Raul F. Rodriguez v. Banco Central, 790 F.2d 172, 1st Cir. (1986)
Raul F. Rodriguez v. Banco Central, 790 F.2d 172, 1st Cir. (1986)
Raul F. Rodriguez v. Banco Central, 790 F.2d 172, 1st Cir. (1986)
2d 172
4 Fed.R.Serv.3d 1325
I.
2
and a number of real estate owners, developers, and brokers. The complaint
alleges that defendants defrauded plaintiffs in connection with the sale of
property in three real estate developments in the state of Florida in violation of
the Interstate Land Sales Full Disclosure Act, 15 U.S.C. Secs. 1701 et seq.
(1982 & Supp. II 1984), the Securities Exchange Act of 1934, 15 U.S.C. Secs.
78a et seq. (1982 & Supp. II 1984), and the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. Secs. 1961 et seq. (1982 & Supp. II 1984).
Plaintiffs further allege that they represent a class of more than 3,000 similarly
situated persons who purchased real estate from defendants.
3
On September 16, 1982, plaintiffs filed a motion for class certification, which
defendants opposed.1 The district court directed the parties to engage in
discovery in respect to the class certification issue. Over the following two
years, discovery took place under supervision of a magistrate. During this
period additional named plaintiffs also joined in the complaint.
At a conference held on April 26, 1985, the magistrate said he would allow
defendants discovery as to all plaintiffs, and not simply as to a representative
group of the putative class. Thereafter, on May 14, plaintiffs filed a motion
requesting that the decision regarding class certification be held in abeyance
pending trial of a "test case" involving one of the named plaintiffs. The district
court approved plaintiffs' motion over the objection of defendants on May 31,
1985, and subsequently denied defendants' motion for reconsideration. This
appeal followed.
II.
5
Defendants' principal contention is that the district court erred in deciding, over
their objection, to postpone its ruling on plaintiff class certification until after
the trial of a test case. Defendants persuasively point out that the district court's
decision to proceed with a test case prior to ruling on plaintiffs' motion for class
certification pursuant to Fed.R.Civ.P. 23(b)(3) is proscribed by Fed.R.Civ.P.
23(c),2 which provides in subpart (c)(1) that a district court must make a
determination on the question of class certification "[a]s soon as practicable
after the commencement of an action." Although a ruling on certification may
be made conditionally and subsequently altered or amended, subpart (c)(1)
states that any amendment should be made "before the decision on the merits."3
Defendants not only contend that the court's order violates the strictures of Rule
23(c), but also urge that it will result in a fundamentally unfair procedure. If the
plaintiff class is certified, and if notice only issues after a decision on the merits
in a test case, the absent class members will not be bound by an adverse
judgment, for they can request exclusion from the class under Rule 23(c)(2). If,
on the other hand, the result of the test case is favorable to the plaintiff, the
absent class members will be free to participate in the judgment. Defendants
point out that those cases which hold or suggest that it may be appropriate for a
district court to proceed with a test case on the merits before ruling on the issue
of class certification in a Rule 23(b)(3) class action are all predicated on the
theory that the party opposing the class has either expressly or constructively
waived its right under Rule 23(c) to a premerits determination of the class
certification issue.4 Here the parties opposing the class have not waived their
right, and strenuously oppose the procedure.
7
These are potent arguments; the district court, on its own initiative, may well
wish to reconsider its proposed actions in light of them. Nonetheless, this court
cannot adjudicate these matters unless we have jurisdiction over this appeal.
After careful consideration, we conclude that the order from which the appeal
is taken is not appealable at this time, being interlocutory and outside the
collateral order exception to the final judgment rule. Accordingly, we must
dismiss the appeal.
A. Untimeliness of Notice of Appeal
10
Here, the district court's order granting plaintiffs' motion to hold class
certification in abeyance pending trial of a test case was entered on June 4,
1985. Nine days later, on June 13, 1985, defendants filed a motion for
reconsideration in the district court requesting the court to set aside its June 4
order or, in the alternative, to permit an appeal of the issue to this court under
28 U.S.C. Sec. 1292(b) (1982). 5 Defendants' motion for reconsideration was
denied in an order entered on July 2, 1985. On July 29, 1985, defendants filed
their notice of appeal. Thus, while defendants' notice of appeal was filed within
30 days of the entry of the district court's denial of their motion for
reconsideration, more than 30 days had elapsed since the entry of the district
12
If a timely motion under the Federal Rules of Civil Procedure is filed in the
district court by any party: (i) for judgment under Rule 50(b); (ii) under Rule
52(b) to amend or make additional findings of fact, whether or not an alteration
of the judgment would be required if the motion is granted; (iii) under Rule 59
to alter or amend the judgment; or (iv) under Rule 59 for a new trial, the time
for appeal for all parties shall run from the entry of the order denying a new
trial or granting or denying any other such motion.
13
Plaintiffs argue that defendants' June 13, 1985 motion for reconsideration did
not restart the 30-day period for notice of appeal prescribed in Fed.R.App.P.
4(a)(1), because it was not a motion made under Fed.R.Civ.P. 50(b), 52(b), or
59. Therefore, they say, defendants' notice of appeal was untimely as to the
underlying June 4, 1985 order holding class certification in abeyance.
14
15
Rule 59, which concerns new trials and amendment of judgments, provides in
subpart (e) for motions "to alter or amend a judgment," and states that "[a]
motion to alter or amend the judgment shall be served not later than 10 days
after entry of the judgment." While defendants' motion for reconsideration was
made within ten days of the district court's June 4 order holding class
certification in abeyance, plaintiffs argue that Rule 59(e) has no application
here because the district court's June 4 order was not a "judgment."
16
Express, Inc., 733 F.2d 39 (6th Cir.1984) (applying Rule 59(e) to motion for
reconsideration of district court's order staying proceedings pending arbitration,
where order was appealable under 28 U.S.C. Sec. 1292(a)(1)). We, therefore,
reject plaintiffs' contention that defendants' notice of appeal was filed too late.
17
We would be tempted to reach the same result even were the technical
applicability of Rule 59 in doubt. The vast majority of interlocutory district
court orders are nonappealable, so a litigant's only speedy avenue of recourse is
to request the district court to reconsider its ruling. Little purpose would be
served in penalizing a party for requesting a district court to reconsider a
disputed interlocutory ruling before attempting to take its grievance to the court
of appeals.
B. Finality
18
But while the notice of appeal was thus timely filed, we believe that defendants
are faced with an insurmountable hurdle in 28 U.S.C. Sec. 1291 (1982). Section
1291 only grants the courts of appeals jurisdiction over appeals from "final
decisions" of district courts.7 The challenged order was plainly interlocutory-not a "final decision" in any normal sense. Defendants concede this, but insist
that it falls within the collateral order exception to the final judgment rule
articulated in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 545-47,
69 S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949). E.g., Boreri v. Fiat S.P.A., 763
F.2d 17, 21 (1st Cir.1985); In re Continental Investment Corp., 637 F.2d 1, 4-5
(1st Cir.1980). We are not persuaded.8
19
23
All four of the Cohen criteria must be met for an order to merit review as a
collateral order. Applying these criteria to the challenged order, we find the
third criterion, and hence the Cohen exception itself, inapplicable.
24
The first, second and fourth prongs of the Cohen test probably are satisfied in
the instant case. As respects the first, the district court's order appears capable
of review without disrupting the trial proper. Present review of the district
court's test case order would not involve "considerations that are 'enmeshed in
the factual and legal issues comprising the plaintiff's cause of action,' " Coopers
& Lybrand v. Livesay, 437 U.S. 463, 469, 98 S.Ct. 2454, 2458, 57 L.Ed.2d 351
(1978) (quoting Mercantile National Bank v. Langdeau, 371 U.S. 555, 558, 83
S.Ct. 520, 522, 9 L.Ed.2d 523 (1963)), so "the issues which animate this
interlocutory appeal have no direct effect upon, and are not directly affected by,
the triable issues in the main litigation." Boreri v. Fiat S.P.A., 763 F.2d at 22.
25
Likewise, the second Cohen criterion--that the interlocutory order under appeal
is "final" and will not be amended later in the district court proceedings--seems
to be met. Since the district court apparently intends to use information gleaned
from the proceedings in the test case to inform its decision on the certification
question, it is unlikely to change its plans and rule on class certification prior to
resolving the merits of the test case. See Moses H. Cone Memorial Hospital v.
Mercury Construction Corp., 460 U.S. 1, 12 n. 14, 103 S.Ct. 927, 935 n. 14, 74
L.Ed.2d 765 (1983); United States v. Alcon Laboratories, 636 F.2d 876, 885
(1st Cir.), cert. denied, 451 U.S. 1017, 101 S.Ct. 3005, 69 L.Ed.2d 388 (1981).
The instant ruling is in this respect arguably distinguishable from an order
granting or denying class certification. In holding that a decision granting or
denying class certification is nonappealable under Cohen, the Supreme Court
noted that there is a substantial possibility that the district court will reverse
itself or amend its certification order prior to final judgment. Coopers &
Lybrand v. Livesay, 437 U.S. at 469 & n. 11, 98 S.Ct. at 2458 & n. 11. See also
Fed.R.Civ.P. 23(c)(1).
26
Finally, in keeping with the fourth Cohen criterion, this appeal can be said to
involve an "important and unsettled question of controlling law." In re
Continental Investment Corp., 637 F.2d at 5; compare, e.g., Peritz v. Liberty
Loan Corp., 523 F.2d 349, 354 (7th Cir.1975) ("the order determining class
status is to be made and finalized 'before the decision on the merits' ") with
Katz v. Carte Blanche Corp., 496 F.2d 747, 762 (3d Cir.) (en banc) (permitting
test case to proceed where defendant opposed prejudgment certification of
plaintiff class), cert. denied, 419 U.S. 885, 95 S.Ct. 152, 42 L.Ed.2d 125
(1974); see generally Note, Reopening the Debate: Postjudgment Certification
in Rule 23(b)(3) Class Actions, 66 Cornell L.Rev. 1218 (1981).
27
But while the first, second and fourth Cohen factors are arguably satisfied, the
third factor--whether the right asserted is incapable of vindication on appeal
from a final judgment--is not. In In re San Juan Star Co., 662 F.2d 108, 112 (1st
Cir.1981), we stated that the third Cohen factor "should be the 'central focus'
and perhaps even the 'dispositive criterion' of appellate jurisdiction over
[interlocutory] orders." This factor " 'turns on whether irreparable harm would
result to appellants, not from the district court order itself, but from a delay in
obtaining appellate review of that order,' " and it is clear that "potential burdens
of litigation or relitigation cannot alone constitute the requisite harm." Id. In the
instant case, we believe the challenged order could be effectively reviewed
after a final judgment.
28
Defendants argue that the order cannot be effectively reviewed after a final
judgment on the merits because the district court's decision to subject them to a
test case before ruling on the issue of class certification will cause them
irreparable harm in three principal ways: (1) a decision in the test case will bind
all the defendants without binding anyone else other than the named test
plaintiff; (2) the district court's decision to postpone its ruling on the
certification issue has tolled the running of the statute of limitations with
respect to all members of the putative class; and (3) the district court's decision
deprives them of their seventh amendment right to a unitary trial before a single
jury on all issues.
29
The difficulty with all of these arguments is that the same alleged harms inhere
in the situation where a district court erroneously refuses to certify a plaintiff
class. Yet the Supreme Court has held that an erroneous refusal to certify is not
immediately appealable under the Cohen collateral order exception. Coopers &
Lybrand v. Livesay, 437 U.S. at 468-69, 98 S.Ct. at 2457-58. Just as the
Supreme Court believed there that sufficient appellate vindication of an
erroneous refusal to certify a plaintiff class could be secured after a final
judgment, we believe that sufficient vindication can later be obtained here,
obviating any need for interlocutory review.
30
hand, if the test plaintiff prevails and the class is certified, the class members
will be free to participate in a favorable judgment.
31
32
Moreover, if there were a judgment for plaintiff in the test case and the plaintiff
class were subsequently certified, the effects of the district court's allegedly
erroneous manner of proceeding could be cured on appeal by vacating the order
certifying the class. Peritz v. Liberty Loan Corp., 523 F.2d 349, 352-55 (7th
Cir.1975). Under this scenario, only the test plaintiff would be able to
participate in the judgment; the putative class members would have to bring a
second action to try their claims. Defendants might have to endure a second
trial on the merits but, as we noted above, the potential burdens of relitigation
do not constitute irreparable harm. In re San Juan Star Co., 662 F.2d at 112.
Thus, we cannot say that the effects upon defendants of undergoing the test
case procedure and waiting to appeal in the usual course are so serious as to
render the rights they assert "incapable" of later vindication.
33
governs the limitations period in the case at bar, if the district court were to rule
promptly on the issue of class certification and refuse to certify the class, the
statute of limitations would run again with respect to the individual claims of
the putative class members. Fernandez v. Chardon, 681 F.2d 42, 49-50 (1st
Cir.1982), aff'd sub nom. Chardon v. Fumero Soto, 462 U.S. 650, 103 S.Ct.
2611, 77 L.Ed.2d 74 (1983).10 However, the limitations period would not begin
to run again with respect to the class; after the district court entered a final
judgment on the merits, the putative class members could promptly intervene
and appeal from the denial of class certification without fear that their claims
were time-barred. United Airlines, Inc. v. McDonald, 432 U.S. at 391-95 & n.
15, 97 S.Ct. at 2468-70 & n. 15.
34
While the district court's decision to proceed with a test case does not extend
defendants' exposure to liability from the class claims, it arguably extends their
exposure with respect to the individual claims. But, even if defendants were
entitled to the interlocutory relief they seek, it is not at all clear that their
exposure to liability from individual claims would be appreciably shortened on
remand, because the district court might certify the plaintiff class, or
conditionally certify the class pending further consideration on the eve of
judgment. See Fed.R.Civ.P. 23(c)(1). Furthermore, defendants appear fully
apprised of the scope of their potential liability. In these circumstances, we do
not think that the suspension of the limitations period in respect to the
individual claims is causing defendants irreparable harm.
35
Third, citing the Third Circuit's decision in Katz v. Carte Blanche Corp., 496
F.2d 747, 761-62 (3d Cir.) (en banc), cert. denied, 419 U.S. 885, 95 S.Ct. 152,
42 L.Ed.2d 125 (1974), defendants argue that the district court's order causes
them irreparable harm because the seventh amendment guarantees them "a
right to a unitary trial before a single jury on all issues." However, the Katz
court did not hold that separating the issues of liability and class certification
necessarily infringes on the seventh amendment; it merely suggested that, in
certain circumstances, it might. Id. As Professors Wright and Miller have
written, "there is no [general] constitutional impediment to trying different
issues to the jury at separate times," 7A C. Wright & A. Miller, Federal Practice
& Procedure Sec. 1801, at 268 (1972), and defendants have not made any
concrete showing of prejudice flowing from the bifurcation of the issues of
liability and certification. See Gasoline Products Co. v. Champlin Refining Co.,
283 U.S. 494, 498-99, 51 S.Ct. 513, 514-15, 75 L.Ed. 1188 (1931); Franklin
Music Co. v. American Broadcasting Co., 616 F.2d 528, 538 (3d Cir.1980).
From this vantage point, we decline to speculate on how the district court's
manner of proceeding might possibly infringe on any seventh amendment rights
of defendants, if it infringes at all.
36
37
Because the district court's order does not cause defendants irreparable harm
and the defendants' asserted right to secure a ruling on the issue of class
certification before the district court renders a judgment on the merits is
capable of vindication on appeal from a final judgment, we hold that this
interlocutory appeal does not fall within the Cohen collateral order exception to
the final judgment rule.
38
Appeal dismissed.
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.
2
See, e.g., Wright v. Schock, 742 F.2d 541 (9th Cir.1984) (district court did not
abuse its discretion in ruling on defendants' motion for summary judgment prior
to ruling on plaintiffs' motion for class certification where defendants implicitly
consented to district court's manner of proceeding); Postow v. OBA Federal
Savings & Loan Ass'n, 627 F.2d 1370 (D.C.Cir.1980) (district court did not
abuse its discretion in sending notice to class members after granting plaintiffs'
Section 1291 provides that "[t]he courts of appeals ... shall have jurisdiction of
appeals from all final decisions of the district courts of the United States, ...
except where a direct review may be had in the Supreme Court."
Our conclusion that the district court's interlocutory order is nonappealable has
nothing to do with plaintiffs' insistence that, because the district court rejected
defendants' request to certify an appeal on the test case issue under 28 U.S.C.
Sec. 1292(b), see note 5, supra and accompanying text, they are precluded for
that reason from relying on the collateral order doctrine. As the Third Circuit
has said, " '[s]ince the discretion of the trial judge whether to certify [under
section 1292(b) ] is itself unreviewable, the value of immediate review in the
"small class" of cases where it is warranted under the collateral order doctrine
could be irretrievably lost if [the] view that denial of certification per se bars
interlocutory review were to prevail.' " Forsyth v. Kleindienst, 599 F.2d 1203,
1208 (3d Cir.1979) (quoting Briggs v. Goodwin, 569 F.2d 10, 60
(D.C.Cir.1977) (Wilkey, J., dissenting), cert. denied, 437 U.S. 904, 98 S.Ct.
3089, 57 L.Ed.2d 1133 (1978)), cert. denied, 453 U.S. 913, 101 S.Ct. 3147, 69
L.Ed.2d 997 (1981)
9
10
We need not express any view as to whether the statute of limitations would
begin to run anew with respect to the individual claims of the putative class
members, or whether they would only gain the benefit of suspension of the
limitations period. Fernandez v. Chardon, 681 F.2d at 50