Class Dismissed: Court Rejects Self-Induced Finality

September 14, 2017

For class actions, the interlocutory class-certification decision is so pivotal and so alters the economic incentives to continue or settle the litigation that it is often considered to be the “whole ballgame” — with the loser of that motion often forced to abandon or settle the claims.

Because these “death knell” dynamics tended to render the class-certification decision effectively unreviewable at the end of the case, the federal rule makers adopted Rule 23(f) to provide a narrow opportunity for discretionary interlocutory review. But with Rule 23(f) petitions denied more often than not, putative class counsel have employed another route for securing early review of a class denial: voluntary dismissal of the individual claim, followed by an appeal of the judgment and the underlying class decision.

In Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), a case decided by the U.S. Supreme Court at the end of last term, the Notorious and Honorable RBG, writing for a unanimous court, closed that door of appellate review of class-certification denials. (Justice Clarence Thomas, joined by Chief Justice John Roberts and Justice Samuel Alito, concurred, deciding the issue under Article III rather than 28 U.S.C. § 1291. Microsoft Corp v. Baker, 137 S. Ct. at 1716-17.)

Under Microsoft, a putative class representative cannot dismiss her own claims in order to appeal as of right under 28 U.S.C. § 1291 from an order denying class certification. Reversing the 9th Circuit, Ginsburg held that a voluntary dismissal does not qualify as a final decision for the purposes of 28 U.S.C. § 1291, because to so interpret § 1291 would undermine the principles of finality and avoidance of piecemeal appeals at the core of § 1291 and also “subvert the balanced solution Rule 23(f) put in place for immediate review of class-action orders.” Id. at 1707.

Microsoft involved a class action over alleged defects in the Xbox 360 system, and the underlying proceedings illustrate both the challenges in securing effective appellate review of a class ruling and creative efforts to find another doorway to immediate appellate review. A group of Xbox owners brought a consumer-fraud class action in 2009, but they lost their motion to certify the class, and the 9th Circuit declined to give them permission to file a Rule 23(f) appeal. Id. at 1710.

After reaching individual settlements to resolve the first case, the same counsel filed another class action headed by another group of Xbox owners based on the same alleged design defect, arguing that intervening 9th Circuit law removed the obstacles to class certification. Based on its prior class ruling, however, the district court struck the class allegations from the complaint. Id. at 1711. The plaintiffs filed a Rule 23(f) petition, which the 9th Circuit denied. Id.

As Ginsburg explained, at this point the plaintiffs had several options: settle their individual claims as the putative class reps did in the first Xbox case, petition the District Court for permission to take an interlocutory appeal under 28 U.S.C. § 1292(b) (which the 9th Circuit would have discretion to take or not), or follow the ordinary path to appeal by litigating their claims to final judgment. They did not take any of these paths.

Instead, the plaintiffs moved to voluntarily dismiss their complaint with prejudice. Microsoft stipulated to the dismissal, reserving its position that plaintiffs had no right to appeal the order striking the class claims after the voluntary dismissal. The stipulation was accepted and the plaintiffs appealed, seeking review not of the dismissal order that they invited, but rather of the prior order striking the class claims. This is the very appeal that the 9th Circuit said it would not take under Rule 23(f).

The 9th Circuit determined that it did have jurisdiction under 28 U.S.C. § 1291 to review the order denying class certification even after the plaintiffs’ voluntary dismissal. 797 F.3d 607, 612 (9th Cir. 2015). The 9th Circuit reasoned that since there was no settlement, the stipulated dismissal was “sufficiently adverse” to create an appealable final decision under § 1291. Microsoft Corp v. Baker, 137 S. Ct. at 1711-12.

The appeals court then reversed the District Court’s order striking class certification, but it stated that the question of whether class certification would be appropriate was left for another day, should the plaintiffs move the District Court for class certification. Id. at 1712. Microsoft petitioned the high court for review, challenging appellate jurisdiction under 28 U.S.C. § 1291, and the Supreme Court took up the case.

The high court concluded that allowing a voluntary dismissal to be a “final decision” would subvert the final-judgment rule created by § 1291. Id. at 1713. Such a tactic also “invites protracted litigation and piecemeal appeals,” and improperly gives the plaintiffs sole custody of the keys to appellate jurisdiction. Id. Whenever plaintiffs wish, they could voluntarily dismiss and obtain appellate review of an adverse class-cert decision. “And, as under the death-knell doctrine, [plaintiffs] may exercise that option more than once, stopping and starting the district court proceedings with repeated interlocutory appeals.” Id.

The court also concluded that such a route to an appeal as of right under § 1291 is also improper because it “undercuts Rule 23(f)’s discretionary regime.” Id. at 1714. Rule 23(f)’s discretionary regime recognizes that immediate appeal of a class cert ruling can be just as important to defendants as it is to plaintiffs, given the intense settlement pressure that defendants can face if class certification is granted, even when there are strong defenses on the merits. Id. at 1715.

Ginsburg stated that Rule 23(f)’s “evenhanded prescription” was how Congress decided to settle the matter of appellate review of class cert orders, and this approach would be subverted by respondents’ voluntary dismissal tactic, concluding with the admonishment that “[i]t is not the prerogative of litigants or federal courts to disturb that settlement.” Id.

While Microsoft v. Baker decisively closes the door on the named plaintiffs’ ability to use voluntary dismissal as the portal to class-certification appeals, is there still an interlocutory backdoor to the appeals court available for unnamed class members?

Forty years ago, the Supreme Court decided that even following the settlement and dismissal of the named plaintiff’s claims, an unnamed class member could intervene for purposes of appealing an earlier class-certification denial. United Airlines, Inc. v. McDonald, 432 U.S. 385 (1977).

Microsoft v. Baker does not address this ruling or expressly indicate that it would foreclose putative class members from intervening to appeal following the class representative’s voluntary dismissal, begging the question of whether Rule 28(j), § 1292(b), or litigating to final judgment are truly the only gateways to appellate review.

Considering the facts in Microsoft v. Baker again, one might ask what the result would have been if, instead of filing a second lawsuit, the plaintiffs’ law firm had tendered the second group of Xbox owners as proposed appellate intervenors following the first class-certification denial and settlement. This use of intervention might lead to a reconsideration of the broad intervention approach condoned by United Airlines.  On the other hand, foreclosing appellate intervention altogether whenever there has been a voluntary dismissal could unfairly preclude unnamed class members, who may have been relying on the pending class action to vindicate their rights, from obtaining any appellate review of an adverse class-certification decision.

This lurking question will likely emerge to the forefront in future cases. And striking the right balance on that question—between protecting the structure of the federal court system and the interests of unnamed class members—will likely be more difficult than it was in the unanimous Microsoft v. Baker decision.

Reprinted with permission of Minnesota Lawyer ©2017


The articles on our website include some of the publications and papers authored by our attorneys, both before and after they joined our firm. The content of these articles should not be taken as legal advice. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views or official position of Robins Kaplan LLP.


Stephen P. Safranski


Co-Chair, Antitrust and Trade Regulation Group

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