Berman v. Narragansett Racing Association

• Citation: 293 F. Supp. 1258
• Decision Date: 24 October 1968
• Docket Number: 3914.,Civ. A. No. 3913
• Parties: Frank E. BERMAN et al. v. NARRAGANSETT RACING ASSOCIATION, Inc. Frank E. BERMAN et al. v. BURRILLVILLE RACING ASSOCIATION, Inc.
• Court: United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Rhode Island

293 F. Supp. 1258

Frank E. BERMAN et al. v. NARRAGANSETT RACING ASSOCIATION, Inc.

Frank E. BERMAN et al. v. BURRILLVILLE RACING ASSOCIATION, Inc.

Civ. A. Nos. 3913, 3914.

United States District Court D. Rhode Island.

October 24, 1968.

Jeremiah J. Gorin, Providence, R. I., Frank E. Berman, Boston, Mass., F. Fleet Cowden, Sudbury, Mass., for plaintiffs.

Stephen F. Achille, Providence, R. I., for Narragansett Racing Ass'n.

William A. Curran, Providence, R. I., for Burrillville Racing Ass'n.

OPINION

PETTINE, District Judge.

These are two purported class actions pursuant to Federal Rule of Civil Procedure 23¹ instituted by the representative plaintiffs, Frank E. Berman, Rose Berman, and Muriel Winston, against the defendants, Narragansett Racing Assoc., Inc. and Burrillville Racing Assoc., Inc.² An accounting, damages, and injunctive relief are sought. Jurisdiction is alleged on the basis of 28 U.S.C. § 1332(a) (1).³

A detailed statement of the factual background of the case is indispensable to a proper understanding of the principles to be enunciated in this opinion.

THE PARI-MUTUEL WAGERING SYSTEM IN R. I.

The pari-mutuel system of wagering in Rhode Island is permitted and controlled by the Rhode Island General Laws. R.I.G.L. §§ 41-1-1 to 41-4-13, as amended, 1956. That system operates on the premise of paying to the winning bettors on each race a certain percentage of the total money bet on that particular race. The total money bet on a particular race is called "the handle", and the percentage paid to the winning bettors, currently approximately 84%, is called "the win pool". The percentage not returnable to the bettors, currently 16%, is called "the commission" and is divided into two portions: The state of Rhode Island receives 8½%, and the "licensee" racetrack receives 7½%. Of the 7½% that it receives the licensee racetrack, by an alleged annual contractual agreement with the horseowners, pays 44.7% to the group of horseowners whose horses win purses.⁴ It does not appear clearly in the pleadings or briefs filed in this case, nor did it appear clearly in the oral argument, by what means and in what portions the horseowners' 44.7% of the track's share of the commission is distributed amongst the individual members of the group of pursewinners.⁵ It is sufficient for purposes of this decision, however, to note that either the entire 44.7% or some portion thereof⁶ is divided amongst and distributed to the individual members of the group of pursewinners in accordance with the discretion of the track.⁷

Tickets betting on a horse sharing in the win pool are divided into the money in the win pool by class, i. e., win, place, and show, to determine the amount of money the winning bettor receives on his bet. After the winning tickets are divided into the win pool by class, payments per ticket are broken "to the dime resulting from such wagering." R.I.G.L. §§ 41-4-3, 4, as amended 1956. This is done to facilitate handling the payment of winning tickets. Thus, a winning ticket which would have been worth $4.43, had a precise division to the cent been carried out, actually pays $4.40 under the current statutorily authorized practice. The odd cents of the win pool for each race are called "breakage" and are divided between the state of Rhode Island and the racetrack on an equal basis. R.I.G.L. §§ 41-4-3(b), 4(b), as amended, 1956.

THE PLAINTIFFS & THEIR CLAIM

The plaintiffs purport to represent all licensed owners of registered thoroughbred horses who won purses⁸ at the racetrack between 1934 and the present or who will win purses in the future. The plaintiffs claim that during the relevant period the 50% portion of the breakage paid over to the racetrack should have been and should be subject to distribution in part to the horseowners by virtue of a consensual agreement between them and the track. Specifically, the plaintiffs claim that 44.7% of the racetrack's share of the breakage has been, is, and will be withheld from them in breach of the alleged contractual agreement.⁹ However, as in the case of the distribution of "bonus money,"¹⁰ the means by which and the portions in which the 44.7% is to be distributed among the individual members of the group of pursewinners is discretionary.¹¹ The plaintiffs ask the court for an accounting by which the gross quantity of money allegedly owing to the class will be ascertained and distributed amongst the members of the class in accordance with some rational formula devised by the court.¹² The plaintiffs further request injunctive relief against the retention of money which will come into the control of the racetrack and will then allegedly be owing to the plaintiffs.

THE RACETRACK'S DEFENSES

The defendant moves for dismissal on four separate grounds: (1) the complaint fails to state a claim upon which relief can be granted; (2) the plaintiffs failed to join an indispensable party under Fed.Rule Civ.P. 19; (3) the plaintiffs have not stated a proper class action under Fed.R.Civ.P. 23; (4) the court lacks jurisdiction because the matter in controversy does not exceed $10,000 within the meaning of 28 U.S.C. § 1332(a) (1).

JURISDICTION

The plaintiffs' complaint alleges a matter in controversy far in excess of $10,000.¹³ However, the defendant's answer attacks the premise upon which the plaintiffs' jurisdictional assertion rests. Specifically, the defendant answers that aggregation of claims under Rule 23 is impermissible in this case, and that on the basis of the plaintiffs' complaint there is absolutely no showing of any individual claim in excess of $10,000.¹⁴ The plaintiffs, confronted with this attack, argue that (1) aggregation is not only permissible but highly desirable under new Rule 23; (2) even if aggregation is impermissible, it cannot be shown "to a legal certainty" that the individual plaintiffs will not recover amounts individually in excess of $10,000, and hence the plaintiffs' allegation must be deemed controlling.¹⁵

AGGREGATION

The initial inquiry is whether the claims of individual class members can be aggregated in order to exceed the minimum requisite jurisdictional amount of $10,000 set out in 28 U.S.C. § 1332 (a) (1). Since the very inception of the use of permissive and necessary joinder devices in the Federal Courts, the question of aggregation has been before the courts. Under the old equitable class action Rule 38, Nolen v. Reichman, 225 F. 812, 816 (W.D.Tenn.1915); Eberhard v. Northwestern Mutual Life Ins. Co., 241 F. 353 (6th Cir. 1917), the old Rule 23, e. g., Knowles v. War Damage Corp., 83 U.S.App.D.C. 388, 171 F.2d 15 (1948), and new Rule 23, e. g., Alvarez v. Pan American Life Ins. Co., 375 F.2d 992 (5th Cir. 1967), the question of aggregation has been considered. The most succinct expression of the principle which has controlled the issue of aggregation is the Supreme Court's statement in Pinel v. Pinel, 240 U.S. 594 at 596, 36 S.Ct. 416 at 417, 60 L.Ed. 817 (1916):

The settled rule is that when two or more plaintiffs having separate and distinct demands unite in a single suit, it is essential that the demand of each be of the requisite jurisdictional amount; but when several plaintiffs unite to enforce a single title or right in which they have a common and individual interest, it is enough if their interests collectively equal the jurisdictional amount.

The plaintiffs in this case have approached the Pinel principle with alternative arguments. First, they assert that they are within the ambit of the latter part of the principle and hence should be allowed to aggregate.¹⁶ Second, they claim that new Rule 23's res judicata effect so modifies Pinel as to permit aggregation.

The plaintiffs' position with respect to their first argument is that they have united to enforce their right to 44.7% of the breakage, in which they have an undivided interest. The argument falls down in two respects. First, the plaintiffs assert a right which is not a common right; rather, all the plaintiffs are actually asserting individual rights based on an alleged contract between them and the racetrack. More simply stated, if a single horseowner who won purses at the racetrack during the relevant period brought an individual contract action, his case could be decided without having to join all the other winning horseowners. Secondly, the fund sought is not an indivisible amount, it is only a currently undivided amount which can and must be divided eventually in order to pay damages. The plaintiffs actually attempt, with respect to this portion of their argument, to create the illusion of indivisibility as to the fund sought and of interlocking causes of action as to those seeking it. The court rejects that illusion and with it the plaintiffs' first alternative argument.¹⁷

The plaintiffs' second alternative argument is that the amendment to Rule 23 — by which all persons who are within the class are bound for res judicata purposes unless they affirmatively opt out — modifies the Pinel principle as applied to class suits, so as to make aggregation permissible. The argument is that the purposes for which Rule 23 was amended would be best served by permitting aggregation, and that, of the five published precedents¹⁸ which consider the question of aggregation under new Rule 23, Booth v. General Dynamics Corp., 264 F.Supp. 465 (N.D.Ill.1967), Gas Service Co. v. Coburn, 389 F.2d 831 (10th Cir. 1968), and Collins v. Bolton, 287 F.Supp. 393 (N.D.Ill.1968) should control as against Alvarez v. Pan American Life Ins. Co., 375 F.2d 992 (5th Cir. 1967) and Snyder v. Harris, 390 F.2d 204 (8th Cir. 1967) affirming 268 F. Supp. 701 (E.D.Mo.1967).¹⁹ There is little doubt that the utilitarian purposes of new Rule 23 would be effectuated by a jurisdictional rule allowing aggregation in all maintainable class suits. Virtually all the learned commentators have taken that position, Cohn, The New Federal Rules of Civil Procedure, 54 Geo.L.J. 1204, 1221, (1966), Franke...