COOPERS & LYBRAND V. LIVESAY, 437 U. S. 463 (1978)

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U.S. Supreme Court

Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978)

Coopers & Lybrand v. Livesay

No. 76-1836

Argued March 22, 1978

Decided June 21, 1978

437 U.S. 463


Respondents, who had purchased securities in reliance on a prospectus, brought this action on behalf of themselves and a class of similarly situated purchasers, alleging that petitioner accounting firm had violated the federal securities laws. The District Court first certified the action as a class action under Fed.Rule Civ.Proc. 23, and then, after further proceedings, decertified the class. Respondents then filed a notice of appeal pursuant to 28 U.S.C. § 1291, under which courts of appeals have jurisdiction of appeals from all "final decisions" of the district courts except where a direct review may be had in the Supreme Court. After examining the amount of respondents' claims in relation to their financial resources and the probable cost of the litigation, the Court of Appeals concluded that they would not pursue their claims individually. On the basis of the "death knell" doctrine (which assumes that, without the incentive of a possible group recovery, the individual plaintiff may find it economically imprudent to pursue his lawsuit to a final judgment and then seek appellate review of an adverse class determination), the Court of Appeals held that it had jurisdiction to hear the appeal, and reversed the District Court's order decertifying the class. Respondents contend in this Court that an order denying class certification is appealable under both the "death knell" doctrine and the "collateral order" exception articulated in Cohen v. Beneficial Industrial Loan Corp., 337 U. S. 541.


1. The "collateral order" exception does not apply to a prejudgment order denying class certification because such an order is subject to revision in the District Court, Fed.Rule Civ.Proc. 23(c)(1); involves considerations that are "enmeshed in the factual and legal issues comprising the plaintiff's cause of action," Mercantile Nat. Bank v. Langdeau, 371 U. S. 555, 371 U. S. 558; and is subject to effective review after final judgment at the behest of the named plaintiff or intervening class members. United Airlines, Inc. v. McDonald, 432 U. S. 385. Pp. 437 U. S. 468-469.

2. Nor does the "death knell" doctrine support appellate jurisdiction of a prejudgment order denying class certification. Pp. 437 U. S. 469-476.

(a) The formulation of an appealability rule that turns on the chanrobles.com-red

Page 437 U. S. 464

amount of the plaintiff's claim is plainly a legislative, not a judicial, function. Pp. 437 U. S. 472-473.

(b) The alternative approach to the "death knell" rule that is based on a thorough study of the possible impact of the class order on the fate of the litigation would have a seriously debilitating effect on the administration of justice. The district court would have to take evidence, entertain argument, and make findings, which the court of appeals would have to review simply to determine whether a discretionary class determination is subject to appellate review, with the possibility of remand for further factual development. Further appeals from adverse rulings on other grounds could likewise be anticipated. Pp. 437 U. S. 473-474.

(c) Perhaps the principal vice of the doctrine is that it authorizes indiscriminate interlocutory review of the trial judge's decisions, circumventing restrictions imposed by the Interlocutory Appeals Act of 1958. Pp. 437 U. S. 474-475

(d) The doctrine favors only plaintiffs, even though the class issue will often be critically important to defendants as well. P. 437 U. S. 476.

(e) Allowing appeals as a matter of right from nonfinal orders that turn on the facts of a particular case thrusts appellate courts indiscriminately into the trial process, thus defeating a vital purpose of the final judgment rule of maintaining the appropriate relationship between the respective courts. P. 437 U. S. 476.

550 F.2d 1106, reversed. STEVENS, J., delivered the opinion for a unanimous Court.