiracy violations alleged by the plaintiffs.

Confronted with this congeries of both separate alle-

gations of conspiracy violations and individualized

claims of injury and damage, all intertwined, the

district judge found that, if he certified this action as a

class action, the court would be swamped by an

overwhelming deluge of mini-trials, in which the po-

l4a

tential claimants would be entitled to a jury trial, and

which would engage the time and attention of the

court for years to come. He gave consideration to

severance of issues but found that the resulting dilem-

ma could not be resolved by any severing of issues. In

view of the overwhelming nature of the individual

claims and their complexity, he found, as we have

said, that the issue of violation did not predominate

nor was a class action a superior remedy in the case. !®

The plaintiffs argue, however, that the district judge

was “plainly wrong” in his denial of certification on the

ground of manageability. In support, they assert that

he rested his findings substantially on the ¢:fficulties

of establishing injury and damages. Such a ground, in

their view, will not justify a denial of class certifica-

tion. There is no question, as they contend, that there

are authorities which at least in result support this

view. 19 On the other hand, there are equally respect-

able authorities in which certification of an anti-trust

action was denied because of the complexity of, and

the difficulties connected with, the proof of individual

18 Cf. Newberry v. Washington Post Co. (D.D.C. 1976) 71 F.R.D.

25,27:

“***From a class point of view, damages are the preponderant

objective of this treble damage jury action. Determination of a

violation or violations of the Sherman Act establishes nothing

automaticaily as far as the measure of individual damage claims is

involved.”

19 Barr v. WUI/TAS, Ine. (S.D. N.Y. 1975) 66 F.R.D. 109; Weit v.

Continental Illinois Nat. Bank & T. Co. of Chicago (N.D. Ill. 1973) 60

F.R.D. 5; Wainwright v. Kraftco Corporaiion (N.D. Ga. 1972) 54

F.R.D. 532; City of Philadelphia v. American Oil Company (D.N.J.

1971) 53 F.R.D. 45; State of Minnesota v. United States Steel

Corporation (D. Minn. 1968) 44 F.R.D. 559. Also see In Re Sugar

Trust Antitrust Litigation, supra, 22 FR Serv2d 634; and In Re

Plywood Antitrust Litigation (E.D. La. 1976) 23 FR Serv2d 303.

15a

injury and damages. 20 This conflict in result among

the decisions seems to reflect more a factual differ-

ence in the cases themselves than a difference over

legal principles. 2! Thus in cases where the fact of

injury and damage breaks down in what may be

characterized as “virtually a mechanical task,” 22 “eap-

20 Plekowski v. Ralston Purina Company (M.D. Ga. 1975) 68 F.R.D.

443, 455, mandamus denied 557 F. 2d 1218 (1977); In Re Transit

Company Tire Antitrust Litigation (W.D. Mo. 1975) 67 F.R.D. 59, 75;

Hettinger v. Glass Specialty Co., Inc. (N.D. IIL 1973) 59 F.R.D. 286,

294 (the .amage and impact issue would create “a plethora of mini

trials”); Gneiting v. Taggares ‘N.D. Ill. 1974) 62 F.R.D. 399, 407;

Chmieleski v. City Products Corp. (W.D. Mo. 1976) 71 F.R.D. 118,

156, (“***in antitrust cases in which damages***are a significant

element in plaintiffs’ class action claims and in which final relief

relates predominantly to damages, certification under Rule 23 (b) (2)

is inappropriate”); Newberry v. Washington Post Co., supra, 71

F.R.D. at 27; Wilensky v. Olympic Airways, S.A. (E.D. Pa. 1977) 73

F.R.D. 473, 477; Trecher v. Manning Implement, Inc. (N.D. Iowa

1976) 73 F.R.D. 554, 563; Boro Hall v. Metropolitan Tobacco Co., Inc.

(E.D. N.Y. 1977) 74 F.R.D. 142, 146.

21 Judge Gibbons in his dissent in Link at 877, states that the

difference in the decisions on this point arise from the fact that a

number of circuits deny class action treatment in those anti-trust

cases “involving a large number of plaintiffs.”

22 Blackie v. Barrack (9th Cir. 1975) 524 F. 2d 891, 905, cert. denied

U.S

See Note, Developments, supra, at 1513 and Practicing Law Insti-

tute, Current Problems in Federal Civil Practice, 491 (1975):

“Where the damages are capable of mathematical or formula

computation, the class action comes rather close to an ideal one

and there is certainly no question of the lack of ‘predominance’ of

the common questions.”

State of Illinois v. Harper & Row Publishers, Inc. (N.D. Ill. 1969) 301

F. Supp. 484 489, aff'd by equally divided court 400 U.S. 348 (1971),

reh. denied 401 U.S. 950, is an excellent illustration of this principle.

In certifying the action for class treatment, the Court said:

“If illegal conspiracies raised prices to noncompetitive levels, the

purchasers were affected in the same manner and to the same

extent.”

l6a

able of mathematical or formula calculation,”23 the

existence of individualized claims for damages seems

to offer no burrier to class certification on grounds of

manageability. 4 On the other hand, where the issue

of damages and impact does not lend itself to such a

mechanical calculation, but requires “separate ‘mini-

trial,{[s]’25 of an overwhelming large number of in-

dividual claims, courts have found that the “stagger-

ing problems of logistics” 26 thus created “make the

damage aspect of [the] case predominate,”*’ and

In Blackie v. Barrack, supra, 524 F. 2d at 905, in finding that liability

predominates over causation or damages, the Court said that “the

process of computing individual damages will be virtually a mechan-

ical task.”

23 Practicing Law Institute, Current Problems in Federal Civil

Practice, 491 (1975).

”4 See cases cited in Note 22.

25 Shaw v Mobile Oil Corporation (D.N.M. 1966) 60 F.R.D. 566, 570.

See, also, Note, 27 Syracuse L. Rev. at 1263-4:

The uniformity of the quality and price of the product is also

likely to have an impact on the manageability of the suit. When

the product is homogeneous in nature, and has an unchanging

price during the life of the alleged conspiracy, aggregate damage

to the class may be easily determined from sales records for the

relevant time period. However, an action involving a commodity

available in different varieties or at fluctuating prices necessitates

examining each sale to determine the defendant's total liability. In

this situation a serious manageability problem arises: the court is

likely to devote more time to individual damage issues than to

what was believed to be the dominant issue, the existence of a

conspiracy. To the extent that these problems arise in anti-trust

or other class actions, they render the trial ‘a less fair and efficient

method of adjudication than other available techniques,’ such as

the consolidation of individual actions by plaintiffs injured under

identical circumstances.”

26 Ralston v. Volkswagenwerk, A.G. (W.D.Mo. 1973) 61 F.R.D.

427,433.

27 Trecker v. Manning Implement, Inc., supra, 73 F.R.D. at 563;

Shaw v. Mobile Oil Co., supra, 60 F.R.D. at 570.

ee ee

Ree me ——

17a

render the case unmanageable as a class action. 28

And this latter view accords with the purpose of Rule

23 which, was to “achieve economies of time, effort,

and expense, and promote uniformity of decision as to

persons similarly situated, without sacrificing proce-

dural fairness or bringing about other undesirable re-

sults.” 29 The district court must accordingly consider

in every case the effect of possible class certification

on the judicial system itself. If the effect of class

certification is to bring in thousands of other possible

claimants, all of whom may assert individualized

claims requiring mini-trials with juries, a procedure

which “will be tremendously time-consuming and

costly,” the justification of class certification is absent

especially so if the individual plaintiffs are financially

able to prosecute individual actions, Yanai v. Frito

Lay, Inc. (N.D. Ohio 1973) 61 F.R.D. 349, 353, or, if a

“test case” approach will likely accomplish the same

result under principles of collateral estoppel without

involving the court in a morass of individual claims

that will bog the court system down interminably.

Gelman v. Westinghouse Electric Corp. (W.D. Pa.

1976) 73 F.R.D. 60, 68-9;39 Link v. Mercedes Benz,

28 See cases listed in Note 20.

29 The Advisory Committee's Note, 39 F.R.D. 69 at 102-3.

30 The bellwether case in this regard is Katz v. Carte Blanche

Corporation (3d Cir. 1974) 496 F. 2d 747, 755-761, cert. denied 419

U.S. 885 (1974). This case was criticized in a case note in 88 Harv. L.

Rev. 825, Primarily becasue the author felt that collateral estoppel is

a doctrine which can only be asserted defensively, never offensively.

See p. 835. The same point is also made in the note on this case in 21

Wayne L. Rev. 1195. It is true that in Blonder-Tongue v. University

Foundation (1971) 402 U.S. 313, 330, the Court avoided deciding

whether the collateral estoppel could be asserted offensively but the

trend of modern decisions is clearly in the direction of finding that the

principle may be used offensively and defensively. Gerrard v. Larsen

(8th Cir. 1975) 517 F. 2d 1127, 1130, n. 2; Zdanok v. Glidden Company,

ete. (2d Cir 1964) 327 F. 2d 944, 955, cert. denied 368 U.S. 814 (1961);

18a

supra 550 F. 2d at 869 (Van Dusen, dissenting).

Several of the plaintiffs testified categorically that,

whether this action was certified as a class action,

they were able financially to continue the suit and

intended to do so. Their recovery, if their action is

successful, is under the district judge's findings, suffi-

cient to induce them to persevere in the prosecution

of their action, whether class certification is granted

or not. 3! There was accordingly no “death-knell”

justification for class action certification. Indeed, it

can well be argued that the individual actions, regard-

ed as test cases, would be in this situation a superior

procedure to a class action. 2

Lange v. Heglund (W.D. Wash. 1974) 391 F. Supp. 128, 130. There

are, it is true, circumstances where the principle will not be applied

either offensively or defensively. Thus, if in the earlier trial the party

against whom it is asserted was denied a jury trial, that denial of his

Seventh Amendment right makes it improper to permit the doctrine

to operate. McCook v. Standard Oil Company of California (C.D. Cal.

1975) 393 F. Supp. 256, 258. In this case, however, there is to be a

jury trial and this exception will not apply.

31 The panel opinion suggests that the recovery by an individual

plaintiff would be insufficient to induce him to persevere in an anti-

trust suit absent certification. 539 F. 2d at 1021, n. 1. There were,

however, six plaintiffs whose average individual claims would be

$16,000. When trebled their award (6 x $16,000), if they prevail,

would be about $300,000, to which should be added an allowance of

attorney's fees. That cannot be likened to the plaintiffs in Eisen,

where the individual claim would be only a few dollars; the plaintiffs

in this case would be entitled, if they won, to a substantial verdict.

Class action cannot, therefore, be rationalized on any theory that

unless granted, the action will die nor have the plaintiffs in their

testimony so indicated - in fact, their testimony is exactly to the

contrary.

32 It is obvious that the common law collateral estoppel rule if it is

applied offensively on the basis of a judgment in a private test anti-

trust suit, is far more advantageous to a party injured by an

anti-trust violation than the prima facie rule of evidence created by

§5, on which the panel opinion sets so much store. §5 merely creates

at best a rebuttable presumption; the rule of collateral estoppel

operates as res judicata of the issues decided. If §5 is to be regarded

19a

The district court concluded, as we have seen, that in

this case computation of damages would be a complex,

highly individualized task, imposing an intolerable

burden on the judicial system. As we have already

indicated, he went to considerable pains to illustrate

and pinpoint the difficulties that would be encoun-

tered and the reasons no mechanical er simple mathe-

matical method of calculation was feasible. In view of

these findings, which are clearly supported by the

record, we think that there is a substantial basis for

the district court’s conclusion that there appears to be

no workable formula to aid in computing the damages

of each member of the plaintiff class and that the

action was unmanageable as a class action.33 The

district court estimated--conservatively, we think--

that, in the absence of « practical damage formula,

determination of individual damages in this case could

consume ten years of its time. The propriety of

placing such a burden on already strained judicial

resources seems unjustified. 34

as an argument for severance, to which we refer infra, collateral

estoppel is a far more potent argument against severance and in

favor of the test case route, which would mean the denial of class

certification. And this would appear particularly so in this case

where the plaintiffs, fully competent financially to maintain their

individual actions, would undoubtedly find it difficult to finance the

preparation 6T a list of the possible class members and the mailing of

notices to such possible members.

33 The author in 27 Syracuse L. Rev., while finding some fault with

the decision of the district court in this case, did conclude (p. 1284):

“In Windham the differing circumstances under which each

claimant was injured made it clear that the action as it stood was

not manageable.”

34 See, Schaffner v. Chemical Bank (S.D. N.Y. 1972) 339 F. Supp.

329, where the Court said at p. 337:

“, .. the notion of utilizing a jury trial in a class suit containing the

20a

Plaintiffs answer by declaring that they “expect” to

develop a formula, which will simplify the computa-

tion of individual damages, at some later point in the

litigation. Concededly, a district court should not

decline to certify a class because it fears that insur-

mountable problems may later appear. 9° But where

the court finds, on the basis of substantial evidence as

here, that there are serious problems now appearing,

it should not certify the class merely on the assurance

of counsel that some solution wil] be found. See In re

Hotel Telephone Charges, supra, 500 F. 2d at 90,

where the Court said:

varied problems certain to abound herein, is enough to chil! any

further discussion of the required superiority of a class claim over

other availabie m-thods for the faiz and efficient adjudication of

the controversy. Such a trial, whether one trial or the multiple

minitrials probably required, would withdraw from all other

usefulness for years to come the federal judicial personne! invol-

ved. Where one could muster jurors willing to devote themselves

so indefinitely in time from their accustomed tasks, is puzzling.

And one might relevantly ask - what public interest would be

served by devoting the public's facilities in this way and what just

purpose requires such a colossal marshalling of judicial resources

and their supporting personnel?”

Kline v. Coldwell, Banker & Co., supra, 508 F’. 2d at 238 (Duniway, J.,

concurring):

“Perhaps more important is the [if certified as a class action]

practical effect of such a suit as this. The burden that it can

impose on the court-discovery, pre-trial, notice to the classes, etc.,

and on a jury, if one is ever empanelled, is staggering. It is incon-

ceivable to me that such a case can ever be tried unless the court is

willing to deprive each defendant of his undoubted right to have

his claimed liability proved, not by presumptions or assumptions,

but by facts, with the burden of proof upon the plaintiff or

plaintiffs, and to offer evidence in his defense. The same applies, if

he is found liable, to proof of the damage of each plaintiff.”

35 Blackie v. Barrack, supra (524 F. 2d at 901).

2la

“The District Court in this case has relied on the

‘imagination’ of appellees’ counsel to provide solu-

tions that will, at some point in the future, prevent

these individual issues from splintering the action

into thousands of individual trials requiring years

to litigate. Thus far the appellees have not been

able to demonstrate to our satisfaction that the

individual questions will not overwhelm the com-

mon questions ... The issues raised by the apparent

existence of numerous individual questions must

be resolved before a class is certified, even if

certification is conditional.” (Emphasis added]

Plaintiffs suggest another procedure which they

contend would obviate the necessity of individualized

proof of the fact and amount of damages. They argue

that any difficulties created by that problem could be

minimized by the simple expedient of bifurcating the

trial, trying first the common issue of “liability” and

then (if liability is found) trying the issue of damages

either in one mass trial or in a series of mini-trials.

The panel opinion would refine ihe concept of liability

into the two elements of violation and injury or

causation, and would find that the district Judge was

clearly wrong in not severing the issue of violation

from the other issues in the case and directing a

bifurcated trial.35a It viewed the violation issue as

presenting a considerably simpler issue than the

other issues in the case and for that reason concluded

that a class action would “not present unusual com-

plexities at least so long as only issues of violation are

before the tribunal.” This view would give no con-

sideration to the fact that generally “‘in a private

35a The panel opinion was approved in the majority opinion in

Bogosian v. Gulf Oil Corp. (3d Cir. 1977) F, 2d , 46 L.W. 2105.

We, however, for reasons hereafter stated, find the reasoning in

Judge Aldisert’s dissenting opinion more persuasive.

22a

antitrust sult | ere is no neat dividing line between

the issues of liability and damages” and because ot the

difficulty of establishing this “‘dividing line” any

severance of issues in such a case “must be ap-

proached with trepidation.” ® In this case, there is

such intertwining of the two issues of liability and

damages but the panel opinion dismisses such fact

with the observation that the “intertwined matters

can be appropriately limited by the common sense,

skill, and discretion of the trial judge.” It is difficult to

understand, though, how a trial judge, however skill-

ful, could deny or limit a litigant’s right to offer rele-

vant “intertwined matter,” whether addressed to the

issue of violation or that of injury and damage. Even

more important: a trial judge cannot, in determining

the manageability of a proposed class action, look

exclusively to only one aspect of the case as the panel

opinion seeks to do; he can and must look at the case

as a whole and, as we have seen, consider proof of

damages as well as other issues in the case.37 In this

eee

36 Response of Carolina, Inc. v. Leasco Response, Inc. (5th Cir. 1976)

537 F. 2d 1307, 1324.

37 This suggestion apparently gives predominance to the issue of

anti-trust violation over the issues of injury and damages in a private

anti-trust suit. This, however, is contrary to the rule, already cited

and repeated in case after case, that conspiracy to violate is not the

crux of the private action. Cf., also, Dlinois Brick Co. v. Illinois (1977)

US. , 45 U.S.L.W. 4611. Even more serious, the suggested

rule, if adopted, would in effect amount to an automatic severance of

issues and class certification, whenever asked, in every private

anti-trust action. This necessarily follows from the reasoning offered

in support of the proposed rule, despite the panel opinion’s guarded

concession that there may be cases where the proposed rule would

not apply. Moreover, the proposed rule poses serious problems of

standing, which Judge Gibbons, who was inclined to favor the

proposed rule, pointed out in his dissent in Link v. Mercedes-Benz,

supra 550 F. 2d at 876-8. That the difficulty foreseen by Judge

Gibbons is real, see Sherman, Antitrust Standing: From Loeb to

Malamud, 51 N.Y.U. L. Rev. 377, 400-401 (1976); Note, Private

Plaintiff's Standing Under Clayton Act Section 4: Clothing the

23a

case, it is obvious that no severance of issues could

remove or even alleviate the overwhelming burden of

damage mini-trials that class certification would im-

pose on the judicial resources in this case.*> Whether

dealt with in a unitary trial or in a severed trial, the

problem of proof of the individual claims and of the

essential elements of individual injury and damage

will remain and severance could only postpone the

Naked Emperor, 7 Seton Hall L. Rev. 588, 601-604 (1976); Note, 89

Harv. L. Rev. 1247 at 1256:

“***As the Supreme Court opinions on this issue demonstrate,

however, the public interest [in a private antitrust action] is to be

served indirectly by the private party's seeking redress for

injuries to himself, rather than by deputizing him as a public

representative. While the Court has consistently taken a broad

view toward permitting a private party to receive adequate relie!

for his own harm, it has never suggested expanding the scope o:

relief beyond these private needs.”

Accordingly standing has always been assessed on the basis of the

plaintiffs right to recover, that is, on both liability and injury.

Taken to its extreme, the rule, as proposed in the pane! opinion

would in effect make class certification well nigh automatic. Taken to

its extreme, a strict application of standing in determining right to

severance, on the other hand, would result in an almost uniform rule

against class certification. We recognize that there is some merit in

both views but we believe that neither should be regarded as an

absolute rule but the facts in each case should be carefully weighed

and, after considering all aspects of the case, including the issues of

injury and damages as well as of violation, the determination of class

certification vel non should be made. And this decision should be

made by the district judge, who has the greatest familiarity with the

complexities of the case. His determination should only be reversed

for clear error. This is the principle we apply in deciding this case

and it is the one we believe to be the better practice to follow.

38 Handler, The Shift from Substantive to Procedural Innovations

in Antitrust Suits in the Twenty-Third Annual Antitrust Review, 71

Col. L. Rev. 1, 8, 9 (1971) [hereinafter cited as Handler, “Twenty-

third Review”).

24a

difficulty of such proof. 39 We think, therefore, it is

well within the “wide range of discretion” granted the

trial court to find that in this case bifurcation would

not make the case manageable or warrant class

certification.

Nor, as the district judge held, can the difficulties

inherent in proving individual damages be avoided by

the use of a form of “fluid recovery.” Such a method of

computing damages in a class action has been appro-

priately branded as “illegal, inadmissible as a solution

of the manageability problems of class actions and

wholly improper.” 49 The district court found, as did

Judge Gessel in Newberry v. Washington Post Co.,

supra, 71 F.R.D. at 27, that “[dJamage proof [in this

case] would be unmanageable if the case proceeds as

a class action,” because there is no “easy formula” by

39 See, Handler, Twenty-third Review, supre, 71 Col. L. Rev. at 8:

“True, the facts may permit the court to sever the issue of liability

and thus postpone discovery and trial on damages; but if the case

is to be litigated, this problem will have to be faced eventually and

the load the court will have to carry will not be reduced by the

delay.”

And see In re Sugar Antitrust Litigation, supra, 22 F.R. Serv.2d at

663:

“Bifurcation merely delays resolution of the problem until a later

date. Hence, if actual individual damages need be proved, and if

such determinations are so predominating that ponderous proof

problems of individual damages would tax a court's resources to

an intolerable degree, a court would be justified in dealing with

the damages enigma at the out set in making its determination as

to whether a class action should be certified.”

See, also Link v. Mercedes-Benz of N. Am., Inc., supra 550 at 877; and

Practicing Law Institute, Current Problems in Federal Civil Practice,

491-94 (1975).

40 Eisen v. Carlisle and Jacquelin, supra, 479 F. 2d at 1018.

25a

which individual proof of damages may be avoided

and that it was “undesirable and impractical for a

jury to consider the issue of damages in a separate

proceeding independent from the proceeding on liabi-

lity.” We cannot say that a similar finding in this case

was clearly wrong. The order of the district court

denying class certification is acordingly affirmed.

BUTZNER, Circuit Judge, dissenting:

I dissent for the reasons stated in the opinion Judge

Wyzanski wrote for the panel in Windham v. Amer-

ican Brands, Inc., 539 F. 2d 1016 (4th Cir. 1976).

41 In the testimony taken, there were indications that many of the

tobacco growers in South Carolina were unsympathetic to this action.

The South Carolina boards of both the Grange and the American

Farm Bureau branches in South Carolina had passed resolutions

which appear to have expressed their disfavor of the action. We,

however, have given no weight to these circumstances in our

decision.

26a

APPENDIX B

UNITED STATES COURT OF APPEALS

For the Fourth Circuit

No. 75-2315

Roy P. Windham, et. al., on

hehalf of themselves and all

others similarly Appellants,

versus

American Brands, Inc., et. al., Appellees,

(Argued May 6, 1976 Decided July 16, 1976)

Before Bryan, Senior Circuit Judge, Craven, Circuit

Judge, and Wyzanski, Senior District Judge.*

E. N. Zeigler (Page Dees, John A. Cochrane, John E.

Thomas, J. Nat Amrick, Robert C. Howison, Jr. and

Frank M. Wooten, Jr. on brief) for Appellants;

Murray H. Bring, Attorney, Philip Morris Inc.

(Willicox, Hardee, Palmer, O'Farrell, McLeod &

Buyck and Arnold & Porter on brief) for Philip Morris

Inc., Appellees; William Reynolds Williams, Assist-

ant United States Attorney and Edward M.

Silverstein, Attorney, Marketing Division, Office of

General Counsel, U. S. Dept. of Agriculture, (Mark

W. Buyck, United States Attorney, James D. Keast,

General Counsel J. Michael Kelly, Assistant General

Counsel, Harold Carter, Assistant Genera! Counsel,

John C. Chernauskas, Director, Marketing Division

on brief) for Appellee.

*Sitting by designation.

27a

WYZANSKI, Senior District Judge*.

The issue before us is whether in this private action

alleging violation of Sections 1 and 2 of the Sherman

Anti-Trust Act, 15 U.S.C. §§ 1 and 2, the District

Court abused its discretion in denying, with respect to

all aspects of the case, class action certification under

Fed. R. Civ. P. 23 (b) (3).

July 29, 1974, six named plaintiffs, growers of flue-

cured tobacco in South Carolina, complained that

seven defendant tobacco companies and the Secretary

of Agriculture of the United States conspired, in

violation of the Sherman Act, (1) to rig bids and fix

prices to force, at prices lower than would have been

the situation in a free market, the sale of tobacco by

tobacco farmers, including owners of land with tobac-

co allotments, lessees of allotments, sharecroppers,

and tenants, (2) to monopolize the warehouse auction

markets for flue-cured tobacco by parallel bidding,

collusive bidding, and percentage purchase agree-

ments, and (3) to restrict arbitrarily the amount of

flue-cured tobacco which could be sold per day and per

week in the auction warehouses and to apportion the

available government tobacco inspectors inequitably

between South Carolina and Georgia.

October 17, 1974, the District Court, responding to a

class action allegation in the complaint, issued a rule

to show cause why an order should not be entered

determining, pursuant to Fed. R. Civ. P. 23 (a) and (b)

(3), that this action be maintained on behalf of a

purported class of more than 20,000 South Carolinians

who from 1970 through 1974 sold, or had an economic

interest in, the sale of flue-cured tobacco in South

Carolina, and whose total claims aggregated, accord-

ing to plaintiffs, more than $335,000,000.

28a

The District Judge permitted the parties to engage

in full discovery on the class action issues, presided at

the deposition of more than 20 witnesses, admitted

extensive documentary materials, and on September

26, 1975 filed a 29-page opinion containing full, precise,

and apposite findings which, after careful analysis, led

him to conclude that the case should not proceed as a

class action because individual issues would predom-

inate over common ones and because the case would

be unmanageable as a class action.

Mindful of the weight which Fed. R. Civ. P. 52 (a)

demands be accorded to a District Court's findings

“unless clearly erroneous,” we first summarize what

District Judge Chapman Found on the basis of sub-

stantial evidence.

Flue-cured tobacco is a non-standardized product

grown in South Carolina, Alabama, Florida, Georgia,

North Carolina, and Virginia. it is sold almost exclu-

sively at auctions at independent warehouses in each

of those states except Alabama. it is sold in individual

piles weighing about 200 pounds each.

In South Carolina there were at the time of the trial

36 tobacco warehouses in 11 different geographic

markets.. The number of warehouses conducting

auctions in each geographic market varied from 2 to 7.

Most of the flue-cured tobacco grown in Sout Carolina

was sold there, but South Carolina growers also had

sold large amounts of tobacco in other states.

The quality of tobacco is affected by moisture con-

tent, sand content, degree of ripeness, spoilage,

disease, method of picking, method of curing, and

other factors. The quality may reflect the skill of the

farmer, the area of production, and other aspects of

29a

production. Quality obviously affects price. Each

tobacco company has its own grading system, and, in

addition, the government has a system of 161 grades,

which it uses in estz lishing levels of price support.

Other findings of the judge relate to topics such as

whether defendants increased their bids on low quali-

ty tobacco to affect prices on high quality tobacco,

whether tobacco producers when dissatisfied with

market bids sell to government-sponsored stabiliza-

tion programs, and whether despite an alleged con-

spiracy covering all 11 markets some defendants

bought at only some of those markets, or did not make

always the same percentage of th ‘r purchases in the

same markets, or paid for the same grade of tobacco

different prices at differnet times in different places.

The judge, in the light of Eisen v. Carlisle and

Jacquelin, 479 F. 2d 1005 (C.A. 2,1973), vacated on

other grounds, 417 U.S. 156 (1974) (which held that it

would be improper to allow a class as such to have a

“fluid recovery” assessing gross damages to the class

as a whole), also made findings that relate to the vast

amount of evidence which probably would be required

to prove the fact of impact of the alleged conspiracy

upon each of the 20,000 proposed members of the

class, and the facts with respect to the specific damage

each of the 20,000 had individually sustained. But the

findings do not address the question whether, if the

sole issue before a court and jury were the existence

of alleged conspiracies which constituted violations of

the anti-trust laws, there would be a substantial

difference in the quantum or character of the requisite

proof if the plaintiffs included all 20,000 in a class

action or only the 6 named plaintiffs.

The findings indicate that there may be among the

30a

potential members of the proposed class some, as the

District Judges denominated them, “antagonisms” of

interest, in the sense that, because of the quality of

their tobacco, or their roles in the market, different

individuals may have been differently affected by the

alleged conspiracies. Obviously, however, these sup-

posed antagonisms would not prove that defendants

did or did not conspire; they would bear chiefly upon

the measure of the impacts of the conspiracies if any

existed.

Moreover, with respect to impact and damages, the

trial court took note of other problems. Plaintiffs had

offered no proof that there is, and the judge did not

believe that there was, any theoretical or practical

over-all workable formula or method to aid in the

computation of damages sustained by different indivi-

duals. The judge added that no expert could qualify to

give opinions concerning the competitive prices of 161

different grades of flue-cured tobacco on each sales

day, at each warehouse for each of the four years

embraced by the complaint. In short, each of the

20,000 probable members of the class, in order to

secure a favorable judgment for him, would require

different, and perhaps voluminous, documentary evi-

dence with respect to his individual transactions.

Against these findings of fact and comments (nereon,

and after concluding that the complaint stated claims

within the jurisdiction of the court, upon which relief

could be garanted, and after considering plaintiffs’

suggestion “in briefs and oral argument...that it would

be helpful to try the issue of liability separate from the

issue of damages,” the District Judge addressed him-

self to the applicability to this case of Fed. R. Civ. P.

23 (a) and (b) (3), the text of which provides:

3la

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

members of a class may sue or be sued as represen-

tative parties on behalf of all only if (1) the class is

so numerous that joinder of all members ‘s imprac-

ticable, (2) there are questions of !aw or fact

common to the class, (3) The claims or defenses of

the representati\e parties are typical of the claims

or defenses of the class, and (4) the representative

parties will fairly and adequately protect the inter-

ests of the class.

(b) Class Actions Maintainable. An action may be

maintained as a class action if the prerequisites of

subdivision (a) are satisfied, and in addition:

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

common to the members of the class predominate

over any questions affecting only individual mem-

bers, and that a class action is superior to other

available methods for the fair and efficient adjudi-

cation of the controversy. The matters pertinent

to the findings include: (A) the interest of mem-

bers of the class in individually controlling the

prosecution or defense of separate actions; (B) the

extent and nature of any litigation concerning the

controversy already commenced by or against

members of the class; (C) the desirability or unde-

sirability 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.

With respect to the just quoted Rule 23 (a), the

District Court decided that (1) the proposed class was

not necessarily (apart from other factors) so numer-

ous that joinder of all members would be impractical,

(2)there are questions of law and fact common to the

32a

proposed class, (3) the claims of the representative

parties are typical of the claims of the proposed class,

and (4) the representative parties would fairly and

adequately protect the interests of the proposed class.

Hence, the District Court held that the prerequisites

of Rule 23 (a) had been satisfied.

But the Cour: :hen held that plaintiffs had failed to

meet the rejuirements of Rule 23 (b) (3) that “the

questions of law or fac. common to the members of the

class predominate over any questions affecting only

individual members, and that a class action is superior

to other available methods for the fair and effective

adjudication of the controversy.” In so holding, the

Court gave consideration to what it called the “possi-

bility of bifurcating this action, that is, planning to try

the issue of liability separate from the issue of

damages.” Despite that possibility, the judge con-

cluded that, largely because of the different impacts

upon the 20,000 individuals and the elaborate docu-

mentary proof that would be needed to trace their

transactions and their possible individual damages,

“the problems of manageability” were such that plain-

tiffs’ claim of a class action should be denied. There-

upon, the Court ordered dismissal of the complaint 2s

to all others than the 6 named plaintiffs and entered a

final judgment against such others.

Pursuant to Fed. R. Civ. P. 54 (b), the District Court

certified that final judgment to this Court.

We accept such certification as appropriate. Katz v.

Carte Blanche Corp., 496 F. 2d 747 (C.A. 3, 1974);

Hayes v. Sealtest Foods, 396 F. 2d 448 (C.A. 3, 1968).

See 9 J. Moore Federal Practice, para. 110.13 [9], at p.

186 (2d ed. 1975).

——— i i oo

FE I OF on ene ©

33a

On the merits, we approve of the District Judge's

findings and conclusions that plaintiffs satisfied the

prerequisites of Fed. R. Civ. P. 23 (a), as an appro-

priate exercise of his discretion. What troubles us is

the lower court’s application of Fed. R. Civ. P. 23 (b)

(3). Of course, we are mindful that in this case we are

not to approach the matter de novo, but to defer to the

District Judge's exercise of discretion, unless we are

convinced that he was plainly wrong. Barnett v. W. T.

Grant Co., 518 F. 2d 543, 547 (C.A. 4, 1975); Cypress v.

Newport News General & Nonsectarian Hosp. Ass'n,

375 F. 2d 648,653 (C.A. 4, 1967); Clark v. Watchie, 513

F. 2d 994, 1000 (C.A. 9, 1975), cert. denied, 423 U.S.

.841 (1975); Price v. Lucky Stores, Inc., 501 F. 2d 1177,

1179 (C.A. 9, 1974); Wilcox v. Commerce Bank, 474 F.

2d 336, 342, 347 (C.A. 10,1973); New York v. Interna-

tional Pipe & Ceramics Corp., 410 F. 2d 295, 298 (C.A.

2, 1960).

The District Court was fully aware that, among their

suggestions, plaintiffs sough: to have that Court

segregate the issues as to whether defendants had

conspired in the three ways alleged in the complaint,

from the issues of which persons were caused to suffer

injury from one or more of the conspiracies, and what

damages, if any, each of those persons individually

suffered.

Unfortunately, because of the plaintiffs’ counsel and

the District Court's use of the unnecessarily compre-

hensive term “liability,” there was not in the lower

court a sufficiently sharp distinction drawn between

issues as to the alleged violations of the anti-trust

laws, and issues as to causation. Had this line of

differentiation been emphasized, the District Court

would probably have seen the cross-light which is |

beamed from Section 5 of the Clayton Act of 1914, 38 —

34a

Stat. 731, 15 U.S.C. §16 (a). Since that statute was

adopted, it has been a Congressional policy that

“[a] final judgment or decree heretofore or here-

after rendered in any civil or criminal proceeding

brought by or on behalf of the United States under

the antitrust laws to the effect that a defendant

has violated said laws shall be prima facie evi-

dence against such defendant in any action or pro-

ceeding brought by any other party against such

defendant under said laws or by the United States

under Section 15a of this title, as to all matters

respecting which said judgment or decree would

be an estoppel as between the parties thereto.”

The importance of the statutory provision just

quoted is wellknown to those who have followed the

course of private civil anti-trust proceedings in the

federal courts in the last half century. To cite only

one, bu: perhaps by no means in volume the least

significant, set of cases applying the rule that a

judgment in favor of the government is available in

private litigation as prima facie evidence of violation

of the anti-trust laws, we refer to the literally hun-

dreds of treble damage actions which drew sustenance

from the judgments favorable to the government

against leading motion picture producers who had

violated the anti-trust laws by conspiracies involving

black-booking, clearance practices, arbitration agree-

ments, and other activities. Paramount Famous

Lasky Corp. v. United States, 282 U.S. 30 (1930);

Lnited States v. First National Pictures, Inc., 282 U.S.

44 (1930). (The hundreds of citations in Sheppard’s

Federal Citations and in the annotated versions of

Title 15 of the United States Code show where those

two cases have been applied.) Equally instructive are

the private actions which built upon the judgment

35a

secured by ‘he government in United Shoe Machinery

Corp. ». United States, 347 U.S. 521 (1954). See

Herman Schwabe v. United Shoe Machinery Corp.,

274 F. 2d 608 (C.A. 2, 1960).

15 U.S.C. §16 (a), quoted above, which was originally

§5 of the Clayton Act, implies more than it says. It

indicates a general policy of aiding those who are

injured by violations of anti-trust laws in ways which

show Congressional sympathy for the usually small

enterprise against the ordinarily large malefactor. As

is sometimes said, there is beyond the law of the

Statute the equity of the statute: that is, the legisia-

ture has shown what policy it favors and this is a

datum to be given great weight by the judiciary not

only in the precise situations covered by the legisla-

tive act but in analogous situations where the judi-

ciary has a freer hand but the policy considerations

are similar to those in the area specifically covered by

the legislative act.

To put the matter clearly and in direct relationship

to the problem before us, there is discernible a public

policy which tends to simplify the presentation of

individual claims of damage caused by what has in a

master suit been found to be a violation of the

anti-trust laws.

We do not mean to imply that in each and every

anti-trust case a trial court should allow plaintiffs to

maintain, at least with respect to issues of alleged

violation of the Sherman Act, 15 U.S.C. §§1 and 2 or

cognate laws, a class action on behalf of others who

meet the class standard of Fed. R. Civ. P. 23 (a),

There are distinguishable situations. See 3B J. Moore

Federal Practice, para, 23.45 [2], at pp. 23-759-762 (2d

ed. 1975). What we do say is that there is almost a

36a

rebuttable presuniption that such a class action should

be allowed where there is a plausible claim of viola-

tion of the Sherman Act. Congress and the courts

have frequently shown they regard the Sherman Act

as an economic “charter of freedom” of hardly less

than Constitutional dimensions. it deserves ungrudg-

ing, and, as is sometimes said, liberal reading tc

accomplish its purposes. Without for one moment

intimating that the defendants in the case at bar are

wrongdoers -- an issue not yet canvassed by evidence,

and one on which we have no opinion other than that

the burden of proof is upon the plaintiffs to establish

defendants’ alleged violations of law -- we are of the

view that if defendants are proven to have been

conspirators, the road to recovery by those who prove

they were caused to suffer injury by the violators

should be shortened by giving them the benefit of.

modern procedural devices such as a class action.

Without such a short-cut, it might not be economically

practica! for a holder of a relatively small individual

claim to get a recovery to which he is legally entitled.!

Approaching in that spirit the facts found in this case

by the District Judge, we have concluded that it was

an abuse of discretion of the District Court not to

allow a class action at least with respect to issucs of

alleged violation of the Sherman Act. As our review

of the lower court’s findings discloses, there was no

substantial evidence which indicated that the trial of

such issues of alleged violation would be noticeably

prolonged even if there were 20,000 plaintiffs instead

ol 6. °

1 The District Judge stated that the average claim would exceed

$16,000, but he did not estimate the median amount. It was

suggested on oral argument before us that some claims might be very

large and that thousands would be much smaller than $16,000. The

hope of recovering even three times $16,000, not to mention a smaller

sum, would hardly lead a prudent man to begin an anti-trust suit.

——— >

Pr t

37a

Assuredly the case with respect to defendants’ al-

ledged violations would not have been unmanageable

merely because the number of plaintiffs was multi-

plied by the thousands. Whether defendants con-

spired as alleged may indeed be either unprovable or

very hard to prove, but those difficulties relate princi-

pally to what defendants can be shown to have done or

said. While proof as to what such violations, if they

occurred, caused in the way of damage may become

relevant to, and even to some degree intertwined

with, issues of violation, nonetheless, if there is a

bifurcated trial, with first a hearing only on the issues

of violation, vel non, the extent of evidence with

respect to intertwined matters can be appropriately

limited by the common sense, skill, and discretion of

the trial judge. He, like the jury, will initially be

required to decide only whether defendants conspired

as alleged.

Managerial difficulties are always present in big

anti-trust cases. But the case at bar, by including a

class of 20,000, will not present unusual complexities

at least so long as only issues of violation are before

the tribunal.

Obviously if plaintiffs cannot prove the alleged con-

spiracies, that ends the case. If they can, then the

District Court, in its discretion, can decide whether

the issues of causation and damage shall be disposed

of by separate trials for each plaintiff, or whether

there shall be one mass trial or several trials with

plaintiffs grouped in sub-classes which meet the stan-

dards of Rule 23 (b) (3).

We find some support for our opinion in the following

cases, none of which is, of course, precisely apposite.

West Virginia v. Charles Pfizer & Co., 314 F. Supp.

38a

710 (S.D.N.Y. 1970), affd, 440 F. 2d 1079 (C.A. 2,

1971); In Re Coordinated Pretrial Proceedings in

Antibiotic Anti-Trust Actions, 333 F. Sup 278 and 333

F. Supp. 285, (S.D.N.Y. 1971); Eisen v. Carlisle and

Jacquelin, 52 F.R.D. 253 (C.D.N.Y. 1971). However,

regardless of the analogies, we rest our judgment

principally on the directive force of Congressional and

judicial policy in anti-trust litigation as applied to

probiems of class actions sought to be covered by Fed.

R. Civ. P. 23 (a) and (b) (3).

Ordered that the judgment be reversed

with opportunity to be allowed to plain-

tiffs to file in the District Court a motion

persuant to Fed. R. Civ. P. 42 seeking a

separate trial of issues concerning defend-

ants’ alleged violations of the anti-trust

lau, and for further proceedings consis-

tent unth this opinion.

BRYAN, Senior Circuit Judge, dissenting:

Not in the slightest unappreciative of the majority's

thoughtful penetration into the entirety of this case

and of its careful positing of available separable is-

sues, together with their distinctive adaptabilities, my

difference with the opinion rests upon its own faithful

recognition of both the force of the District Court’s

fact findings in themselves, F. R. Civ. P. 52, and the

force of that Court’s discretionary judgment upon

them. In re Cessna Aircraft Distributorship Antitrust

Litigation, 518 F 2d 213, 215 (8 Cir. 1975), cert. denied

November 11, 1975, _US ; City of New York

v. International Pipe & Ceramics Corp., 410 F 2d 295,

298 (2 Cir. 1969).

39a

With its factual recital unquestioned, for me the

District Judge's decision is not enfeebled by an abuse

of discretion. I track and stand on his comprehensive

and closely scanned findings of fact and conclusions of

law, q. v., and so I would affirm.

0

40a

APPENDIX C

ORDER

IN THE UNITED STATES DISTRICT COURT

For The District Of South Carolina

Florence Division

No. 74-1008

Roy P. Windham, Harden Evans,

Joe Skipper, David Nexsen,

W. A. Turner and Toby Gaskins, Plaintiffs,

veTsus

American Brands, Inc., Liggett

& Myers, Incorporated, R. J.

Reynolds Tobacco Company,

(R. J. Reynolds, Inc.), Brown

& Williamson Tobacco Corporation,

The Imperial Tobacco Company

(of Great Britain and Ireland)

Ltd., Mullins Leaf Tobacco Company,

Inc., C. W. Walters Co., Inc.,

Export Leaf Tobacco Company,

Loews Theaters, Inc., d/b/a

Lorillard), Philip Morris, Inc.,

Universal Leaf Tobacco Co., Inc.,

The Austin Company, Inc. (Greenville,

Tennessee), J. P. Taylor Company,

Incorporated, Dibrell Brothers, Inc.,

Gallaher Limited, and Earl L. Butz,

Secretary of Agriculture of the

United States, Defendants.

4la

This matter is before the Court upon motion of

' intiffs seeking certification of this cause as a class

action. Through extensive discovey, consisting most-

\y of depositions taken before the Court, together with

briefs of counsel and oral arguments, the issue has

been fully exployed and the Court must now decide if

the plaintiffs satisfy Rule 23 of the Federal Rules of

Civil Procedure.

PENDING MOTIONS AND BACKGROUND

The complaint sets forth three causes of action. It is

alleged in the first and second causes of action that the

company defendants, “with the knowledge, consent

and acquiescence” of the Secretary of Agriculture

(hereinafter referred to as Secretary) conspired to fix,

control, lower and stabilize prices and conspired or

attempted to monopolize the warehouse auction mar-

kets for flue-cured tobacco in violation of §1 and 2 of

the Sherman Act. These actions by defendants al-

legedly occurred prior to July 15, 1974, the opening

day of sales for the 1974 crop, and commenced as early

as July 1970. This suit was filed July 29, 1975, and the

first and second causes of action pertain to the four

marketing seasons 1970 through 1973 and the first

part of the 1974 season.

For a third cause of action plaintiffs allege that the

company defendants and the Secretary unlawfully

conspired “to fix, control and restrict ... the amount of

flue-cured tobacco which could be sold per day and per

week in the auction warehouses available to plaintiffs

... to apportion the available inspectors to various

marketing areas, to restrain trade ..., and to preclude

plaintiffs ... from selling their tobacco as it becomes

ready....” This conspiracy allegedly took place on or

about December 14, 1973, therefore, only the 1974

42a

season would be affected.

Plaintiffs have moved for leave of court to amend the

third cause of action pursuant to Rule 15.’ The

proposed amendment covers alleged inequitable ap-

portionment of inspectors between South Carolina

and Georgia and states “no allegation of this complaint

should be construed as an effort to amend, modify, or

change the ‘designation system’ ....”

The company defendants assert that the motion to

amend is not an effort to “clarify” the coraplaint, but

rather an effort to change the basic nature of the third

cause of action because discovery has revealed, as will

be discussed more fully hereinafter, that many to-

bacco farmers support the “designation system”.

Defendants contend that granting an amendment of

this type would be improper and prejudicial at this

stage of the case, since the evidence of farmer support

of the “designation system” indicates that plaintiffs

cannot properly represent the class.

The proposed amendment does not change complete-

ly the nature of the third cause of action. The new

allegations tend to narrow the claim by alleging

anti-trust violations in connection with the apportion-

ment of available inspectors between the State of

South Carolina and the State of Georgia. The defen-

dants will not be prejudiced by allowing plaintiffs to

amend. Any intra-class adversity that might effect

plaintiffs’ ability to adequately represent the class

could be dealt with consistent with Rule 23, as is more

fully discussed under the heading of “typicality”.

Therefore, plaintiffs’ motion to amend is granted. The

1 Rule 1 (a) provides in part: “Otherwise a party may amend his

pleading only by leave of court or by written consent of the adverse

party; and leave shall be freely given when justice so requires.”

43a

proposed third amendment attached to said motion,

which has been served on all parties, shall govern the

case consistent with further Order of this Court.

Also pending is the defendant Secretary's motion to

dismiss pursuant to Rule 12, or, in the alternative, for

summary judgment under Rule 56, on the following

grounds: (1) The Court lacks jurisdiction with respect

to the issues involved since plaintiffs seek, in effect, to

bring an unconsented suit against the United States;

(2) the complaint fails to state a claim upon which

relief can be granted and (3) the Secretary cannot be

in violation of the anti-trust laws for administering the

flue-cured tobacco inspection and price support pro-

grams in accordance with their enabling statutes.

The Secretary cites Parker v. Brown, 317 U.S. 341

(1943) which involved an anti-trust attack on a Cali-

fornia stabilization program for the raisin industry.

The Supreme Court held that the Sherman Act would

not render the California Agricultural Prorate Act

invalid, even, assuming the program would be invalid

if made effective by a conspiracy of private persons.

“The Sherman Act makes no mention of the state

as such, and gives no hint that it was intended to

restrain state action or official action directed by a

state.” Parker at 351.

The instant case is distinguishable. Plaintiffs allege

the Secretary conspired with private persons in viola-

tion of the anti-trust laws, while Parker did not

involve a combination of state and private action.

“see WE have no question of the state or its munici-

pality becoming a participant in a private agree-

ment or combination by others for restraint of

44a

trade.” (cite omitted). Parker at 351 and 352.

The Secretary contends that the Court lacks jurisdic-

tion of this case because plaintiffs have brought an

unconsented suit against the United States. This is an

area of the law that is not precisely defined.

“There is no general statutory jurisdiction over

actions against federal officers and agencies. Such

actions must find independent grounds for jurisdic-

tion. The extent to which sovereign immunity may

bar such a suit against an officer for actions done in

his official capacity is an extraordinarily difficult

question that the Court’s decisions have failed to

clarify.” (footnotes omitted). C. A. Wright, Law of

Federal Courts, at page 71 (1970).

The Secretary cites Larson v. Domestic and Foreign

Corp., 337 U.S. 682 (1949) which involved a suit by an

individual against the head of the War Assets Admin-

istration for an injunction prohibiting the sale or

delivery of certain coal to anyone other than the

plaintiff who felt that he had a contractual right to the

coai. The Supreme Court held that sovereign immun-

ity did apply.

“We hold that if the actions of an officer do not

conflict with the terms of his valid statutory au-

thority, then they are the actions of the sovereign,

whether or not they are tortious under general

law, if they would be regarded as the actions of a

private principal under the normal rules of agency.

A Government officer is not thereby necessarily

immunized from liability, if his action is such that a

liability would be imposed by the general law of

torts. But the action itself cannot be enjoined or

directed, since it is also the action of the sover-

——t

45a

eign.” Larson at 695.

The important prerequisite to finding sovereign im-

munity, as expressed above, is met when “the actions

of an officer do not conflict with the terms of his valid

statutory authority”. The Court in Larson was aware

that there may be suits for specific relief against

officers of the sovereign which are not suits against

the sovereign itself.

“

. where the officer’s powers are limited by

statute, his actions beyond those limitations are

considered individual and not sovereign actions.

The officer is not doing the business which the

sovereign has empowered him to do or he is doing

it in a way which the soverign has forbidden. His

actions are ultra vires his authority and therefore

may be made the object of specific relief. It is

important to note that in such cases the relief can

be granted, without impleading the sovereign, only

because of the officer's lack of delegated power. A

claim or error in the exercise of that power is

therefore not sufficient. And, since the jurisdiction

of the court to hear the case may depend, as we

have recently recognized, upon the decision which

it ultimately reaches on the merits, it is necessary

that the plaintiff set out in his complaint the

statutory limitation on which he relies.” (footnote

omitted) Larson at 689 and 690.

Clearly participation in an anti-trust violation that is

not in furtherance of a legislative command would be

outside the scope of the Secretary’s authority, there-

fore, the doctrine of sovereign immunity would not

protect him.

Additionally, the Secretary asserts that the relief

46a

sought is in the nature of mandamus and would

require that this Court order the Secretary to carry

out the functions which are discretionary rather than

ministerial and the complaint fails to state a claim

upon which this Court can grant plaintiffs’ requested

relief.

The relief sought against the Secretary is stated in

general terms, to wit, “for a mandatory order and/or

injunction requiring the defendant, Secretary of Agri-

culture, to discharge the respective duties of his

office...” The allocation of Government inspectors as

between Georgia and South Carolina based on grower

designation might well be the type of official function

that this Court cannot properly control. But, if

defendant Butz is found to have acted in excess of his

authority, as alleged, restraint of his conduct would be

proper injunctive relief from this Court. See Larson,

supra, at 690.

The Court concludes that the complaint states a

claim upon which relief can be granted, the Court has

jurisdiction to grant the relief sought and there are

genuine issues of material fact; therefore, the Secre-

tary’s motion to dismiss and in the alternative for

summary judgment are denied. The Secretary may

renew his summary judgment motion at a later date

and after the evidence is further dev¢loped if he be so

advised.

The named plaintiffs have commenced this action for

themselves and are requesting this Court to make

them the representatives of all other South Carolin-

ians who are “cooperators” or “producers” of flue-

cured tobacco within the meaning of Title 7 of the

47a

United States Code §1441° during the period 1970

through 1974. Based on the deposition testimony of

Barney Page of the Agricultural Stabilization and

Conservation Service it appears that there are no

South Carolina producers of flue-cured tobacco who

do not qualify as cooperators. The evidence reveals

further that flue-cured tobacco grown in South Caro-

lina is marketed as a result of participation of all four

classes of producers, i.e. owners of land with tobacco

allotments, lessess of allotments, sharecroppers and

tenants. Many individual producers have the charac-

teristics of more than one of these four classes of

producers.

Flue-cured tobacco is sold by auction in individual

piles at independent warehouses. In South Carolina

there are presently 36 warehouses in 11 different

geographic areas. Most South Carolina grown flue-

cured tobacco is sold in South Carolina; however,

large amounts have been sold in North Carolina,

Georgia, Florida and Virginia. The grower designa-

27 U.S.C. §1441 authorizes and directs the Secretary of Agriculture

to make price supports available to “cooperators” for any crop of any

basic agricultural commodity, which includes tobacco (see 7 U.S.C.

$1428 (c)).

The terms “cooperator” and “producer” have been used inter-

changeably in this case. The statutory definitions indicate that

cooperators are producers of a certain crop that qualifies for price

supports.

“A ‘cooperator’ with respect to any basic agricultural commodity

shall be a producer on whose farm the acreage planted to the

commodity does exceed the farm acreage allotment for the

commodity under subchapter II of chapter 35 of this title . . ..” 7

U.S.C. §1428 (b).

7 C.F.R. §719.2s defines ‘producer’ as follows: Person who as

owner, landtord, tenant, or sharecropper, is entitled to share in

the crops available for marketing from the farm or in the proceeds

thereof... ..”

48a

tion system, which was effective for the 1974 season,

removes price support from sales made more than

100 miles from the county seat of the county in which

the particular farm is located, but it does not prohibit

out-of-state sales.

Plaintiffs’ contend that defendants conspired to rig

the bidding at tobacco markets and to hold down the

price to the injury of every tobacco farmer in South

Carolina. Plaintiffs claim further injury as a result of

the alleged inequitable distribution of Government

graders.

RULE 23 (a)

In order to qualify as a class action under Rule 23,

the action must meet all of the requirements set out

in Rule 23 (a), which are: (1) the class is so numerous

that joinder of all members is impractical, (2) there

are questions of law and fact common to the class, (3)

the claims or defenses of the representative 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.

3 The so-called grower designation system was put into effect prior

to the 1974 tobacco season by regulation adopted by the Secretary.

39 F.R. 17753 and §1464.2(ii) provides in pertinent part as follows:

“(ii) Producer designation of warehouses. Producers will be

required, as a condition of price support, to designate the ware-

houses at which they will market their tobacco. Such designa-

tions may be at any warehouse or warehouses in any market

within a radius of 100 miles from the county seat of the county in

whi h the farm is located .... A producer may obtain price sup-

port only in a warehouse he has designated, and at such ware-

house only with respect to the quantity of tobacco he designated

for sale at such warehouse.”

As explained in this Court's decision in Warr v. Butz, 379 F. Supp. 268

(D.C.S.C. 1974), the Secretary adopted the above regulation in order

49a

RULE 23 (a) (1)

NUMEROSITY

There is no question that joinder of all members of

the class would be impractical. The complaint esti-

mates the class at 11,000, however, the Court feels

that this is a very conservative estimate. Barney

Page of the Agricultural Stabilization and Conserva-

tion Service testified for plaintiffs that in 1974 alone

there were approximately 13,000 different farms in

South Carolina on which tobacco was grown. Since a

farm might have several tenants the number of

cooperators might greatly exceed the number of

tobacco farms. The fact that this suit covers a period

in excess of four years must also be considered in

estimating the numerosity of the class. Page esti-

mated that there were approximately 30,000 names

on the voter eligibility list of South Carolina tobacco

farmers, tenants and operators during the relevant

period. Plaintiffs own computer analyst, Richard C.

Hoyt, estimated that the class, including lessees and

sharecroppers, would total 20,000 to 25,000 persons.

From these estimates, the Court concludes that it is

reasonable to assume the purported class wil! number

at least 20,000.

7 RULE 23 (a) (2)

COMMON QUESTIONS OF LAW AND FACT

*~.e existence of questions of law and fact c

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