Eisen v. Carlisle & Jacquelin

1974-05-28

Headline: Court requires mailed individual notice to identifiable class members, assigns notice costs to the class representative, and sends this six‑million‑member antitrust class action back to the lower courts, blocking the suit as originally defined.

Holding: The Court held that Rule 23(c)(2) requires mailed individual notice to all class members identifiable through reasonable effort and that the class representative must initially bear the expense of such notice, so the large class as defined must be dismissed.

Real World Impact:

Requires mailed individual notice to identifiable class members, increasing procedural costs for class lawsuits.
Makes representative plaintiffs initially responsible for the expense of class notice in adversary lawsuits.
Large, diffuse classes may be dismissed or forced into smaller subclasses to meet notice rules.

Topics: class actions, notice requirements, civil procedure, antitrust lawsuits, court appeals

Summary

Background

Petitioner sued on behalf of odd‑lot traders on the New York Stock Exchange, claiming brokers and the Exchange charged excessive odd‑lot differentials in violation of antitrust and securities laws. The case covered millions of small investors, petitioner’s personal damages were only $70, and the litigation produced a long procedural history in the District Court and three appeals decisions over whether the suit could proceed as a class action.

Reasoning

The Court addressed whether Rule 23(c)(2) permits publication notice instead of mailed notice to known class members and who must pay for notice. It held that Rule 23 requires the court to give “the best notice practicable,” including individual mailed notice to all members who can be identified through reasonable effort. The Court rejected the District Court’s use of a preliminary merits hearing to shift most notice costs to defendants and concluded that, in truly adversary suits, the plaintiff must initially bear notice expenses. Because petitioner refused to pay notice costs for the class as originally defined, the Court directed dismissal of that class and vacated the Court of Appeals’ judgment.

Real world impact

The decision means courts must mail individual notice to identifiable class members when reasonable effort can locate them, and representative plaintiffs normally must finance that notice initially in adversary cases. The ruling is procedural, not a final decision on the merits, and the dismissal was without prejudice to redrafting or creating smaller subclasses to meet Rule 23’s requirements.

Dissents or concurrances

Justice Douglas (joined by Brennan and Marshall) emphasized that courts may and should form manageable subclasses under Rule 23(c)(4) so smaller, test subclasses could proceed with individual mailed notice and preserve access for small claimants.