Ott v. Speedwriting Pub. Co.

• Decision Date: 14 July 1975
• Docket Number: No. 74-2002,74-2002
• Parties: 1975-2 Trade Cases 60,393 Debra OTT, Plaintiff-Appellant, v. SPEEDWRITING PUBLISHING COMPANY and I.T.T. Educational Services Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1143

518 F.2d 1143

1975-2 Trade Cases 60,393

Debra OTT, Plaintiff-Appellant, v. SPEEDWRITING PUBLISHING COMPANY and I.T.T. Educational Services Inc., Defendants-Appellees.

No. 74-2002.

United States Court of Appeals Sixth Circuit.

July 14, 1975.

Archie R. Carpenter, Knoxville, Tenn., Oliver B. Dickins, Jr., Nashville, Tenn., for plaintiff-appellant.

Harold B. Stone, Stone & Bozeman, Knoxville, Tenn., Harvey M. Applebaum, Covington & Burling, Charles E. Lister, Washington, D. C., for defendants-appellees.

Before WEICK, LIVELY and ENGEL, Circuit Judges.

LIVELY, Circuit Judge.

The first question which must be decided in this case is whether the "death knell" doctrine as enunciated by the Court of Appeals for the Second Circuit in Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (1966) (Eisen I ), cert. denied, 386 U.S. 1035, 87 S.Ct. 1487, 18 L.Ed.2d 598 (1967), should be applied to permit the plaintiff Debra Ott to appeal from an order of the district court denying her request to prosecute this case as a class action under Rule 23, Fed.R.Civ.P.

Plaintiff, a former student at the Knoxville Business College, alleged in her complaint that Knoxville Business College and other institutions which teach the Speedwriting method of shorthand had entered into franchise contracts with the defendants under which each franchisee is obligated to sell one complete new set of the defendants' Speedwriting books to each student taking a shorthand course. It was further claimed that no student has been permitted to take such shorthand courses using secondhand books, and that through this device the defendants have suppressed and eliminated all competition from secondhand books and assured the sale of new books to each student at its franchisee business colleges. Jurisdiction was based on provisions of the Sherman and Clayton Acts, the declaratory judgment action and 28 U.S.C. § 1337. Claims were also made under the law of Tennessee, and plaintiff sought to have these adjudicated in the district court as pendent claims. The plaintiff's alleged injury resulted from the fact that her sister had previously taken a shorthand course at the Knoxville Business College and had made available to her all of the books required for the Speedwriting course. Nevertheless plaintiff charged that she was required to purchase new books at a cost of $30.00, and that in making this requirement Knoxville Business College was "acting in accordance with its contractual obligations to the defendants as a franchisee." Plaintiff also stated that she will be subjected to a further loss in that the continuing requirement that each new student purchase a set of books will make it impossible for her to sell her books when she has completed the course.

Although Debra Ott is the sole plaintiff, the complaint stated that the action was brought "on behalf of herself and others similarly situated for the defendants' deliberate suppression of the market for secondhand copies of books published by them." The complaint described the general class as consisting "of all persons injured by the defendants' practices of requiring all students taking shorthand to purchase new books from the defendants whether needed or not." It was stated that the number of such persons is unknown but that plaintiff "expects" it to be "in the hundreds" in Tennessee and "in the thousands" throughout the United States. The complaint alleged that the prerequisites to a class action set forth in Rule 23(a) have been met and certification of a class action was sought under 23(b)(1) or 23(b)(2), or in the alternative, under 23(b)(3).

The legal violation charged in the complaint is that contractual provisions imposed by the defendants upon their franchisees requiring students in the franchised business colleges to purchase new books demonstrate a combination or conspiracy in violation of Section 1 of the Sherman Act; constitute a monopoly or attempt at monopoly under Section 2 of the Act; and constitute an unwarranted interference with interstate commerce. Plaintiff further claimed to be entitled to an injunction under Section 12 of the Clayton Act and damages under Section 4 thereof. The prayer of the complaint in addition to requesting certification of the class action, sought a declaration of rights, temporary and permanent injunctions, damages, costs and reasonable attorneys fees and other relief necessary "to do justice."

In its answer ITT Educational Services, Inc. (ITTES) stated that its co-defendant Speedwriting Publishing Co., Inc. has been merged into ITTES and is no longer in existence. ITTES denied that Knoxville Business College is a franchisee, stating that it has been licensed by ITTES to teach the Speedwriting method of shorthand as part of its curriculum. The answer averred that ITTES has different licensing arrangements with various business colleges and denied that any licensee is obligated by any agreement with ITTES to sell Speedwriting books to any student or to require any student to purchase such books. It denied the suppression or elimination of competition for secondhand books or that Knoxville Business College is "under any contractual obligation to ITTES to require plaintiff to purchase any Speedwriting shorthand books."

ITTES made a motion to strike the class action allegations and filed affidavits in support thereof. The district court entered an order denying class action certification under Rule 23(c)(1) and filed a memorandum setting forth its reasons. The plaintiff did not seek a ruling from the District Judge that his order involves a controlling question of law under 28 U.S.C. § 1292(b) or request that judgment be entered pursuant to Rule 54(b). Furthermore, although the district court order denied a preliminary injunction as well as class action certification, the plaintiff did not seek to appeal under 28 U.S.C. § 1292(a). The notice of appeal states that it is "from the order of the Court overruling the plaintiff's Motion to certify the present suit as a class action . . .." Thus the plaintiff has proceeded under 28 U.S.C. § 1291 which provides that this court has jurisdiction of appeals from all "final decisions" of the district courts.

The defendant made a motion in this court to dismiss the appeal under Rule 8 of the Rules of the Sixth Circuit for lack of jurisdiction. This court ordered that the motion be passed for consideration by the panel to which the appeal was assigned. The parties have briefed and argued the questions raised by the motion to dismiss as well as the issue on appeal relating to the correctness of the action of the district court in denying class action certification.

Appealability

As Mr. Justice Powell wrote for the Supreme Court in Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 170, 94 S.Ct. 2140, 2149, 40 L.Ed.2d 732 (1974) (Eisen IV ), "While the application of § 1291 in most cases is plain enough, determining the finality of a particular judicial order may pose a close question. No verbal formula yet devised can explain prior finality decisions with unerring accuracy or provide an utterly reliable guide for the future." (footnote omitted). In Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783 (1940), the Supreme Court traced the history of the finality requirement as a condition of review in the federal system and stated that it "has been departed from only when observance of it would practically defeat the right to any review at all." Id. at 324-25, 60 S.Ct. at 541. (footnote omitted). Exceptions to the finality requirement were spelled out more fully in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). In discussing interlocutory appeals the Court stated:

The effect of the statute is to disallow appeal for any decision which is tentative, informal or incomplete. Appeal gives the upper court a power of review, not one of intervention. So long as the matter remains open, unfinished or inconclusive, there may be no intrusion by appeal. But the District Court's action upon this application was concluded and closed and its decision final in that sense before the appeal was taken.

Nor does the statute permit appeals, even from fully consummated decisions, where they are but steps toward final judgment in which they will merge. The purpose is to combine in one review all stages of the proceeding that effectively may be reviewed and corrected if and when final judgment results. But this order of the District Court did not make any step toward final disposition of the merits of the case and will not be merged in final judgment. When that time comes, it will be too late effectively to review the present order, and the rights conferred by the statute, if it is applicable, will have been lost, probably irreparably. We conclude that the matters embraced in the decision appealed from are not of such an interlocutory nature as to affect, or to be affected by, decision of the merits of this case.

This decision appears to fall in 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. The Court has long given this provision of the statute this practical rather than a technical construction. Bank of Columbia v. Sweeny, 1 Pet. 567, 569 (26 U.S. 567, 7 L.Ed. 265); United States v. River Rouge Co., 269 U.S. 411, 414 (46 S.Ct. 144, 70 L.Ed. 339); Cobbledick v. United States, 309 U.S. 323, 328 (60 S.Ct. 540, 84 L.Ed. 783).

337 U.S. at 546, 69 S.Ct. at 1225.

Noting that the order before it would not be appealable "if Congress has allowed appeals only from those final judgments which terminate an action," id. at 545, 69 S.Ct. at 1225, the Court permitted an appeal because the order constituted "a final disposition of a claimed right which is not...