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June 01, 2018 Legal Lore

Collateral History in the Interlocutory Making—Before Two Legal Titans Became Famous

Richard A. Dean | The author is a U.S. magistrate judge for the Southern District of Ohio, Dayton, and a fellow of the American Bar Foundation.

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Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949), is best known for its holding that a collateral order may be subject to an interlocutory appeal, even if it is not a “final order.” Lawyers and law students have been litigating the application of the Cohen test for generations now. But few realize the unusual crossroads of judicial and legal legacy the history of that case reflects.

In Cohen, a handful of disgruntled shareholders accused Beneficial of mismanagement. Suit was filed in the U.S. District Court for the District of New Jersey. During the pendency of the litigation, the New Jersey legislature enacted a statute requiring the posting of a cost bond if less than 5 percent of the shareholders joined such an action. In Cohen, well under 1 percent of the shareholders had joined, and Beneficial asked the court to require the plaintiffs to post a $125,000—a crippling sum at the time. The district court denied that request, finding that the Federal Rules of Civil Procedure governed and did not permit the relief, in the federal forum, that the state statute provided.

The U.S. Court of Appeals for the Third Circuit reversed and ordered that the bond be required. It first found that the order was appealable under 28 U.S.C. § 1292, allowing appeals from nonfinal orders that have an irreparable effect on the rights of the parties. Then it found that the statute was the “public policy” of New Jersey and a “substantive” right that the federal court should follow under the Erie doctrine.

The U.S. Supreme Court affirmed. Justice Robert Jackson, writing for the six-person majority, found that the order was appealable “because it is a final disposition of a claimed right which is not an ingredient of the cause of action and does not require consideration with it.” 337 U.S. at 546. He hastened to add that not every order seeking security was subject to appeal but that, here, the right to security presented a serious and unsettled question. Id. The majority also found that nothing in Federal Rule of Civil Procedure 23 addressed the security issue and that this was a valid state policy that should be implemented by the federal courts.

The case, which still reflects prevailing doctrine, is commonplace reading for most federal court litigators. Few, however, are aware of its remarkable historical import arising from the lawyers involved. Counsel for the Cohen plaintiffs was Phillip Kurland. Counsel for Beneficial was John Marshall Harlan II.

Kurland graduated from Harvard Law School in 1944, so he was surprisingly new to the bar to be arguing in the Supreme Court just five years later. But he was no mere novice. He had been president of the Harvard Law Review, clerked for Judge Jerome Frank on the Second Circuit, and then clerked for Supreme Court Justice Felix Frankfurter. He practiced briefly in New York City, during which time he argued Cohen. He went on to a distinguished academic career in 1950, spending the majority of that career at the University of Chicago Law School. He founded the Supreme Court Review, served as its editor until 1988, and authored numerous scholarly articles.

John Marshall Harlan II, of course, became Justice Harlan in 1955 after serving on the Second Circuit for one year. He was the grandson of Justice John Marshall Harlan, who served on the Supreme Court from 1877 to 1911 and in 1896 famously dissented in Plessy v. Ferguson. While at Princeton, where he graduated in 1920, John Marshall Harlan II was a classmate and good friend of Adlai Stevenson II, later a governor, presidential candidate, and United Nations ambassador. Harlan became a Rhodes scholar, spending three years at Oxford’s Balliol College, the university’s law school. On his return to the United States, he immediately went into private practice in New York City with a predecessor firm of Dewey Ballantine. In 1949, when Cohen was argued, he was a leading lawyer in private practice in New York City. Later, Harlan became known as the great dissenter of the Warren Court.

Transcripts of oral arguments were not kept in 1949, so we’re unable to compare the oral advocacy of these two prominent lawyers. But we do have the briefs and the opinion of the Court. Harlan’s offering for Beneficial came in at a massive 90 pages. Kurland’s brief for Cohen was a mere 35 pages. Ironically, the Harlan brief quoted from an article by one of Kurland’s own partners about the evils of derivative suits and the validity of legislative steps to provide protections from their perceived abuse.

The intersections between Frankfurter, Harlan, and Kurland were numerous. Frankfurter and Harlan knew each other well and corresponded regularly before Harlan’s appointment to the federal bench. Justice Harlan eventually became closely aligned with the Frankfurter philosophy of judicial restraint. And Frankfurter wanted Kurland to write his biography, but Kurland could not do so because he had already committed to write Justice Jackson’s biography.

But the most direct intersection of these three legal giants was in the Cohen case

Richard A. Dean

The author is a partner with Tucker Ellis LLP, Cleveland.