Richard T. Schwarzschild v. Bernard K..

58 F.3d 430, 95 Daily Journal DAR 8190, 31 Fed. R. Serv. 3d 1329, 95 Cal. Daily Op. Serv. 4770, 1995 U.S. App. LEXIS 15325
CourtCourt of Appeals for the Ninth Circuit
DecidedJune 22, 1995
Docket93-16681
StatusPublished

This text of 58 F.3d 430 (Richard T. Schwarzschild v. Bernard K..) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Richard T. Schwarzschild v. Bernard K.., 58 F.3d 430, 95 Daily Journal DAR 8190, 31 Fed. R. Serv. 3d 1329, 95 Cal. Daily Op. Serv. 4770, 1995 U.S. App. LEXIS 15325 (9th Cir. 1995).

Opinion

58 F.3d 430

64 USLW 2003, Fed. Sec. L. Rep. P 98,788,
31 Fed.R.Serv.3d 1329

Richard T. SCHWARZSCHILD, Plaintiff-Appellant,
v.
Bernard K. TSE, et al.; Lawrence D. Lummis; Robert C.
Wilson; Phillip E. White; James P. Lally; Wyse
Technology, Inc.; WT Acquisition Corp.; and Channell
International Corporation, Defendants-Appellees.

No. 93-16681.

United States Court of Appeals,
Ninth Circuit.

Argued and Submitted March 13, 1995.
Decided June 22, 1995.

Joel C. Feffer, Wechsler, Skirnick, Harwood, Halebian & Feffer, New York City, for plaintiff-appellant.

Steven Schatz, Wilson, Sonsini, Goodrich & Rosati, Palo Alto, CA, for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before: FLETCHER, REINHARDT, and NOONAN, Circuit Judges.

REINHARDT, Circuit Judge:

We consider here a narrow question of procedure involving notices in class action cases. We must decide whether a defendant who has succeeded in obtaining summary judgment may subsequently compel the named plaintiff to give the class the Rule 23(c)(2) notice that is ordinarily given shortly after class certification, or whether by obtaining judgment before the notice is given the defendant has waived any right to have notice sent to the purported class members.

I.

Richard T. Schwarzschild [plaintiff] sued Bernard K. Tse, et al. [defendants], for violations of Sections 13(e) and 14(e) of the Securities and Exchange Act, as well as for violations of the California Corporations Code. Plaintiff filed his claim in January of 1990. In July of that year, he moved for class certification. The district court granted the motion to certify on October 24th, 1991 and denied the defendants' subsequent motion for reconsideration in July of 1992.

On October 9th, 1992, defendants filed a motion for summary judgment and a motion to decertify the class. On the same day, plaintiff filed a motion for an order approving class notice. On December 9th, 1992, the district court entered an order granting the defendants' motion for summary judgment and stating that the defendants' motion to decertify and the plaintiff's motion to distribute notice were moot. Almost six months after the grant of summary judgment, in May of 1993, defendants moved for an order directing the distribution of notice to the class concerning the pendency of an action.

On July 13, 1993, the district court granted the defendants' motion and ordered that notice concerning the pendency of an action be sent to all members of the plaintiff class. Schwarzschild now appeals that order.1 He contends that, once summary judgment has been granted upon the defendants' own motion, a district court may not require notification of the members of the class.

II.

This appeal involves the notice requirement of Federal Rule of Civil Procedure 23(c)(2), which states that:

In any class action maintained under subdivision (b)(3), the court shall direct to the members of the class the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice shall advise each member that (A) the court will exclude the member of the class if the member so requests by a specified date; (B) the judgment, whether favorable or not, will include all members who do not request exclusion; and (C) any member who does not request exclusion may, if the member desires, enter an appearance through counsel.

Fed.R.Civ.P. 23(c)(2). We review the district court's interpretation of the rule de novo.

Defendants maintain, and the district court agreed, that Rule 23(c)(2) compels a court to send notice concerning the pendency of the action to all members of the class even when summary judgment has already been granted upon the merits of the case. Plaintiff contends, in contrast, that notice is not required when a district court has already granted summary judgment in favor of the defendants upon their own motion. We agree with the plaintiff and hold that, by obtaining summary judgment before the class has been certified and notice has been sent, the defendants waived any right to compel the plaintiff to notify the class of the pending action.

III.

The unusual nature of the issue before us is due in large part to the fact that district courts generally do not grant summary judgment on the merits of a class action until the class has been properly certified and notified. The purpose of Rule 23(c)(2) is to ensure that the plaintiff class receives notice of the action well before the merits of the case are adjudicated. See, e.g., Postow v. OBA Fed. Sav. and Loan Ass'n, 627 F.2d 1370, 1381-82 (D.C.Cir.1980); Katz v. Carte Blanche Corp., 496 F.2d 747, 759-60 (3d Cir.1974) (en banc), cert. denied, 419 U.S. 885, 95 S.Ct. 152, 42 L.Ed.2d 125 (1974); 7B Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure, Sec. 1788, at 222-23 (2d ed. 1986); cf. Besinga v. United States, 923 F.2d 133, 136-37 (9th Cir.1991).

As the Third Circuit has noted, the history of the development of Rule 23(c)(2) makes clear that the rule was adopted to prevent "one-way intervention"--that is, the intervention of a plaintiff in a class action after an adjudication favoring the class had taken place. Such intervention is termed "one way" because the plaintiff would not otherwise be bound by an adjudication in favor of the defendant. Katz, 496 F.2d at 759. In the words of the Third Circuit:

Many commentators objected that one-way intervention had the effect of giving collateral estoppel effect to the judgment of liability in a case where the estoppel was not mutual. This was thought to be unfair to the defendant. To meet the point that one-way intervention was unfair to the defendant, the Advisory Committee on Federal Rules concluded that class members should be brought in prior to the determination of defendant's liability, thus making the estoppel mutual. To make joinder at an early stage practically achievable, the "opting out" mechanism was devised.

Id. (emphasis added and internal citations omitted).

The language of Rule 23(c)(2) supports the view that notice must be sent before a judgment has been granted. First, it applies only to a class action "maintained" before the district court. Fed.R.Civ.P. 23(c)(2). Second, the rule states that the notice must advise the member that "the judgment, whether favorable or not, will include all members who do not request exclusion," id. (emphasis added).

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58 F.3d 430, 95 Daily Journal DAR 8190, 31 Fed. R. Serv. 3d 1329, 95 Cal. Daily Op. Serv. 4770, 1995 U.S. App. LEXIS 15325, Counsel Stack Legal Research, https://law.counselstack.com/opinion/richard-t-schwarzschild-v-bernard-k-ca9-1995.