Isaacs, John H. v. Sprint Corp

In the
United States Court of Appeals
For the Seventh Circuit

No. 01-8016

John H. Isaacs, et al.,

Plaintiffs-Appellees,

v.

Sprint Corporation, et al.,

Defendants-Appellants.

Appeal from the United States District Court
for the Southern District of Illinois.
No. 00-cv-0155-MJR--Michael J. Reagan, Judge.

Submitted July 12, 2001--Decided August 14, 2001

Before Posner, Easterbrook, and Kanne,
Circuit Judges.

Posner, Circuit Judge. Beginning in the
1980s, Sprint purchased from some 40
different railroads operating in every
state of the continental United States
the right to install fiber-optic cables
on the railroads’ rights of way. A suit
has been filed in the district court on
behalf of owners of the land adjacent to
these rights of way, claiming that the
right belongs to them, not to the
railroads, and seeking damages for the
alleged conversion. Class certification
was sought under Fed. R. Civ. P.
23(b)(3). The district court certified
two plaintiff classes, one consisting of
landowners adjacent to rights of way
obtained by condemnation, the other of
landowners adjacent to rights of way
obtained by grants of public land to the
railroads. Sprint appeals from the order
of certification under Fed. R. Civ. P.
23(f), which grants the courts of appeals
discretion to review orders granting or
denying class certification.

The rule did not become effective until
the last month of 1998, and the courts
have not yet coalesced on an exhaustive
list of grounds for the exercise of this
discretion. For a recent discussion, see
Lienhart v. Dryvit Systems, Inc., No. 00-
908, 2001 WL 715773, at *2-5 (4th Cir.
June 26, 2001). It is doubtful that the
creation of such a list would be a desir
able undertaking, Blair v. Equifax Check
Services, Inc., 181 F.3d 832, 834 (7th
Cir. 1999), but in any event all agree
that a compelling case for the exercise
of our new discretion is one in which the
grant of class status places undue
pressure on the defendant to settle
regardless of the actual merit of the
suit. E.g., id. at 834-35; Lienhart v.
Dryvit Systems, Inc., supra, at *3. This
is such a case as a consequence of the
case-management plan set forth in the
order of certification. The district
judge proposes to determine first whether
any of the railroads obtained their
rights of way in fee simple absolute.
(The judge just said "fee," but he must
have meant fee simple absolute, because
the purpose of the determination is to
see whether the railroads own their
rights of way free and clear, in which
event the adjacent landowners retain no
rights and Sprint is entitled to summary
judgment, as the judge said.) If, second,
the railroad obtained not a fee simple
absolute but merely an easement, the
judge pro-poses to determine whether
under the law of the state in which the
right of way is located the holder of
such an easement is permitted to grant a
subeasement for the laying of fiber-optic
cable. If not, the plaintiffs are
entitled to summary judgment. Third, if
the railroad obtained an easement and
state law does not forbid the granting of
fiber-optic subeasements, a trial will be
necessary to determine whether the
particular railroad easement authorized
such grants and at that point all members
of the certified classes will be notified
of their right to remain members of the
class and so participate in any judgment
or settlement that the named plaintiffs
obtain.

What this means is that if the first two
rulings go in favor of Sprint, no members
of the class, other than the named
plaintiffs, will fail to opt out of the
suit, and the result will be that only
the named plaintiffs will be bound by the
judgment. If, however, the judge proceeds
to stage 3, few if any class members will
opt out and Sprint will be exposed to
enormous potential liabilities. So even
if Sprint prevails at stages 1 or 2, it
will have to face the class members in
other cases, while if the judge rules
against it at those stages its prospects
will darken greatly as a result of the
combined effects of the two rulings--
portents of likely future judgments
against Sprint--plus the effect of those
rulings in encouraging members of the
class not to opt out of the suit. Were it
not for this "one-way intervention"
authorized by the challenged order,
Sprint would face a smaller potential
liability because members of the class
would have a greater incentive to opt out
of the suit. If the order of
certification stands, the pressure on
Sprint to settle will be enormous.

We conclude that this is an appropriate
case in which to accept a Rule 23(f)
appeal and we proceed to the merits
because they have been fully briefed in
connection with Sprint’s petition for
permission to appeal and the plaintiffs’
opposition to it.

The certification order must be
reversed, and not only because one-way
intervention is forbidden. Fed. R. Civ.
P. 23(c)(2); Amati v. City of Woodstock,
176 F.3d 952, 957 (7th Cir. 1999);
Schwarzschild v. Tse, 69 F.3d 293, 295-96
(9th Cir. 1995). The fact that the order
authorizes one-way intervention is merely
one aspect of a more fundamental failing,
which is that the judge certified the
case to proceed as a class action before
making any of the determinations
(manageability of the case as a class
action, adequacy of the named plaintiffs
to represent the class, predominance of
common issues, etc.) that Rule 23 makes
prerequisite to certification. General
Telephone Co. v. Falcon, 457 U.S. 147,
161 (1982); Szabo v. Bridgeport Machines,
Inc., 249 F.3d 672, 677 (7th Cir. 2001);
Jefferson v. Ingersoll Int’l, Inc., 195
F.3d 894, 896-97 (7th Cir. 1999). The
rule could not be clearer, and this is
hardly a case in which class action
treatment is obviously appropriate. Quite
the contrary, it seems decidedly
inappropriate. The case involves
different conveyances by and to different
parties made at different times over a
period of more than a century
(railroading began in the United States
in the 1830s) in 48 different states
(plus the District of Columbia) which
have different laws regarding the scope
of easements, compare Mellon v. Southern
Pacific Transportation Co., 750 F. Supp.
226 (W.D. Tex. 1990), with Buhl v. U.S.
Sprint Communications Co., 840 S.W.2d 904
(Tenn. 1992)--laws moreover that have
changed over the period embracing the
grant of property rights to railroads,
Great Northern Ry. v. United States, 315
U.S. 262, 273-74 (1942), and whose
application involves intricate legal and
factual issues illustrated by Davis v.
MCI Telecommunications Corp., 606 So. 2d
734, 737 (Fla. App. 1992) (per curiam),
making it unlikely that common issues
predominate over individual-claim issues.
See Szabo v. Bridgeport Machines, Inc.,
supra, 249 F.3d at 677-78; In re Rhone-
Poulenc Rorer, Inc., 51 F.3d 1293, 1299-
1302 (7th Cir. 1995); Castano v. American
Tobacco Co., 84 F.3d 734, 741-44 (5th
Cir. 1996). This is a nightmare of a
class action.

The plaintiffs suggest that since Rule
23(c)(1) permits conditional grants of
class status, the judge’s order should be
viewed as properly conditioned on the
plaintiffs’ eventually establishing that
the prerequisites for class status have
been met. But the prerequisites cannot be
bypassed in this way. General Telephone
Co. v. Falcon, supra, 457 U.S. at 160.
Rule 23(c)(1) merely authorizes amending
the certifi-cation order on the basis of
new facts that emerge in the course of
the litigation; it presupposes a valid
order.

In like vein the plaintiffs argue that
the appeal is premature because the
district judge has made clear that his
order certifying the class was tentative
and is subject to revision. Emphasis on
tentativeness and revisability is
misplaced in the present context. Most
interlocutory orders are subject to
reconsideration as a case proceeds; that
fact cannot defeat an appeal from such an
order when interlocutory appeals are
authorized. Finality is by definition not
a property of an interlocutory order, and
in fact the Supreme Court has described a
certification order as "inherently
tentative." Id. at 160. Rule 23(f) would
be nullified if the appealability of an
order granting class certification were
destroyed by a judge’s statement that he
might change it.

A final point: Our decision of this
appeal was delayed by the district
judge’s failure to make an adequate
inquiry into the existence of federal
jurisdiction over the plaintiffs’ suit.
The only jurisdictional basis alleged in
the complaint is diversity of
citizenship, and it requires that each of
the named plaintiffs separately have a
stake in the case that exceeds $75,000.
With Sprint contending that the
individual claims are "relatively small,"
the plaintiffs only that they are
"substantial" but not large enough to
justify a separate suit by any of the
plaintiffs, and the value of the subease
ments that the plaintiffs claim to have
lost not obviously great, the allegation
that the requirements of diversity
jurisdiction are satisfied could not be
taken at face value. The parties had also
failed to specify the citizenship of a
trust that was a defendant and of the
partners in a limited partnership that
was another defendant. The fact that an
appeal is interlocutory does not excuse
the absence of adequate jurisdictional
statements, for unless a case is within
the jurisdiction of the district court,
we cannot decide the merits of an appeal;
we can only direct that the suit be
dismissed. So we ordered the filing of
supplemental briefs on jurisdiction. The
briefs repair the deficiencies of the
original filings well enough to prevent
us from concluding at this stage that the
district court lacked jurisdiction. But
the size of the stakes remains
sufficiently murky to bear further
inquiry by the district court, should the
plaintiffs decide to press on with their
case.

Circuit Rule 36 shall apply on remand.

Reversed.