Webster Eisenlohr, Inc. v. Kalodner

Brief Fact Summary.

Webster Eisenlohr, Inc. (Plaintiff) offered to buy stock from members of a class action lawsuit filed against it during litigation of the suit. Judge Kalonder (Defendant) appointed a special master to investigate the offer.

Synopsis of Rule of Law.

A judge may only involve itself in the controversy before the court and may not order investigations that exceed the scope of that controversy.

Facts.

Speese brought a lawsuit against Plaintiff on behalf of all preferred shareholders. The suit alleged that Plaintiff had defaulted on dividend payments to the preferred shareholders which now vested full voting power in the preferred shareholders. After the litigation had begun, Plaintiff sent a letter to all preferred shareholders, explaining the lawsuit and offering to purchase their preferred shares. Speese and several other in the class sold their shares to Plaintiff. Defendant felt this solicitation was improper and appointed a special master to investigate the matter. Plaintiff objected and filed a petition seeking a writ of mandamus ordering the vacation of the appointment and a prohibition preventing the special master from carrying out his investigation.

Issue.

May a trial judge order investigations that exceed the scope of the lawsuit before him?

Held.

(Goodrich, J.) No. A judge may only involve itself in the controversy before the court and may not order investigations that exceed the scope of that controversy. The court’s power is judicial, not legislative or investigative. A court’s authority extends only to the case or controversy before it. Any inquiry is limited to matters related to that controversy. While Federal Rule of Civil Procedure 53 allows the appointment of a special master, it should be used only in exceptional circumstances when needed to decide a difficult matter. In this case, Plaintiff’s offer to purchase preferred stock was not before the court, so the appointment of a special master to investigate that offer exceeded the scope of the litigation. The court may dismiss class actions, but this one was not dismissed and any remaining preferred shareholder may intervene to protect his rights.

Discussion.

Although the intervention in matters not before the court was problematic here, the trial judge does have some authority to intervene in the course and conduct of a trial in the interests of justice. A judge may call a witness who was not subpoenaed by the parties involved in the litigation or question witnesses or object sua sponte to evidence offered.