GONZALES v. CASSIDY

INGRAHAM, Circuit Judge:

The question in this appeal is whether plaintiff-appellant Gonzales and the class he seeks to represent are bound by the res judicata effect of a prior class suit1 involving the same class (represented by a different named plaintiff), the same defendants and the same issues. We agree with Gonzales that the class was inadequately represented when the class representative in the prior suit failed to appeal from the trial court's judgment. We reverse and remand.

The prior suit began in May 1969. Antonio Gaytan filed suit as a class action against Clifton Cassidy, Chairman of the Texas Department of Public Safety, in the United States District Court for the Western District of Texas, seeking a declaratory judgment that the Texas Safety Responsibility Act2 was unconstitutional and an injunction against its enforcement. Gaytan, an uninsured motorist, had been involved in an automobile accident in Texas, and pursuant to §§ 4, 5(a), 5(b) and 7 of the Act3 his driver's license and the registration receipt on his vehicle were suspended without a hearing on liability or fault because he did not post security — as required by the Act — for the damages claimed by the adverse party. A three-judge court was convened, 28 U.S. C., §§ 2281 and 2284, and denied Gaytan and his class any relief by its holding that the Act was constitutional.4 On direct appeal to the Supreme Court, 28 U. S.C. § 1253, the district court's judgment was vacated, and the case was remanded for reconsideration in light of Bell v. Burson, 402 U.S. 535, 96 S.Ct. 1586, 29 L.Ed.2d 90 (1971), which was decided after the three-judge court's decision.

In Bell the Supreme Court held the Georgia Motor Vehicle Safety Responsibility Act unconstitutional as violative of procedural due process.5 The Georgia Act, like the Texas statute under attack in Gaytan, provided that the motor vehicle registration and driver's license of an uninsured motorist involved in an accident would be suspended unless the motorist posted security for the amount of damages claimed by an aggrieved party, but did not provide for a hearing on liability or fault prior to the suspension.

On remand the three-judge court accordingly held the Texas Act unconstitutional. But, regarding the scope of relief to which Gaytan and his class were entitled, the court held:

Having obtained full relief for himself, Gaytan did not appeal the court's denial of retroactive relief to the other members of his class.

The present action began in the Northern District of Texas on June 24, 1971, after the Supreme Court vacated the first Gaytan decision, but before the case was heard on remand. Pedro Gonzales filed a class action against Cassidy, the defendant in Gaytan, seeking the same relief as had been sought by Gaytan in his suit.7 On July 1, 1971, the Gonzales court entered a temporary restraining order in favor of Gonzales and the other named plaintiffs in his action, prohibiting the defendant from suspending their licenses and vehicle registration receipts. This was before the amended order in Gaytan was rendered but only one day after the first order denying retroactive relief to all of the class except Gaytan was entered. On August 19, 1971, the Gaytan court entered its amended and final order. Then on August 25, 1971, the Gonzales court ordered a show cause hearing as to why its temporary restraining order of July 1 should not be made permanent. This hearing was held on September 28 and the court reasoned that, because Gayton v. Cassidy was a class action and because Gonzales and the class he sought to represent were members of the Gaytan class, the principles of res judicata foreclosed their claims.8 Gonzales appeals claiming that Gaytan's failure to appeal the final three-judge order in Gaytan v. Cassidy rendered his representation of the class inadequate, therefore precluding res judicata from attaching to that judgment.

To answer the question whether the class representative adequately represented the class so that the judgment in the class suit will bind the absent members of the class requires a two-pronged inquiry: (1) Did the trial court in the first suit correctly determine, initially, that the representative would adequately represent the class? and (2) Does it appear, after the termination of the suit, that the class representative adequately protected the interest of the class? The first question involves us in a collateral review of the Gaytan trial court's determination to permit the suit to proceed as a class action with Gaytan as the representative, while the second involves a review of the class representative's conduct of the entire suit — an inquiry which is not required to be made by the trial court but which is appropriate in a collateral attack on the judgment such as we have here. Our discussion will treat each question separately.

The starting point in a trial court's determination to allow a suit to proceed as a class action is Rule 23(a) of the Federal Rules of Civil Procedure, which provides the prerequisites to a class action as follows:

The primary contention in this appeal is that Gaytan did not meet the requirements of 23(a)(4).9 Remembering that at this point we are only concerned with the court's initial determination that Gaytan would be an adequate representative, we look to the criteria on which the decision should be based. There are two: (1) the representative must have common interests with the unnamed members of the class; and (2) it must appear that the representative will vigorously prosecute the interests of the class through qualified counsel.10 We have little difficulty in concluding that Antonio Gaytan met both of these requirements when he filed his suit in May of 1969. He was an uninsured motorist as were the members of his class; he had an automobile accident in Texas and had failed to post the necessary security under the Act as had the members of his class; his license and registration receipt were suspended without a hearing on liability or fault just as occurred to the members of his class. Likewise, he had the same basic interests in not having his license suspended or in having the suspension revoked as did the other members of his class. It is clear then that Gaytan had common interests which coincided with those of the class he sought to represent. Furthermore, there are no allegations that Gaytan's attorney was not fully qualified to handle the case, or that, initially at least, he would not vigorously prosecute the action. The fact that Gaytan's counsel appealed to the Supreme Court after the three-judge court's adverse decision and subsequently won a reversal of that decision points significantly to counsel's qualification to handle the litigation. Therefore we cannot refuse to give res judicata effect to the judgment in Gaytan v. Cassidy on the basis that the trial court in that case erroneously determined that Gaytan would be an adequate representative of the class.

The second question is whether Gaytan's conduct of the entire suit was such that due process would not be violated by giving res judicata effect to the judgment in that suit.11 This is the crucial issue when the judgment in a class action is under collateral attack. Our first step, however, is to examine subdivisions (b) and (c) of Rule 23 in order to establish the proper context in which to make this inquiry.

Subdivision (b) of Rule 23 provides:

Gaytan v. Cassidy obviously fits within (b)(2) — thus, to be specific, we are dealing with the res judicata effect of the judgment in a (b)(2) type of class action.12 Subdivision (c) (3) provides: "The judgment in an action maintained as a class action under subdivision . . . (b)(2), whether or not favorable to the class, shall include and describe those whom the court finds to be members of the class . . . ." Although the Gaytan court's opinion, neither originally nor on remand, describes the class it considered Gaytan to be representing, we agree with the lower court here that Gonzales and the class he seeks to represent were members of the Gaytan class and would at first blush appear bound by the Gaytan decision. But our inquiry into the binding effect of Gaytan does not end with Rule 23 for, "although thus declaring that the judgment in a class action includes the class, as defined, subdivision (c)(3) does not disturb the recognized principle that the court conducting the action cannot predetermine the res judicata effect of the judgment; this can be tested only in subsequent action. See Restatement, Judgments § 86, comment (h), § 116 (1942)." Advisory Committee's Notes to Rule 23 F.R.C.P., 28 U.S.C.A. at 301; Moore ¶ 23.60 at 1203. As a general rule though, a judgment in a class action will bind the absent members of the class.13 The exception to this general rule is grounded in due process. Due process of law would be violated for the judgment in a class suit to be res judicata to the absent members of a class unless the court applying res judicata can conclude that the class was adequately represented in the first suit. Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 85 L.Ed. 22 (1942). See Sam Fox Publishing Co. v. United States, 366 U.S. 683, 691, 81 S.Ct. 1309, 6 L.Ed.2d 604 (1961); Dierks v. Thompson, 414 F.2d 453 (1st Cir., 1969); Eisen v. Carlisle and Jacquelin, 391 F.2d 555 (2nd Cir., 1968); Mersay v. First Rep. Corp. of America, 43 F.R.D. 465 (S.D.N.Y., 1968).

The 1966 amendments to Rule 23 eliminated the distinctions between true, hybrid and spurious class actions and the differing res judicata effect of each type of action, thus broadening the effect of res judicata under the amended rule.14 It follows then that a court — whether it be the trial court making its initial 23(a)(4) determination, or a subsequent court considering a collateral attack on the judgment in a class action — must stringently apply the requirement of adequate representation.15 Judge Frankel has noted:

M. Frankel, Some Preliminary Observations Concerning Civil Rule 23, 43 F.R. D. 39 (1967). And, as Justice Harlan observed: "The judgment in a class action will bind only those members of the class whose interests have been adequately represented by existing parties to the litigation." Sam Fox Publishing Co. v. United States, supra, 366 U.S. at 691, 81 S.Ct. at 1314. Our inquiry then into the adequacy of class representation for purposes of res judicata is made with the understanding that generally the class will be bound unless the party attacking the judgment can show that the class was inadequately represented.

What standards should determine whether Gaytan adequately represented the class in Gaytan v. Cassidy? In Mersay v. First Republic Corp. of America, supra, the trial court was making the 23(a)(4) determination of whether the named plaintiff would adequately represent the class when it said, "the primary criterion is the forthrightness and vigor with which the representative party can be expected to assert and defend the interests of the members of the class, so as to insure them due process." Id. 43 F.R.D. at 470. This precept is equally applicable to the determination which must be made by a court when a class action judgment is under collateral attack. We hold that the primary criterion for determining whether the class representative has adequately represented his class for purposes of res judicata is whether the representative, through qualified counsel, vigorously and tenaciously protected the interests of the class. A court must view the representative's conduct of the entire litigation with this criterion as its guidepost.

We have previously recognized that Gaytan's representation was more than adequate up to the time the three-judge court entered its final order on remand. The narrow question, therefore, is whether Gaytan's failure to appeal this order, which denied retroactive relief to all members of the class except Gaytan, constitutes inadequate representation of the class so that they are not bound by the judgment. We are compelled to hold that Gaytan's failure to prosecute an appeal on behalf of the other members of his class rendered his representation of them inadequate. For this reason, the judgment in Gaytan v. Cassidy cannot be res judicata to the class.16

Gaytan, through his attorney, vigorously represented the class until he obtained individual relief. The problem is that he was representing approximately 150,000 persons, who, although having had their licenses and registration receipts suspended without due process, were denied any relief by the three-judge court's prospective only application of its decision. So long as an appeal from this decision could not be characterized as patently meritless or frivolous, Gaytan should have prosecuted an appeal. Otherwise, it cannot be said that he vigorously and tenaciously protected the interests of the class he was purporting to represent, or that all members of the class had been afforded due process of law by having a full day in court. It is axiomatic that an appeal is a significant element in the judicial process. Gaytan's failure to prosecute an appeal deprived the members of his class, whose rights were not vindicated by the three-judge court's decision, of full participation in this process.

Appellees do not meet the argument that Gaytan's failure to appeal rendered him an inadequate representative of the class. Instead, they advance an estoppel-type argument to support the proposition that Gonzales cannot raise the inadequate representation issue. Their position is that since counsel for Gonzales was aware that on remand the Gaytan court denied retroactive relief by his June 30, 1971 order, and finally denied such relief in its amended order of August 19, Gonzales is estopped to attack the judgment collaterally because he should have intervened in Gaytan for the purposes of appeal. We reject this contention.

First, as the 1966 amendments to Rule 23 clearly illustrate, the purpose of a class action is to allow as few as one member of a class to prosecute an action for the benefit of the class if the requirements of 23(a) and (b) are met. This is one reason why the requirement of 23(a)(4) is stringently applied.17 The purpose of Rule 23 would be subverted by requiring a class member who learns of a pending suit involving a class of which he is a part to monitor that litigation to make certain that his interests are being protected; this is not his responsibility — it is the responsibility of the class representative to protect the interests of all class members.

Secondly, it would simply be inequitable to foreclose Gonzales from attacking the Gaytan judgment on the facts of our case. The Gaytan court rendered its initial order on remand denying retroactive application of its decision that the Texas Act was unconstitutional on June 30, 1971. The Gonzales court, nevertheless, entered a temporary restraining order on July 1, 1971, prohibiting the defendants in Gonzales (which are the same as those in Gaytan) from suspending plaintiffs-appellants' licenses or registration receipts. Thereafter, a motion was filed in Gaytan for clarification of the court's order. This motion was granted and on August 19, 1971, the Gaytan court issued an amended order giving relief only to the named plaintiff Gaytan and to those persons whose effective date of suspension occurred after June 30, 1971. Thus, there was not a final appealable judgment in Gaytan until August 19. Meanwhile, the Gonzales court's temporary restraining order remained in effect throughout this period of time. On August 28, 1971, the Gonzales court entered an order to show cause why its temporary restraining order should not be made permanent and set a hearing for September 28, 1971. By September 28th it was already too late for Gonzales to intervene for the purpose of prosecuting an appeal in Gaytan. Nevertheless, the Gonzales court held that Gaytan was res judicata to plaintiffs-appellants' claims. The only remedy then available to Gonzales was to appeal the court's decision to apply res judicata.

While some attorneys might have possessed the omniscience to have begun seeking intervention in Gaytan after that court's June 30th decision, we cannot fault counsel here for not doing so when one day later they obtained the relief which they were seeking in another court.18 Also, inasmuch as the Gaytan decision on remand was subsequently amended during the time the temporary restraining order was in effect, we cannot say that counsel should have sought intervention during this time. Nor is counsel to be faulted for not seeking intervention after August 19, 1971. The Gonzales court shortly thereafter ordered a hearing as to why the temporary restraining order should not be made permanent. To require counsel to have sought intervention in Gaytan while awaiting the hearing in Gonzales would require too much. In these circumstances the application of res judicata cannot be sustained.

On remand there will be at least two issues. The first will be whether this action may be maintained as a class action. The district court denied Gonzales's motion to allow this suit to proceed as a class action. In light of our decision and for reasons of judicial economy, we think the district court should reexamine this decision, and if it concludes that Gonzales meets the prerequisites of 23(a) and (b), it would seem appropriate to allow a class action. The second issue will be the retroactivity question.19 We express no views on the resolution of this issue.

Reversed and remanded.