609 F.2d 411

In re U. S. FINANCIAL SECURITIES LITIGATION.

Michael FABRIKANT and Milton Binswanger, Petitioners-Appellants, v. BACHE & CO., Basle Securities Corp. et al., Respondents/Appellees. FIRST NATIONAL BANK OF TOLEDO, etc. et al., Petitioners/Appellants, v. R. H. WALTER, J. B. Halverson, R. G. Steward et al., Respondents/Appellees. MELLON BANK, N. A., (“Mellon”) et al., Petitioners/Appellants, v. U. S. FINANCIAL, Salmon Bros, et al., Respondents/Appellees. Petition of Charles D. PRUTZMAN, Jr. Petition of UNION BANK. Petition of TOUCHE ROSS AND COMPANY. Petition of Angelo ADAMS. Petition of BROWN, Wood, Ivey, Mitchell & Petty. Petition of SOCIETE GENERALE DE BANQUE, RENTINVEST, et al. COLONIAL GROWTH SHARES, INC., Petitioner/Appellant, v. TOUCHE ROSS & CO. et al., Respondents/Appellees. Michael FABRIKANT and Milton Binswanger, Plaintiffs/Appellees, v. Philip HAMPTON, Philip D. Reed et al., Defendants/Appellants. *412Michael FABRIKANT and Milton Biswanger, Plaintiff/Appellees, v. John WEINBERG, etc. et al., Defendants/Appellants.

Nos. 77-2993 to 77-2995, 77-3063, 77-3064, 77-3093, 77-3099, 77-3121, 77-3122, 77-3333, 77-3344 and 77-3345.

United States Court of Appeals, Ninth Circuit.

Dec. 10, 1979.

Mitchell L. Lathrop, Los Angeles, Cal., for Richard Gant & V. Frank Asaro.

Charles D. Siegal, Los Angeles, Cal., for Charles D. Prutzman.

James W. Colbert, III, Los Angeles, Cal., for Union Bank.

Robert F. Brown, for Crosby, Fox, et al.

Stephen D. Miller, Beverly Hills, Cal., for Angelo Adams.

James M. Shaughnessy, New York City, for Societe Generale de Banque etc.

J. Asa Rountree, New York City, for Philip Hampton, Philip D. Reed, et al.

Winthrop J. Allegaert, New York City, for Colonial Growth Shares, etc.

Irwin F. Woodland, Los Angeles, Cal., for Touche Ross & Co.

*413Before KILKENNY and ANDERSON, Circuit Judges, and BYRNE,* District Judge.

J. BLAINE ANDERSON, Circuit Judge:

This appeal presents a challenge which strikes at the heart of this country’s system of jurisprudence. Simply stated, we are asked to decide whether there is a “complexity” exception to the Seventh Amendment right to a jury trial in civil cases. We answer this question in the negative and reverse the decision of the district court.

I. PROCEEDINGS BELOW

U.S. Financial (USF) was a high-flying real estate development company which began losing altitude in 1972 and finally crashed in 1973. This spawned an abundance of lawsuits.1 The present case concerns twenty separate suits filed by a variety of plaintiffs who were on the most part purchasers or representatives of purchasers of the different stock and debenture offerings made by USF.2 The various defendants include USF, certain closely-related companies, assorted USF insiders, underwriters, outside attorneys and accountants. All of the lawsuits present common issues relating to the allegations of federal and state securities law violations, common law fraud and negligence.

The different lawsuits were filed in federal court for the Southern District of California and four other federal judicial districts. The Judicial Panel on Multidistrict Litigation found that the prevalence of common issues and allegations justified transfer of the several cases to the Southern District of California for coordinated or consolidated pretrial proceedings. In re U. S. Financial Securities Litigation, 385 F.Supp. 586 (Jud.Pan.Mult.Lit.1974); In re U. S. Financial Securities Litigation, 375 F.Supp. 1403 (Jud.Pan.Mult.Lit.1974).

On its own motion, the court below struck all demands for jury trial in these consolidated cases. Judge Turrentine reasoned that the legal and factual issues were of such complexity as to be beyond the practical abilities and limitations of a jury. In re U. S. Financial Securities Litigation, 75 F.R.D. 702 (S.D.Cal.1977). Recognizing the importance of the jury trial question, it was certified for interlocutory appeal under 28 U.S.C. § 1292(b). By an order filed on August 29, 1977, this court granted permission to appeal.

II. BACKGROUND

In order to place this case and the question presented by it in perspective, its background is developed more fully than is normally necessary. Recently, there has been considerable controversy surrounding the Seventh Amendment’s guarantee of civil jury trial and the abilities of jurors as fact-finders in complex lawsuits.3 We therefore briefly sketch the history of USF, the status of the present litigation, the analysis *414used by the court below, and that used by the other federal district courts which have lately addressed the same issue.

1. History of USF

USF grew slowly for the first three years after it was incorporated in 1962 as West Coast Financial.4 Initially, it was primarily engaged in small accounts receivable financing. In 1964 the USF name was adopted and the company expanded into real estate financing and title insurance. USF also made its first public stock offering and filed a registration statement with the SEC in 1964.

USF’s growth and expansion began in earnest when R. H. Walter was appointed president in 1966. Walter brought his two real estate development companies and the joint venture concept with him to USF.5 That same year, USF formed U.S. Mortgage as a subsidiary to make long-term loans on real estate projects.

In 1967, USF acquired Capital Leasing Company. It also formed another subsidiary, U. S. Realty, as a real estate sales and management company. And in 1968, USF sold 250,000 shares of common stock in an interstate offering at $10.75 per share.

During 1969 it continued to expand its operations in the real estate field. Twenty million dollars was raised from a public offering of 15,000 units, each consisting of ten shares of common stock and one 5%% convertible subordinated debenture with a face value of $1,000, due in 1989. USF organized and acquired additional title insurance companies, and expanded its real estate operations with the acquisition of San Carlos Construction Co. and Due and Elliott Development Company. Additionally, U.S. Guaranty Capital was formed to make interim construction loans.

USF continued its capital expansion in 1970 with another securities offering through U. S. Financial Overseas, N.V., a wholly-owned Netherland Antilles subsidiary of USF.6 The offering was for $12.5 million in 9% debentures, due 1982, guaranteed by USF, and which came with attached warrants for the purchase of ten shares of USF common stock. During 1970 USF acquired three more companies, Development Creators, Inc., an architectural firm, Mosser Construction, Inc., an Ohio corporation engaged in heavy construction, and Shelton Corporation, a Hawaiian real estate company. In keeping with its rapid *415growth, USF common stock was listed on the New York Stock Exchange in December of 1970.

USF’s capital growth continued in 1971 with the offering of $35 million of 5V¿% convertible subordinated debentures in this country. Unfortunately for its investors, 1971 was the last year of USF’s phenomenal growth. USF’s reported assets had risen from $338,795 in 1962 to more than $310 million in 1971, its revenues from $8,876 to more than $180 million, and its earnings from $1,215 to over $6 million. The price of USF common stock had also increased correspondingly. From a selling price of less than $5.00 per share it soared to $92.00 per share in 1969, and following a three for two split in 1969 it had risen to a price of $57.00 per share in 1971.

USF was a vertically-integrated company at the time of its downfall. It was in the business of developing, constructing, operating, marketing, and financing real estate projects, individually and as a “participant” in joint ventures. The construction and financing of the real estate developments were controlled through its subsidiary corporations. These various operations were further supplemented by USF’s wholly-owned title insurance and casualty insurance companies.

Despite some problems in 1971, the collapse did not begin until 1972 after the SEC had begun investigating the USF operations.7 In late 1972 the SEC suspended trading in USF securities altogether. At this time USF had approximately 4.5 million outstanding shares of common stock. In 1973, USF began a Chapter XI arrangement proceeding in bankruptcy which has since been converted into a Chapter X reorganization proceeding.

2. Status of the Present Litigation

On June 24, 1977, when the district court entered its order striking the demands for jury trial, there were eighteen consolidated cases.8 Subsequently, certain plaintiffs brought additional claims, increasing the total number of actions to twenty.9 However, several of the cases have been settled and dismissed since the district court’s order.10 This court has been advised that there are ten cases remaining, four of *416which, while still pending, have never been, and are not now, being actively pursued.11

Thus, there are six remaining active cases. The appellants maintain12 that these six actions actually amount to only three separate prosecutions. The three remaining cases brought by Societe Generale De Banque, they contend, allege a single continuing scheme to defraud, causing damages to a class of debenture purchasers, by Touche Ross & Co., Union Bank, and Brown, Wood. Liability is predicated upon violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), Rule 10b-5, 17 C.F.R. § 240.10b-5, and also for common law fraud and negligence. The appellants contend that the two separate actions brought by Colonial Growth, and the one action by Bank of Toledo, are all based upon the same continuing scheme to defraud which forms the basis of the So-ciete Generale De Banque actions.

The appellees claim that the dismissals have done little, if anything, to reduce the complexity of the issues, the volume of the evidence, or the estimated length of trial. Furthermore, they contend that the nature and scope of the legal and factual issues remain basically the same as they were before any settlements were reached. The trier of fact will still have to decipher the financial statements and accounting procedures of USF for the period from 1966 through 1972. Since differing degrees of difficulty and complexity would not alter our ultimate decision, we accept the appel-lees’ representations.

3. District Court Decision

In a carefully thought out opinion the district court presents a persuasive argument as to why there should be an exception to the Seventh Amendment right to jury trial in this type of case. The practical difficulties created by the size and scope of these consolidated cases are vividly illustrated.13 Nevertheless, such practical considerations diminish in importance when they come in conflict with the constitutional right to a jury in civil cases.

The court, under the compulsion of the Seventh Amendment guarantee, acknowledged that the right to jury trial was dependent upon the legal or equitable classification of the case. After quoting several *417English and American court decisions with approval for their disparaging remarks about the abilities of juries,14 the court then reasoned somewhat as follows: If this case falls within equity jurisdiction, then there is no right to jury trial. Equity has jurisdiction over cases in which there is no adequate remedy at law. The inability of juries to handle complex cases and render a fair decision means that there is no adequate remedy at law. Therefore, complex cases are within equity jurisdiction and there exists no right to jury trial in them.

Support for this reasoning is drawn from Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962), and Ross v. Bernhard, 396 U.S. 531, 90 S.Ct. 733, 24 L.Ed.2d 729 (1970). In Dairy Queen, the court made the observation that a plaintiff may bring an action for an equitable accounting only when it can be shown “. . . that the ‘accounts between the parties’ are of such a ‘complicated nature’ that only a court of equity can satisfactorily unravel them.” 369 U.S. at 478, 82 S.Ct. at 900. And, in the Ross decision the court noted that one of the factors used in determining whether a case was legal or equitable was “. . . the practical abilities and limitations of juries.” 396 U.S. at 538, n. 10, 90 S.Ct. at 738, n.10 (referred to as Ross footnote).

The decision then takes a quantum leap and establishes some general guidelines as to when the “complexity exception”15 will deny to a litigant his constitutional right to a civil jury trial. These are:

“First, although mere complexity is not enough, complicated accounting problems are not generally amenable to jury resolution. Although such problems often arise only during the damages portion of a trial, they sometimes are present during the liability portion as well only a case in which such a special master could not assist the jury meaningfully may be subject to removal from the province of the jury because of complex accounts.
“Second, the jury members must be capable of understanding and of dealing rationally with the issues of the case.
“And third, an unusually long trial may make extraordinary demands upon a jury which would make it difficult for the jurors to function effectively throughout the trial.”

75 F.R.D. at 711. The court found the first two guidelines satisfied based on its conclusion that a jury was not capable of either understanding or rationally reconciling the mass of data, the variety of legal theories, and the number of parties involved in the case. Since the trial time was estimated at two years, the court concluded that it would be very difficult to find a jury which could sit for that long.

4. Other District Courts

Recently, five other district courts have also faced the question of whether jury trial should be denied in complex cases.16 The focal point of the various inquiries has cen*418tered around the previously-mentioned footnote from the Ross decision and its consideration of the practical abilities and limitations of juries. Agreeing with the court below, thus far three of the other five courts have also found a “complexity exception” to the Seventh Amendment.

First in this line of decisions was the case of In re Boise Cascade Securities Litigation, 420 F.Supp. 99 (W.D.Wash.1976). The district court struck the demands for a jury trial because of the complicated nature of the accounting and securities issues. The order was based upon the Ross footnote which the court found to be of “constitutional dimensions.” And the court also relied in part upon the due process clause which it found required fairness in decision-making, something which a jury was incapable of doing in a case of Boise Cascade’s complexity.

The plaintiff in Radial Lip Mach., Inc., v. Intern. Carbide Corp., 76 F.R.D. 224 (N.D. 111.1977), moved to strike the defendants’ demand for jury trial. Radial Lip was a complicated trademark and patent infringement case with claims and counterclaims seeking a wide variety of legal and equitable relief. Faced with the argument based upon the Ross footnote, the court reasoned that this did not mean that the practical abilities and limitations of juries operated as an exception to the Seventh Amendment. The court also rejected the contention that the case was of such extraordinary complexity that only a court of equity could unravel the issues.

The court, in Bernstein v. Universal Pictures, Inc., 79 F.R.D. 59 (S.D.N.Y.1978), on its own motion, struck the plaintiffs’ demand for jury trial. Various composers and lyricists brought Bernstein as a class action, alleging various antitrust violations. The court based its decision on what were viewed as the court’s traditional equity powers, which were found to include “ . . . the power to strike a jury demand when to allow it to stand would work an injustice.” 79 F.R.D. at 66. Relying principally on the Ross footnote, the court concluded that “ . . . the sheer size of the litigation and the complexity of the relationships among the parties render it as a whole beyond the ability and competence of any jury to understand and decide with rationality.” 79 F.R.D. at 70.

In another decision from a district court in this circuit, an order was entered striking a jury demand. ILC Peripherals v. International Business Machines, 458 F.Supp. 423 (N.D.Cal.1978).17 ILC Peripherals was a complicated antitrust case where the court, after dismissing a hopelessly deadlocked jury, entered a directed verdict in favor of the defendant. As part of its decision, the court entered an order striking the jury demand in the event of a remand for a retrial. The court relied principally on the Ross footnote:

“It is the third factor of the equation, the practical abilities and limitations of jurors, that causes the court to conclude that the issues in this case must be considered to be equitable.”

458 F.Supp. at 445. Where the issues are beyond the abilities of a jury, the court reasoned, the legal remedy becomes inadequate and equity jurisdiction attaches. Unlike any of the other district court decisions on this issue, the ILC Peripherals court based its decision upon “its own observations during the five month trial.” 458 F.Supp. at 447.

The most exhaustive analysis of the jury issue by any court was the recent opinion, In re: Japanese Electronic Products Antitrust Litigation, 478 F.Supp. 889 (E.D.Pa. 1979).18 In the consolidated cases which were described as “so massive as to make *419them unique in the annals of United States antitrust and trade regulation litigation,” the district court refused to strike the plaintiffs’ jury demands.19

III. DISCUSSION

Analytically, we are faced with three different arguments as to why the Seventh Amendment right should not apply to this class of complex civil cases.20 The first approach follows the historical legal-equitable test. Complex commercial litigation, such as the present case, is analogized to an “equitable accounting,” where there was no right to jury trial. The second argument, based upon the Ross footnote, asks the court to adopt a new interpretation of the Seventh Amendment and examine the practical abilities and limitations of juries. The final argument claims that due process requires trial by the court when a jury cannot comprehend the issues and evidence in the case. After a short explanation of the historical background of the Seventh Amendment, we will address each of these arguments.

1. Historical Background

Throughout this country’s history, the Seventh Amendment and the right it is designed to guarantee, has engendered neither the controversy nor the litigation that has surrounded some of the other nine Amendments forming the Bill of Rights. Nevertheless, the importance of the civil right to jury trial should not be underestimated.21

The right to jury trial arrived on the shores of this country with the first English *420colonists.22 The original Jamestown charter guaranteed all the rights of Englishmen to the colonizers, including trial by jury.23 During the next two hundred years of development in colonial America, the right to jury trial continued to expand.24 The principles embodied in jury trials found a receptive atmosphere in the egalitarian principles of the colonists. By 1776, the right to jury trial existed, in one form or another, in each one of the thirteen colonies.25 In fact, one of the primary grievances against England at the time of the Declaration of Independence was the restriction on the right to jury trial.26 Colonial administrators had been circumventing the right by trying various cases, both criminal and civil, in the vice-admiralty courts.27

When the Constitution was finally drafted, there was limited debate as to whether the civil right to jury trial should be included.28 The lack of this guarantee formed one of the primary arguments against the adoption of the new Constitution.29 The right to jury trial in civil cases, embodied in the Seventh Amendment, then became one of the chief reasons supporting the adoption of the Bill of Rights.

This does not mean that juries were not without their detractors. The Federalists generally opposed juries and the Seventh Amendment. Since their arguments did not carry the day, we do not believe that we should give much credence to the Federalists’ opinions about the abilities of juries as suggested on appeal.30

The preceding brief historical sketch serves to illustrate the significance of the civil right to a jury. Additionally, certain general considerations pertaining to the nature and construction of the Seventh Amendment further dramatize the importance attached to it.

*421In Jacob v. City of New York, 315 U.S. 752, 62 S.Ct. 854, 86 L.Ed. 1166 (1942), the Supreme Court noted that:

“The right of jury trial in civil cases at common law is a basic and fundamental feature of our system of federal jurisprudence which is protected by the Seventh Amendment. A right so fundamental and sacred to the citizen, whether guaranteed by the Constitution or provided by statute, should be jealously guarded by the courts.”

315 U.S. at 752-753, 62 S.Ct. at 854. The Court has also explained that:

“Maintenance of the jury as a fact-finding body is of such importance and occupies so firm a place in our history and jurisprudence that any seeming curtailment of the right to jury trial should be scrutinized with the utmost care.”

Dimick v. Schiedt, 293 U.S. 474, 486, 55 S.Ct. 296, 301, 79 L.Ed.2d 603 (1935), quoted with approval in Beacon Theatres v. West-over, 359 U.S. 500, 501, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959). With these general considerations in mind, we turn to the question of whether the Seventh Amendment protects the right to jury trial in the present case.31

2. Historical Approach

Whenever a court is called upon to interpret the Constitution, its analysis must begin with the language of the constitutional provision which it is called upon to interpret. Initially, we must therefore look to the Seventh Amendment which provides as follows:

“In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of common law.”

The surface simplicity of this provision is beguiling for the exact scope of its application was unclear even when it was first adopted.

The Seventh Amendment “preserved” the right to jury trial in all suits “at common law.” The basic purpose behind it was to maintain the right to jury trial as it existed when the Amendment as adopted in 1791. Because the Amendment speaks in terms of preservation, an historical test has been employed to determine its application. And since it refers to the common law, reference is made to the English practice as the source of this country’s common law.32

The classic explanation of what was meant by “common law” was made by Justice Story almost one hundred fifty years ago:

“The phrase ‘common law,’ found in this clause, is used in contradistinction to equity, and admiralty, and maritime jurisprudence. ... By common law they meant what the Constitution denominated in the third article ‘law;’ not merely suits, which the common law recognized among its old and settled proceedings, but suits in which legal rights were to be ascertained and determined, in contradistinction to those where equitable *422rights alone were recognized, and equitable remedies were administered; or where, as in the admiralty, a mixture of public law, and of maritime law and equity was often found in the same suit. . In a just sense, the amendment, then, may well be construed to embrace all suits which are not of equity and admiralty jurisdiction, whatever may be the peculiar form which they may assume to settle legal rights.”

Parsons v. Bedford, 3 Pet. 433, 28 U.S. 433, 446-447, 7 L.Ed. 732 (1830).

The right to jury trial does not depend on the character of the overall action but instead is determined by the nature of the issue to be tried. Ross v. Bernhard, 396 U.S. 531, 538, 90 S.Ct. 733, 24 L.Ed.2d 729 (1970). Thus, there is a right to jury trial when the issue presented in a case would have been heard at common law. And conversely, there is no right when the issue presented in a case, viewed historically, would have been tried in the courts of equity, or in some other manner without a jury.33

Thus, the basic consideration in determining when the right to jury trial applies depends on the ancient distinction between law and equity. Since the merger of law and equity in 1938, some have stated that this is the only area where the distinction has any further significance. Groome v. Steward, 79 U.S.App.D.C. 50, 142 F.2d 756 (D.C.Cir.1944).

Although the primary test depends upon the distinction between law and equity, courts are not rigidly bound to the procedural rules and forms of action as they existed in 1791. Several procedural devices developed and expanded since 1791 have infringed upon the civil jury’s historic role; nevertheless, they have been found consistent with the Seventh Amendment.34 Conversely, other procedural developments have limited the scope of equity jurisdiction, and expanded the right to jury trial.35 Additionally, it is too obvious to be doubted that the constitutional right to jury trial attaches to statutory causes of action as long as they involve legal rights and remedies.36 Thus, the historical test is not static, *423rather it is more in the nature of an historical inquiry, an inquiry which is guided by the statutory expansion of legal rights, and the procedural developments which have both expanded and retracted the role of the civil jury.

Returning to the present case, the appel-lees do not seriously contest the fact that the issues presented here are basically of a legal nature.37 The remedy which is sought in all of the consolidated cases is damages, which is the traditional form of relief granted by the common law courts. The substantive rights asserted are, in part, based on the common law principle of fraud and negligence. The statutory rights under the securities laws (principally Section 10(b) of the Securities Exchange Act of 1934 and the rules and regulations which form its progeny) merely create new legal duties. An action seeking damages from a breach of any of these statutory duties is analogous to a tort action at common law. From this it is clear that the present cases, where legal relief is sought and legal rights are asserted, involve suits either at common law or analogous to common law actions where the Seventh Amendment preserves the right to jury trial.38

Nevertheless, the appellees claim that due to the complexity of the present case, it is analogous to an action for an equitable accounting where historically there has been no right to a jury.

This argument misses the mark. It attempts to have the legal or equitable nature of the case characterized as a whole rather than by examining the nature of the issues involved. As previously pointed out, the issues presented here are of a legal nature. The fact that resolution of the issues will involve an examination of USF’s accounts, and accounting procedures, cannot transform the case into an action for an equitable accounting.39

The Supreme Court rejected a similar argument in Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962). The plaintiff there had brought an action for an injunction restraining an alleged patent infringement and for an accounting for profits lost through the infringement. The Court decided that the plaintiff’s characterization of the case as an action for an equitable accounting was of no consequence. The true basis of the action, the Court found, was on a “debt allegedly due under a contract . . [or] for damages . . . .” 369 U.S. at 477, 82 S.Ct. at 899. The opinion went on to note that in view of the ability of masters to assist the jury in complicated cases, it would be extremely difficult to satisfy one of the prerequisites for bringing an equitable accounting; that is, a showing that the accounts between the parties are of such a *424complicated nature that only a court of equity could unravel them.40

A suit for an “accounting” was a narrow and little-used ground for establishing equitable jurisdiction.41 The present actions do not involve any claims for an equitable accounting. The questions in this case are of a legal character traditionally heard at common law. The fact that a case may involve accounting principles cannot magically convert the legal causes of action into an action for an equitable accounting.

3. The Ross Test

As we discussed earlier in this opinion, the Ross v. Bernhard, 396 U.S. 531, 90 S.Ct. 733,24 L.Ed.2d 729 (1970), decision has been interpreted by some courts and commentators as establishing a new test for determining the right to jury trial.42 The court below held, and the appellees argue, that Ross establishes a test under which a court must inquire into the practical abilities and limitations of juries in resolving the Seventh Amendment question. We do not believe that Ross may be read as establishing a new test for determining when the Seventh Amendment applies.

In Ross, the plaintiffs had brought a stockholders’ derivative suit against the directors of an investment company and the company’s brokers. The complaint alleged statutory violations of the Investment Company Act of 1940, breach of fiduciary duties, and requested that the defendants return their profits to the company. Despite the fact that stockholders’ derivative suits were historically only recognized in equity, the Court held that “ . . . the right to jury trial attaches to those issues in derivative actions as to which the corporation, if it had been suing in its own right, would have been entitled to a jury.” 396 U.S. at 532-533, 90 S.Ct. at 735. The Court viewed the prior rule which only allowed derivative suits to be brought in equity as merely a procedural obstacle which was “destroyed” by the merger of law and equity under the Federal Rules of Civil Procedure.

For our purposes here, the most important part of the Ross decision came during the discussion of Beacon Theatres v. West-over, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959), and Dairy Queen, Inc. v. Wood, 369 U.S. 469, 82 S.Ct. 894, 8 L.Ed.2d 44 (1962), where the court said this:

*425“The Seventh Amendment question depends on the nature of the issue to be tried rather than the character of the overall action.10 ”

396 U.S. at 538, 90 S.Ct. at 738

This statement was explained in footnote 10 as follows:

“As our cases indicate, the ‘legal’ nature of an issue is determined by considering, first, the pre-merger custom with reference to such questions; second, the remedy sought; and, third, the practical abilities and limitations of juries. Of these factors, the first, requiring extensive and possibly obtruse historical inquiry, is obviously the most difficult to apply. See James, Right to a Jury Trial in Civil Actions, 72 Yale L.J. 655 (1963).”

Based on this footnote, this court is asked to employ an inquiry into the practical abilities and limitations of a jury as the test for determining the application of the Seventh Amendment. We decline this invitation for several reasons.43

While it is unclear as to what was meant by the inclusion of the third factor, we do not believe that it stated a rule of constitutional dimensions. After employing an historical test for almost two hundred years, it is doubtful that the Supreme Court would attempt to make such a radical departure from its prior interpretation of a constitutional provision in a footnote.44

Another consideration involves the two sources cited for the rule: the vague reference to “our cases” and the James article. No Supreme Court decision prior to Ross ever utilized a test even partially dependent upon an inquiry into the abilities of jurors. The only occasions even remotely resembling such an inquiry are the equitable accounting cases, the significance of which Dairy Queen limited practically to the point of extinction.45 The James article also fails to add any support to the use of the third factor, and, if anything, it counsels against such an inquiry. James explains that under the Constitution, judges are not free to examine what issues may be best suited for resolution by a judge or by a jury.46

While the Supreme Court has never specifically repudiated the third factor in the Ross footnote, it has never met with general acceptance by the courts47 In the Ross *426decision itself, the Court did not consider the practical abilities and limitations of juries. And, although the Supreme Court has considered the Seventh Amendment question in depth on at least five occasions since Ross, the abilities of juries have never been considered.48 The subsequent decisions have all relied upon the traditional historical test.

Another factor which militates against our adoption of a new interpretation of the Seventh Amendment is our belief that it would be totally at odds with prior Seventh Amendment experience.49 To consider the practical abilities and limitations of juries within the context of complex cases would necessitate an examination of the whole case. However, the Seventh Amendment right has never been made dependent upon such an examination; it has always been the nature of the issue.50 When a case involves mainly equitable issues and only incidental legal issues, the right to jury trial still attaches to the legal issues.51 Under Seventh Amendment jurisprudence, an historical approach must still be followed.52 Thus, we conclude that Ross may not be read as establishing a functional interpretation of the Seventh Amendment.53

*4274. Due Process

The appellees argue that their rights to due process under the Fifth Amendment would be violated if this case were tried to a jury. Because of the size and magnitude of the present litigation, they reason that a jury could not reach a rational decision. According to one of the briefs, due process dictates that a jury should not be required when the facts and issues are beyond a jury’s comprehension.54

We assume, without deciding, that there is such a right to a “competent” fact-finder. However, we do not agree with the two assumptions upon which this argument is based, that is, the complexity and the inability of a jury to serve as fact-finder.

It should be noted that both of the arguments, discussed previously under the historical approach and the Ross test, shared the same underlying premise. With the historical approach, had we found this case analogous to an equitable accounting, then an inquiry into the ability of a jury in complex cases would have been necessary; just as it would were we to follow the suggested Ross test. Because of the manner by which we approached those arguments it was unnecessary to examine the abilities of juries in complex cases since we did not reach that step in their arguments. Had we found it necessary at that point to resolve the jury competence issue under either one of those arguments, we would have done so in the same manner as we do in the following discussion; that is, a jury is a competent fact-finder in complex cases.

A. Complexity

Many cases appear overwhelmingly complicated in their early stages. Nevertheless, by the time such cases go to trial, what had initially appeared as an impossible array of facts and issues has been synthesized into a coherent theory by the efforts of counsel. Moreover, in answering the Seventh Amendment question, courts should take into consideration the various procedural developments which serve to simplify and facilitate the trial of a “complex” case to a jury.55

The assumption that attorneys cannot develop and present complex cases to a jury underestimates the abilities of the bar, especially the experienced and capable counsel associated with the present litigation. Whether a case is tried to a jury or to a judge, the task of the attorney remains the same. The attorney must organize and assemble a complex mass of information into a form which is understandable to the uninitiated. In fact, one judge has suggested attorneys may do a better job of trying complex cases to a jury than to a judge.56

Also, the trial judge has the power and the authority to control, manage and direct the course of complex cases. The Federal Judicial Center developed the Manual for Complex Litigation for just such cases.57 *428The Manual is designed to provide for the fair, firm, and efficient judicial control of complex litigation. Id. p. IV. A district judge is not left in the position of a captain whose ship, lacking a rudder and throttle, proceeds at its own speed in its own direction. Instead, the Manual encourages and provides suggestions as to how the district judge should exercise control over the parties and give the case direction.

Various occurrences prior to trial may assist in simplifying the overwhelmingly complex case. Tights, Inc. v. Stanley, 441 F.2d 336, 339-340 (4th Cir. 1971), cert. denied, 404 U.S. 852, 92 S.Ct. 90, 30 L.Ed.2d 91, A motion under Fed.R.Civ.P. 12 may be used to test the sufficiency of an adversary’s pleadings. The facts may become sufficiently clear on some issues to entitle a party to have judgment entered as a matter of law under Fed.R.Civ.P. 56. The parties may stipulate to the admissibility of evidence, or to the facts themselves, thus reducing the time necessary to present a case at trial. The trial court could also order separate trials on some of the claims or issues under Fed.R.Civ.P. 42(b).58 And, as it is apparent from the present case, many cases or issues may be settled prior to trial.59

When a case involves complicated issues, the trial judge may appoint a master under Fed.R.Civ.P. 53(b) to assist the jury.60 In referring matters, the court has considerable discretion in deciding what the master should undertake to report upon. Fed.R. Civ.P. 53(c). We recognize that .use of masters in jury cases is “ . . . the exception and not the rule . . . ,” because they do represent a limited inroad on the jury’s traditional sphere. Fed.R.Civ.P. 53(b). Nevertheless, the use of a master is constitutional, and certainly is preferable to a denial of the Seventh Amendment right altogether.61

The Federal Rules of Evidence also provide for the simplification of the evidence presented at trial by allowing for the use of summaries of voluminous materials. Fed.R. Evid. 1006.62 Since this rule should be construed so as to promote fairness, and eliminate unjustifiable expense and delay, it should be liberally employed in complex cases. See Fed.R.Evid. 102.63 Whether the *429present case is tried to a judge or a jury, in view of the estimates of the amount of documentary evidence the fact-finder will have to read,64 there will need to be extensive reliance upon summaries.65

We generally accept the district court’s characterization of the complicated nature of this case. It found that the fact-finder will, in part, need to focus on the following matters:

“a) Complex real estate transactions. There were many intricate purchases and sales of large parcels of real estate. Large construction projects were undertaken. The financing of the purchases and of the construction projects often involved a series of loans among various USF subsidiaries. Sometimes there would be a series of purchases and sales with each subsidiary involved in the deal reporting a profit on its share of the transaction.
“b) Reporting of income. Income reported was not always represented by cash in the bank. Income and profits from a variety of sources and in a variety of forms were reported. Sometimes the income was to be realized at a future date.
“c) Securities. USF bought and sold securities of some of its subsidiaries. The value of those securities, and the net worth of those subsidiaries, hence would be of importance. These figures, in turn, would be affected by some of the other matters listed above.”

75 F.R.D. at 712. We recognize that a difficult task lies ahead for the fact-finder in attempting to understand and unravel the USF financial records. Nevertheless, we believe that the use of the aforementioned considerations should reduce what might otherwise be considered the overwhelming complexity of the present case.

B. Abilities of Juries

The jury system has never been without its critics, which have included some of this country’s most eminent judges.66 The oppo*430nents of the use of juries in complex civil cases generally assume that jurors are incapable of understanding complicated matters. This argument unnecessarily and improperly demeans the intelligence of the citizens of this Nation. We do not accept such an assertion. Jurors, if properly instructed and treated with deserved respect, bring collective intelligence, wisdom, and dedication to their tasks, which is rarely equalled in other areas of public service.

Although various views have been expressed about the practical abilities of jurors, there has been little substantive research done on the subject.67 This is due, in part, to the sacrosanct manner by which our country has regarded the jury’s deliberative process. In the federal courts we generally do not allow any inquiry or challenge based on what occurs in the jury room.68 In fact, the only major study undertaken in this area, which violated the sanctity of the jury room, resulted in a public censure by the Attorney General of the United States and a Congressional investigation.69

Opponents of the use of juries in civil cases look to the virtual abolition of the civil jury in Great Britain as support for why a similar course should be followed in this country. However, an examination of the British experience does not support the conclusion that the gradual obsolescence of the civil jury there resulted from any consideration of the practical abilities and limitations of juries. In fact, the two principal causes of the civil jury’s decline were a manpower shortage during World War I and an economy drive during the depression.70 Neither consideration carries any weight in this country; we do not have a manpower shortage and the cost of juries is minimal at best.71 And the most important factor which makes the British analogy inappropriate is that the civil jury was never afforded the constitutional protection in *431Great Britain that it has received in this country.72

As we noted earlier (see n. 17, supra), the outcome in ILC Peripherals v. International Business Machines, 458 F.Supp. 423 (N.D. Cal.1978), is used as an example of a jury’s inability to serve as a fact-finder in complex cases. After discharging the deadlocked jury, the district judge asked the foreman whether a case like ILC Peripherals should be heard by a jury, to which the foreman responded as follows:

“If you can find a jury that’s both a computer technician, a lawyer, an economist, knows all about that stuff, yes, I think you could have a qualified jury, but we don’t know anything about that.”

458 F.Supp. at 447. Although we can sympathize with the frustration that this juror must have felt after being deadlocked for nineteen days, it does not necessarily follow that the parties would be any better off trying the case to a judge rather than a jury. Although judges are lawyers, they generally do not have any more training or understanding of computer technology or economics than the average juror. Whether a case involves computer technology, aircraft design, or accounting, attorneys must still educate the uninitiated about the matters presented in their case. While we express great confidence in the abilities of judges, no one has yet demonstrated how one judge can be a superior fact-finder to the knowledge and experience that citizen-jurors bring to bear on a case. We do not accept the underlying premise of appellees’ argument, “that a single judge is brighter than the jurors collectively functioning together.” 73

In fact, the vast majority of the parties to this appeal oppose the decision to strike the demand for jury trial. We are impressed with this vote of confidence in the jury system shown by the litigants (both plaintiffs and defendants) and their experienced counsel. This serves as additional support for this court’s belief that the present case is not beyond the practical abilities of a jury. In fact, experience demonstrates that juries are capable of sorting out complex factual issues and applying the law to them.74

IV. CONCLUSION

Not only do we refuse to read a complexity exception into the Seventh Amendment, but we also express grave reservations about whether a meaningful test could be developed were we to find such an exception. Where would the courts draw the line between those cases which are, and those which are not, too complex for a jury? The court below found that the complexity of the present case was created primarily by the accounting and financial nature of the issues and evidence. The appellees generally assume that only antitrust and securities cases could qualify for the complexity exception. We acknowledge the complicated nature of the evidence and issues associated with the accounting and financial questions involved in antitrust and securities cases. Yet, almost all tax cases also involve the same type of evidence and issues; does this then mean that there should not be a right to jury trial in this broad class of cases as well?

Many other types of cases also require a jury to unravel complicated factual issues totally unrelated to financial or accounting problems. Products liability cases almost always require an inquiry into the design of the product, which includes the plan, structure, choice of materials, and specifications which were used. For instance, cases arising from airplane crashes often present difficult issues, the resolution of which is dependent upon engineering evidence relating to the design, metallurgy, materials, and service. Inevitably, both sides will present expert testimony on the different issues. Will this type of case also come within the *432complexity exception? Should we draw a distinction based upon whether a case involves engineering or accounting issues? Once we open the door, it would be difficult to keep it only partially open. In answering the Seventh Amendment question, we believe that any test which is dependent upon the complexity characterization of a case would be too speculative to be susceptible of any type of practical application.

Another argument which weighs heavily against the need for a complexity exception to the Seventh Amendment is provided by the procedural checks which a judge may exercise after a jury has returned a verdict. A new trial may be granted under Fed.R. Civ.P. 59 when the verdict is against the weight of the evidence, the damages are excessive, or the trial was unfair for some reason.75 And, a judgment notwithstanding the verdict under Fed.R.Civ.P. 50 may be granted if there was not enough evidence to make an issue for the jury.76 These procedures protect litigants from the risk of a jury reaching an “irrational” verdict.77

Although we express great confidence in the jury system, some of the points raised by its critics should not be summarily dismissed. However, in view of the mandate of the Seventh Amendment, time might be better spent in searching for ways to improve rather than erode the jury system.

We hold that there is no complexity exception to the Seventh Amendment right to jury trial in civil cases. We do not believe that the equitable action for an accounting can be stretched so as to include all the complex commercial cases which arise today. Moreover, we decline the invitation to read the Ross footnote as establishing a new interpretation of the Seventh Amendment. And we do not believe any case is so overwhelmingly complex that it is beyond the abilities of a jury. The order striking the demands for jury trial is REVERSED and this case is REMANDED for trial.

REVERSED.

KILKENNY, Circuit Judge,

dissenting:

Although Judge Anderson presents mighty forceful arguments in favor of his respective theories, I remain convinced that the highly complicated issues presented by this litigation are such that an attempt to dispose of them in a jury trial would result in nothing short of judicial chaos.

It is my considered judgment that Judge Turrentine’s opinion “covers the waterfront” and adequately responds to every proposal of the majority. In re U. S. Financial Securities Litigation, 75 F.R.D. 702 (1977). To express the same views in my own language would add nothing to the persuasiveness of the district court’s opinion.

The fact that a number of the cases may have been settled since the consolidation and the order of the court striking the demands for a jury trial is of no consequence. If judicial power to proceed was present at the time of striking the jury trial demands, it would not be lost by reason of the settlement of claims subsequent to that time.

Fabrikant v. Bache & Co.
609 F.2d 411

Case Details

Name
Fabrikant v. Bache & Co.
Decision Date
Dec 10, 1979
Citations

609 F.2d 411

Jurisdiction
United States

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