Upon this rehearing en banc we are confronted with the novel question whether, under the Federal Rules of Civil Procedure, the district court was empowered to order a defendant at its own expense to cull from its computerized records the names and addresses of the members of the class represented by plaintiffs. We hold that the district court was possessed of discretion to require the production of the list which plaintiffs demand in order to meet their obligations under Rule 23(c)(2), Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 94 S. Ct. 2140, 40 L. Ed. 2d 732 (1974) (Eisen IV ), of providing individualized notice to the members of the class. On the record before us, the district court did not abuse its discretion.

The defendant Oppenheimer Fund, Inc., which was required by the district court to produce the names and addresses of the members of the class, is an "open-end" investment company registered under the Investment Company Act of 1940, 15 U.S.C. §§ 80a-1 et seq. Shares of the fund are sold to the public at prices reflecting the current value of the fund's assets plus a service charge; shareholders of the fund are free to liquidate their interests by exchanging their shares for a sum determined to represent their proportionate share of the fund's net assets. The roster of shareholders, who number well over 100,000, is of course constantly changing. It scarcely need be said that the computer plays an integral role in the operations of the fund; indeed, in the absence of computer technology, operations so vast and complex as those of the fund might well be impossible to conduct.

The defendant Oppenheimer Management Corporation is the investment adviser which manages the fund's investment portfolio. All of the voting stock of the investment adviser is owned by the defendant Oppenheimer & Co. Individual defendants are directors of Oppenheimer Fund; some of the individual defendants, in addition to occupying directorships in the fund, are officers, directors, or partners of Oppenheimer & Co. or the Oppenheimer Management Corporation.

The plaintiffs are shareholders of the fund. The essence of their complaint is that defendants overvalued restricted securities purchased by the fund; the overvaluation of the fund's assets is alleged in turn to have caused the inflation of the prices at which plaintiffs purchased shares in the fund and to have caused overpayments to the fund's manager, defendant Oppenheimer Management Corporation, whose fees are computed as a percentage of the net asset value of the fund's portfolio.

In their initial motion for class determination pursuant to Rule 23(c)(1), plaintiffs sought to represent all who purchased shares of the fund between March 28, 1968, and April 24, 1970. After this Court's holding in Eisen v. Carlisle & Jacquelin, 479 F.2d 1005 (2d Cir. 1973) (Eisen III ), aff'd, 417 U.S. 156, 94 S. Ct. 2140, 40 L. Ed. 2d 732 (1974) (Eisen IV ), plaintiffs sought a redefinition of the class to exclude those who had sold their shares in the fund. Plaintiffs hoped thus to reduce the cost of the individualized notice to class members which Eisen III and Eisen IV required plaintiffs to bear, by including the notice in a regular mailing by the fund to its shareholders. At the time when plaintiffs requested the modified class determination, there were approximately 171,000 shareholders of the fund, 103,000 of whom had purchased their shares during the class period; those who had purchased during the class period and subsequently sold their shares and thus would have been excluded from the class if plaintiffs' proposed modification had been accepted numbered some 18,000. The defendants opposed the class modification, preferring the broader class definition. By its order, the district court rejected plaintiffs' proposed redefinition of the class and directed that notice be effected by a separate mailing to all class members. Thus to notify a class so defined will cost the plaintiffs $20,000, in comparison to the $5,000 expense which their proposed class definition and method of notice would have entailed. The district court, however, required the fund to shoulder the expense, about $16,000, of extracting from its computerized records the list of the names and addresses of the class members. Defendants appeal from the district court's order insofar as it determined that the lawsuit was properly maintainable as a class action and that defendants should, at their own expense, provide the plaintiffs with the names and addresses of class members.

A panel of this Court determined that the district court's order was appealable and that the litigation was manageable as a class action. 558 F.2d 642 (1976). We do not reconsider these aspects of the panel's decision, and we limit our discussion to the question, answered in the negative by the panel, whether defendants were properly required to bear the cost of furnishing plaintiffs with the list of class members.

Eisen IV held that Rule 23(c)(2), reflecting constitutional principles of due process, see Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950), commands that "individual notice must be provided to those class members who are identifiable through reasonable effort." 417 U.S. at 175, 94 S.Ct. at 2151. The Supreme Court further held in Eisen IV that the representative plaintiff was required to bear the cost of notice:

"In the absence of any support under Rule 23, petitioner's effort to impose the cost of notice on respondents must fail. The usual rule is that a plaintiff must initially bear the cost of notice to the class. . . . (T)he plaintiff must pay for the cost of notice as part of the ordinary burden of financing his own suit."

Id. at 178-79, 94 S. Ct. at 2153. The Court in Eisen IV had no occasion to consider which party would bear the cost of determining the names and addresses of those to whom the notice would be sent, because the plaintiff in Eisen, unlike the plaintiffs in the instant litigation, was unwilling to bear even the expense of printing and mailing the required notice.

Defendants argue that, since it is prerequisite to sending the notice mandated by Eisen IV that plaintiffs obtain the names and addresses of those to whom the notice will be sent, Eisen should govern the allocation of the cost of providing the information. We disagree. In Eisen, the plaintiff's effort to impose the costs of notice upon the defendants failed "(i)n the absence of any support under Rule 23." Here, Federal Rule of Civil Procedure 34 provides the basis for requiring the fund, at its own expense, to provide plaintiffs with discoverable information contained in its computerized records.

It hardly requires our extended discussion to establish that the information sought by plaintiffs as to the names and addresses of the members of the class is indeed within the broad scope of permissible discovery established by our Federal Rules. Under Rule 26, "(p)arties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action . . . ." Fed.R.Civ.P. 26(b)(1). The holding of Eisen IV itself propels us ineluctably to the conclusion that the names and addresses of class members are "relevant to the subject matter" of a class action. By mandating that a representative plaintiff in a class suit send individualized notice to the members of his class, Eisen raises as a potential issue in all such litigation whether the required notice has properly been sent. A list of the names and addresses of the class members would of course be essential to the resolution of that issue. See Appleton Electric Co. v. Advance United Expressways, 494 F.2d 126, 138 (7th Cir. 1974); Brennan v. Midwestern United Life Ins. Co., 450 F.2d 999 (7th Cir. 1971), cert. denied, 405 U.S. 921, 92 S. Ct. 957, 30 L. Ed. 2d 792 (1972).

Under Rule 34(a), plaintiffs were entitled "to inspect and copy, any designated documents (including . . . data compilations from which information can be obtained, translated, if necessary, by the respondent through detection devices into reasonably usable form) . . . ." Rule 34, therefore, provided ample basis for the district court's order compelling the defendant fund to produce from its computerized records the discoverable information concerning the names and addresses of the class members. The 1970 amendments to the Federal Rules rendered Rule 34 specifically applicable to the discovery of computerized information:

"The inclusive description of 'documents' is revised to accord with changing technology. It makes clear that Rule 34 applies to electronic data compilations from which information can be obtained only with the use of detection devices, and that when the data can as a practical matter be made usable by the discovering party only through respondent's devices, respondent may be required to use his devices to translate the data into usable form. In many instances, this means that respondent will have to supply a print-out of computer data."

Advisory Committee Note, 48 F.R.D. 459, at 527 (1970).

Defendants argue, however, that because plaintiffs' requests for computerized information require the fund to devise, at a cost in excess of $16,000, a special computer program to extract the names of the class members, plaintiffs should be required to bear the added expense. We acknowledge that Rule 34, coupled with Rule 26(c), allows the district court to shift the expense of special computer programming to the discovering party where the demand for information would impose upon the respondent "undue burden or expense", but we hold that in the instant case the trial judge did not abuse his discretion in declining so to do.

Rule 33, which defendants contend would dictate a different result, is inapplicable. That Rule provides, in pertinent part:

"(c) Option to Produce Business Records. Where the answer to an interrogatory may be derived or ascertained from the business records of the party upon whom the interrogatory has been served or from an examination, audit or inspection of such business records, or from a compilation, abstract or summary based thereon, and the burden of deriving or ascertaining the answer is substantially the same for the party serving the interrogatory as for the party served, it is a sufficient answer to such interrogatory to specify the records from which the answer may be derived or ascertained and to afford to the party serving the interrogatory reasonable opportunity to examine, audit or inspect such records and to make copies, compilations, abstracts or summaries."

It may well be that where ordinary business records are concerned Rule 33 would generally require that the discovering party bear the expense of data compilation unless for special reason the compilation can be undertaken only by the respondent.1 However, Rule 33(c) cannot derogate from the general command of Rule 34 that the respondent to a demand for computerized information produce a "reasonably usable" print-out of data contained in a computer's memory. Unlike Rule 34, Rule 33 was not especially tailored to the discovery problems posed by contemporary computer technology.

Here, the demand for computerized information creates a necessity for special programming, entailing the substantial expenditure of $16,000 by the fund. Nonetheless, there is no warrant for applying an inflexible rule that the discovering party bear the expense. Computers, which in general make information more readily available, may occasionally make information more difficult to discover. Even where a party adapts his computer software strictly in accordance with legitimate business purposes, complex electronic processes may be required to extract information which might have been obtainable through a minimum of effort had different systems been used. If the information demanded is such as the respondent might reasonably have expected to be required to make available for public examination or for use in the judicial process, it seems not unfair to require production of the information albeit necessitating special programming. In this and other respects, computer technology presents discovery problems with which the courts have developed relatively little familiarity.

The Rules do not leave the courts without power to avoid a litigant's unreasonable appropriation to himself of his opponent's computer resources. "(T)he courts have ample power under Rule 26(c) to protect respondent against undue burden of expense, either by restricting discovery or requiring that the discovering party pay costs." Advisory Committee Note, supra, 48 F.R.D. at 527. See also Federal Judicial Center, Manual for Complex Litigation P 2.715, at 152 (Tent. Draft July 21, 1976); 8 C. Wright & A. Miller, Federal Practice and Procedure § 2218, at 658-59 (1970). However, the draftsmen of Rule 34 chose wisely, in light of the relative judicial inexperience with the discovery problems posed by computer technology not to burden discovery of computerized information with the more rigid principle of Rule 33(c). The existence of discretion pursuant to Rule 26(c) to reallocate the costs of discovery of computerized information in order to avoid abuse merely underlines the general rule: "The responding party who is required to prepare a printout or otherwise make the data reasonably usable for the discovering party must ordinarily bear the expense of doing this." Id. at 659.2

The district court did not err in declining to exercise its discretion pursuant to Rule 26(c) to impose the costs of obtaining the computerized data upon the plaintiffs. Although compliance with the district court's order entails an expenditure by the fund in excess of $16,000, we cannot say the burden thus imposed is unreasonable in light of the nature of the information sought and the extent and character of the fund's business operations. Although an expense of $16,000 seems large in absolute terms, the cost of identifying the name and address of each present or former shareholder who is a member of the class is only thirteen cents. Considering the extent of the fund's business therefore, the burden of compliance with the Rule 34 discovery demand is not excessive. There is no injustice in requiring one whose business is vast and complex to go to proportionately greater lengths to meet the law's legitimate requirements for disclosure of business-related information than might be expected of one whose business is small and simple. Great corporations, for example, must expend millions to provide to the government information necessary to comply with internal revenue laws; an individual taxpayer may provide the required information at a cost to himself of a mere few dollars. It is scarcely unreasonable, moreover, to demand of a respondent that he employ his computer resources to provide discoverable information of a relatively simple nature where, as here, the respondent makes extensive use of computers in the operation of its business.

The order of the district court allocating the costs of discovery of the computerized names and addresses of the class members was not unreasonable, moreover, in light of the district court's definition of the class. The plaintiffs sought to redefine the class to exclude former shareholders of the fund, so that the individualized notice mandated by Eisen IV could be inserted, at small expense, in one of the fund's regular mailings. The defendants opposed the class redefinition and the proposed method of notice on the grounds, respectively, that the more restrictive class definition would exclude potential class members as to whom the legal and factual issues would be similar to those raised by plaintiffs,3 and that the proposed notice to all the fund's shareholders would prejudice the fund by notifying even those shareholders not involved in the litigation.4 The district court rejected plaintiffs' proposed redefinition of the class. Plaintiffs, accordingly, are required to bear an expense of $20,000 to notify the class, in comparison to the $5,000 cost which plaintiffs had contemplated. But the district court declined to impose on plaintiffs the added cost of discovering the names and addresses of the class members, which cost was occasioned by the court's agreement with defendant that the fund would have been harmed by the proposed class redefinition. The considerations advanced by the defendant in opposition to plaintiffs' proposed class redefinition were undoubtedly entitled to some weight; still, they did not require the class definition ultimately accepted by the district court.5 See Eisen IV, 417 U.S. at 179 n. 16, 94 S. Ct. 2140, 40 L. Ed. 2d 732 and Eisen III, 479 F.2d at 1023 (Oakes, J., dissenting from denial of rehearing en banc) (raising possibility that class may be divided into subclasses pursuant to Rule 23(c)(4) so as to minimize cost of notice borne by representative plaintiff). Cf. Eisen III, 479 F.2d at 1009 n. 5 (suggesting that notice may be included in regular mailing by defendant to class members). As such, we are not disposed to hold that the district court's refusal to impose on plaintiffs the cost of discovery of the computerized names and addresses was an abuse of its discretion. Indeed, the order of the district court accommodated the competing interests in a manner which was fair and imaginative.

We note, finally, that our affirmance of the district court's order is without prejudice to a claim by the defendant fund for discretionary taxation of the cost of discovery against plaintiffs, should the plaintiffs ultimately lose. See 15 U.S.C. §§ 77k(e), 77ooo (e) and 78i(e); Fed.R.Civ.Pro. 54(d). If plaintiffs' suit proves frivolous, their attorneys might be held liable for the cost of discovery which, defendant fund is now required to bear. 28 U.S.C. § 1927. Plaintiffs have represented that they are unwilling to bear the cost of discovery of the names and addresses of the class members. However, their present unwillingness to pay this cost does not immunize them from a judgment for costs, nor does it necessarily diminish the deterrent effect of such a judgment against a strike suit.6 The mere possibility that plaintiffs may prove to be judgment-proof does not affect our decision, since here, unlike in Eisen, there is a basis in the Federal Rules for imposition of the cost of discovery on the defendant fund. Cf. Eisen III, 479 F.2d at 1020 (Hays, J., concurring).

Affirmed.

Ironically enough, the majority states that its holding is compelled by Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 94 S. Ct. 2140, 40 L. Ed. 2d 732 (1974) (Eisen IV ) and Rule 23(c)(2) although the Court in that case construed the rule to require the representative plaintiffs to pay the costs of notifying the prospective class of the pending action. The majority reaches this result by finding that the plaintiffs, who admittedly are only seeking the list of names and addresses of the potential plaintiff class in order to notify them of the pending action, are seeking instead a discovery which makes the cost allocable to the defendants in the discretion of the district court thus circumventing Rule 23 and Eisen IV. The majority then proceeds to find no abuse of discretion by the district court in foisting the special computer programming cost upon the defendant fund. Since the only purpose of obtaining the required information is to notify the class as mandated by Rule 23, Eisen IV compels the conclusion that the cost of such notification be borne initially, at least, by the plaintiffs. The majority forces the defendant to subsidize the suit against it, a result which is aberrant to our jurisprudence and to the extent that it depends upon the premise that the defendant has greater financial resources is further in conflict with Eisen IV. In sum, we believe Judge Palmieri's opinion for the panel properly disposed of the issue now before us en banc.1

* In Eisen IV the Court stated, "The usual rule is that a plaintiff must initially bear the cost of notice to the class." Id. at 178, 94 S. Ct. at 2153. The majority does not claim that this case falls outside the usual rule.2 Instead, the majority has decided that obtaining the names and addresses of the prospective class is not part of the notification process mandated by Rule 23(c)(2) but is rather within a discovery process governed by an amalgam of Rules 26(b)(1) and 34. As a matter of logic this is bewildering. The only purpose of the plaintiffs here in obtaining the data is to notify the class; it is an essential and unavoidable step in the notice giving process. As Judge Palmieri observed "the cost of obtaining the name and address to be affixed to the envelope does not differ in kind from the cost of printing the notice and of procuring, stuffing and posting the envelopes." At 642. The majority now creates in effect a bicephalous rule which is anomalous. The cost of printing, stuffing and postage of the notice must be borne by the plaintiffs but the cost of obtaining the names and addresses to put on the envelopes may be thrust upon the defendants in the discretion of the trial bench. As Eisen IV held, "the plaintiff must pay for the cost of notice as part of the ordinary burden of financing his own suit." 417 U.S. at 179, 94 S. Ct. at 2153. We cannot appreciate how it can be reasonably held that the expense incurred in producing the list of addresses is distinguishable from the expense of preparing and mailing the notice.

The majority cites no authority at all for its novel position except to claim that the result is mandated by Rule 23 and Eisen IV. But Rule 23(c) requires the district court to direct "the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." (Emphasis supplied). This language would clearly indicate that the draftsmen of the rule made no distinction between the identification of the class and the notification of individual members. Notification posits identification which is an inseparable part of the process.

How then does Eisen IV compel a result which seemingly contradicts its holding? This is the crucial point in the majority holding since it is the basis for the determination that the discovery Rule 34 is applicable and not Rule 23. The majority finds that it "hardly requires our extended discussion" to establish that the list sought is within the scope of permissible discovery established by the rules. Its reasoning is as follows:

Under Rule 26(b), "(p)arties may obtain discovery regarding any matter . . . relevant to the subject matter involved in the pending action . . . ." Fed.R.Civ.P. 26(b)(1). The holding of Eisen IV itself propels us ineluctably to the conclusion that the names and addresses of class members are "relevant to the subject matter" of a class action. By mandating that a representative plaintiff in a class suit send individualized notice to the members of his class, Eisen raises as a potential issue in all such litigation whether the required notice has properly been sent. A list of the names and addresses would of course be essential to the resolution of that issue.

This is an exercise in sophistry and not syllogistic reasoning. No one questions that Rule 23 mandates that the plaintiffs have the obligation to notify the class and the majority in that part of the opinion we have excerpted admits that a list of the names and addresses is an essential step in the required notification. How then can it avoid the holding of Eisen IV that such costs must be assumed by the plaintiffs? The deus ex machina employed is discovery under Rule 34. We do not maintain that discovery in class action cases is limited to the search for evidence or leads relevant to the substantive merits of the underlying controversy. It properly may encompass inquiry to determine whether class action requirements can be satisfied.3 However, that was not the purpose of the plaintiffs here. The district court has certified the class and found that the action was properly maintainable as a class action. The panel unanimously agreed and no one in the en banc panel disagrees. There is no issue as to numerosity or a predominance of common questions of law or fact. The plaintiffs have never sought discovery relief under Rule 34. In the memoranda submitted by the plaintiffs to Judge Griesa prior to his opinion below there is no mention of Rule 34. Judge Griesa expressly and correctly perceived the issue as being "who is to bear certain expenses connected with the giving of notice." Sanders v. Levy, 69 Civ. 1242, Slip op. at 2 (S.D.N.Y. May 15, 1975).

No party here, certainly not the plaintiffs, is seeking "discovery" as a method of determining whether notice has "properly" been sent. Plaintiffs are not anticipating potential issues and seeking discovery to maintain a position. They were avowedly and quite simply seeking the list to notify the class under Rule 23. Should any issue arise as to "proper notification", e. g., was the list complete, was the notice appropriate, was the postage adequate, presumably it would be raised by a putative member of the class but not in limine by the plaintiffs who are required to notify and pay the costs of notification under Eisen IV.

The raw tape data from which the proper list can be ascertained is fully available to the plaintiffs. The only issue is who is to pay the expense of the special programming necessary to make it usable. The names and addresses which will be so produced will be equally accurate no matter who pays the cost. Since the obligation of proper notification is admittedly on the plaintiffs we cannot understand by what alchemy the majority decides that the cost becomes attributable to the defendant. We can only conclude that the majority while purporting to follow Eisen IV is in fact flouting its holding.4

Having decided that the notification required by Rule 23 has been somehow transmogrified by Eisen IV into a discovery procedure not governed by Rule 23, the majority proceeds to find no abuse of discretion in requiring the defendant fund to finance the suit against it, by relying on two factors which it finds persuasive. In rejecting the "inflexible" rule espoused by the Supreme Court, the majority then proceeds to impose its own by holding that there is no injustice in requiring one whose business is vast and complex to pay the substantial costs involved, while suggesting that the result might be different if the defendant's business was small and simple. But class actions for damages are invariably brought against those who are relatively opulent and affluent in comparison with the plaintiffs. This is inherent in the theory of the action. The impecunious or those of modest means are seldom if ever the target of such damage actions. The deeper pocket is invariably in the trousers of the defendant. This consideration moreover was expressly rejected in Eisen IV where the Court stated, "There is nothing in Rule 23 to suggest that the notice requirements can be tailored to fit the pocketbooks of particular plaintiffs." 417 U.S. at 176, 94 S.Ct. at 2152. The majority's attempt to transmute notification into discovery, as we have indicated, is totally unpersuasive.

The labored reasoning of the majority becomes evident in the analogy it draws. The majority argues that great corporations must expend millions to provide the government with information necessary to comply with the internal revenue laws. The information thus sought, however, is to determine whether there has been any violation of those laws and the retention of such records and data is imposed by those laws. But what law demands that the defendant maintain lists of past and present customers who might in the future band together to sue the corporation in some class whose perimeters will be fixed by the accidents and exigencies of possible litigation? There is no question that the information sought here has nothing to do with the merits of the underlying action. Nor is it relevant to determine whether the class action is properly maintainable. It is sought simply for notification purposes and not discovery in any sense in which that process has ever been defined. Moreover, the data is available if the plaintiffs are willing to assume the burdens, as well as the benefits, of the class action they have initiated. To require corporate defendants to so arrange their computer programming as to anticipate the endless variety of prospective classes which might some day bring class actions is, of course, unrealistic and not required by any law we know of until this decision which hopefully will be short lived.

The second consideration stressed by the majority is that when the plaintiffs sought to redefine by excluding some 18,000 investors the class they had initially selected, the defendants opposed the attempt. This resulted in a higher cost than would have resulted if the plaintiffs had been successful in reducing the class. Thus as the majority seems to view the matter, the defendant fund has somehow brought the burden of spending $16,580 at 1973 levels upon its own head. But the district court found that the exclusion of the 18,000 "would involve an arbitrary reduction in the class," since these people "logically belong in the class." Sanders v. Levy, 69 Civ. 1242, Slip op. at 7, 10 (S.D.N.Y. May 15, 1975). The determination of the scope of the class was on the merits. We cannot agree that by opposing an improper class a defendant thus becomes liable for any increased costs of notification. The class cannot become proper only if the defendant bears the costs of notifying the members. If this is to be the law the opportunities for abuse become obvious.5

The majority is not totally insensitive to the obvious inequity of requiring the defendant to finance the class action brought against it. It suggests that if the plaintiffs ultimately lose discretionary costs "might" be assessed against them. But this is unrealistic. The plaintiffs have consistently maintained that they cannot afford to pay the $16,580 costs entailed. Their average stake in the litigation is in the range of $2 to $24. The prospect of the defendant obtaining reimbursement is dim indeed. The further suggestion that the costs may be recouped from counsel to the plaintiffs is admitted only as a possibility if the suit is found to be frivolous. If it is simply unsuccessful on the merits there is no hope at all of reimbursement. On the other hand, if the plaintiff class is successful there is no question that the prevailing parties will be entitled to costs, Fed.R.Civ.P. 54(a). Cost transference at this stage of the litigation therefore is hardly justified by the highly doubtful recoupment possibilities envisaged by the majority in derogation of the normal principles reiterated in Eisen IV.6

Although responsible commentators have indicated that class actions for damages have in fact become a financial bonanza only for the attorneys and not for members of the class and have, in effect, converted the federal courts into small claims courts,7 a burden not inconsiderable in days of overcrowded calendars and apparently not alleviated by Eisen IV, see notes 5 & 6 supra, we do not rest our decision at all on that basis. Nor do we rest it on our recognition which is implicitly shared by the majority that strike suits may be encouraged by the added prospect of obtaining settlements of non-meritorious claims because of the increased cost of defending them. Rather we base our dissent on the ground that the costs involved here are unquestionably costs of notification which must be borne by the plaintiffs under Rule 23 and therefore are clearly within the rule of Eisen IV. The strained attempt to convert notification into Rule 34 discovery is conceptually unsound and unprecedented. We would therefore adhere to the well-reasoned opinion of Judge Palmieri for the panel.