Eisen v. Carlisle & Jacquelin
Annotate this Case
417 U.S. 156 (1974)
U.S. Supreme Court
Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974)
Eisen v. Carlisle & Jacquelin
Argued February 25, 1974
Decided May 28, 1974
417 U.S. 156
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.
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
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
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.
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