417 U.S. 156 (1974)
In May 1966 petitioner Morton Eisen filed a class action in the United States District Court for the Southern District of New York on behalf of himself and all other odd-lot traders on the New York Stock Exchange.1 The complaint charged respondent brokerage firms Carlisle & Jacquelin and DeCoppet & Doremus with monopolizing odd-lot trading and setting the differential at an excessive level in violation of the Sherman Act.2 It also charged the Exchange with failing to regulate the differential in violation of the Securities Exchange Act of 1934.3
The class was later limited to traders during the period from May 1, 1962, through June 30, 1966.4 Throughout that period odd-lot trading was handled exclusively by special dealers.5 The two respondent firms together handled 99 percent of the Exchange's odd-lot business.6 They were compensated by a differential of 12.5 cents per share on stocks trading below $40 and 25 cents per share on stocks trading at or above $40.7 Petitioner's individual stake in the damages sought was $70.8
The District Court dismissed the suit as a class action in September 1966.9 The Court of Appeals issued Eisen I, holding the dismissal appealable as a final order under 28 U.S.C. § 1291.10 It also issued Eisen II, reversing the dismissal and remanding for further inquiry into the requirements of Rule 23, including notice, manageability, and adequacy of representation.11 After evidentiary hearings on remand, the District Court in 1971 held the suit maintainable as a class action.12
The District Court found that some 2,250,000 class members could be identified by name and address with reasonable effort.13 Individual notice to them would cost approximately $225,000 at six cents per letter.14 It approved a limited notice plan costing about $21,720.15 After a preliminary hearing on the merits, the court ordered respondents to bear 90 percent of that cost.16 Respondents appealed.17 In Eisen III the Court of Appeals held that individual notice to all identifiable members was required, that the representative plaintiff must bear the notice costs, and that the class action was unmanageable.18 The Supreme Court granted certiorari in 1973.19
Whether the Court of Appeals had jurisdiction under 28 U.S.C. § 1291 to review the District Court's orders permitting the suit to proceed as a class action and allocating notice costs?20
Under the collateral order doctrine of Cohen v. Beneficial Loan Corp., an order is appealable as a final decision if it conclusively determines a claimed right separable from and collateral to the merits.21 The order must be too important to be denied review and too independent of the cause itself to require deferral until final judgment on the merits.22
Yes. The District Court's order allocating 90 percent of notice costs to respondents conclusively rejected their contention that they could not lawfully be required to bear the expense of notice to the members of petitioner's proposed class.23 The order involved a collateral matter unrelated to the merits of petitioner's claims.24 Like the security-for-costs ruling in Cohen, the allocation was a final disposition of a claimed right that is not an ingredient of the cause of action.25
In the established facts the District Court had ordered respondents to pay after a preliminary hearing.26 This rendered the order appealable under section 1291 and gave the Court of Appeals jurisdiction to review the class-action notice problems.27
The Court of Appeals had jurisdiction under 28 U.S.C. § 1291 to review the District Court's orders.28
Whether Rule 23(c)(2) requires individual notice to all class members identifiable through reasonable effort in a Rule 23(b)(3) class action?29
Rule 23(c)(2) mandates that the court direct to class members the best notice practicable under the circumstances.30 This includes individual notice to all members who can be identified through reasonable effort.31 Each member may then request exclusion, enter an appearance, or be bound by the judgment.32
Yes. The established facts establish that some 2,250,000 class members could be identified by name and address with reasonable effort.33 Individual notice to them would cost approximately $225,000.34 Because the names and addresses are easily ascertainable, individual notice is the best notice practicable.35 The District Court's limited plan of notice to member firms, 2,000 active traders, 5,000 random members, and publication therefore failed to satisfy the rule.36
The Advisory Committee's Note and due-process precedents such as Mullane confirm that publication cannot substitute when individual notice is feasible.37
Rule 23(c)(2) requires individual notice to all class members identifiable through reasonable effort in a Rule 23(b)(3) class action.38
Related opinions on this issue
Joined by Mr. Justice Brennan And Mr. Justice Marshall
Justice Douglas dissented in part from the majority's treatment of notice and manageability.39 He emphasized that Rule 23(c)(4) permits a class action to be brought or maintained with respect to particular issues or by dividing the class into subclasses.40 The District Court could divide the class into smaller subclasses such as participants in monthly investment plans or payroll deduction plans.41
Individual notice could then be given at reasonable cost to the members of each subclass.42 The court could define the subclass by order without requiring amendment of the complaint.43 This approach would preserve the flexibility of the class action device while protecting the interests of small claimants who otherwise would have no practical remedy.44
Douglas noted that statute of limitations and preclusion questions raised by subclasses were not insurmountable obstacles to using the subclass mechanism.45
Whether a district court may conduct a preliminary hearing on the merits to allocate the cost of notice among the parties?46
No. The District Court conducted a preliminary hearing, found that petitioner was more than likely to prevail, and allocated 90 percent of notice costs to respondents on that basis.49 This procedure contravenes Rule 23(c)(1) by allowing a representative plaintiff to secure the benefits of a class action without first satisfying its requirements.50 It also risks prejudicing defendants because tentative findings are made without the safeguards of a full trial.51 The established facts show that the hearing was used solely to shift costs after petitioner declined to pay the $21,720 himself.52
A district court may not conduct a preliminary hearing on the merits to allocate the cost of notice among the parties.53
Whether the representative plaintiff must bear the full cost of notice to the class?54
Yes. Petitioner's individual stake was only $70 and the relationship with respondents was truly adversarial rather than fiduciary.58 The usual rule therefore placed the entire expense of notice on petitioner.59 Petitioner has consistently maintained that he will not bear the cost of notice under subdivision (c) (2) to members of the class as defined in his original complaint.60
The established facts confirm that the District Court's attempt to impose 90 percent of the cost on respondents after a merits preview was erroneous, requiring remand with instructions to dismiss the class action.61
The representative plaintiff must bear the full cost of notice to the class.62