Blair & Wilbon v. Equifax Check Serv.

Decision Date22 June 1999
Docket NumberNo. 99-8006,99-8006
Citation181 F.3d 832
Parties(7th Cir. 1999) Beverly Blair and Letressa Wilbon, on behalf of themselves and a class of others similarly situated, Plaintiffs-Respondents, v. Equifax Check Services, Inc., Defendant-Petitioner
CourtU.S. Court of Appeals — Seventh Circuit

On Petition for Leave to Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 97 C 8913--Paul E. Plunkett, Judge.

Before Posner, Chief Judge, and Easterbrook and Rovner, Circuit Judges.

Easterbrook, Circuit Judge.

In 1992, at the suggestion of the Federal Courts Study Committee, Congress authorized the Supreme Court to issue rules that expand the set of allowable interlocutory appeals. 28 U.S.C. sec.1292(e). An earlier grant of jurisdictional rulemaking power- -28 U.S.C. sec.2072(c), which permits the Court to "define when a ruling of a district court is final for the purposes of appeal under section 1291"--had gone unused, in part because it invites the question whether a particular rule truly "defines" or instead expands appellate jurisdiction. Section 1292(e) expressly authorizes expansions. So far, it has been employed once. Last year the Supreme Court promulgated Fed. R. Civ. P. 23(f), which reads:

A court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders.

This rule became effective on December 1, 1998, and we have for consideration the first application filed in this circuit (and, so far as we can tell, the nation) under the new rule. A motions panel directed the parties to file briefs discussing the standard the court should employ to decide whether to accept appeals under this rule.

The Committee Note accompanying Rule 23(f) remarks: "The court of appeals is given unfettered discretion whether to permit the appeal, akin to the discretion exercised by the Supreme Court in acting on a petition for certiorari. . . . Permission to appeal may be granted or denied on the basis of any consideration that the court of appeals finds persuasive." (The parties call this an "Advisory Committee Note," following old usage, but its title was changed more than a decade ago to "Committee Note." It speaks not only for the responsible advisory committee but also for the Standing Committee on Rules of Practice and Procedure, which coordinates and superintends the several bodies of federal rules.) Although Rule 10 of the Supreme Court's Rules identifies some of the considerations that inform the grant of certiorari, they are "neither controlling nor fully measuring the Court's discretion". Likewise it would be a mistake for us to draw up a list that determines how the power under Rule 23(f) will be exercised. Neither a bright-line approach nor a catalog of factors would serve well-- especially at the outset, when courts necessarily must experiment with the new class of appeals.

Instead of inventing standards, we keep in mind the reasons Rule 23(f) came into being. These are three. For some cases the denial of class status sounds the death knell of the litigation, because the representative plaintiff's claim is too small to justify the expense of litigation. Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), held that an order declining to certify a class is not appealable, even if that decision dooms the suit as a practical matter. Rule 23(f) gives appellate courts discretion to entertain appeals in "death knell" cases--though we must be wary lest the mind hear a bell that is not tolling. Many class suits are prosecuted by law firms with portfolios of litigation, and these attorneys act as champions for the class even if the representative plaintiff would find it uneconomical to carry on with the case. E.g., Rand v. Monsanto Co., 926 F.2d 596 (7th Cir. 1991). These law firms may carry on in the hope of prevailing for a single plaintiff and then winning class certification (and the reward of larger fees) on appeal, extending the victory to the whole class. A companion appeal, briefed in tandem with this one, presented just such a case. After class certification was denied, the plaintiff sought permission to appeal under Rule 23(f); although the remaining plaintiff has only a small stake, counsel pursued the case in the district court while we decided whether to entertain the appeal, and before the subject could be argued here the district judge granted summary judgment for the defendant. That plaintiff now has appealed on the merits and will seek to revive the class to boot. Many other cases proceed similarly; Coopers & Lybrand did not wipe out the small-stakes class action. But when denial of class status seems likely to be fatal, and when the plaintiff has a solid argument in opposition to the district court's decision, then a favorable exercise of appellate discretion is indicated.

Second, just as a denial of class status can doom the plaintiff, so a grant of class status can put considerable pressure on the defendant to settle, even when the plaintiff's probability of success on the merits is slight. Many corporate executives are unwilling to bet their company that they are in the right in big-stakes litigation, and a grant of class status can propel the stakes of a case into the stratosphere. In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995), observes not only that class actions can have this effect on risk-averse corporate executives (and corporate counsel) but also that some plaintiffs or even some district judges may be tempted to use the class device to wring settlements from defendants whose legal positions are justified but unpopular. Empirical studies of securities class actions imply that this is common. Janet Cooper Alexander, Do the Merits Matter? A Study of Settlements in Securities Class Actions, 43 Stan. L. Rev. 497 (1991); Reinier Kraakman, Hyun Park & Steven Shavell, When are Shareholder Suits in Shareholder Interests?, 82 Geo. L.J. 1733 (1994); Roberta Romano, The Shareholder Suit: Litigation Without Foundation?, 7 J.L. Econ. & Org. 55 (1991). Class certifications also have induced judges to remake some substantive doctrine in order to render the litigation manageable. See Hal S. Scott, The Impact of Class Actions on Rule 10b-5, 38 U. Chi. L. Rev. 337 (1971). This interaction of procedure with the merits justifies an earlier appellate look. By the end of the case it will be too late--if indeed the case has an ending that is subject to appellate review.

So, in a mirror image of the death-knell situation, when the stakes are large and the risk of a settlement or other disposition that does not reflect the merits of the claim is substantial, an appeal under Rule 23(f) is in order. Again the appellant must demonstrate that the district court's ruling on class certification is questionable--and must do this taking into account the discretion the district judge possesses in implementing Rule 23, and the correspondingly deferential standard of appellate review. However dramatic the effect of the grant or denial of class status in undercutting the plaintiff's claim or inducing the defendant to capitulate, if the ruling is impervious to revision there's no point to an interlocutory appeal.

Third, an appeal may facilitate the development of the law. Because a large proportion of class actions settles or is resolved in a way that overtakes procedural matters, some fundamental issues about class actions are poorly developed. Recent proposals to amend Rule 23 were designed in part to clear up some of these questions. Instead, the Advisory Committee and the Standing Committee elected to wait, anticipating that appeals under Rule 23(f) would resolve some questions and illuminate others. When an appellant can establish that such an issue is presented, Rule 23(f) permits the court of appeals to intervene. When the justification for interlocutory review is contributing to development of the law, it is less important to show that the district judge's decision is shaky. Law may develop through affirmances as well as through reversals. Some questions have not received appellate treatment because they are trivial; these are poor candidates for the use of Rule 23(f). But the more fundamental the question and the greater the likelihood that it will escape effective disposition at the end of the case, the more appropriate is an appeal under Rule 23(f). More than this it is impossible to say.

Judges have been stingy in accepting interlocutory appeals by certification under 28 U.S.C. sec.1292(b), because that procedure interrupts the progress of a case and prolongs its disposition. That bogey is a principal reason why interlocutory appeals are so disfavored in the federal system. Disputes about class certification cannot be divorced from the merits- -indeed, one of the fundamental unanswered questions is whether judges should be influenced by their tentative view of the merits when deciding whether to certify a class--and so this argument against interlocutory appeals carries some weight under Rule 23(f). But it has less weight than under sec.1292(b), because Rule 23(f) is drafted to avoid delay. Filing a request for permission to appeal does not stop the litigation unless the district court or the court of appeals issues a stay-- and a stay would depend on a demonstration that the probability of error in the class certification decision is high enough that the costs of pressing ahead in the district court exceed the costs of waiting. (This is the same kind of question that a court asks when deciding whether to issue a preliminary injunction or a stay of an administrative decision. See Illinois Bell Telephone Co. v. WorldCom Technologies, Inc., 157 F.3d...

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