La Mar v. H & B Novelty & Loan Company

• Decision Date: 07 December 1973
• Docket Number: 73-1271.,No. 72-1485,72-1485
• Citation: 489 F.2d 461
• Parties: Robert LA MAR et al., Appellee, v. H & B NOVELTY & LOAN COMPANY et al., Appellant. Ronald J. KINSLING et al., Appellant, v. ALLEGHENY AIRLINES et al., Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

489 F.2d 461 (1973)

Robert LA MAR et al., Appellee, v. H & B NOVELTY & LOAN COMPANY et al., Appellant.

Ronald J. KINSLING et al., Appellant, v. ALLEGHENY AIRLINES et al., Appellee.

Nos. 72-1485, 73-1271.

United States Court of Appeals, Ninth Circuit.

December 7, 1973.

Norman T. Ollestad and Alan L. Freedman (argued), of Ollestad & Freedman, Los Angeles, Cal., for appellants.

L. A. Aschenbrenner and Charles J. Merten, Don H. Marmaduke & Noreen K. Saltveit, of Marmaduke, Aschenbrenner, Merten & Saltveit, Portland, Or., Henry C. Thumann, Patrick Lynch, James V. Selna (argued), of O'Melveny & Myers, Los Angeles, Cal., for appellees.

Before ELY and SNEED, Circuit Judges, and SWEIGERT,^* District Judge.

SNEED, Circuit Judge:

The common issue of these cases is whether a plaintiff having a cause of action against a single defendant can institute a class action against the single defendant and an unrelated group of defendants who have engaged in conduct closely similar to that of the single defendant on behalf of all those injured by all the defendants sought to be included in the defendant class. We hold that he cannot. Under proper circumstances, the plaintiff may represent all those suffering an injury similar to his own inflicted by the defendant responsible for the plaintiff's injury, but in our view he cannot represent those having causes of action against other defendants against whom the plaintiff has no cause of action and from whose hands he suffered no injury.

In a condensed form the facts of these cases are as follows. In La Mar the plaintiff initiated an action against all the pawn brokers licensed to conduct business under the laws of Oregon on behalf of all customers of such pawn brokers to recover either $100 or double the finance charges for alleged violations by the defendant pawn brokers of the Truth-in-Lending Act, 15 U.S.C. §§ 1601-1677. In his complaint La Mar estimated that there were 33,000 such customers and that the recovery should approximate three million dollars. In fact La Mar did business with only one such pawn broker, the H & B Novelty and Loan Company. The district court determined that La Mar's action was a proper class action on behalf of all those who borrowed from the H & B Novelty and Loan Company as well as on behalf of those who borrowed from all other defendants. Rule 23(b)(3) of the Federal Rules of Civil Procedure was the basis for the court's action. Subsequent to this determination, an interlocutory appeal therefrom was authorized. Thereafter, a settlement between H & B Novelty and Loan Company and La Mar on behalf of himself and all those who did business with H & B, save those who requested exclusion, was approved by the district court. No settlement has been reached with the other named defendants. The appeal before us, therefore, concerns the appropriateness of the court's determination that La Mar's action was a proper class action with respect to those pawn brokers with whom he had no dealings.

In Kinsling, the plaintiff purchased a round trip ticket between Kansas City, Missouri and Augusta, Georgia from Trans World Airlines and Piedmont Aviation Corp. Because there was no published joint fare for the route, a fare construction was required under the applicable tariff rules. The plaintiff alleged that he was overcharged in the amount of $10 in violation of certain provisions of the Federal Aviation Act. This suit was brought against Trans World Airlines and Piedmont Aviation Corp. and the six appellee air carriers on behalf of Kinsling and all others who had suffered a similar overcharge in dealings with these carriers. The aggregate amount of such overcharges in the four years prior to filing the suit was alleged to be approximately eighty million dollars. In due course, the district court dismissed the complaint as to the six appellee carriers on the ground that the plaintiff had no dealings with, nor suffered any injury at the hands of, these carriers. This appeal was taken from that dismissal.

We, therefore, reverse the lower court order in La Mar v. H & B Novelty & Loan Co. et al., No. 72-1485, which designates the case as a proper class action against all defendants other than the H & B Novelty & Loan Co. and direct that the plaintiff's action be dismissed as to such defendants.

In Kinsling v. Allegheny Airlines et al., No. 73-1271, the action of the lower court dismissing the complaint of plaintiff with respect to six of the eight defendants is affirmed.

An explanation of these actions follows and is divided into four parts. To provide some jurisprudential underpinnings to our action, the first part concerns itself with the distinctions between the judicial and administrative process, distinctions which, in our view, must be kept in mind in considering the proper scope of class actions. The second part deals with the standing issue while the third consists of an analysis of Rule 23 of the Federal Rules of Civil Procedure as it relates to the issue before us. Finally, the relevant cases are discussed and, while very few of such cases are directly in point, the resonances of most support our holding.

I. The Judicial Process and the Administrative Process Contrasted

The emergence of the class action inescapably forces consideration of the characteristics of the judicial and administrative processes because its features in many instances are derived from both. In a broad sense, fixing the outer limits of permissible class actions involves the determination of the extent to which proceedings within the judiciary will be permitted to resemble in function the administrative process.

It is obvious to even the casual observer that the two processes have features in common and that there is no bright line between them. Judges, for example, bring to their tasks the same informed judgment about the society within which their rulings operate as do administrators. Also those in executive positions frequently find themselves involved, either in a formal or informal setting, in passing judgment on particular claims presented on the basis of a substantially circumscribed record.

Nonetheless, the archetypes are distinguishable and it is in the interest of the judiciary, as well as the executive, to recognize and maintain these distinctions. There is no need to dwell on them at great length. It is enough to observe that the judicial process generally is concerned with discrete complaints of injury by one or a very small number of alleged wrong-doers. Those invoking the aid of the courts generally have in mind particular relief which can be provided by the court in a relatively easy and expeditious manner. The passivity of the judiciary is underscored by its dependence on the evidence provided by the parties and the relatively narrow scope of possible resolutions of the controversy imposed by the applicable rules of law which it must observe. The attorneys for the parties function in a manner compatible with this structure. The method by which evidence is introduced and the type of evidence that is permissible are rigidly controlled. The forums within which persuasion may be attempted are fixed and the methods of persuasion limited and to a degree quite formal. Finally, and of particular importance to class actions, the attorneys are restrained in their pursuit of clients. While the limits of these restraints continue to perplex the profession, which must function in a world in which advertising and salesmanship are omnipresent, no one will deny that restraints do and should exist. All perceive that they are congruent with the fundamentally passive role of the judiciary.

The administrative process, on the other hand, frequently need not await the specific complaint. It can initiate, sua sponte, steps designed to correct perceived evils in accordance with the authority provided it by legislative action or delegation from higher executive authority. Traditionally it represents large and imprecise interests which, at the highest level of abstraction, are designated "the public interest." Continuous oversight, as opposed to intervention by invitation as in the judiciary's case, is a normal administrative function. And, not surprisingly, lawyers function quite differently in the administrative setting. Procedures and forms of persuasion are less hampered, and representation of large groups having broad common interests is quite common.

These observations set the stage for an examination of the issues which these two cases present. Class actions, we believe, must be structured so as to conform in the essential respects to the judicial process. This is the principle by which we are guided. It dictates, inter alia, that the courts not be available to those who have suffered no harm at the hands of them against whom they complain. They have no standing to sue. It is necessary, therefore, to examine the standing of the plaintiffs to institute the class actions before us.

II. Standing

In the briefs in Kinsling and during oral argument of both cases much attention was devoted to problems of the standing. This Court, after reflection, does not believe it is necessary to pass on this issue because in our view, under a proper application of Rule 23 of the Federal Rules of Civil Procedure, the plaintiffs here are not entitled to bring a class action against defendants with whom they had no dealing. That is, for the purposes of these appeals, we are prepared to assume the presence of standing.

Our assumption is not intended to foreclose the issue. It should be observed, however, that in Hall v. Beals, 396 U.S. 45, 90 S.Ct. 200, 24 L.Ed.2d 214 (1969); Bailey v. Patterson, 369 U.S. 31, 82 S.Ct. 549, 7 L.Ed.2d 512 (1962); and McCabe v. Atchison, T. & S. F. R. Co., 235 U.S. 151, 35 S.Ct. 69, 59 L.Ed. 169 (1914), the Supreme Court, in asserting that one who was not a member of a class could not represent that class, was confronted with plaintiffs who had never been injured...