Weight Watchers of Phila. v. Weight Watchers Int.

• Decision Date: 20 January 1972
• Docket Number: Docket 71-2158.
• Parties: WEIGHT WATCHERS OF PHILADELPHIA, INC., Plaintiff-Appellant, v. WEIGHT WATCHERS INTERNATIONAL, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

455 F.2d 770 (1972)

WEIGHT WATCHERS OF PHILADELPHIA, INC., Plaintiff-Appellant, v. WEIGHT WATCHERS INTERNATIONAL, INC., Defendant-Appellee.

Docket 71-2158.

United States Court of Appeals, Second Circuit.

Argued January 4, 1972.

Decided January 20, 1972.

Hammond & Schreiber, New York City (Alexander Hammond and Dale A. Schreiber, New York City, of counsel), for plaintiff-appellant.

Kaye, Scholer, Fierman, Hays & Handler, New York City, for defendant-appellee.

Before FRIENDLY, Chief Judge, and MOORE and OAKES, Circuit Judges.

FRIENDLY, Chief Judge:

Defendant moves to dismiss, for want of appellate jurisdiction, an appeal by plaintiff from an order permitting the defendant to communicate, on terms stipulated by the district judge, with potential members of a class on whose behalf plaintiff seeks to maintain a class action. This is the latest but, we are sure, not the last case in which we must determine to what extent orders long antedating the final disposition of such suits are appealable.

The complaint, in the District Court for the Eastern District of New York, alleged that defendant is engaged in the business of maintaining a system of franchises, some 95 in number, in various parts of the United States to promote its standardized weight-reduction and weight-control programs and to resell various goods in connection therewith. Plaintiff holds the franchise for Philadelphia, Pennsylvania. The complaint alleged that defendant has imposed on plaintiff and the other franchisees maximum and, indeed, uniform prices, thereby causing damages of at least $15,000,000 to the class. Plaintiff asserted that the suit was maintainable as a class action under F.R.Civ.P. 23(b) (1), (2) and (3). In accordance with local court rules, the action was assigned to Judge Bruchhausen, since he had previously been assigned a somewhat similar action, except for the lack of class allegations, wherein two other franchisees, Bergen Weight Watchers, Inc. and Weight Watchers of Hartford, Inc., sought large damages for alleged antitrust and other violations.

Shortly after the instant action was brought, Mr. Lippert, chairman of defendant's board of directors, sent a letter to all franchisees. This announced that defendant would vigorously defend both actions, that it was seeking evidence helpful to that end, and that, in its view, "Widespread publicity that any Franchisees claim that they preferred to charge more money to a highly sensitive obese population would surely have a detrimental effect on the image of WEIGHT WATCHERS." Later a similar letter was sent by defendant's president, Mrs. Nidetsch. These precipitated a motion by plaintiff asking the court to exercise its regulatory powers under F.R.Civ.P. 23(d) so as to restrain defendant from communicating with any member or potential member of the class concerning the action without prior approval of the court or of plaintiff's counsel, to direct defendant to send a letter of retraction in a form proposed by plaintiff, and to require defendant to file a report of any communications that had been had with members of the class. In Judge Bruchhausen's absence, this motion came on for hearing before Judge Costantino. The judge properly considered his duty to be to take only such action as he believed to be immediately required to preserve the status quo with a view to enabling Judge Bruchhausen to resume control upon his return. Taking note of the Suggested Local Rule No. 7 in the Manual for Complex and Multidistrict Litigation, and the Sample Pretrial Order 15, he directed that both plaintiff and defendant be restrained from further communications without the consent and approval of the court, in the form stated in Sample Pretrial Order 15. He reserved plaintiff's other requests for decision by Judge Bruchhausen, save for directing the parties not to respond to any communications concerning the action except to acknowledge receipt and to make certain limited answers.

Upon Judge Bruchhausen's return, defendant moved for a modification of Judge Costantino's order. The court granted this. Its order provided that defendant might conduct discussions with franchisees concerning the subject matter of the action "in connection with contract negotiations requested in each instance by the franchisee" and incorporate any conclusion in any agreement resulting therefrom. This permission was subject to the conditions that counsel for the franchisee should be present at each negotiating session and review any new contract provision, that plaintiff's counsel should receive at least five days advance notice of the commencement of any such negotiations and of each negotiating session and be afforded full opportunity to express their views concerning the rights of the franchisees with respect to the subject-matter of the action, and that the last negotiating session with each franchisee prior to execution of a contract should be held at the offices of defendant's counsel in New York City—a location convenient to plaintiff's counsel. Plaintiff's request for letters of retraction, which had been reserved by Judge Constantino, was denied. Plaintiff appealed from the order and moved for a stay. Upon defendant's announcing that it intended to move promptly to dismiss the appeal for want of appellate jurisdiction, the stay was granted.

It is obvious that the order is not a "final decision" within 28 U.S.C. § 1291, in the ordinary sense of finally determining the rights of the plaintiff and the class it seeks to represent against the defendant. Indeed it makes no determination bearing upon these in the slightest degree. Plaintiff's case for appealability under § 1291 thus rests on the assertion that the order falls within "that small class which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated." Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546-547, 69 S.Ct. 1221, 1225-1226, 93 L.Ed. 1528 (1949). We have often indicated that Cohen must be kept within narrow bounds, lest this exception swallow the salutary "final judgment" rule. See Bancroft Nav. Co. v. Chadade S.S. Co., 349 F.2d 527, 529-530 (2 Cir. 1965); Donlon Industries, Inc. v. Forte, 402 F.2d 935, 937 (2 Cir. 1968); West v. Zurhorst, 425 F.2d 919 (2 Cir. 1970).

When we compare the order here sought to be appealed with others implicating Cohen, the inapplicability of that decision becomes clear. An order, like that of the district court in Cohen, which refused to apply a statute requiring an undertaking for costs by the plaintiff before the suit could be prosecuted, deprived the defendant of the very benefit the legislature arguably intended to confer. Per contra an order requiring such an undertaking when the court allegedly had no power to do this, as in Fielding v. Allen, 181 F.2d 163 (2 Cir.), cert. denied, 340 U.S. 817, 71 S.Ct. 46, 95 L.Ed. 600 (1950), and Chabot v. Nat'l Securities & Research Corp., 290 F.2d 657 (2 Cir. 1961), might prevent a plaintiff from entering the courtroom door. The order here can have no such drastic consequences. Its maximum effect, and this is wholly speculative, would be to cause settlements by so many franchisees—a course long favored by the law, cf. Williams v. First Nat'l Bank, 216 U.S. 582, 595, 30 S.Ct. 441, 54 L.Ed. 625 (1910)—as to eliminate the numerosity which F.R.Civ.P. 23(a) (1) makes a prerequisite to a class action, leaving plaintiff nonetheless free to prosecute its own individual claim, as two other franchisees were already doing.

Another important factor bearing on the application of the Cohen doctrine, which we mentioned in Donlon, supra, 402 F.2d at 937, is whether a decision will settle a point once and for all, as it did in the Cohen case, or will open the way for a flood of appeals concerning the propriety of a district court's ruling on the facts of a particular suit. This case is of the latter sort. Plaintiff's attempt to escape this conclusion by asserting that once a plaintiff brings a suit on behalf of a class, the court may never permit communications between the defendant and other members, even when, as here, both desire this, is in conflict not only with Suggested Local Rule No. 7 and Sample Pretrial Order 15, but with elementary considerations of common sense—and possibly, although we need not decide this, with a command of higher authority as well. Indeed, we are unable to perceive any legal theory that would endow a plaintiff who has brought what would have been a "spurious" class action under former Rule 23 with a right to prevent negotiation of settlements between the defendant and other potential members of the class who are of a mind to do this;¹ it is only the settlement of the class action itself without court approval that F.R.Civ.P. 23(e) prohibits. Cf. Webster Eisenlohr, Inc. v. Kalodner, 145 F.2d 316, 320 (3 Cir. 1944) (Goodrich, J.) cert. denied, 325 U.S. 867, 65 S.Ct. 1404, 89 L.Ed. 1986 (1944).

Def...