The Masses Cannot Sue

Seven years ago, Morton Eisen, a New York City wholesale shoe salesman, became convinced that his stockbroker had charged excessive fees. All other buyers and sellers of odd lots of stock (fewer than 100 shares), Eisen figured, were discriminated against in the same manner. He brought a class action on behalf of all who had paid the inflated fees--a total that has now reached 6,000,000 people--and he won a signal victory. Smaller class actions had long been common, but in Eisen's case a U.S. court of appeals held for the first time that federal rules governing such suits should not be applied so rigidly as to automatically preclude the huge and diffuse group that Eisen represented. Since then, mass class-action suits, in one case on behalf of "all people in the U.S.," have mushroomed.

Last week Eisen's case was back before the same U.S. court of appeals. This time the court decided that the suit was too unmanageable and should be dismissed. Eisen had conceded that he was unable to pay for millions of individual notices to other members of the class, and the court held that that was a legal necessity. Moreover, the court observed, the mere cost of sending each claimant his share of the damages (the average claim was $3.90) might well use up the entire award.

If the decision withstands planned appeals, Eisen's class action is finished, and so, too, are virtually all other similar mass suits. Noting that many such suits had been brought as "legalized blackmail" to force settlements from companies unwilling to face the cost or risk of fighting the actions, Federal Judge Harold Medina, who wrote the decision, called it "a landmark." Replied Mark Green, a legal activist who works with Ralph Nader: "I'd call it a land mine."

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