Kathleen Hackett, on Behalf of Herself and All Others Similarly Situated v. General Host Corporation

455 F.2d 618, 17 A.L.R. Fed. 913

• Court: Court of Appeals for the Third Circuit
• Decided: January 14, 1972
• Docket: 19320
• Status: Published

Opinions

OPINION OF THE COURT

GIBBONS,- Circuit Judge.

Kathleen Hackett, a consumer of bread purchased at retail, filed a complaint under Section 4 of the Clayton Act, 15 U.S.C. § 15 (1971) seeking treble damages, costs and attorney’s fees from the defendants for their alleged violation of Sections T and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 1px solid var(--green-border)">2 respectively. The defendants are seven bakers of pan-baked bread who sell such bread through various channels of distribution in the Philadelphia market area. Mrs. Hackett’s complaint seeks recovery for injury to herself and to all other members of a class whom she claims to represent, consisting of all individual consumers in the Philadelphia market area who have purchased pan-baked bread from retail stores for their own consumption or for consumption by members of their family. The parties agree that her individual claim is for roughly nine dollars. She asserts that some one and one-half million purchasers of bread from retail stores, who purchased the bread involved for the use of some six million consumers comprise the class, of which she claims to be an appropriate class representative.

Mrs. Hackett’s complaint was inspired by an indictment, United States of America v. General Host Corp., Crim. No. 23,200 (E.D.Pa., filed Mar. 13, 1968), which charged that the defendants conspired to fix the prices and terms of sales of bread in the Philadelphia market. The district court accepted a plea of nolo contendere to that indictment. There is pending in the district court a civil action Philadelphia v. General Host Corp., Civil No. 68-704 (E.D. Pa., filed Apr. 2, 1968) in which Philadelphia, on behalf of itself and various other public and private institutions, is seeking recovery of the damages of such institutional purchasers occasioned by the alleged price fixing conspiracy.

The defendants moved for a pretrial conference and a stay of all proceedings until the district court should, pursuant to E.D.Pa. R 45(c), determine whether the case should be maintained as a class action. See Fed.R.Civ.P. 23(c) (1). By an order dated May 4, 1970 and in accordance with Rule 23(c) (1), the district court fixed a schedule for the filing of affidavits and briefs dealing with the class action issue. On July 30, 1970, the court filed an opinion and order, the crucial provisions of which follow:

“It is our considered opinion that under the facts of this case, the problem of management of the proposed class is clearly insurmountable. The class is so large that it would be unmanageable and could only result in knotty, complicated and unnecessary problems.

ORDER

The plaintiff's request for confirmation of her action as a class action is Denied.”

Mrs. Hackett then requested the district court to amend the July 30, 1970, order to set forth a statement, pursuant to 28 U.S.C. § 1292(b) (1971) that its decision on the class action issue involves a controlling question of law as to which there is substantial ground for difference of opinion and that immediate appeal would materially advance the ultimate termination of the litigation. On August 25, 1970 the district court declined to issue such § 1292(b) certification.

Mrs. Hackett then filed a notice of appeal. She contends that the July 30, 1970, order is a final appealable order within the meaning of 28 U.S.C. § 1291. The defendants contend that the appeal is interlocutory and should be dismissed.

No request was made to the district court that the July 30, 1970, order be treated for purposes of Fed.R.Civ.P. 54 (b), as a dismissal of the complaint on behalf of the one and one-half million class members or for a determination and direction pursuant to that rule, that the order be entered as a final judgment. Cf. Hayes v. Sealtest Foods Division of National Dairy Products Corp., 396 F.2d 448 (3d Cir. 1968).

Mrs. Hackett predicates her claim that this court must entertain her appeal upon the so called “death knell” rule of the Second Circuit which first appeared in Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2d Cir. 1966), cert. denied, 386 U.S. 1035, 87 S.Ct. 1487, 18 L.Ed.2d 598 (1967). In that case Mr. Eisen sued both for himself and on behalf of all odd lot purchasers and sellers on the stock exchange. His individual claim amounted to only seventy dollars, and in a previous appeal in Eisen Judge Kaufman wrote:

“ . . . We can safely assume that no lawyer of competence is going to undertake this complex and costly case to recover $70 for Mr. Eisen.

******

Dismissal of the class action in the present case, however, will irreparably harm Eisen and all others similarly situated, for, as we have already noted, it will for all practical purposes terminate this litigation. Where the effect of a district court’s order, if not reviewed, is the death knell of the action, review should be allowed.”

370 F.2d at 120-121. (citations omitted)

The court in Eisen relied upon Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), as authority for its “death knell” rationale. In this circuit we have referred to the Cohen rule as the “collateral order doctrine,” and we have not been overly hospitable to requests for its extension. See g., Borden Co. v. Sylk, 410 F.2d 843 (3d Cir. 1969); but cf. Greene v. Singer Co., Civil No. 71-1835 (3d Cir., filed Nov. 2, 1971). We have not, however, ever been confronted directly with the problem of the appeal-ability of a determination adverse to the confirmation of a class which leaves a single plaintiff to litigate a small claim for money damages.

Indeed no other circuit has had occasion either to adopt or expressly to reject the “death knell” rational.¹ The experience of the Second Circuit has shown the application of the rule to be somewhat difficult. In Green v. Wolfe Corp., 406 F.2d 291 (2d Cir. 1968), cert. denied, Trostee, Singer & Co. v. Green, 395 U.S. 977, 89 S.Ct. 2131, 23 L.Ed.2d 766 (1969), Green had an individual claim amounting to less than $1000 for overcharges on publically traded securities. The court held that an order dismissing the class action aspects of the complaint was appealable. In City of New York v. International Pipe and Ceramics Corp., 410 F.2d 295 (2d Cir. 1969) and Caceres v. International Air Transport Association, 422 F.2d 141 (2d Cir. 1970) where the individual claims of the plaintiffs seeking to represent a class were $1,560,000 and $150,000, respectively, the court declined to apply the Eisen rule and dismissed the appeal. Most recently, in Korn v. Franchard Corp., 443 F.2d 1301 (2d Cir. 1971), the court considered two appeals. In one the appellant Korn, whose individual claims totaled $386, appealed from an order revoking a class action designation. In the other, the appellant Millberg, and her husband, who was acting as her attorney, had claims totaling' $8,500. Mill-berg appealed from an order denying class action designation. Korn’s appeal was held to fall within the Eisen rule while Millberg’s appeal was dismissed. These results disturbed Judge Friendly, who in concurring wrote:

“Since I-regard Judge Feinberg’s opin-on as correctly applying the present law in this circuit, I concur therein. However, despite the obvious appeal of the ‘death-knell’ doctrine, I am not sure it affords a rule that is truly workable or, indeed, is legally sustainable. If my fears should be realized, I might wish on some subsequent occasion to request that the court consider in banc whether we are not obliged to formulate a rule that will avoid the necessity of making such ad hoc judgments as have been required in these and other cases and also will afford equality of treatment as between plaintiffs and defendants. Perhaps, before occasion for doing this should arise, we shall have received enlightenment from the Supreme Court.” 443 F.2d 1301 at 1307.

Judge Friendly’s mention of equality between plaintiffs and defendants refers, of course, to the peculiarity of the “death knell” rationale that it operates only in favor of the plaintiff who has unsuccessfully sought to be designated as a class representative. It neither requires nor permits general supervision by the court of appeals over class action designations.² Indeed the rule operates in a very narrow area.

First, Eisen does not operate at all in those cases in which federal jurisdiction depends upon jurisdictional amount. In Snyder v. Harris, 394 U.S. 332, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1968) the Supreme Court rejected the contention that the revised Fed.R.Civ.P. 23 permitted aggregation of claims for purposes of jurisdictional amount. Since the court which developed the Eisen “death knell” doctrine has in Korn v. Franchard Corp., supra, drawn the survivability line as low as $8,500, it is clear that in no case where a party with a $10,000 claim is before the court will the “death knell” doctrine be applicable. In the absence of a party’s meeting the dollar-amount requirements, under Snyder v. Harris, there will be no federal jurisdiction unless the claim falls within a category of federal question cases which may proceed without regard to such jurisdictional amount. See Zahn v. International Paper Co., 53 F.R.D. 430 (D.Vt.1971).

Secondly, Eisen is not needed to afford interlocutory appellate review in those cases in which the refusal to grant class action designation amounts to a denial of a preliminary injunction broader than would be appropriate for individual relief. 28 U.S.C. § 1292(a) (1). See e. g., Oatis v. Crown Zellerbach Corp., 398 F.2d 496 (5th Cir. 1968); Shapiro, Bernstein & Co. v. Continental Record Co., 386 F.2d 426 (2d Cir. 1967); Brunson v. Board of Trustees, 311 F.2d 107 (4th Cir. 1962). This category of interlocutory appeals is adequate, we think, to protect against most district court inhospitability to class action litigation involving civil rights, the elective franchise, protection of the environment and the like. The Eisen rule is not likely to be needed in this area. Indeed the underlying assumption of Eisen — that no competent counsel would be willing to represent an individual small-claimant— is, whatever its validity, completely inapplicable to those numerous areas where the protection of rights incapable of measure in money is the primary object of the lawsuit.

Thus the “death knell” rule would operate only in that narrow category of cases where the object of the suit is the recovery of money damages, and where a statute affords federal jurisdiction regardless of amount. This narrow category is, however, significant for consumer advocates. But even in this field, the “death knell” rationale, based upon the assumption that no competent lawyer would undertake a complicated case to recover a small amount of money, must be qualified by several considerations. A number of federal statutes provide for the award of counsel fees and costs.³ Indeed the statute under which Mrs. Hack-ett sues contains such a provision. 15 U.S.C. § 15 (1971). If the “death knell” is to ring for her case the rope is in her attorney’s hand. There is no certain basis for the assumption that an interested holder of a small claim will be unable to prevail upon a private attorney to pursue that claim in the hope of being compensated by the award of “reasonable counsel fees” against a wrongdoer. Moreover the burgeoning in recent years of interest in publicly supported legal service organizations and of private support for legal aid and public interest law firms cannot be disregarded.⁴ Many small but important claims heretofore, for purposes of litigation, beyond the pale of financial practicability, have been successfully litigated by such organizations in recent years. Thus an adverse class action decision may ring out as a death knell on far fewer occasions than superficial analysis would suggest.

This brings us precisely to the practicabilities of the operation of the “death knell” rule. It will operate primarily if not exclusively in that class of cases in which attorneys are willing to undertake on a contingent fee basis class actions for the recovery of money damages for claimed violations of federal regulatory statutes. These are chiefly the federal antitrust⁵ and securities ⁶ statutes.

The chief policy argument in favor of a hospitable attitude toward such class actions is that they tend to reenforce the regulatory scheme by providing an additional 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 § 4 of the Clayton Act.⁷ Even assuming such a deterrent policy, however, it must be balanced against the competing policies which have historically protected the federal appellate courts from being overwhelmed by interlocutory appeals.⁸ And on the side of the balance opposed to interlocutory appellate review as of right must be weighed the existence and effectiveness of alternative discretionary appellate remedies with which to protect against excessive inhospitability of district courts to consumer class actions.

One of these is certification pursuant to 28 U.S.C. § 1292(b) (1971). Another is an order certifying a ease as final under Rule 54(b). It has been suggested that an order may not fall under both § 1292(b) and Rule 54(b). C. Wright, The Interlocutory Appeal Act of 1958, 23 F.R.D. 199, 203 (1959). Whether this is true with respect to class action determinations we need not here decide. Cf. Hayes v. Sealtest Foods, supra,.9 It suffices to say that by one route or the other a disappointed applicant for class action designation could, with the cooperation of the district court, in those rare instances where it might be appropriate bring before this court for review the questionable Rule 23 order. We have had no indication that the district courts of this circuit will reject applications under § 1292(b) or Rule 54(b), arbitrarily or in disregard of the policy considerations favoring, where feasible, consumer class actions warranted by federal statutes. If in isolated instances arbitrariness creeps in, there remains the ultimate remedy of mandamus. See Inter-pace Corp. v. City of Philadelphia, 438 F.2d 401 (3d Cir. 1971).

The advantage of restricting interlocutory appellate review of Rule 23 class action determinations to the § 1292(b), Rule 54(b), or mandamus routes is that in each instance at least one court and in the case of § 1292(b), two courts, will exercise some discretion in the allowance of the appeal and weigh the countervailing considerations. With the exception of mandamus,¹⁰ those discretionary routes were not open in 1949 when the Supreme Court decided Cohen v. Beneficial Industrial Loan Corp., supra,. Since the Interlocutory Appeals Act of 1958 ¹¹ and the 1963 Amendment to Rule 54 (b)¹² there is less reason for enlarging those categories of orders which for purposes of appealability are deemed to be sufficiently “collateral” as to qualify under § 1291.

Nor may our decision in Greene v. Singer Co., supra, be considered as reflecting any basic change in our attitude toward enlargement of the Cohen doctrine.¹³ In the Greene case we held that an order denying a defendant’s motion to disqualify the plaintiff’s attorney on the ground that he had previously represented the defendant in the matter which was the subject of the lawsuit was appealable under Cohen. Even that issue is a close one. See 9 J. Moore, Federal Practice ¶ 110.13 [10] at 189 et seq. The considerations favoring “collateral order” treatment in the Greene situation are different and more compelling than here. The decision appealed from in Greene allowed an attorney who had switched allegiance to represent the plaintiff, subject only to a protective order. The attorney’s duty of loyalty was the matter in issue on the motion to disqualify, a matter wholly separate from the merits of the lawsuit. Postponement of review of the order denying the disqualification motion until final hearing could have the effect of destroying the very subject matter — the duty of loyalty —which was the object of the collateral proceeding which resulted in the order appealed from.

This case could possibly be viewed as the reverse of an analogy to Greene since the decision refusing confirmation of the proposed class can be construed as one which, in effect, disqualifies Hackett’s attorney from representing the one and one-half million other potential claimants.¹⁴ Looked at as an order disqualifying an attorney, the order refusing to permit a class action confronts us with some practical problems of standing. The one and one-half million potential claimants are not before the court seeking the attorney’s services. This contrasts with the Greene case, where the attorney’s former client came before us seeking to preserve his duty of loyalty. Mrs. Hackett’s disinclination to proceed with her lawsuit unless her attorney is allowed to represent many others besides herself does not move us to convert by an ipse dixit an order which as to her is clearly interlocutory into a final appeal-able order. We come down, then, to the question whether on the authority of Greene v. Singer Co., supra, or by a different ipse dixit we should recognize the attorney deprived of the quixotic opportunity¹⁵ of representing one and one-half million potential claimants, should be recognized as a private attorney general with standing of his own to appeal the adverse class action decision. When all is said and done this pragmatically is the core issue, though conventional pieties about the role of the legal profession might suggest its obfuscation. Realistically, when we are asked to grant interlocutory appellate review of an adverse class action determination we are asked to recognize a separate interest of the attorney sufficient to bring the class action determination within the “collateral order” doctrine, or to recognize the standing of the attorney’s client to assert such an interest on his behalf. We decline to do either. Those typical consumer class actions in which the Eisen rule would be likely to operate involve areas of federal law in which public enforcement co-exists with private remedies. There is no compelling need to go beyond those inducements to the bar which already encourage a lively pursuit of private enforcement remedies.

One part of Judge Rosenn's dissenting opinion requires special comment, since it points up a difference in approach to the proper role in society of the limited resources of the judicial process. He says that despite the statute providing for attorneys’ fees in antitrust suits he:

“ . . . cannot believe that a capable attorney would press forward a complex anti-trust action when the amount in controversy is nine dollars . . . Nor does the growth of public legal services, also cited by the majority, provide the means by which an individual litigant might secure legal representation. No publically supported legal service organization could explain or justify the time and effort required to press a nine dollar anti-trust suit.” (Dissenting opinion at 631) (footnotes omitted).

Judge Rosenn may well be right on both points. But, if so, the conclusion that the judicial process must therefore provide a mechanism, by making class action determinations appealable, whereby the lawsuit will be more attractive to attorneys, does not follow. If the public interest issue involved in the individual suit is so insignificant that neither a private nor a public attorney deems it worthy of pursuit, despite the availability of an award of attorneys’ fees in the event of success, then the public interest issue may well be so insignificant that the redress of the nine-dollar wrong should from a policy viewpoint be left to the realm of private ordering. Our scarce federal judicial resources cannot be allocated on the assumption that they must provide a forum for the vindication of every individual wrong however slight. As we pointed out hereinabove, the only instances in which the adverse class action determination will be made appeal-able under either the Eisen rationale or the “collateral order” rationale, will be those cases in which a federal regulatory statute permits a suit for money damages regardless of jurisdictional amount. In every such instance other regulatory mechanisms are available to assert the public interest against the wrongdoer. If in some cases as Judge Rosenn suggests the individual claim often will be so small that neither private nor public lawyers think it should be litigated, then that decision of the legal marketplace may be the best reflection of a public consciousness that the time of the lawyers and of the court should best be spent elsewhere.

There remains for consideration whether on this record we should treat Mrs. Hackett’s notice of appeal and briefs as a petition for mandamus and grant relief under 28 U.S.C. § 1651 (1971). See e. g. In re Harmon, 425 F.2d 916 (1st Cir. 1970); International Products Corp. v. Koons, 325 F.2d 403 (2d Cir. 1963). As in Interpace Corp v. Philadelphia, supra, the district court’s decision was within the limits of the discretion allowed by Rule 23(1) (c). The non-arbitrary exercise of that discretion will not be disturbed by the extraordinary remedy of mandamus.

In view of our conclusions on appeala-bility we have no occasion to rule upon Mrs. Hackett’s standing as a plaintiff under Hanover Shoes, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968). That issue was tendered by the defendants as additional support for the district court’s order.

The appeal will be dismissed.

1 . Bisen was considered in Weingartner v. Union Oil Co., 431 F.2d 26 (9th Cir. 1970) but the court found a basis for distinguishing, rather than rejecting, its authority.

2 . See Note, Interlocutory Appeal from Order Striking Class Action Allegations, 70 Colum.L.Rev. 1292 (1970), which suggests that a broader interlocutory appellate remedy than that afforded by Eisen, supra, is required.

3 . E. g. statutes providing for damages arising from the following improper actions, a single instance of which may harm individual members of large classes, additionally provide that successful plaintiffs’ attorneys shall be awarded reasonable attorneys’ fees and costs: Failure to disclose under the Truth in Lending Act 15 U.S.C. § 1640 (1971) ; Unlawful wiretapping, 18 U.S.C. § 2520 (1971). Other-statutes place the decision of whether to allow reasonable attorneys’ fees and costs within the discretion of the district court: Securities Acts Violations; 15 U.S.C. §§ 77k, 77www; 78i (1971). See also 28 U.S.C. § 2678 (1971) providing for reasonable attorneys’ fees in suits involving torts committed by the Federal Government where its immunity has been waived.

4 . See Note, The New Public Interest Lawyers, 79 Yale L.J. 1068 (1970).

5 . Clayton Act § 4, 15 U.S.C. § 15 (1971). (1971).

6 . Securities Exchange Act of 1934, § 27, 15 U.S.C. § 78aa (1971).

7 . The decision in Snyder v. Harris, supra, would seem to indicate that the Court had a much more limited goal in mind when it promulgated the' revised Rule 23. Allowing the aggregation of claims would have been more consistent with such an intention.

8 . See e. g. Carrington, Crowded Dockets and the Court of Appeals: The Threat to the Function of Review and the National Law, 82 Harv.L.Rev. 542 (1969).

9 . In Sages, supra, the court permitted the aspiring class representative to appeal the district court’s refusal to confirm the described class at the time he appealed the dismissal of his complaint. To the appel-lee’s objection that the time for appeal of the order refusing confirmation had elapsed, the court responded that, in the absence of Fed.R.Civ.Pro. 54(b) certification, it was not final “at least [not] in the sense that plaintiffs were precluded from appealing because they did not appeal within 30 days from the entry of such order.” 396 F.2d at 449 (emphasis supplied). Although the court’s opinion was a holding that such orders are not final only in the sense that it need not be appealed within thirty days, it strongly implies that they are non-final in a fuller sense, i. e., that they cannot be appealed.

10 . Mandamus is only partially an exception, since its availability seems to have increased at least somewhat since Cohen was decided. See 9 J. Moore, Federal Practice ¶ 110.28.

11 . Act of Sept. 2, 1958, Pub.L.No.85-919, 28 U.S.C. § 1292(b), amending the original and expanding the category of permissible interlocutory appeals to include those from orders issued by a district court judge which are certified by him to involve “controlling question [s] of law as to which there is substantial ground for difference of opinion,” the interlocutory determination of which “may materially advance the ultimate termination of the litigation.”

12 . In 1961 Rule 54(b) was amended to make it clear that district courts possess the authority to enter a final judgment disposing of the claims of fewer than all the parties to an action.- See 6 J. Moore, Federal Practice, ¶ 54.01 [12] at 7 (Supp. 1970).

13 . In reaffirming our adherence to the rule of Alexander v. United States, 201 U.S. 117, 26 S.Ct. 356, 50 L.Ed. 686 (1906), Judge Aldisert wrote in Borden Co. v. Sylk, supra:

“We have detected what appears to be an irresistible impulse on the part of appellants to invoke the ‘collateral order’ doctrine whenever the question of appealability arises. Were we to accept even a small percentage of these sometime exotic invocations, this court would undoubtedly find itself reviewing more ‘collateral’ than ‘final’ orders.” 410 F.2d at 845-846.

14 . If one accepts the analogy, the fact that the instant case would be the mirror image of Greene could be important. In the Second Circuit, for example, it seems to be the law that an order disqualifying counsel is appealable while an order refusing to do so is not. Marco v. Dulles, 268 F.2d 192 (2d Cir. 1959) ; Fleischer v. Phillips, 264 F.2d 515 (2d Cir. 1959). But see Harmar Drive-In Theatre, Inc. v. Warner Bros. Pictures, 239 F.2d 555 (2d Cir. 1956).

15 . Quixotic in the sense that for many attorneys it would truly be the impossible dream come true. Franks, Rule 23-Don Quixote Has a Field Day: Some Ethical Ramifications of Securities Fraud Class Actions, 46 Chi.-Kent L.Rev. 1 (1969).