Mercury Records Productions, Inc. v. Economic Consultants, Inc.
| Decision Date | 04 September 1979 |
| Docket Number | E-C,No. 76-218,76-218 |
| Citation | 283 N.W.2d 613,91 Wis.2d 482 |
| Court | Wisconsin Court of Appeals |
| Parties | , 207 U.S.P.Q. 30, 1978-81 Copr.L.Dec. P 25,099 MERCURY RECORDS PRODUCTIONS, INC., ABC Records, Inc., MCA Records, Inc., Columbia Broadcasting Systems, Inc., Electra Records, Inc., (a division of) Warner Communications, Inc., A & M Records, Inc., Buddah/Kama Sutra Records, Inc., London Records, Inc., Atlantic Recording Corporation, Plaintiffs-Respondents, v. ECONOMIC CONSULTANTS, INC. d/b/aTape Service, Inc., and David L. Heilman, Defendants-Appellants. |
Review Denied.
Thomas M. Kells, Milwaukee and David L. Heilman in pro. per., for defendants-appellants.
Howard S. Smith and Mitchell, Silberberg & Knupp, Los Angeles, Cal., Ronald L. Piette, Steven E. Keane, Richard S. Florsheim and Foley & Lardner, Milwaukee, for plaintiffs-respondents.
Before DECKER, C. J., MOSER, P. J. and CANNON, J.
This is a class action brought by the named plaintiffs on behalf of themselves and all persons engaged in the manufacture of records, and brought against the defendants for alleged piracy. Because of the inordinate number of issues raised on appeal, additional facts will be included as needed in the disposition of the individual issues.
This case began almost seven years ago with the filing of the complaint on December 16, 1972, and an amended complaint on July 27, 1973. On February 15, 1974, the trial court, Judge Robert W. Landry, presiding, sustained the defendants' demurrer, but did not rule on the plaintiffs' request for a temporary injunction. On appeal, the Wisconsin Supreme Court reversed the trial court, holding that the complaint stated a cause of action for unfair competition, 1 and remanded the case to the trial court for a determination on the temporary injunction issue. 2
On September 18, 1974, the trial court issued a temporary injunction, but stayed it for ninety days. On September 30, 1974, the Wisconsin Supreme Court issued an alternative writ of mandamus ordering the trial court to vacate the stay and to modify the injunction by adding a protective order. On October 3, 1974, Judge Jackson, on behalf of Judge Landry, issued the temporary injunction. 3 On December 9, 1974, the plaintiffs moved the trial court, Judge Barron, presiding, for an order finding the defendants in contempt of the temporary injunction.
On January 26, 1976, the defendants were found in contempt for advertising in Wisconsin, and were ordered to pay within five months the plaintiffs' costs in the contempt proceedings. On July 12, 1976, the plaintiffs moved the trial court for an order of commitment of defendant Heilman for failure to pay the costs as ordered. On September 21, 1976, the trial court ordered defendant Heilman incarcerated for up to six months.
On October 5, 1976, the defendants filed a notice of appeal from the September 21, 1976, order. On October 25, 1976, the defendants filed an amended notice of appeal adding the October 3, 1974, and the January 26, 1976, orders. The plaintiffs' motion to dismiss the amended notice of appeal was denied by the Wisconsin Supreme Court on February 13, 1977.
On November 2, 1976, a notice of hearing for an order approving forms for notice to class members was filed. The trial court, on March 18, 1977, denied the defendants' motion to dismiss this action on the merits, the defendants contending that there was conflict among the plaintiffs and that the delay in notifying the class members had prejudiced the defendants. On April 5, 1977, the trial court denied numerous defense motions concerning the class action and granted, with amendments, the plaintiffs' motion to approve the notices to class members.
On May 19, 1977, the trial court ordered the proposed notices to class members approved and ordered the notices to be mailed and to be published in Billboard magazine. A motion to certify the class action was filed on November 9, 1977, and the class was certified on February 7, 1978.
The defendants have raised numerous issues on appeal. We address ourselves to the following issues:
1. Whether the trial court had jurisdiction to issue the orders appealed from prior to the mailing and publication of notices to unnamed members of the plaintiff class.
2. Whether the injunction was unconstitutional because it:
(a) violated the defendants' rights to freedom of speech and press; and
(b) unreasonably restrained the defendants in interstate commerce.
3. Whether incarceration was an appropriate sanction for defendant Heilman's alleged contumacious conduct.
There is no case or statutory law in Wisconsin governing the procedural aspects of class action suits, which are statutorily authorized pursuant to sec. 803.08, Stats. (formerly sec. 260.12).
There are three prerequisites for bringing a class action: (1) there must be a common or general interest shared by all members of the class; (2) the named parties must fairly represent the interest involved; and (3) it must be impracticable to bring all interested parties before the court. 4 All members of the class need not share all interests, but all must share a common interest. 5
The test for common interest is whether all members of the purported class desire the same outcome of the suit that the alleged representatives of the class desire. 6 It is considered to be in the public interest as declared by the legislature to permit class actions when the three prerequisites are met. 7 In the interest of simplifying the lawsuit and avoiding a multiplicity of litigation, a class action is proper even if each member of the class has a separate cause of action for money damages. 8
There has been no real guidance given by our supreme court in the area of state procedural requirements for class actions. In Browne v. Milwaukee Board of School Directors, the court did warn bench and bar alike that, with respect to state class actions, interpretations of federal class action statutes are not necessarily controlling. 9
Our supreme court has, however, listed four ways by which class members may be bound by the judgment: (1) where they participate; (2) where their interests are joint; (3) where they stand in legal privity; and (4) where they are in fact adequately represented by the parties who are present. 10
What the defendants object to is the entry of the orders appealed from prior to certification and notification of members of the class. The defendants argue that because of this lack of certification and notification, the trial court acted without jurisdiction in entering the orders appealed from, thus violating the defendants', as well as the absent class members', due process rights. Finally, the defendants contend that because of the lack of certification and notice, the preliminary legal ruling prior thereto is not binding on the court, the defendants, or the absent members. We disagree.
The trial court, in its January 23, 1974, decision, found that a class action in this case was appropriate. The defendants do not appear to challenge the propriety of such finding. Indeed such a determination that a class action is appropriate is largely within the discretion of the trial court and will not be upset absent a finding of abuse of discretion. 11 The trial court found that the delay in giving notice to class members did not prejudice either the defendants or the absent class members.
In Hansberry v. Lee, 12 a case decided before the 1966 amendment to the federal class action statutes, the United States Supreme Court held that class actions, "to which some members of the class are parties" and which may bind those represented who were not made parties to it, are the exception to the general rule that one who is not a party and who is not served with process is not bound by the judgment. 13
Hansberry involved the conclusiveness of a prior judgment regarding a restrictive covenant running with the land. The covenant agreement had purportedly been signed by ninety-five percent of the landowners. The second trial court found that, although in fact only fifty-four percent of the owners had signed this agreement, the prior judgment was Res judicata as to all landowners. The Illinois Supreme Court affirmed.
The United States Supreme Court reversed, holding that the class action procedures used in that case violated the due process clause of the fourteenth amendment. With proper regard for local interests and institutions, the Court refused to mandate that the states or federal government adopt a particular rule for the conclusiveness of a judgment in a class action suit. However, due process requires that the procedures used most fairly insure the interests of the parties who are absent and yet who are to be bound by the judgment. 14 In Hansberry, the Court did not find the necessary fair protection due to the conflicts among the interests of those within the represented class. 15
The Court did recognize, as the Wisconsin Supreme Court subsequently did in Schlosser v. Allis-Chalmers Corporation, 16 the same four basic ways parties may properly be bound by a judgment: (1) actual participation; (2) joint interests; (3) legal privity; and (4) adequate representation by present parties. 17
The Court did not address itself to the need for notice in class action suits, but importantly recognized the necessary division between state and federal law, and set forth the test for due process violations in terms of adequate representation.
In American Pipe and Construction Co. v. Utah, 18 the Supreme Court dealt with the notice provisions of Fed.R.Civ.P. 23(c)(1) and (2) in Fed.R.Civ.P. 23(b)(3) class actions. Under Rule 23(b)(3), a court must direct such notice to members of the class as is practicable under the circumstances. In speaking of the need for notice, the Supreme Court stated:
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