Number 513-77 4-12-71 Cited 1971 Trade Cases suit, and little interest in attempting a class action. In consequence, those who violate the antitrust laws by price-fixing or monopolizing would retain the fruits of their illegality because no one was available who would bring suit against them. Treble-damage actions, the importance of which the Court has many times emphasized, would be substantially reduced in effectiveness [392 U. S. at 494]. Keeping these comments in mind, there are then several obvious distinctions between the principles laid down in Hanover Shoe and the present case. First, the passing-on doctrine is not here being used as a defense to permit the defendants to escape liability, but rather as an attempt to award damages, insofar as is possible, to those who ultimately paid higher prices as a result of the collusive pricing, and to avoid giving a windfall gain to those who rather clearly were not injured. Secondly, to permit the use of the doctrine in the present circumstances will not act to limit or frustrate private treble-damage claims. but will, if anything, do the opposite. As Judge Feinberg noted in discussing this problem in Atlantic City Electric Co. v. General Electric Co. [1964 TRADE CASES 71,015], 226 F. Supp. 59, 70 (S. D. N. Y. 1964): Were consumers a proper party in these proceedings, it might be urged by defendants that the Court should equitably distribute the damages between the utilities and the consumers, but when the only parties to the suit are the equipment manufacturers and the immediate purchaser-utilities, the manufacturers should not be able to prevent the utilities from recovering from them the amount of the overcharges because the utilities have passed them on to the ultimate consumers in the form of higher rates. Finally, the Hanover Shoe Court itself indicated, as quoted above, that it might well be willing to recognize, in the limited situation where the initial purchaser of the collusively priced goods resold them on a "cost-plus" basis "thus making it easy to prove that he had not been damaged. [that] the considerations requiring that the passing-on defense not be permitted in this case would not be present" [392 U. S. at 494]. The record below makes it clear that the arrangements under which the whole See the "oil jobber" cases-Clark Oil Co. v. Phillips Petroleum Co. [1944-1945 TRADE CASES 57.358), 148 F. 2d 580 (8 Cir.), cert. denied, 326 U. S. 734 (1945); Northwestern Oil Co. v. Socony Vacuum Oil Co. [1940-1943 TRADE CASES 156,294), 138 F. 2d 967 (7 Cir. 1943). cert. denied, 321 U. S. 792 (1945); Twin Parts Trade Regulation Reports 90,235 [Recovery of General Damages] The second major contention of the ap- The use of the parens patriae theory has ¶ 73,540 90,236 Court Decisions West Virginia v. Chas. Pfizer & Co., Inc. of treble-damage antitrust claims, most notably in the recent ruling of the Ninth Circuit in State of Hawaii v. Standard Oil Co., [1970 Trade Cases ¶73,340], 431 F. 2d 1282 (1970), reversing the District Court for Hawaii which had allowed a private antitrust action to be brought by the state under this theory, although the Supreme Court has recently granted certiorari in this case, 39 U. S. L. W. 3367 (March 1, 1971). While in our view the court below might well have considered making use of a parens patriae theory in the present case (see, "State Protection of Its Economy and Environment" (supra)), Judge Wyatt made it quite clear, in spite of the assertions of appellants here, that he was proceeding solely on the basis of a Rule 23 class action, and therefore evaluation of the parens patriae doctrine by this court is unnecessary. [Propriety of Class Action] We then turn to the question of the propriety of permitting the maintenance of a class action under Rule 23. To be maintainable as a class action, a suit must meet all the requirements set forth in Rule 23(a) and also fall within one of the subsections of 23(b), in this case 23(b)(3).* In Eisen v. Carlisle and Jacquelin [1968 TRADE CASES 72,381], 391 F. 2d 555 (2d Cir. 1968) this court had before it the question of whether a class action was proper by a single "odd-lot" purchaser of securities on behalf of himself and an estimated 3,750,000 other odd-lot traders in an action alleging violations of the Sher 'See also. Philadelphia Housing Authority v. American Standard, 309 F. Supp. 1057 (E. D. Pa. 1969): Pfizer and Co., Inc. v. Clark County Hospital Ass'n, 69 Civ. 768 (S. D. N. Y. 1970); North Carolina v. Chas. Pizer and Co., 69 Civ. 839 (S. D. N. Y. 1970). Rule 23(a). Prerequisites to Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or 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. Section 23(b). Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfled, and in addition: Number 513-78 4-12-71 man Act. Judge Medina in a lengthy opinion held that a class action under these circumstances was maintainable under the provisions of revised Rule 23(b)(3), and the holding in Eisen would appear largely controlling in the present case. Rather clearly the requirements of Rule 23(a) have been met in that joinder of all the members would be impossible, questions of law and fact as well as claims and defenses are typical of all the members, and the representation by the state adequately protects the class members' interests. Obviously the only practical way that individual consumers could recover in the circumstances of this case is through the device of class representation, and, as Judge Medina noted, "the class suit [is designed to provide small claimants with a method of obtaining redress for claims which would otherwise be too small to warrant individual litigation." [391 F. 2d at 560.] In addition, as Judge Medina pointed out, under both the old and new versions of Rule 23, antitrust violations involving large numbers of individuals have been held to merit treatment as class actions." [Adequacy of Notice} The appellants also attack the adequacy of the notice given to consumers pursuant to Rule 23(c)(2). This section calls for "the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." As noted above, notice The matters pertinent to the findings include: (A) the interest of members 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 undesirability 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. Kainz v. Anheuser Busch, Inc. [1952 TRADE CASES 67,221]. 194 F. 2d 737 (7 Cir.), cert. denied, 344 U. S. 820 (1952): City of Philadel phia v. Morton Salt Co. (1965 TRADE CASES 171,611), 248 F. Supp. 506 (E. D. Pa. 1965); Seigel v. Chicken Delight, Inc. [1967 TRADE CASES 172,192]. 271 F. Supp. 722 (N. D. Cal. 1967): Philadelphia Electric Co. v. Anaconda Brass Co. (1968 TRADE CASES 1 72.359). 43 F. R. D. 452 (E. D. Pa. 1968): ct. Norwalk CORE v. Norwalk Redevelopment Agency, 395 F. 2d 920 (2d Cir. 1968); Hohmann v. Packard Investment Co., 399 F. 2d 711 (7 Cir. 1968). Sce. Kaplan, "Continuing Work of the Civil Committee: 1966 Amendments of the Federal Rules of Civil Procedure (1)," 81 Harv. L. Rev. 356 (1967). 1971, Commerce Clearing House, Inc. Number 513-79 4-12-71 Cited 1971 Trade Cases West Virginia v. Chas. Pfizer & Co., Inc. to consumers was published in quarterpage, prominently headlined ads in every daily newspaper in the participating states. There are no precise rules as to what constitutes adequate notice, and the due process standards have been held to vary depending on the circumstances of each case. In the present action notice by publication was obviously the only practical alternative. The Supreme Court in Mullane v. Central Hanover Trust Co., 339 U. S. 306, 317 (1949) noted: "This Court has not hesitated to approve of resort to publication as a customary substitute in another class of cases where it is not reasonably possible or practicable to give more adequate warning." Judge Weinstein in Dolgow v. Anderson, 43 F. R. D. 472, 497, 498 (E. D. N. Y. 1968) commented on the particular notice problem involved here. In determining what constitutes "the best notice practicable under the circumstances," it is necessary to remember that the recent amendments were specifically designed to broaden the usefulness of the class action device. emphasizing the notice requirement that purpose may be defeated. To re By over quire the [4] present plaintiffs to provide immediate actual notice to each member of the classes involved [over 200,000] would, for all practical purposes spell the immediate end to this litigation, It should also be noted that the Judicial Panel on Multi-District Litigation has used Judge Wyatt's notice in the present case as the model for federal trial courts. Manual for Complex and Multidistrict Litigation, 1 Pt., 2 Moore, App. 1.65 (1970). If this type of litigation is to be entertained at all, therefore, the methods of notice used by the district court here would appear adequate to meet the due process problem. ["Book-of-the-Month-Club" Procedure] There is one aspect of the manner in which the consumer class recovery was handled that does present some difficulty, although not mentioned by appellants, and that is allowing the states to recover on behalf of this class without requiring any affirmative indication from individual members that they wished to assign their claims in this manner. There are some cases where the courts have required class members to give notice that they wish to participate. Philadelphia Electric Co. v. Anaconda Brass Co. (1968 TRADE CASES 172.3591 (upra at 459): Harris v. Jones, 41 F. R. D. 71, 74-75 (D. Utah. 1966); Iowa v. Union Asphalt and Reading Trade Regulation Reports 90,237 We conclude, however, that the use of what might be termed the "Book-of-theMonth-Club" procedure in these circumstances should be permitted. The notice stated that those not filing individual claims by a certain date would be assumed to be authorizing the state through its Attorney General to recover on their behalf. Presumably there were among this group some who read the notice and made an affirmative decision to assign their claims. Undoubtedly there were also those who did not receive notice, and it is with this group we should be concerned. Since under the revised rule those in a (b)(3) class who do not elect to opt out will be bound by the judgment, it is difficult to see how those who do not receive notice but on whose behalf damages are awarded to the state are in any way harmed by permitting the use of this procedure. To require those who wish to authorize the state to recover for them to affirmatively notify the court to this effect would obviously, as a practical matter, be likely to reduce the amount of these recoveries to a minimum. The other points raised by appellants appear to be clearly without merit and can be dealt with summarily. Appellants make several rather vague charges of conflict-of-interest as to various counsel for both the wholesaler-retailer class and the government plaintiffs. The district court specifically found that "from the affidavits submitted and [from] the Court's own knowledge of the progress of these negotiations, it is clear that the proposed compromise was the result of good faith bargaining at arm's length." The appellants have suggested nothing of substance which would cast doubt on this conclusion. Appellants also attack the wholesalerretailer notice of February 16, 1970 concerning the settlement conference and hearings for failure to mention the plan of allocation submitted by the Committee of Counsel for the wholesaler-retailer class. This is erroneous since the notice clearly referred to the plan and invited any interested party to inspect it at the clerk's office. Appellants also complain that the wholesaler-retailer notices (of June, 1969 and February, 1970) were mailed only to wholesalers and retailers in business as of June, 1969, and therefore failed to notify drug Oils, Inc. [1968 TRADE CASES ! 72,4731. 281 F. ¶ 73,540 90,238 Court Decisions Glen Mfg. Inc. v. Perfect Fit Industries, Inc. gists who went out of business prior to that time. This contention is without merit since the second notice went beyond the Clark-O'Neill trade list to include anyone whose name was available. In addition, it appears that at a later stage in these proceedings when the district court administers the intra-class distributions, individual claims will again be considered. [Merit of Appeal] Some of the appellees have suggested that the taking of this appeal was solely to obtain for the appellants the extra month's interest (some $640,000) as provided in the escrow agreement. There is a letter dated December 18, 1969 from counsel for the minority group of wholesaler-retailers, Edward A. Berman, which suggests that this may be the case. In that letter Mr. Berman states: "Also, our group is convinced that the defendant's modified plan as accepted by most of the committee members invites and demands an appeal from the allocation order because, in our opinion, an Number 513-80 4-12-71 appeal is the only way that the final order can be delayed beyond the thirteenth month." Under the escrow agreement, this extra month's interest, which, of course is not an insubstantial amount in this case, would otherwise have accrued to the government entity plaintiffs and the classes they represent. Sections 1912 and 1927 Title 28 of the United States Code and Rule 38 of the Federal Rules of Appellate Procedure provide that the court may award damages and double costs to the appellee in cases of frivolous and vexatious appeals. The imposition of such sanctions, however, is highly unusual and requires a clear showing of bad faith on the part of appellants. We are unable to find sufficient evidence in the record to warrant such action. Finally we wish to commend Judge Wyatt for the skill and diligence which he has demonstrated in conducting this difficult and complex litigation. Affirmed. IN RE MASTER KEY ANTITRUST LITIGATION Cite as 528 F.2d 5 (1975) 5 ity and damage issues was also not appealable under such doctrine. Appeal dismissed for lack of jurisdiction. In re MASTER KEY ANTITRUST LITIGATION. No. 378, Docket 75-7386. United States Court of Appeals, Argued Oct. 2, 1975. Several states, cities and city agencies as well as private and institutional building owners brought antitrust actions against manufacturers of builders' hardware and lock and key systems. The United States District Court for the District of Connecticut, M. Joseph Blumenfeld, District Judge, 70 F.R.D. 23, certified suits for class action status, ordered cases consolidated and ordered separate trials on liability and dammediate review. The Court of Appeals, Oakes, Circuit Judge, held that, by itself, refusal to certify interlocutory appeal of the subject rulings was not appealable, that appeal will lie from class action certification orders in certain exceptional cases, that instant class action order was not such an exceptional case, that claim that variety of separate issues applicable culiarly to individual plaintiffs would cause confusion and prejudice did not warrant immediate review of consolidation order under the "collateral order" doctrine and that order bifurcating liabil3. Certain alleged trial errors were also argued by Defendants as grounds for reversal. In Three factors which must be present in conjunction before there is the requisite finality warranting appeal from a class action designation are: (1) the designation must be fundamental to further conduct of the case, (2) review of the order must be separable from the merits of the action and (3) the order must be likely to cause irreparable harm in terms of time and money spent in defending a huge class action. Fed.Rules Civ.Proc. rule 23(b)(3), 28 U.S.C.A.; 28 U.S.C.A. § 1291. 4. Courts 405(12.7) Fundamentality is an important ingredient of the test for determining appealability of a class action designation; it is on the basis of possible additional, substantial litigation expenses if the order is not "fundamental" to the litigation and if appellees would pursue their action as individuals should class certification be denied that "fundamentality" has been treated as an appropriate inquiry for determination whether a class view of our dismissal of the indictment, those assertions require no further comment. |
