231 Pa. Super. 1 | Pa. Super. Ct. | 1974
Dissenting Opinion
Dissenting Opinion by
The question presented by this appeal is whether an order dismissing a class action is interlocutory or final. The majority of the court has ordered the appeal quashed, and has denied a petition to reconsider its order, without explanatory opinion. I regret and respectfully dissent from this action. My reasons may be summarized as follows:
In certain cases, particularly consumer protection, securities, and civil rights cases, class actions are essential to the vindication of individual rights. In view of this fact, whether an order dismissing a class action is appealable is a question deserving appellate resolution. There is no such resolution in Pennsylvania (unless the unexplained order filed in the present case be so regarded). If the federal cases are consulted, I suggest that one will be persuaded at least to adopt the “death knell” doctrine; and if one looks further, and consults the most recent decisions of other State appellate courts, I suggest that one will conclude that the best rule is that any order dismissing a class action should be held final and therefore appealable. In the ensuing sections of this opinion, after a statement of the case, each of these reasons is considered in turn.
Statement of the Case
Appellants, Edward and Marie Bell, brought an action on their own behalf and as representatives of a class
Appellants have averred: that on December 17, 1971, they negotiated a loan in the amount of $2,520 from Beneficial, secured by a mortgage that Beneficial filed without notice in the Recorder of Deeds Office of Allegheny County; that the mortgage debt was paid in full on April 24, 1972; but that the satisfaction was not recorded until December 27,1972, which was a period well in excess of the mandatory forty-five days. In reply to interrogatories, Beneficial listed fifty-three mortgagors to whom it had made loans secured by mortgages, for which it had been fully reimbursed, but whose mortgages were not timely satisfied. Beneficial in turn filed preliminary objections claiming that the action was not properly a class action. Judge Silvestri sustained the objections without leave to amend. An appeal followed but on Beneficial’s petition the appeal was quashed per ewriam. Appellants filed a petition for reconsideration. On September 19,1974, this petition was granted, Watkins, P. J., Price and Van der Yoort, JJ., dissenting, but on November 14, 1974, after briefs and oral argument, the appeal was again quashed per ewriam, with a
The Importance of Class Actions
In deciding whether an order dismissing a class action is immediately appealable or whether review must await an appeal after adjudication on the merits of the individual action accompanying the class action, it is important that the purposes of the class action not be overlooked.
The historical purpose of class actions was to alleviate the burden on the court in cases where a claim was common to a large number of persons. Greenfield v. Villager Industries, Inc., 483 F. 2d 824, 831 (1973). See also 25 Vanderbilt L. Rev. 911, 913 (1972). The class action also makes possible the effective assertion of many claims that otherwise might not be litigated. In our modern economic system a single harmful act may result in damages to a great many people. There is therefore a need for representative action to vindicate claims that taken individually are too small to justify legal action, but that taken as a group are of significant size. Weeks v. Bareco Oil Co., 125 F. 2d 84, 90 (7th Cir. 1941). In consumer protection, securities, and civil rights cases, the class action is almost a necessity if problems of legal expense and the acquisition of competent counsel are to be overcome. See Note, Appealability of a Class Action Dismissed: The “Death Knell” Doctrine, 39 U. Chi. L. Rev. 403 (1972). Finally, the class action provides a needed supplement to the prosecutorial activities of government agencies. Since governmental manpower and facilities are not plentiful enough to ensure that all statutory violations will be detected, let alone tried, the private class action can serve as an added sanction and deterrent. See J. I. Case Co. v. Borak, 377 U.S. 426, 432 (1964); Kalven & Ros
Reflection upon these several purposes makes it evident that the class action is an important social device. It is against this background that the present case must be decided.
The Absence of Appellate Authority
In general, the Superior Court has jurisdiction only over appeals from final orders, regardless of the nature of the controversy or the amount involved;
The present appeal was not authorized by law, nor was it certified by the lower court, nor has appellee
If the lower court had dismissed the class action and also the individual action, the order would clearly be final. The difficulty appears when, as in the present case, the court dismisses the class action but allows the individual action to continue. In McMonagle v. Allstate Insurance Company, 227 Pa. Superior Ct. 205, 324 A. 2d 414 (1974), this court did not consider the issue of appealability of such an order but proceeded directly to the merits.
This reasoning is not applicable to the opposite order, as in the present case, where instead of being permitted, the class action is put out of court. First, the named plaintiff’s individual action may be for so small an amount that the potential costs of the action will prove prohibitive. Consequently, although permitted, the individual action may as a practical matter be dis
The Federal “Death Knell” Doctrine
The federal courts have for several years wrestled with the problem presented by this case. While their decisions are not binding, their experience is instructive. See McMonagle v. Allstate Insurance Company, supra (Spaeth, J., concurring).
Federal judges have started with the principle that class actions are like other civil actions and therefore an appeal is available only from final orders. Walsh v. City of Detroit, 412 F. 2d 226 (6th Cir. 1969); 28 U.S.C. §1291. In applying this principle, federal judges
When it is obvious that the named plaintiff will continue pressing his claim despite the dismissal of the class action, however, the Second Circuit has not hesi
Hence, the Second Circuit has devised a rule that defines finality according to whether the remaining individual claim is too small to warrant the expense of further suit and the dismissal of the class action sounds the “death knell” for the whole litigation.
Not all the federal circuits have adopted the death knell doctrine, as may be seen by Hackett v. General Host Corporation, 455 F. 2d 618 (3d Cir. 1972), cert. denied, 407 U.S. 925 (1972). A consumer of bread in Philadelphia brought an antitrust action against Philadelphia bakers on behalf of all individual consumers who had purchased pan-baked bread from retail stores in the Philadelphia market area. Her individual claim was approximately nine dollars. The district court dismissed the class action, and the Third Circuit refused to apply the death knell doctrine and dismissed the appeal. The court first noted that in the federal system the doctrine “does not operate at all in those cases in
What Rule Should Pennsylvania Adopt?
From the above discussion it appears that Pennsylvania courts have three alternatives in deciding the appealability of an order dismissing a class action. First, all such orders could be considered interlocutory and
In deciding among these alternatives a good starting point is the federal rule that the requirement of finality should be decided in a practical rather than technical manner. Cohen v. Beneficial Industrial Loan Corp., supra. This rule is not only inherently persuasive but also represents the Pennsylvania rule.
In Commonwealth v. Bosurgi, 411 Pa. 56, 64, 190 A. 2d 304, 308 (1963), the Supreme Court held that an order suppressing evidence may be appealed if under the circumstances of the particular case the “practical effects” of the order give it “such an attribute of finality” as to make it proper to treat it as though it were a final order. Similarly, in Commonwealth v. Elias, 394 Pa. 639, 149 A. 2d 53 (1959), the court held that an order placing a convicted defendant on probation is appealable. The usual rule is that appeals may not be taken in criminal proceedings where judgment of sentence has not been passed. Commonwealth v. Trunk, 311 Pa. 555, 167 A. 333 (1933). However, as the court in Elias explained: “The harm that would be done to a defendant by denying him an appeal from a conviction when sentence is suspended and he is placed on probation is patent. In the instant case the defendant pleaded not guilty and has at all times stoutly maintained his innocence. If he were to comply with the conditions of the probation, which the trial court has imposed upon him, a judgment of sentence would never be entered against him and, in consequence, the errors in his trial, which he alleges, would go unreviewed and become moot. In reality, his compliance with the trial court’s order would be tantamount to an admission of his guilt which
Likewise in civil cases the requirement of finality has been decided in a practical manner. An example is McCahill v. Roberts, 421 Pa. 233, 219 A. 2d 306 (1966). The plaintiffs instituted an action in equity seeking to have their title to certain real estate judicially declared and to enjoin any sale of the real estate. The defendants filed a petition praying that the court enter an order permitting sale free of liens. The lower court entered an' order permitting the sale and directing that the proceeds of the sale be held in escrow pending adjudication of the action. The plaintiffs immediately appealed from this order. A motion to quash was filed. The Supreme Court denied the motion and held: “The court’s order is final in that it effectively puts the plaintiffs ‘out of court’ so far as their present claim is concerned . . . .” Id. at 236, 219 A. 2d at 308. Again, in Brandywine Area Joint School Auth. v. VanCor, Inc., 426 Pa. 448, 233 A. 2d 240 (1967), the court looked beyond legal formalism to the realities of the situation and ruled that orders granting preliminary objections to additional party complaints are final and appealable. And in Broido v. Kinneman, 375 Pa. 568, 101 A. 2d 647 (1954), the court ruled final and appeal-able an order sustaining preliminary objections to a counterclaim, stating: “The order is appealable . . . . Its intendment and effect was to put the defendants out of court so far as their counterclaim was concerned. To that extent the order was final and would, no doubt, have impeded the defendants if unreversed before trial of the plaintiffs’ claim. In so saying, we do not mean to suggest that a final judgment on the original issue raised by the complaint could not have been awaited by the defendants or that, upon appealing from such final
When one accepts this premise, the rationale underlying the death knell doctrine seems persuasive, particularly when one bears in mind the importance of class actions, as already discussed, in providing a remedy for group wrongs by affording relief to small claimants, and in deterring the commission of group injuries.
For these reasons I believe that at the very least Pennsylvania should adopt the death knell doctrine.
The further question must be decided, however, whether Pennsylvania courts should limit themselves to the death knell doctrine. Application of the doctrine does create problems, and a better doctrine may be available.
One problem with the death knell doctrine occurs when the claims are neither so large as to ensure continuation of the action nor so small as to ensure its termination. This problem was highlighted in two companion cases reviewed by the Second Circuit. In Korn v. Franchard Corporation, 443 F. 2d 1301 (2d Cir. 1971), the appeal was allowed since the financial incentive ($386) was considered sufficiently small. However, in Milberg v. Western Pacific R.R. Co., 443 F. 2d 1301, 1306-1307 (2d Cir. 1971), the appeal was dismissed : “While it is true that . . . Milberg’s individual claim, according to her papers, is about $1,000, we refuse to look at her suit through blinders .... [PJlaintiff’s husband, who signed her complaint as attorney, has a claim for at least $7,500 .... Accordingly, we do not believe that the ‘death knell’ doctrine is properly applicable here.”
The dividing line between a final and an interlocutory order may therefore be difficult to draw. The courts may in a particular case be forced to make an ad hoc determination according to such other factors as the subject matter of the dispute, the complexity of the litigation, and the financial resources of the plaintiff, quite apart from the factor of the amount in con
In my judgment we should profit from these remarks and from the experience of the federal courts generally, and, taking the opportunity offered by this appeal, should go beyond the death knell doctrine and hold that all orders dismissing class actions are final and therefore subject to immediate appellate review. In doing so we should be following the lead of several other states, specifically, California,
One advantage has already been discussed; it is that the danger of ad hoc determinations, implicit in the death knell doctrine, would be eliminated. Another advantage would be that the interests of the unnamed class members would be completely protected. The death knell doctrine affords some protection to the class, but not complete protection. Suppose the named plaintiff has a large enough individual claim so that he continues to litigate despite the order dismissing the class action. The death knell doctrine tends to assume that in the course of that litigation the named plaintiff will protect the interest of the unnamed class mem
This shift of focus is not a shift of reasoning. To the contrary, the same reasoning that compels acceptance of the death knell doctrine compels acceptance of a broader rule of appealability. As Judge Hats stated in dissent in City of New York v. International Pipe and Ceramics Corporation, 410 F. 2d 295, 300-301 (2d Cir. 1969): “Certain members of the proposed class [in this case] have claims that are not large enough to warrant their undertaking the expense of separate lawsuits. For those members the order determining that the action is not maintainable as a class action has terminated the litigation .... [A]s to those members of the class . . . the order below is precisely the ‘death knell of the action . . ” And see Miles v. New Jersey Motors, 32 Ohio App. 2d 350, 291 N.E. 2d 758 (1972); Note, Interlocutory Appeal from Orders Striking Class Action Allegations, 70 Colum. L. Rev. 1292 (1970).
Nor is the situation different if we suppose that the unnamed plaintiffs all have claims of sufficient size to proceed on their own in another suit. Certainly, such plaintiffs are not in the same situation as a “death knell named plaintiff” or “a small claim unnamed plaintiff,” for they are not completely foreclosed from collecting their claims. The fact remains, however, that they are prevented from gaining relief in a particular suit; as to that suit, they are out of court.
To hold that all orders dismissing a class action are final and therefore immediately appealable would simply be another application of the principle, already dis
This reasoning applies equally to cases involving orders dismissing a class action. Dismissal of the class action puts the passive members of the class out of court. As the argument that the order of dismissal is not final because the person might sue in futuro was rejected in Brandywine, so too it must be rejected here. It seems only logical that if an order denying joinder of additional parties is final, then an order denying class status, which is merely joinder of a great many persons,
I suspect that the majority has resisted this logic from apprehension that the court would be burdened with appeals. My own judgment is quite to the contrary. The purpose of the final judgment rule is to dispose of litigation by a single appeal,
A corollary consideration is that by permitting immediate appeal an appellate court enables itself to play a larger role in shaping the class action procedures and remedies. Standards can be clearly defined to guide the lower courts in the exercise of their judgment. Note, U. Chi. L. Rev. 403 (1972). Since the United States Supreme Court has decided that in a class action brought under Fed. R. Civ. Pr. 23 individual claims may not be aggregated so as to reach the $10,000 amount required for diversity jurisdiction, Snyder v. Harris, 394 U.S. 332 (1969), it may be expected that state courts will have to decide an increasingly large number of class actions. It is therefore imperative that the procedures to be employed in class actions be uniform and clear.
Conclusion
. In sum, I believe that at the very least Pennsylvania should adopt the “death knell” doctrine. In addition, though, I believe that precedent, sound policy, and practical considerations all support the conclusion that orders dismissing a class action should be considered final orders and therefore appealable. The opinion of Justice Sullivan in Daar v. Yellow Cab Company, supra at 698-699, 433 P. 2d at 735-736, summarizes the arguments
“. .. We conclude that the order in the case at bench is in legal effect a final judgment from which an appeal lies . . . .”
Accordingly, I should not have quashed this appeal, but should have proceeded to hear argument on the merits of the lower court’s order dismissing the class action.
The Appellate Court Jurisdiction Act of July 31, 1970, P. L. 673, No. 223, art. III, §302, 17 P.S. §211.302.
Id. art. V, §501, 17 P.S. §211.501; Genro, Inc. v. International Chemical and Nuclear Corp., 224 Pa. Superior Ct. 60, 302 A. 2d 466 (1973); Lewandowski v. General Tel. Co., 223 Pa. Superior Ct. 476, 302 A. 2d 478 (1973).
“I express no opinion herein as to whether, upon particular facts, a class representative whose class action is terminated may file an appeal as from a final order.” McMonagle v. Allstate Insurance Company, supra at 216, n.18, 324 A. 2d at 420, n.18 (1974) (Cercone, J., opinion in support of the order per curiam).
A plaintiff wlio has been successful in Ms individual action can appeal the order dismissing the class action since that order does not merge with the final decree. Esplin v. Hirschi, 402 F. 2d 94 (10th Cir. 1968) cert. denied, 394 U.S. 928 (1969).
The Seventh Circuit has also rejected the death knell doctrine. Thill Securities Corp. v. New York Stock Exchange, 469 F. 2d 14 (7th Cir. 1972). The Fifth Circuit and the Ninth Circuit, however, have approved the doctrine. Gosa v. Securities Investment Company, 449 F. 2d 1330 (5th Cir. 1971); Falk v. Dempsey-Tegeler & Co., 472 F. 2d 142 (9th Cir. 1972).
“[C]lass actions [are] . . . ‘one of the few legal remedies the small claimant has against those who command the status quo.’ ” Roemisch v. Mutual of Omaha Insurance Co., 39 Ohio St. 2d 119, 126, 314 N.E. 2d 386, 390 (1974) (O’Neill, C. J., concurring).
In addition appellate resolution of the issue would be beneficial because the ruling will significantly affect the conduct of the trial. See Roemisch v. Mutual of Omaha Ins. Co., supra (O’Neili,, C. J., concurring). As Judge Rosenn, dissenting in Hackett v. General Host Corporation, supra at 628, stated: “Furthermore, the district court’s denial of the right to proceed as a class action has certainly affected the subsequent conduct of the litigation. Assuming that the suit will continue on the part of the appellant in her individual capacity, it is inconceivable that either the lawyers or the court will give a $9.00 suit the same consideration and attention due a class action involving hundreds of thousands of persons and many millions of dollars in potential damages. If nothing else, it would be a waste of judicial resources to allocate extensive time .. . over this paltry sum.”
Arizona and Arkansas have adopted the death knell doctrine. Reader v. Magma-Superior Copper Co., 108 Ariz. 186, 494 P. 2d 708 (1972); Reynolds v. Bakem Credit Union, 255 Ark. 322, 500 S.W. 2d 355 (1973). See generally, 54 A.L.R. 3d 595.
Daar v. Yellow Cab Co., 67 Cal. 2d 695, 433 P. 2d 732 (1967); Hebbard v. Colgrove, 28 Cal. App. 3d 1017, 105 Cal. Rptr. 172 (1973).
Roemisch v. Mutual of Omaha Insurance Co., supra.
Johnson v. Travelers Ins. Co., 89 Nev. 467, 515 P. 2d 68 (1973).
As noted initially, one of the purposes of a class action is the consolidation of like claims into a single lawsuit.
Coleman v. Huffman, 348 Pa. 580, 36 A. 2d 724 (1944).
Sullivan v. Philadelphia, 378 Pa. 648, 107 A. 2d 854 (1954).
Accord, Roemisch v. Mutual of Omaha Insurance Co., supra at 123, 314 N.E. 2d at 389: “In our opinion, the underlying purpose of R.C: 2505.02 [rule defining appealable orders] is to limit the absolute number of appeals taken. If a trial court determines that a class of plaintiffs is not permitted to function as such in a lawsuit, the number of actions filed will approach the magnitude of the number of class members [large claim class members], and possible appeals from those actions would far exceed any number of ‘piecemeal’ appeals arising from a unified class action.”
Accord, Roemisch v. Mutual of Omaha Insurance Co., supra at 125, 314 N.E. 2d at 390: “It is beyond argument that an order that a class action is not so maintainable determines the class action and totally prevents a judgment thereon. Since the class aetion is terminated by such an order, the labeling of the order as ‘interlocutory’ is simply incorrect.”
Since the appeal was quashed, I have not considered the merits. Nothing said in this opinion should be read as intimating any judgment regarding the propriety of the present case as a class action.
Lead Opinion
Opinion
Appeal quashed.