Eisen v. Carlisle & Jacquelin Motion for Leave to File Brief and Brief Amicus Curiae

    I n' the

four! of %  Imltft
October Teem, 1973

No. 73-203

Morton E isen, on Behalf of Himself and All Other Pur­
chasers and Sellers of “ Odd-Lots” on the New York 
Stock Exchange Similarly Situated,

Petitioner,

Carlisle &  J acqueijn and DeCoppet & D oremus, Each 
Limited Partnerships Under New York Partnership 
Law, Article 8 and New Y ork Stock E xchange, an 
Unincorporated Association.

ON A P PE A L  P R O M  T H E  U N IT E D  STATES COURT OF APPE A LS 
FOR T H E  SECOND C IR C U IT

MOTION FOR LEAVE TO FILE BRIEF AND BRIEF OF THE 
NEW YORK STATE TRIAL LAWYERS ASSOCIATION, 

AMICUS CURIAE

S heldon Y. B urman
Attorney for Amicus Curiae, 

New York State Trial 
Lawyers Association 

21 East 40 Street 
New York, New York 10016



I N D E X

Motion for Leave to File Brief Amicus Curiae ..........  1

Opinion Below ................................................................... 3

Constitutional, Statutory and Procedural Rule Involved 4

Statement of Case.............................................................  4

Questions Involved ...........................................................  7

Summary of Argument ....................................................  7

A rgument :

I. The constitutional rights of the class members 
are violated by denying them realistic access to 
the courts because of the financial inability of 
the plaintiff .........................................................  9

II. Actual individual notice pursuant to Rule 23 
(c ) (2) to all class members is neither consti­
tutionally nor statutorily required ..................  12
A. Constitutional Requirements ........................ 12
B. Statutory Requirements.................................  17

1. Type of Class A ction...............................  17

2. Limited Notice Requirement....................  19
3. Type of Notice..........................................  20

4. Timing of Notice....................................... 22

5. Cost of Notice............................................  23

PAGE



11

III. A fluid class recovery is eminently proper as an 
exercise of the Court’s general equitable powers, 
pursuant to Rule 23, and to foster the remedial 
intent of the antitrust and securities laws ....... 25

Conclusion .................................................................................  28

T able of A uthorities
Cases:

Affiliated Ute Citizens v. U. S., 406 U.S. 128 (1972) ....... 26
Almenares v. Wyman, 453 F.2d 1075, cert. den. 405 U.S.

944 (1972) ....................................................................... 18
Armstrong v. Manzo, 380 U.S. 545 (1965) ..................... 9

Bebchick v. Public Utilities Comm., 318 F.2d 187 (D.C.
Cir., en banc), cert. den. 373 U.S. 913 (1963) ..............  26

Berland v. Mack, 48 F.R.D. 121 (S.D.N.Y. 1969) ......... 23
Bigelow v. R.K.O. Radio Pictures, 327 U.S. 251 (1946) .. 26
Boddie v. State of Connecticut, 401 U.S. 371 (1970) ..... 10
Bolling v. Sharpe, 347 U.S. 497 (1953) .............................  11
Bowen v. Haekett, Civil Action No. 5038 (D.C. R.I., 

Order dated May 10, 1973) .........................................  20

Commissioner of Internal Revenue v. Heinger, 320 U.S.
467 (1943) ........................    24

Commissioner of Internal Revenue v. Tellier, 383 U.S.
687 (1966) ....................................................................... 24

Daar v. Yellow Cab Co., 67 Cal.2d 695, 433 P.2d 732
(1967) ..............................................................................  26

Deckert v. Independence Shares Corp., 311 U.S. 282,
288 (1940) ....................................................................... 25

Dolgow v. Anderson, 43 F.R.D. 472 (E.D.N.Y. 1968) .... 23

PAGE



I l l

Eseott v. Barchris Construction Corp., 340 F.2d 731 
(2d Cir. 1965) .................................................................  11

Feder v. Harrington, 52 F.R.D. 178 (S.D.N.Y. 1970) .... 23 
Federal Land Bank v. Bismarck Lumber Co., 314 U.S.

95 (1941) ........................................................................  20
Francis v. Davidson, 340 F.S. 351 (D. Md. 1972) ........... 20

Griffin v. Illinois, 351 U.S. 12 (1956) .............................  11

Hammond v. Powell, 462 F.2d 1053 (4th Cir. 1973) ....... 20
Hanover Shoe Co. v. United Shoe Machinery Corp., 392

U.S. 481 (1968).......................................... .................. 25, 26
Hansberry v. Lee, 311 U.S. 32 (1940) ......................13,14,15

In re Antibiotic Antitrust Actions, 333 F.S. 278 (S.D.
N.Y. 1971), mand. den., 449 F.2d 119 (2d Cir. 1971) .. 17,

26

PAGE

J. I. Case & Co. v. Borak, 377 U.S. 426 (1964) ..............  25

Katz v. Carte Blanche, 17 FR Serv. 2d 279,------F.2d
------ (3d Cir. 1973) .................................... ...................  19

Lamb v. United Security Life Company, 1971-72 Fed.
Sec. L. Rep. 1193,489 (S.D. Iowa 1972) .........................  23

Lee v. Habib, 424 F.2d 891 (D.C. Cir. 1970) ..................  11

Mack v. General Electric Co., Civil Action No. 69-2653
(E.D. Pa., Sept. 7,1971)................................................  23

Miller v. Alexander Grant & Co., 1971-72 Fed. Sec. L.
Rep. 1f93,287 (E.D.N.Y. 1971) ....................................... 23

Mills v. Electric Auto-lite Co,, 396 U.S. 375 (1970) ....... 25



IV

Mullane v. Central Hanover Trust Company, 339 U.S.
306 (1949) ........................................................11, 14, 15, 16

Nolop v. Volpe, 333 F.S. 1364 (D.C.S.D. 1971) ..............  21
Northern Natural Gas Co. v. Grounds, 292 F.S. 619 

(D. Kans. 1968), af’d oth. gds. 441 F.2d 704 (10th Cir. 
1971)................................................................................  20

Ostapowicz v. Johnson Bronze Co., 54 F.R.D. 465 (W.D.
Pa. 1972) ......................................................................... 23

Perma-Life Muffler, Inc. v. Int’l Parts Corp., 392 U.S.
134 (1968) ....................................................................... 26

Phelps Dodge Corp. v. N.L.R.B., 313 U.S. 177 (1940) .... 21

Rothman v. Gonld, 52 F.R.D. 494 (S.D.N.T. 1971) ....... 23

Sam Fox Publishing Co. v. U. S., 366 U.S. 683 (1961) .... 13 
S.E.C. v. Manor Nursing Center, Inc., 485 F.2d 1082

(2d Cir. 1972) .....................................    25
Smith v. Swormstedt, 57 U.S. 288 (1853) ........................  25
State of Hawaii v. Standard Oil Co. of California, 405

U.S. 251 (1972)...............................................................  11
State of Minnesota v. U.S. Steel Corp., 44 F.R.D. 559

(D. Minn. 1968) .............................................................  23
Surowitz v. Hilton Hotels Corp., 383 U.S. 363 (1966) .... 11

Truax v. Corrigan, 257 U.S. 312 (1920) .............................  11

University of Southern Calif, v. Cost of Living Council,
472 F.2d 1065 (T.E.C.A. 1972), cert, den., 93 S. Ct.
1364 (1973) ..................................................................... 25

PAGE



V

West Virginia v. Charles Pfizer, 440 F.2d 1079 (2d Cir.
1971), cert. den. 404 U.S. 871 (1971) ....................17, 21, 26

Wyman v. Lopez, 329 F.S. 483 (W.D.N.Y. 1971), afd  
no op., 404 U.S. 1055 (1972) .......................... ............... 21

Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S.
100 (1969).................. .................................................... 25-26

PAGE

Constitutional Provision:

United States Constitution
Fifth Amendment ........... .................................. 4, 7, 9,11

Rules:

Federal Rules of Civil Procedure
Rule 23 .....................................
Rule 23(a) ..............................
Rule 23(a)(4) .........................
Rule 23(b) ..............................
Rule 23(b)(1) ........................
Rule 23(b)(2) ........................
Rule 23(b)(3) .........................
Rule 2 3 (c )(1 )...........................
Rule 23(c)(2) ......................... .

Rule 2 3 (c )(3 )...........................
Rule 2 3 (c )(4 )...........................
Rule 23(d)(2) .........................
Rule 23(e) .................. .............
Rule 56 .....................................

................. passim
......................5,17
...................... 16
...................... 17
.....8,14,17,18,19
.....8,14,17,18,19
........ -5,14,17, 27
.......... ........... 13
.7, 8,10,12,13,15, 

19, 20, 21, 22, 23
.....................  13
...................18, 22
...................15,16
...................15,16
..................... 18



Statutes :

15 U.S.C. §§1 and 2 ...........................................................  4
15 U.S.C. §§15 and 26 ........................................................ 4
15 U.S.C. §§78(f) and 78aa..............................................  4
26 U.S.C. §162(a)...............................................................  24
28 U.S.C. §§1291 and 1292(b) ................................... .......  4
28 U.S.C. §1915...................................................................8, 24

Other Authorities:

Antineau, Modern Constitutional Law, Secs. 7:13, 7:14;
X II Columbia Forum (Summer 1970) ...................... 9

Advis. Comm. Note, 39 F.R.D. 89 ............................. 10,12,18

Comment, Adequate Representation, Notice and the
New Class Action Rule, 116 U. Pa. L. Rev. 889 ___  13

116 Congressional Record, April 28, 1970 ............ ...... . 28

Homburger, State Class Actions and The Federal 
Rule, 71 Colum. L. Rev. 609, 637-638 (1971) ............. 14

Kaplan, A Prefatory Note, 10 B.C. Ind. & Comm’l L.
Rev. 497, 499 (1969) ....................................................13,17

Miller, Problems in Administering Judicial Relief in 
Class Actions Under Federal Rule 23(b)(3), 54
F.R.D. 501, 512-513 (1972) ................................... .......  27

Miller, Problems of Giving Notice in Class Actions, 
Symposium of Fifth Judicial Circuit, 58 F.R.D. 313,
314-315, 317 (1973) ........... ....... ................................ 13, 22

IB Moore, Fed. Prac. §1.45 (The Manual for Complex
Litigation) ..................................................................... 23

3B Moore, Fed. Prac. 1J23.55 ............. ..................... .......  13



Vll

1952 New York State Judicial Conference Report, pp.
240-241 ....... ............................... ...................... ..... ........ . 14

1973 New York State Judicial Conference Report, pp.
A. 38-39 __________ _________________________ ___  14

Note, Class Actions, Cost of Notice, 1973 Wise. L. Rev.
301 ..................................................................................  23

Note, Proposed Rule 23: Class Actions Reclassified,
51 Virg. L. Rev. 629, 639-640 ......... ...........................13,14

Weinstein, Some Reflections on the “Abusiveness” of
Class Actions, 58 F.R.D. 299, 305 (1973) .................. 27

7A Wright & Miller, Fed. Prac. & Proc.
1(1775 .........
1T1782, p. 103 
H1786, p. 148

PAGE

18
17
13



In the

tyuprmp (Enitrt of the lilnifpft States
O ctober T eem , 1973

No. 73-203

M orton E xsen, on Behalf of Himself and All Other Pur­
chasers and Sellers of “ Odd-Lots” on the New York 
Stock Exchange Similarly Situated,

Petitioner,
-v -

Carlisle & J acquelin  and D e C oppet &  D oremus, Each 
Limited Partnerships Under New York Partnership 
Law, Article 8 and N ew  Y ork S tock  E xchan ge , an 
Unincorporated Association.

ON A P PE A L  PR O M  T H E  U N IT E D  STATES COURT OP APPEALS 
POR T H E  SECOND C IR C U IT

MOTION FOR LEAVE TO FILE BRIEF 
AMICUS CUMAE

The New York State Trial Lawyers Association respect­
fully moves for leave to file a brief amicus curiae in this 
case. The petitioner’s attorney granted consent to this ap­
plication by letter, the original of which has been filed with 
the Clerk. The attorneys for respondents have declined to 
consent to the filing of this brief.

The New York State Trial Lawyers Association is the 
largest organization of trial lawyers in New York State. 
It is the New York affiliate of The Association of Trial 
Lawyers of America. During its approximately 20-year



2

existence, this Association lias utilized its experience and 
knowledge to concern itself with various matters affecting 
the public interest. The right of access to the courts by 
aggrieved consumers and others seeking to utilize judicial 
procedures is of particular concern to the Association.

This case involves issues which shall crucially affect the 
rights of consumers and environmentalists to utilize the 
federal and state courts to redress wrongs against them. 
The viability of the class action remedy, or its demise, is 
the real issue before this court. In viewT of the broad public 
interest ramifications transcending the circumstances of 
this particular case, this Association seeks to present its 
views.

The Association believes this brief should be of some 
assistance to the Court in resolving these issues.

Wherefore, it is respectfully requested that the movant’s 
application be granted.

Respectfully submitted,

S heldon  V. B orman  
Attorney for Movant



I n  th e

Supreme (Enurt of %
O ctober T erm , 1973

No. 73-203

M orton E isen , on Behalf of Himself and All Other Pur­
chasers and Sellers of “ Odd-Lots” on the New York 
Stock Exchange Similarly Situated,

Petitioner,
—v.—

Carlisle & J acquelin  and D e C oppet & D oremus, Each 
Limited Partnerships Under New York Partnership 
Law, Article 8 and N ew  Y ork S tock  E xchan ge , an 
Unincorporated Association.

ON A P PE A L  FR O M  T H E  U N IT E D  STATES COURT OF APPEALS 
FOR T H E  SECOND C IR C U IT

BRIEF OF THE NEW YORK STATE 
TRIAL LAWYERS ASSOCIATION 

AMICUS CURIAE

The interest of amicus is set out in the Motion for Leave 
to Pile, supra.

Opinion Below

The opinion of the United States Court of Appeals for 
the Second Circuit is reported at 479 F.2d 1005.



4

Constitutional, Statutory and Procedural Rule Involved

The constitutional provision involved is the Due Process 
Clause of the Fifth Amendment to the United States Con­
stitution. The rule involved is Rule 23 of the Federal 
Rules of Civil Procedure. The statutory provisions in­
volved are Sections 1 and 2 of the Sherman Act, 15 U.S.C. 
§§1 and 2 and Sections 4 and 16 of the Clayton Act, 15 
U.S.C. §§15 and 26, Sections 6 and 27 of the Securities 
Exchange Act of 1934, 15 U.S.C. §§78 (f) and 78aa (the 
“Exchange Act” ), and 28 U.S.C. §§1291 and 1292(b).

Statement of Case

This proceeding was commenced in May, 1966 as a class 
action on behalf of all persons who were compelled to pay 
an odd-lot (less than 100 shares) differential based on the 
purchase and sale of common stock listed on the New York 
Stock Exchange.

Plaintiff’s complaint asserts that (i) the two limited 
partnership stock brokerage firms who are defendants 
herein, illegally conspired to fix the price of this differen­
tial in violation of the federal antitrust laws; (ii) defendant 
New York Stock Exchange illegally acquiesced in such con­
spiratorial price-fixing in violation of the Securities Ex­
change Act of 1934 and its fiduciary obligation to investors.

The complaint requests damages and injunctive relief, 
including treble damages as to the antitrust claims.

In September, 1966 this action was dismissed as a class 
action (41 F.R.D. 147). Upon appeal by plaintiff, a motion 
to dismiss the appeal was denied (377 F.2d 119, cert. den.



5

386 U.S. 1035), in a decision hereinafter referred to as 
Bisen I. The appeal was thereafter decided in March, 1968 
(391 F.2d 555), in a decision hereinafter referred to as 
Eisen II.

The Eisen II  decision reversed the trial court’s dismissal 
of the class action, holding that the action met the require­
ments of Rule 23(a) F.R.C.P. and was maintainable as a 
class action under Rule 23(b)(3). The trial court was or­
dered to conduct further hearings, however, relating to the 
issues of “notice, adequate representation, effective admin­
istration of the action and any other matters which the 
court may consider pertinent and proper.”

On remand, further hearings were held by the trial court 
on these matters, resulting in decisions by the trial court 
(50 F.R.D. 471; 52 F.R.D. 253; 54 F.R.D. 565). These deci­
sions held “this suit is a proper class action under F.R. 
Civ. P. Rule 23 and, except for assessment of the cost of 
notice yet to be decided, it shall go forward as such.” (52 
F.R.D. 253, 272) The trial court further decided that to 
the extent that individual claims for damages were satis­
fied, a “fluid” recovery could be had, i.e., determination of 
gross damages to the entire class distributed to present 
class members (52 F.R.D. 253, 264).

On the “cost” question, the court ordered defendants to 
pay 90% of the cost1 of the following notice: individual 
notice to approximately 2,000 class members who had ten 
or more transactions; individual notice to 5,000 class mem­
bers selected at random from the over 2,000,000 identifiable 
class members; notice by publication in various news­
papers. Plaintiff’s offer to send individual notice to all

1 54 F.R.D. 565, 573.



6

New York Stock Exchange brokerage houses and commer­
cial banks with large trust departments, was noted by the 
court (52 F.R.D. 253, 267-268). A further suggestion was 
made by plaintiff that notice could be included in customer’s 
monthly confirmation statements from the New York Stock 
Exchange brokerage firms.

On interlocutory appeal, the trial court’s two orders were 
reversed (479 F.2d 1005), in a decision and judgment here­
inafter referred to as Eisen III. The court found, inter 
alia, that individual notice had to be given to all of the 
2,250,000 identifiable class members, notice by publication 
was a “ farce”, a “fluid class” recovery was improper, a 
mini-hearing on allocation of costs improper and that 
plaintiff had to bear the entire cost of notice. One judge 
on the Eisen III panel concurred in the result based only 
on the defendants bearing 90 per cent of the cost of notice.

A petition for an en banc hearing by the Second Circuit 
was denied (5-3), as the en banc panel considered the case 
“ of such extraordinary consequence” that it wanted to 
“ speed” it “ on its way to the Supreme Court” . (479 F.2d 
1020, 1021) A vigorous dissent was delivered by Judge 
Oakes, concurred in by Judge Timbers. The dissent found 
the three-man panel opinion, inter alia, to be “very doubt­
ful to say the least” , “ on its face to give a green light to 
monopolies . . . unhampered by any realistic thread of 
private consumer civil proceedings”, and “not merely ossi­
fies, but destroys” class actions (479 F.2d 1020, 1022-1023).



7

Questions Involved

1. Would dismissal of this class action because of the 
financial inability of plaintiff to pay the cost of notice vio­
late the constitutional right of class members to have their 
“day in court” !

2. Is individual notice required to be given to the ap­
proximately 2,250,000 identifiable class members, with the 
cost thereof borne solely by plaintiff?

3. Is notice by publication to class members, pursuant 
to Rule 23(c)(2) F.R.C.P., constitutionally and statutorily 
proper ?

4. Is it within the equitable powers of the district court 
to adopt procedures and remedies to disgorge past illegal 
profits and deter future illegal conduct of wrongdoers so 
as to effectuate Congressional purposes?

Summary o f Argument

The decision to be rendered in this case involves no less 
than the life, or death, of the class action remedy as a 
means of vindicating the rights of small claimants who are 
the victims of mass illegalities.

It is urged in point I that realistic access to the courts 
is a civil right, protectible by the Due Process Clause of the 
Fifth Amendment to the United States Constitution. Fur­
ther, that to deprive the class members of the right to be 
heard on the merits, because of a dismissal of the class 
action based on the inability of the named plaintiff, who



8

has a claim of approximately $70.00, to pay for the enor­
mous cost of notice, is constitutionally defective.

Point II deals with the constitutional and statutory re­
quirements of notice pursuant to Rule 23(c)(2) F.R. Civ. 
P . On the constitutional level, it is asserted that the crucial 
factor is adequate representation of the class, not notice of 
pendency of the action, which is merely for the purpose of 
permitting class members to opt out.

Moreover, the circumstances in cases of this type render 
opting out from the class entirely “ theoretic rather than 
practical,” because of the small individual claims involved. 
To require the called for notice would only serve as a 
destructive force for the class members, not as a source 
of protection. Only the defendants would benefit. The class 
members will have no remedy if the concepts of the Eisen 
III decision are followed. The constitutional priorities of 
the court below would appear awry.

On the statutory level, Rule 23(c)(2) is viewed by 
Amicus as requiring neither of the following: (i) plaintiff 
to pay for the cost of notice in all cases; (ii) notice in all 
cases where 23(b)(1) or 23(b)(2)-type actions are in­
volved; (iii) individual notice to all identifiable members 
of the class regardless of the “ circumstances” or whether 
it is “practicable” ; (iv) sending out notice at any particular 
time. Eisen III held to the contrary.

The Court’s attention is directed to 28 U.S.C. §1915, 
which codifies the constitutional principle of access to the 
courts for all, asserted in point I of this brief.

In summary, to follow the court below, would completely 
vitiate the intent of Rule 23. As stated by Judge Oakes’



9

en banc dissent, Eisen III “ seems utterly inconsistent with 
the flexible, equitable spirit that motivated the innovative 
1966 amendments to F.R.C.P. 23.”

Point III relates to the propriety of a “ fluid class re­
covery.” Amicus maintains that it is the duty of the courts, 
and within their power, to adjust their remedies to grant 
appropriate relief so as to foster the intent of Congres­
sional enactments. Many decisions of this Court champion 
effective enforcement of the antitrust and securities laws. 
Their relevance to this action unmistakably indicates that 
the “fluid class recovery” management technique employed 
by the trial court and negated by Eisen III, is eminently 
proper. In any event, such technique would appear to only 
apply to a small minority of the class.

A R G U M E N T

I.

The constitutional rights o f the class members are 
violated by denying them realistic access to the courts 
because o f the financial inability o f the plaintiff.

Access to the courts at a “meaningful time and in a 
meaningful manner” 2 is a civil right protectible by the 
Fifth Amendment to the United States Constitution. “ One’s 
day in Court” and “the right to be heard on the merits” 
is “ one of the most fundamental requisites of due proc­
ess.” 3 Obviously, an individual member of the class with 
a $70.00 claim, as plaintiff herein, challenging monopolistic 
practices of defendants with enormous financial resources,

2 Armstrong v. Manzo, 380 U.S. 545, 552 (1965).
3 Antineau, Modern Constitutional Law, Secs. 7 :13, 7 :14; X II 

Columbia Forum (Summer 1970).



10

would not have Ms “day in Court” in a meaningful way, 
except via the class action remedy.4

If the class action procedure may not he availed of by 
the class members herein, they are rendered remediless. 
There is no other available method by which the aggrieved 
class members may redress their grievances which arise 
from the monopolistic practices alleged. Under such cir­
cumstances, the denial of the judicial forum to resolve such 
claims is a violation of constitutional dimensions. Boddie 
v. State of Connecticut, 401 U.8 . 371, 376 (1970).

Even where a statute or a rule, such as Rule 23(c)(2) 
F.R.C.P., is constitutional on its face, if it is applied in 
a manner which deprives individuals of their protectible 
rights and forecloses their opportunity to be heard, such 
rule cannot withstand constitutional scrutiny (Boddie, 
supra, p. 379).

The interpretation placed upon Rule 23(c)(2) by the 
Eisen III court, is clearly a foreclosure of the constitu­
tional rights of the class members to be heard on the merits. 
Requiring plaintiff to pay the cost of notice and dismissing 
the class action as a result sounds the “ death knell” of the 
rights of class members (Eisen I ).4 Obviously, no court 
would knowingly add 6,000,000 cases to its trial calendars, 
nor would defendants welcome such a fusillade of actions.

Moreover, 23(c)(2) notice to the class members merely 
has the purpose of giving them an opportunity to opt out 
so that individual members of the class may control their 
own litigation. Such interest is “ theoretic rather than prac­
tical” (Advis. Comm. Note, 39 F.R.D. 89, 104), however, in 
the type of action herein, where the individual claims are 
too small to warrant individual litigation. The statute of

4 Eisen 1, 370 F.2d 119,120 (1966).



11

limitations having elapsed is another reason which makes 
the opportunity to opt out purely “theoretic.”

“ Civil rules are written to further, not defeat the ends 
of justice,” Surowitz v. Hilton Hotels Corp., 383 U.S. 363, 
373 (1966); cf. Escott v. Barchris Construction Corp., 340 
F.2d 731, 733 (2d Cir. 1965). Where a procedural rule is 
of a type that “ stripped of all real remedy” the prevention 
and redress of wrongs and the enforcement of contracts, 
it is constitutionally defective. Truax v. Corrigan, 257 U.S. 
312, 334 (1920). Not only are the “'due process” rights of 
the Fifth Amendment violated in such instances, but “ equal 
protection of the laws,” which although not contained in 
the Fifth Amendment, is embraced by “due process” con­
cepts. Bolling v. Sharpe, 347 U.S. 497, 499 (1953).

The decision of the Court below, places fatal restrictions 
on the prosecution of consumer and environmental class 
actions, both in federal and state courts, violating the “ im­
possible or impractical obstacle” standards of Mullane v. 
Central Hanover Trust Company, 339 U.S. 306, 313-314 
(1949).

Similarly, the spirit and intent of Rule 23 is vitiated. 
As stated in State of Hawaii v. Standard Oil Co. of Cali­
fornia, 405 U.S. 251 (1972), Rule 23 provides:

“ . . .  for class actions that may enhance the efficacy 
o f private actions by permitting citizens to combine 
their limited resources to achieve a more powerful 
litigation posture” (265-266).

There can be no constitutional propriety in any procedure 
which makes access to the courts dependent upon “the 
amount of money a man has.” Griffin v. Illinois, 351 U.S. 
12, 19 (1956); Lee v. Habib, 424 F.2d 891 (D.C. Cir. 1970).



12

The foregoing unassailably shows that the construction 
of Rule 23(c)(2) by Judge Medina in Eisen I I I  is uncon­
stitutional. It strips the named plaintiff and class members 
of any real remedy because of the financial inability of the 
named plaintiff.

II.

Actual individual notice pursuant to Rule 23(c )(2 )  
to all class members is neither constitutionally nor statu­
torily required.

A. Constitutional Requirements.

The opinion below results in the complete deprivation 
of any relief to which the class members might be entitled. 
Ostensibly, the rationale of the decision is that the con­
stitutional rights of the class members are infringed be­
cause of less than “perfect” notice. Thus, the “perfect” 
notice called for becomes the instrument for the most im­
perfect of remedies, i.e., no remedy. The true purpose of 
notice, vis., “ for the protection of the members of the class 
and otherwise for the fair conduct of the action” is com­
pletely overlooked (Advis. Comm. Note, 39 F.R.D. 69, 
107).

To bury the remedy by individual notice inundation is 
not only unnecessary, but fatal, to the real protection of 
the class. Such notice is of benefit only to the wrongdoers. 
The dismissal of the class actions would permit them to 
retain their ill-begotten gains.

An absurd example of the effect of Eisen III is given by 
Judge Oakes in his en banc dissenting opinion. Since the



13

plaintiff “ can never advance the money for notice to, say, 
all the people in the city phone book, who certainly are 
identifiable,” pollution cases would always be dismissed. 
Finally, Judge Oakes finds Eisen 111 to be “utterly incon­
sistent with the flexible, equitable spirit that motivated the 
innovative 1966 amendments to F.R.C.P. 23” (479 F.2d 1020, 
1023).

It is the adequacy of representation which is the consti­
tutional foundation for permitting class actions to bind 
absent members of the class, not notice. Hansberry v. Lee, 
311 U.S. 32, 42-43 (1940); Sam Fox Publishing Co. v. U. S., 
366 U.S. 683, 691-692 (1961); 3B Moore’s, Fed. Prac. p.3.55; 
7A Wright & Miller, Fed. Prac. & Proe. fll786, p. 148; Note, 
Proposed Rule 23: Class Actions Reclassified, 51 Virg. L. 
Rev. 629, 639-640; Miller, Problems of Giving Notice in 
Class Actions, Symposium of Fifth Judicial Circuit, 58 
F.R.D.. 313, 314-315 (1973); Kaplan, A Prefatory Note, 10 
B.C. Ind. & Comm’l L. Rev. 497, 499 (1969); Comment, Ade­
quate Representation, Notice & the New Class Action Rule, 
116 U. Pa. L. Rev. 889.

Indeed, under original Rule 23(c)5 in force from 1938 
to 1966, notice was required only as to a “ true” class action 
and only upon dismissal or compromise of the action. No 
notice at all was required in a “hybrid” or “ spurious” class

5 Dismissal or compromise. A class action shall not be dismissed 
or compromised without the approval of the court. If the right 
sought to be enforced is one defined in paragraph (1) of subdivision 
(a) of this rule notice of the proposed dismissal or compromise 
shall be given to all members of the class in such manner as the 
Court directs. If the right is one defined in paragraphs (2) or 
(3) of subdivision (a) notice shall be given only if the court re­
quires it.



14

action (51 Vir. L. Rev. 629, 639, supra; 1952 N.Y.S. Judicial 
Conference Report, pp. 240-241). The present counterparts 
of the “ true” , “hybrid” and “ spurious” categories are Rule 
23(b)(1), 23(b)(2) and 23(b)(3), respectively.

A proposed New York State class action statute is 
contained in the 1973 Judicial Conference Report of the 
State of New York. Proposed Section 904 thereof permits 
notice to be dispensed with entirely, in the following in­
stance :

“ . . . where notice would be burdensome and costly, the 
interests of the individual members of the class in 
controlling the litigation minimal, an effective repre­
sentation of the class obtainable without notification” 
(pp. A. 38-39).

It is obvious that the drafters of that section do not 
deem notice to be a constitutional requirement in class 
actions. A  functional point of view is taken, dependent 
on circumstances. See: Homburger, 71 Colum. L. Rev. 609, 
637-638 (1971).

Even where the class is relatively small, such as the 113 
trust funds and beneficiaries thereof, in Mullane, supra, 
notice by publication “ in case of persons missing or un­
known” (p. 317) was expressly held to be constitutionally 
proper. Moreover, the question of the “ finality” (p. 313) 
of a decree was there involved. In Jlansberry, supra, the 
court was also concerned with finality.

Here, however, it must be kept in mind that this action 
is still at a preliminary stage. The class members are not 
bound until judgment is entered. The “ finality” of binding



15

decrees, which was the concern of the Mullane and Hans- 
berry decisions, supra, is not present. Notice pursuant to 
Rule 23(d) (2) and 23(e) remain to be given.

A fortiori, the notice requirements for this type of case, 
if any, are based on standards which are much less strin­
gent. For example, in Hansberry, the court held that con­
siderations relative to proceeding as a class action “differ 
from those which must be taken into account in determin­
ing whether the absent parties are bound by the decree” 
(p. 42), within “due process” concepts.

The average class member was found by the trial court 
to have had approximately five transactions of the asserted 
illegal nature during the four-year period from May, 1962 
through June, 1966. The average odd-lot differential was 
found to be $5.18 per transaction, amounting to a total 
differential of $25.90 (52 F.R.D. 253, 257). The Eisen III 
decision assumed a 5 per cent illegal overcharge on this 
average total differential, or $1.30 per class member actual 
damages and $3.90 for trebled damages (479 F.2d 1005, 
1010).

Common sense would dictate that 6,248,000 claimants 
with such small recovery possibilities have absolutely no 
reason for opting out. Their right to opt out would be 
wholly “ theoretic” . This is particularly so herein where 
the Statute of Limitations would bar new actions.

With the opting out benefit of no practical use to the 
small claimant, or even to the 2,000 class members having 
ten or more transactions who would be given individual 
notice, the only benefit of 23(c)(2) notice would be solely 
to the defendants. Firstly, defendant would be able to ob­
tain a judgment which would be res judicata against all



16

class members who did not opt out. Secondly, even if res 
judicata benefits were not derived by defendant, the stare 
decisis authority of any opinion would be most compelling. 
Thirdly, one-way intervention would be avoided by defen­
dants, i.e., class members could not, as under the old Rule 
23, wait until a favorable determination on the merits was 
made and then intervene. In view of all these benefits 
accruing solely to the defendants, it is not constitutionally 
proper to burden the plaintiff with the cost of notice.

In summary, with respect to the 4,000,000 “unknown” 
members of the class, publication notice is the best notice 
“practicable” within the Mullane doctrine. With respect to 
the approximately 2,250,000 class members who can be 
identified with reasonable effort, and the “unknown” mem­
bers, the following additional notice would be had: (i) indi­
vidual notice to 5,000 class members selected at random 
from the identifiable members of that class; (ii) individual 
notice to all New York Stock Exchange firms; (iii) individ­
ual notice to all commercial banks with large trust depart­
ments, who would have fiduciary obligations to the bene­
ficiaries of these trusts; (iv) the wide newspaper and other 
media coverage of this case; (v) individual notice given to 
approximately 2,000 members having ten or more transac­
tions; and (vi) any notice to be later given under Rule 
23(d)(2) and 23(e). The foregoing notice program ensures 
that all differing opinions, if any, among the class members, 
will have an opportunity to be asserted.

The trial court has found the 23(a)(4) requirement of 
“ adequate representation” to have been met. This finding 
has not been disturbed by the Second Circuit opinion below. 
Since adequate representation is the crucial element to sat­
isfaction of constitutional standards, not notice of pendency



17

of an action, the notice ordered by the trial court is constitu­
tionally proper,

B. Statutory Requirements.

1. Type of Class Action.

The revision of Rule 23 in 1966 had two primary pur­
poses, to wit, (i) avoiding a mutiplieity of suits; and (ii) 
providing a “means of vindicating the rights of groups of 
people who individually would be without effective strength 
to bring their opponents into court at all” (10 B.C. Ind. & 
Comm’l L.J. 497, supra). This latter purpose has been ap­
provingly and unanimously noted in cases arising from the 
Second Circuit Court of Appeals,6 including Eisen I and II.

Rule 23(a) sets forth four conditions precedent to the 
maintenance of a class action. These four requirements 
have all been found to have been met herein and are not 
challenged by defendants or the Eisen III opinion.

Rule 23(b) sets forth three separate categories of actions 
which may be maintained as class actions upon satisfaction 
of Rule 23(a) criteria. This action has been found to fall 
within Rule 23(b) (3), although an analysis of 23(b) (1) and 
(b )(2) reveals, on its face, that this action may be main­
tained under either 23(b)(1)(B) or 23(b)(2). Certainly, a 
determination of the propriety of the challenged monopo­
listic practices “would as a practical matter be dispositive 
of the interests of the other members not parties to the 
adjudication,” either on res judicata or stare decisis princi-

6 In re Antibiotic Antitrust Actions, 333 P.S. 278, 282-283, 289 
(S.D.N.Y., 1971), mand. den., 449 F.2d 119 (2d Cir. 1971),- West 
Virginia v. Charles Pfizer, 440 F.2d 1079, 1090 (2d Cir. 1971), 
cert. den. 404 U.S. 871 (1971); see also: 7A Wright & Miller, Fed. 
Proc. & Prac. §1782, p. 103.



18

pies. At the very least, a decision on the merits would “ sub­
stantially impair or impede their [class members] ability 
to protect their interests.” Under such circumstances, class 
action relief is appropriate under 23(b)(1)(B).

The substantive antitrust and securities issues herein 
are either legal or illegal. Each of the members of the class 
would be identically affected by these issues. The measure 
of damages with respect to members of the class would 
likewise be identical. The only individual issues involved 
would be the exact amount of damages sustained by each 
of the class members. Differences of this type, however, 
would in no way affect the substantive liability questions. 
Indeed, summary judgment pursuant to F.R.C.P. Rule 56 
may be granted, notwithstanding open questions as to the 
damages sustained.

Even if, arguendo, Rule 23(b) (1) (B) were not appropri­
ate, this action would properly be maintainable under 23 
(b) (2) for declaratory and injunctive relief, together with 
incidental monetary damages and restitution. Advis. 
Comm. Note 39 F.R.D. 69, 102; Almenares v. Wyman, 453 
F.2d 1075, 1086 (note 15a), cert. den. 405 U.S. 944 (1972); 
7A Wright & Miller, supra, §1775.

Further flexibility in resolving the common substantive 
issues is provided for in 23(c) (4), in the following manner.

“ (4) When appropriate (A) an action may be brought 
or maintained as a class action with respect to particu­
lar issues, or (B) a class may be divided into subclasses 
and each subclass treated as a class, and the provisions 
of this rule shall then be construed and applied accord­
ingly.”



19

In a recent case Katz v. Carte Blanche,------F .2d_____,
(3d Cir. 1973), 17 F.R. Serv. 2d 279, the liability and dam­
age issue were separated in the above manner. The con­
trolling common liability issue was first to be determined 
with the damage question to be resolved thereafter. As 
stated by the court:

“ Clearly, the controlling question of law as to defen­
dant’s liability in this case is readily amenable to dis­
position by class suit. The question of defendant’s lia­
bility under the Act (Truth-in-Lending) involves a 
single determination of law. Thus, the task facing a 
court in making the threshold determination is essen­
tially the same whether one plaintiff be involved or 
whether a class of 800,000 be involved. The additional 
managerial tasks forced upon a court are more than 
offset by the judicial economy realized in disposing of 
the controlling legal issue in one consolidation proceed­
ing” (p. 282).

Judge Oakes in the en hanc opinion in this case (479 F.2d 
1020, 1023), suggested such an approach, among others, to 
prevent the unnecessary “burial” of this action while viable 
alternatives existed.

2. Limited Notice Requirement.

Rule 23(c)(2) requires notice to be given to class mem­
bers only in class actions “maintained under subdivision 
(b) (3).” If this action is maintainable under Rule 23(b) (1) 
or (b) (2), as set forth above, notice at the pleading stage in 
the proceeding is not required under the statute. The court 
below (Eisen II), however, in dictum, stated that notice is 
constitutionally required in all class actions. For all of the 
reasons more particularly set forth in point I, supra, this



20

view is in error. Additionally, various courts have expressly 
rejected this view and dispensed with 23(c)(2) notice en­
tirely. Ilammond v. Powell, 462 F.2d 1053, 1055 (4th Cir. 
1973); Northern Natural Gas Go. v. Grounds, 292 F.S. 619, 
636 (D. Kans. 1968), af’d oth. gds. 441 F.2d 704 (10th Cir.
1971) ; Francis v. Davidson, 340 F.S. 351, 361 (D. Md.
1972) ; Bowen v. Hackett, Civil Action No. 5038 (D.C. R.I., 
Order dated May 10, 1973).

3. Type of Notice.

Rule 23(c) (2) requires “ the best notice practicable under 
the circumstances, including individual notice to all mem­
bers who can be identified through reasonable effort.”

The court below interprets the latter phrase of the rule, 
starting with the word “ including,” as mandating that per­
fect notice be given, i.e., actual individual notice to each 
and every one of approximately 2,250,000 identifiable class 
members. Under this view, such notice is required regard­
less of the “ circumstances” and without consideration of 
whether such notice is “practicable” or not, or the purpose 
of such notice.

There is nothing in the legislative history of Rule 23 to 
require such a niggardly, delimiting construction of the 
word “ including” . The whole format of Rule 23 is one 
geared to flexibility and judicial inventiveness. The word 
“ including” , within the intendment of Rule 23, and as an 
essential remedial procedure for the enforcement of the 
antitrust and securities laws, and other consumer-oriented 
legislation, should not be considered as a word of limitation, 
but “ simply as an illustrative application of the general 
principle.” Cf., Federal Land Bank v. Bismarck Lumber 
Co., 314 U.S. 95,100 (1941).



21

Similarly, this Court in Phelps Dodge Corp. v. N.L.R.B., 
313 U.S. 177 (1940), so interpreted an unfair labor prac­
tice provision of the National Labor Relations Act. This 
provision called for “ affirmative action, including reinstate­
ment of employees.” It was held that such language did not 
mean that only former employees were within its coverage. 
The Court (Frankfurter, J.) rejected defendant’s limiting 
interpretation of the word “ including”, in the following 
language:

“ To attribute such a function to the participial phrase 
introduced by ‘including’ is to shrivel a versatile prin­
ciple to an illustrative application___The word ‘includ­
ing’ does not lend itself to such destructive significance” 
(p .189).

The word “ including” in 23(c)(2) is merely illustrative 
of one type of notice which may be given, dependent upon 
the “ circumstances.” The cases supportive of this view 
include:

Wyman v. Lopez, 329 F.S. 483, 486 (W.D.N.Y. 
1971), af’d no op., 404 U.S. 1055 (1972):
(Notice to class members via posting of signs in 
local social service departments, although names 
and addresses of all class members known.)

“Drug” Cases, supra, West Virginia v. Pfizer, 440 
F.2d 1079, 1090:
(Notice by publication to consumers of drugs, al­
though large segments of the class were iden­
tifiable.)

Nolop v. Volpe, 333 F.S. 1364 (D.C.S.D. 1971):
(Notice by publication in college newspaper and 
TV and radio station, although names and ad­
dresses of all students known.)



22

In any event, even if such, notice were required, the indi­
vidual notice to approximately 7,000 members of the class 
would meet such stringent requirements. Hence, an ap­
propriate subclass under Buie 23(c)(4) would be created.

Dismissal of the class action would consequently not be 
warranted as to these 7,000 class members, nor the approxi­
mately 4,000,000 unidentifiable class members who would 
receive notice through publication, media coverage, New 
York Stock Exchange firms or from the trust departments 
of large commercial banks, or those who would receive 
notice through their monthly brokerage firm statements.

4. Timing o f Notice.

Buie 23(c)(2) does not state when the required notice 
should be sent out. In the within action, for example, this 
notice has still not been sent out, although the action was 
commenced in 1966. The class members would not be preju­
diced, however, since they could exclude themselves from 
whatever date was set forth in the notice eventually sent 
(See: Miller, supra, 58 F.B.D. 313, 317). However, as a 
practical matter, since the Statute of Limitations would 
foreclose any new actions, the likelihood of opting out by 
class members, the purpose of 23(c)(2) notice, would un­
doubtedly be the product of either ignorance or mistake.

The failure of any class members to intervene, or opt out, 
during this seven-year period, despite this case being well 
known to the financial community and to the public through 
extensive media coverage, is reflective of the theoretic na­
ture of 23(c)(2) notice. When the notice issue at bar is 
viewed in this light, the perfect notice called for by the 
court below appears wholly unrealistic and only conducive 
to gross violations of consumers’ rights.



23

5. Cost of Notice.

Rule 23(c)(2) does not state who shall bear the cost of 
notice. IB Moore, Fed. Prac., §1.45 (Manual for Complex 
Litigation), states on this issue as follows:

“Rule 23 is silent on the cost of preparing and distribut­
ing the required (c) (2) notice. This is an appropriate 
area for the exercise of the court’s discretion, ‘having 
in mind the objective of enabling the class action device 
to be used effectively to prosecute a meritorious claim 
(instead of being foreclosed as too expensive). . . . ”

In the within action, as discussed above, the benefits of 
notice accrue only to defendants. Further, the probability 
of success of plaintiff in this action has been found by the 
trial court, after extensive hearings, to be so compelling 
that 90% of the cost of notice was allocated to the defen­
dants (54 F.R.D. 565). The trial court has properly exer­
cised its discretion.

The apportioning of the cost of notice is not unusual. 
There is substantial authority for such allocation. Dolgow 
v. Anderson, 43 F.R.D. 472 (E.D.N.Y. 1968): Rothman v. 
Gould, 52 F.R.D. 494 (S.D.N.Y. 1971); State of Minnesota 
v. U.S. Steel Corp., 44 F.R.D. 559 (D. Minn. 1968); Borland 
v. M ad, 48 F.R.D. 121 (S.D.N.Y. 1969); Feder v. Earring- 
ton, 52 F.R.D. 178,184 (S.D.N.Y. 1970); Miller v. Alexander 
Grant & Co., 1971-72 Fed. Sec. L. Rep. *[[93,287 (E.D.N.Y. 
1971); Mach v. General Electric Co., Civil Action No. 69- 
2653 (E.D. Pa., Order of September 7, 1971); Lamb v. 
United Security Life Company, 1971-1972 Fed. Sec. L. Rep. 
[[93,489 (S.D. Iowa 1972); Ostapowicz v. Johnson Bronze 
Co., 54 F.R.D. 465, 466 (W.D. Pa. 1972); Note, Class Ac­
tions, Cost of Notice, 1973 Wise, L. Rev. 301.



24

Another factor warranting that the cost of notice he 
borne by defendants, is that such costs are “ ordinary and 
necessary” expenses deductible by defendants for income 
tax purposes, pursuant to 26 U.S.C. 162(a). See: Commis­
sioner of Internal Revenue v. Tellier, 383 U.S. 687 (1966); 
Commissioner of Internal Revenue v. Eeinger, 320 U.S. 467 
(1943).

One other factor militates against plaintiff being asked 
to bear the cost of notice. It is provided by statute (28 
U.S.C. §1915), as follows:

“ (a) Any court of the United States may authorize 
the commencement, prosecution, or defense of any suit 
action or proceeding, civil or criminal, or appeal 
thereon, without prepayment of fees and costs or 
security therefor, by a person who makes affidavit that 
he is unable to pay such cost or give security there­
for . . . ” .

It is clear that the plaintiff is “unable to pay” the cost of 
notice required by the court below to proceed with the pros­
ecution of this action. The constitutional infirmities of de­
priving class members of access to the courts because of 
mere financial inability, urged in point I, supra, has been 
codified by the aforesaid statute.



25

III.

A fluid class recovery is eminently proper as an exer­
cise of the Court’ s general equitable powers, pursuant 
to Rule 23, and to foster the remedial intent o f the anti­
trust and securities laws.

The Federal Courts have the power to “adjust their 
remedies so as to grant the necessary relief where federally 
secured rights are invaded” , and indeed it is “ the duty of 
the courts to be alert to provide such remedies as are nec­
essary to make effective the Congressional purpose”. J. I. 
Case & Co. v. Borak, 377 U.S. 426, 433 (1964); Mills v. 
Electric Auto-lite Co., 396 U.S. 375, 391 (1970); Deckert 
v. Independence Shares Corp., 311 U.S. 282, 288 (1940); 
S.E.C. v. Manor Nursing Center, Inc., 485 F.2d 1082, 1104 
(2d Cir. 1972); University of Southern Calif, v. Cost of 
Living Council, 472 F.2d 1065 (T.E.C.A. 1972), cert, den., 
93 S. Ct. 1364 (1973).

If this action cannot proceed as a class action, it is a 
“green light” for monopolists, consumer defrauders and 
polluters. Consumers would have no remedy against mass 
illegalities, in the state or federal courts. Disrespect for the 
rule of law would thereby be engendered and illegality en­
couraged. The common law equitable power of a court to 
deal with class actions, even before Rule 23, to prevent a 
“ failure of justice,” was enunciated by this court 120 years 
ago. Smith v. Swormstedt, 57 U.S. 288, 302 (1853).

This Court in a long line of cases, has championed the 
effective enforcement of antitrust and securities laws. E.g., 
Hanover Shoe Co. v. United Shoe Machinery Corp., 392 
U.S. 481 (1968); Zenith Radio Corp. v. HaseUine Research,



26

Inc., 395 U.S. 100 (1969); Perma-Life Muffler, Inc. v. Int’l 
Parts Corp., 392 TT.S. 134, 138-139 (1968); Affiliated Ute 
Citizens v. U. S., 406 U.S. 128 (1972).

In Hanover Shoe Co., supra, this court went beyond the 
“fluid class recovery.” It allowed recovery from the anti­
trust wrongdoer even where no damage at all may have been 
sustained, as the additional monopolistic costs may have 
been passed on to the ultimate consumer (p. 494). The 
rationale: To do otherwise would have allowed the wrong­
doer to violate the law with impunity.

The difficulty of ascertaining damages in antitrust eases 
has not deterred this Court from fostering the strong public 
policy underlying the antitrust laws. As stated in Bigelow 
v. B.K.O. Radio Pictures, 327 U.S. 251 (1946):

“ The most elementary conceptions of justice and public 
policy require that the wrongdoer shall bear the risk 
of the uncertainty which his own wrong has created” 
(p. 264).

The Second Circuit, in other opinions contrary to the 
panel below, has expressly permitted “fluid class recovery” . 
In Re Antibiotic Antitrust Actions and West Virginia v. 
Pfizer, supra. There is ample other authority for this pro­
cedure.7

As stated by Judge Lord (333 F.S. 278, 282) in the Anti­
biotic Antitrust Actions, supra, defendants “wrongfully con­
clude that no remedy is better than an imperfect one.” Oth­
erwise, wrongdoers would “freely engage in predatory 
price practices . . . ” (p. 282). See also: Miller, Problems

7 Bebchick v. Public Utilities Comm., 318 F.2d 187 (D..C. Cir., 
en bane), cert. den. 373 U.S. 913 (1963); Daar v. Yellow Cab C o’., 
67 Cal.2d 695, 433 P.2d 732 (1967) ; Miller, infra, 54 F.R.D. 501, 
512-513.



27

in Administering Judicial Relief in Class Actions Under 
Federal Rule 23(b)(3), 54 F.RD. 501, 512-513 (1972); 
Weinstein, Some Reflections on the “Abusiveness” of Class 
Actions,” 58 F.R.D. 299, 305 (1973).

Rule 23 provides no guidance on the “management” prob­
lem, i.e., the ascertaining and distributing of damages. It 
merely sets forth that this element be one of the considera­
tions taken into account by the trial court (Rule 23(b)(3) 
(D) in a 23(b) (3)-type class action. The Advisory Com­
mittee Note, supra, likewise provides no enlightenment on 
this issue. Most assuredly, there is nothing in Rule 23 
itself which bars the use of a “fluid-class recovery” tech­
nique to handle management problems.

On the other hand, there is ample support for a flexible, 
inventive and liberal construction of Rule 23, a strong public 
policy to effectively enforce the antitrust and securities 
laws and permitting courts to adopt remedies which would 
foster the intent of federal legislation. As a deterrent to 
future illegal conduct and to prevent illegality from being 
profitable, the wrongdoers must be disgorged of their 
tainted profits. Plaintiff is acting as a private attorney 
general for this purpose.

In the within action, 56% of the challenged transactions 
have been found to be on computer tapes, which can pre­
cisely identify the individual transactions (52 F.R.D. 253, 
257). Of the remaining 44% of the class, fluid class re­
covery would only be necessary to the extent that individual 
claims were not subsequently satisfied. Thus, the fluid-class 
recovery technique would only apply to a minority of the 
class members. As between the bilked and the bilker, judi­
cial remedies to prevent injustice are entirely within the 
power of the trial court and to be encouraged, not criti­
cized.



28

CONCLUSION

It lias been estimated by U. S. Senator Philip Hart, Chair­
man of the U. S. Senate Subcommittee on Antitrust & 
Monopoly Legislation, that consumers, through “fraud and 
deception in the marketplace” are illegally bilked of “ $174 
to $231 billion each year.” 8

The magnitude of this consumer bilking displays the 
urgent need for effective class action enforcement of the 
antitrust and other consumer laws. Constitutional require­
ments of “due process” mandate access to the courts on 
a realistic basis. To deprive the consumer of a judicial 
remedy, which the dismissal of this class action would surely 
do, would be tantamount to legalizing illegality. Both state 
and federal court proceedings would be so affected.

For the reasons stated above, the decision and judg­
ment of the United States Court of Appeals for the 
Second Circuit ( E isen  I I I ) ,  should be reversed.

Respectfully submitted,

S heldon  V . B tjrman

Attorney for Amicus Curiae, 
New York State Trial 
Lawyers Association 

21 East 40 Street 
New York, New York 10016

Dated: November 29,1973

116 Congress Bee., April 28, 1970.



RECORD PRESS, INC., 95 MORTON ST., NEW YORK, N. Y. 10014— (212) 243-5775 
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