filed: November 18, 1971.
ACE HEATING & PLUMBING COMPANY, INC. & NUMBER TWO J.D. SEWERAGE & PLUMBING CO., INC., AND STANFORD BRINSKY
CRANE COMPANY, BORG-WARNER CORP., AMERICAN RADIATOR & STANDARD SANITARY CORP., KOHLER CO., CHICAGO POTTERY CO., WALLACE-MURRAY CORP., UNIVERSAL-RUNDLE CORP., RHEEM MANUFACTURING CO., BRIGGS MANUFACTURING CO., PLUMBING FIXTURE MANUFACTURERS ASSN., GERBER PLUMBING FIXTURES CORP., OGDEN CORP., MANSFIELD SANITARY, INC., PEERLESS POTTERY, INC., KILGORE CERAMICS CORP., LAWNDALE INDUSTRIES, INC., GEORGIA SANITARY POTTERY, INC., JOSEPH J. DECKER, DANIEL J. QUINN, NORMAN R. HELD, ROBERT E. CASNER, JOHN B. BALMER, STANLEY S. BACKNER, ROBERT J. PIERSON, JR., GEORGE W. KELCH, AND WILLIAM E. KRAMER. NALCO PLUMBING & HEATING COMPANY, IN BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED V. AMERICAN RADIATOR & STANDARD SANITARY CORPORATION, KOHLER CO., CRANE CO., WALLACE-MURRAY CORP., UNIVERSAL-RUNDLE CORP., RHEEM MANUFACTURING CO., BORG-WARNER CORP., BRIGGS MANUFACTURING CO., PLUMBING FIXTURE MANUFACTURERS ASSN., GERBER PLUMBING FIXTURES CORP., OGDEN CORP., MANSFIELD SANITARY, INC., PEERLESS POTTERY INC., KILGORE CERAMICS CORP., LAWNDALE INDUSTRIES, INC. AND GEORGIA SANITARY POTTERY, INC. ACE HEATING & PLUMBING CO., INC., ET AL., APPELLANTS IN NO. 71-1384, AND ROLAND A. ESSWEIN AND SON, APPELLANT IN NO. 71-1385
Seitz, Chief Judge, Biggs and Rosenn, Circuit Judges.
These are consolidated appeals from an order of the district court approving a two million dollar settlement with a nationwide class of plumbing, mechanical and general contractor claimants in the so-called Plumbing Fixture Antitrust Cases. The legal steps and negotiations leading to the order complained of are exhaustively set out in Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp., 323 F. Supp. 364 (1970) and Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp., 322 F. Supp. 834 (1971) (reporting the opinion involved in this appeal). We address ourselves primarily to the resolution of several novel and important procedural aspects of antitrust settlements.
Plaintiffs' Right to Appeal
The unique procedural steps leading to final district court approval of the settlement in December, 1970 are the basis for the appellees' contention that the appellants have no right to appeal the district court's order approving the settlement. In moving to dismiss the appeal appellees point out that all potential class members, including the appellants, were informed of the terms of the proposed settlement and were given the option beforehand to exclude themselves from participation therein. From this premise they reason that appellants' election to join the class constituted a ratification of the settlement or a waiver of objections to it.
The appellees rely upon the Legal Notice sent to all identifiable class members prior to the district court's approval order:
"As a condition to disbursement of the Settlement Fund, the claims of all members of the Class who have not excluded themselves shall be the subject of final and unappealable judgments of dismissal with prejudice."
We read the quoted language to mean that disbursement of the settlement fund would await a final judgment which could not be appealed. It cannot be construed to preclude a timely appeal from the original judgment of approval. A serious public policy question would be presented if the notice were construed to require a waiver of the right to appeal as a condition to opting in.
We next consider whether plaintiffs are otherwise precluded from appealing the district court's findings of fairness and its approval of expenses and appointment of counsel. Appellees argue that a party who "accepts" a settlement by not electing to be excluded admits that the settlement benefits him and, therefore, cannot be aggrieved by an order approving the settlement. This contention highlights an important unresolved question involving the administration of class action law suits brought pursuant to Federal Rules of Civil Procedure, 28 U.S.C.A., Rule 23 (1971 Supp.).
Ordinarily aggrieved class members may appeal any final order of a district court in proceedings held pursuant to Rule 23. This general proposition holds true even though such class members have the right to exclude themselves from the class. Here, however, at the point of deciding whether to join the class, the potential class members had the advantage of knowing all the substantial terms of the proposed settlement. The question then is whether this conceded awareness so differentiates the situation here that the right to appeal the approved settlement is lost. The answer must be found by a consideration of the policies behind the federal class action rule.
Perhaps the drafters of Rule 23 did not envisage circumstances like those here, in which potential class members are able to elect whether or not to join the class knowing the proposed settlement terms. In such a case there may be less need to police settlements, since the question of fairness is left to the informed choice of the class members. Nevertheless, the remedy for this unprovided for situation does not lie with the courts. Furthermore, court approval under these circumstances still may serve salutary purposes. It is possible that, within a class, a group of small claimants might be unfavorably treated by the terms of a proposed settlement. For them, the option to join is in reality no option at all. Rule 23 recognizes the fact that many small claimants frequently have no litigable claims unless aggregated. So, without court approval and a subsequent right to ask for review, such claimants would be faced with equally unpalatable alternatives -- accept either nothing at all or a possibly unfair settlement. We conclude that appellants have standing to appeal in the circumstances here presented. Cf. 3B Moore's Federal Practice, Para. 23.80(5) (1969).
We therefore conclude that appellees' motion to dismiss the appeals ...
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