An historical analysis of the binding effect of class suits.

• Author: Hazard, Geoffrey C., Jr.

INTRODUCTION

This essay is a history of the doctrine of res judicata in class suits. It reveals that the condition of precedent on this issue was from the beginning equivocal and confused, and that it remains somewhat so today. Specifically, in the eighteenth and early nineteenth centuries, English and American decisions oscillated between saying that absent members of a class were bound by a decree and that they were not. The same pattern of equivocation persisted over the next century and into the modern era, exemplified by the decisions in Supreme Tribe of Ben-Hur v. Cauble(1) on the one hand and Hansberry v. Lee(2) on the other hand. The pattern persists in the Supreme Court's recent decisions in Cooper v. Federal Reserve Bank,(3) Phillips Petroleum Co. v. Shutts,(4) Amchem Products Inc. v. Windsor,(5) and Matsushita Electric Industry Co. v. Epstein.(6)

Whether a class suit decree has binding effects on the class goes to the essence of the class suit device. If the judgment is indeed conclusive on the class, the usual rules of merger and bar generally apply. If a class suit judgment is only nominally conclusive on the class members, however, its significance is minimally different from a judgment for or against one of several adversaries of a common opponent. A judgment of the latter kind may have significant effects now that the "mutuality rule" has been abolished.(7) With the abolition of the mutuality rule, an absentee who is situated similarly to a prevailing litigant may be able to invoke the prevailing litigant's judgment in quite the same way a class member could do so.(8) Moreover, since such a judgment may be invoked offensively against a common opponent, the judgment has powerful effects on settlement possibilities. It is also true that a victory by the common opponent against one or more of its antagonists has powerful negative effects on the settlement value of the claims of similarly situated persons.(9) Thus, a judgment between one member of a group of similarly situated persons against a common opponent has significant dispute-resolving effects even without any effect of a class rule.

The key legal question for the class suit therefore has been whether, where the judgment in such a suit is adverse to the members who were actual parties, the judgment would be not merely discouraging to absentees, but preclusive against them as a matter of law--whether the rule of bar applies to absent class members.(10) A subsidiary question is whether a judgment in favor of a class representative precludes other members of the class from seeking additional relief; that is, whether the rule of merger applies to absent class members.(11)

In stark legal terms, the question is whether persons who were not individually parties to a litigation will be treated as part of a set--a class--that was a party, and hence, being deemed to have participated vicariously, are now deemed to be precluded vicariously. The resolution of that question in turn involves tradeoffs between equality of outcome, which is promoted by treating the members as a group, and individuation of process, which is promoted by treating them as individuals; between the collective interest of the group and the separate interests of its members, between the procedural and strategic interests of the members and the procedural and strategic interests of the opposing party, and between the convenience of society and the interests of one or more of the parties. Combining these elements, the choice involves a calculus of the utilities and disutilities of the class suit as a mechanism of justice. This calculus is at least partially dependent on the substantive interests at stake in a particular type of class suit.

The problem can be formulated more abstractly: The law can regard any person either as a member of a group or as a legally distinct individual.(12) How the law regards any particular person depends partly on the legal task at hand. The group most tightly bound in modern law is probably the corporation, whether business, nonprofit, or municipal. The unitary aspect of such a group is so strongly emphasized that the members of a corporation as a group are, for most purposes, treated as a legal personality that is distinct from the constituent members and exists in its own right.(13) Until relatively modern times, another group of individuals treated as a unity for many legal purposes was the husband and wife.(14) Partners in a business venture have been, perhaps, next closest in legal affiliation,(15) followed by the members of fully organized, unincorporated associations.(16)

At the other end of this spectrum, the group most loosely bound is a set of persons suffering or contributing to common injury, who, in general, are permitted, but not required, to act together in joinder as plaintiffs or when joined as defendants.(17) Such a set of persons may form a coalition for pursuit of their common legal interests, but the coalition is usually weak and unstable. Thus, under present procedural doctrine, the parties joined under permissive joinder are on their own for most purposes; for example, a procedural initiative taken by one is generally not attributable to the other.(18)

Neither of these polar types, the individual and the group, comes in legally pure form. Those associated in a corporate undertaking, for example, have divergent interests as well as common ones, so their legal bonds are contingent, not absolute. These divergences of interest and contingencies of affiliation in the "corporate connection" are the subject of a whole jurisprudence known as corporation law.(19) Similar divergences and contingencies are found in the law of partnerships and associations.(20) On the other hand, persons associated merely by the fact of their common victimization have some legal connections among themselves, and accordingly may be treated as a group for some purposes. One example, already noted, is their being made the beneficiaries of issue preclusion under the modern formulation of res judicata.(21) Another legal connection from mere common victimization is that the victims may be limited to proportionate recovery where only a limited fund is available to satisfy their claims.(22)

Bringing these variations to mind warns that it is impossible to formulate an analytically unambiguous legal definition of a "group" or "class." This means that in formulating and administering a rule of res judicata that governs class suits there is unavoidable ambiguity in the predicate definition: What, exactly, is a "class" for this purpose? This question, in turn, suggests that it is also impossible to formulate a completely neat solution to the problem of res judicata in class suits, however tight or loose the legal bonds within the class.

Notwithstanding these complexities, the basic choice in the rule of res judicata in class suits has been between the alternative of treating the individuals as a more or less tightly knit association acting through agents and that of treating them as individuals who can act only for themselves. Historically, the resolution of this choice has been cast in terms of the definition of what constitutes a class. Hence, the definition of the class has been the key controversy.(23)

The definition of a class in a lawsuit can be specified from two different chronological points in the course of the lawsuit. One is a prospective definition adopted in connection with framing the suit at the outset. Such a definition specifies who is a party, or deemed by representation to be a party, in the instant case. The other chronological point is retrospective, specifying who was a party in the case formerly adjudicated. A prospective definition is employed in framing the action and may serve to anticipate who will be precluded by the adjudication; a retrospective definition is employed in applying the rules of res judicata and determines whether the prior forecast will actually be fulfilled. In the language of economics, the difference of perspective is that between ex-ante and ex-post.

Considerations of legal consistency and protection of party expectations require that the two definitions coincide. Of course, these considerations are not preemptory. Where numerous persons are commonly involved in a legal controversy, it could be said prospectively that the suit will bind all of them, including absentees, but then be held retrospectively that the absentees actually are not bound. (It would also be possible to say prospectively that they are. Surprise!)(24) There is, however, a serious shortcoming in such inconsistency. Very simply put, if, in the administration of justice, courts take inconsistent positions ex-ante and ex-post, then party expectations are rendered uncertain. Serious unfairness can result when party expectations about the effect of the suit are uncertain.

As we shall see, over the course of history, the courts have been quite inconsistent in their position on res judicata in class suits. Notwithstanding these inconsistencies, the courts have seemed to think they were dealing with two temporal aspects of a single problem and therefore have employed a single definition both ex-ante and ex-post. The history of the class suit nevertheless demonstrates that the courts have great difficulty actually maintaining a consistent position concerning res judicata in cases where res judicata effects have practical significance.

In formulating a coherent and consistent position as to whether an absentee class member is bound by a class suit judgment, courts have relied on two basic concepts. One is that of identity of interest among the class members. If the members of the class have a relatively strong identity of interest, then courts will be on safe ground in treating a member of the defined class, or a small group of members, as a legal representative of the whole group, and, on that basis, binding the group to the judgment. This...