Eisen v. Carlisle & Jacquelin
417 U.S. 156 (1974)

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U.S. Supreme Court

Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974)

Eisen v. Carlisle & Jacquelin

No. 73-203

Argued February 25, 1974

Decided May 28, 1974

417 U.S. 156

Syllabus

Petitioner brought a class action under Fed.Rule Civ.Proc. 23 on behalf of himself and all odd-lot traders on the New York Stock Exchange for a certain four-year period, charging respondent brokerage firms, which handled 99% of the Exchange's odd-lot business, and respondent Exchange with violating the antitrust and securities laws. There followed a series of decisions by the District Court and the Court of Appeals. The District Court ultimately decided that the suit could be maintained as a class action, and, after finding that some two and a quarter million members of the prospective class could be identified by name and address with reasonable effort and that it would cost $225,000 to send individual notice to all of them, proposed a notification scheme providing for individual notice to only a limited number of prospective class members and notice by publication to the remainder. The District Court then held a preliminary hearing on the merits, and after finding that petitioner was "more than likely" to prevail at trial, ruled that respondents should bear 90% of the costs of the notification scheme. The Court of Appeals reversed and ordered the suit dismissed as a class action, disapproving the District Court's partial reliance on publication notice. The Court of Appeals held that Rule 23(c)(2) required individual notice to all identifiable class members; that the District Court had no authority to hold a preliminary hearing on the merits for the purpose of allocating notice costs; that the entire notice expense should fall on petitioner; and that the proposed class action was unmanageable under Rule 23(b)(3)(D). Petitioner contends that the Court of Appeals had no jurisdiction to review the District Court's orders, and further, that the Court of Appeals decided the above issues incorrectly.

Held:

1. The District Court's resolution of the notice problems constituted a "final" decision within the meaning of 28 U.S.C. § 1291, and was therefore appealable as of right under that section. Pp. 417 U. S. 169-172.

(a) Section 1291 does not limit appellate review to "those

Page 417 U. S. 157

final judgments which terminate an action . . . ," but rather the requirement of finality is to be given a "practical, rather than a technical construction." Cohen v. Beneficial Loan Corp., 337 U. S. 541, 337 U. S. 545-546. Pp. 417 U. S. 170-172.

(b) The District Court's decision that respondents could lawfully be required to bear the costs of notice involved a collateral matter unrelated to the merits of petitioner's claims and was "a final disposition of a claimed right which is not an ingredient of the cause of action, and does not require consideration with it," Cohen, supra, at 337 U. S. 546-547. P. 417 U. S. 172.

2. The District Court's resolution of the notice problems failed to comply with the notice requirement of Rule 23(c)(2). Pp. 417 U. S. 173-177.

(a) The express language and intent of Rule 23(c)(2) leave no doubt that individual notice must be sent to all class members who can be identified through reasonable effort. Here there was nothing to show that individual notice could not be mailed to each of the two and a quarter million class members whose names and addresses were easily ascertainable, and, for these class members, individual notice was clearly the "best notice practicable" within the meaning of Rule 23(c)(2). Pp. 417 U. S. 173-175.

(b) The facts that the cost of sending individual notices would be prohibitively high to petitioner, who has only a $70 stake in the matter, or that individual notice might be unnecessary because no prospective class member has a large enough stake to justify separate litigation of his individual claim, do not dispense with the individual notice requirement, since individual notice to identifiable class members is not a discretionary consideration to be waived in a particular case, but an unambiguous requirement of Rule 23. Pp. 417 U. S. 175-176.

(c) Adequate representation, in itself, does not satisfy Rule 23(c)(2), since the Rule speaks to notice, as well as to adequacy of representation, and requires that both be provided. Otherwise no notice at all, published or otherwise, would be required in this case. Pp. 417 U. S. 176-177.

3. Petitioner must bear the cost of notice to the members of his class, and it was improper for the District Court to impose part of the cost on respondents. Pp. 417 U. S. 177-179.

(a) There is nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether

Page 417 U. S. 158

it may be maintained as a class action, and, indeed, such a procedure contravenes the Rule by allowing a representative plaintiff to secure the benefits of a class action without first satisfying the requirements of the Rule. Pp. 417 U. S. 177-178.

(b) A preliminary determination of the merits may substantially prejudice a defendant, since it is unaccompanied by the traditional rules and procedures applicable to civil trials. P. 417 U. S. 178.

(c) Where, as here, the relationship between the parties is truly adversary, the plaintiff must pay for the cost of notice as part of the ordinary burden of financing his own suit. Pp. 417 U. S. 178-179.

479 F.2d 1005, vacated and remanded.

POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, WHITE, BLACKMUN, and REHNQUIST, JJ., joined. DOUGLAS, J., filed an opinion dissenting in part, in which BRENNAN and MARSHALL, JJ., joined, post, p. 417 U. S. 179.

Page 417 U. S. 159

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Primary Holding

A plaintiff planning to file a class action must provide notice to every individual in the class, unless it would create an unreasonable burden, and must bear any resulting cost.

Facts

Eisen alleged that Carlisle, a brokerage firm, had harmed odd-lot traders and other brokerage firms by monopolizing odd-lot trading on the New York Stock Exchange in violation of antitrust laws. The initial suit, Eisen I, was dismissed because it contained six million potential members. However, Eisen II eventually proceeded under a curious structure of providing notice. Eisen's claim was worth only $70, and the cost of notice was estimated at $250,000. To resolve this problem, the court ordered that individual notice would be provided to all brokerage firms, to 2,000 odd-lot traders who had 10 or more transactions during the relevant time period, and to 5,000 randomly identified odd-lot traders. However, the remaining 25,000 potential class members would receive only publication notice.

The cost still would be substantial even with this structure of providing notice, so the court held a hearing on the probability of Eisen succeeding in the claim. It found that he likely would prevail, so it ordered Carlisle to cover 90 percent of the costs of notice. The appellate court found that no class action could be maintained in Eisen III, but Eisen argued that the appellate court lacked jurisdiction to review the process to this point because no final judgment had been reached. On the other hand, Carlisle asserted that the notice procedure violated Federal Rule of Civil Procedure 23(a)(2) and its requirement of individual notice. It contended that it should not be forced to bear the cost of notice.

Opinions

Majority

  • Lewis Franklin Powell, Jr. (Author)
  • Warren Earl Burger
  • Potter Stewart
  • Byron Raymond White
  • Harry Andrew Blackmun
  • William Hubbs Rehnquist

The notice requirement under FRCP 23(a)(2) is mandatory and cannot be discarded by a court. It requires individual notice to all class members who can be identified or reasonably ascertained. The district court's proposal does not meet this requirement, and publication notice may not be permitted in this situation. The court acted outside its discretion in conducting a prior hearing on the merits and requiring the defendant to bear some of the costs of notice, since there is no support in the Constitution or the Federal Rules for these actions. The assessment of costs allowed the appellate court to review the decision because this was a final judgment on a matter that was not related to the merits of the case, and an immediate appeal was appropriate.

Dissent

  • William Orville Douglas (Author)
  • William Joseph Brennan, Jr.
  • Thurgood Marshall

Case Commentary

Class actions are designed to hold defendants accountable for wrongs that a single plaintiff would not have the motivation to litigate. At the same time, when the class is as large as six million people, the logistical complications of providing individual notice to each class member are often impracticable for plaintiffs' attorneys who are responsible for the effort and expense.

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