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Posts Tagged ‘eisen rule’

While doing some research today on another issue, I came across this news clipping from the May 3, 1973 issue of the St. Petersberg Times discussing a federal court of appeals decision in a class action decided a few days before. 

The article begins:

NEW YORK – A three-judge panel of the U.S. Court of Appeals ruled here Monday that a person who files a class-action suit must pay the cost of notifying each person on behalf of whom the suit was brought – even if that means notifying millions of people.

The decision, handed down by Judges Harold R. Medina, J. Edward Lumbard and Paul R. Hays, could, if it stands, bring an end to mass class-action lawsuits.

The decision, Eisen v. Carlisle & Jaquelin, 479 F.2d 1005 (2d Cir. 1973), ultimately did stand.  The United States Supreme Court, in Eisen v. Carlisle & Jaquelin, 417 U.S. 156 (1974), agreed with the Second Circuit panel’s holding that the plaintiff must be required to bear the cost of class notice.  However, in reaching that conclusion the Court created a rule that would for decades become a key argument by plaintiffs in support of certification in class actions: that it is improper for a trial court to consider the merits of the plaintiff’s claims in evaluating class certification.  See Generally Geoffrey P. Miller, Review of the Merits in Class Action Certification, 33 Hofstra L. Rev. 51 (2004).  In this way, the decision, in an odd way, actually contributed to the explosion of class actions between the late 1970s and early 2000s.  Several key recent federal decisions, including In re IPO Securities Litigation, 471 F.3d 24 (2d Cir. 2006) and In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305  (3d Cir. 2008), reflect an erosion of what was previously considered by many authorities to be a hard-and-fast rule preventing any consideration of the merits at the class certification stage.  This interpretation had caused many courts to gloss over practical problems posed by certification of cases in which certification was only arguably appropriate if one accepted the plaintiff’s bare allegations on issues of fact.

So, aside from perhaps marking the end of the use of a hyphen between “class” and “action,” the Second Circuit’s decision in 1973 did not mark the end of anything.

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