The federal Court of Appeals for the 9th Circuit has reversed the striking of class allegations, where the District Court applied a prior court's dismissal of similar class allegations as a matter of comity. Baker v. Microsoft Corp., No. 12-35946 (9th Cir. 3/18/2015). In so doing, the Court of Appeals held that the application of comity was misplaced because the prior court's analysis had been rejected as a matter of 9th Cir. precedent. Thus, it was an abuse of discretion for the District Court to strike the class allegations at least until a motion for class certification could be considered.
Since the introduction of the Xbox 360 computer/internet gaming system in late 2005, complaints have surfaced to the effect that the console can scratch discs during use. See generally,http://en.wikipedia.org/wiki/Xbox_360_technical_problems#Scratched_discs. But see, U.S. v. Lawson, 677 F.3d 629, 650 (4th Cir. 2012) (Wikipedia not deemed reliable as proof of specific facts) (collecting cases). The Baker plaintiffs filed suit in 2011, claiming that design defects in the console caused the scratched discs.Baker was the second such lawsuit by Plaintiffs' counsel, following denial of class certification in an action based on similar substantive and class allegations -- but that involved different named Plaintiffs. In re Microsoft Xbox 360 Scratched Disc Litig., C07–1121, 2009 WL 10219350 (W.D. Wash. 10/5/2009).
After receiving the Baker Complaint, Microsoft filed a motion to strike its class-based allegations based upon comity with the denial of class certification inScratched Disc. The Baker Court noted that "[t]his case is identical in pertinent part to a putative class action previously pursued by Plaintiffs' counsel in which plaintiffs asserted the same claims at issue here on behalf of the same putative classes". 851 F. Supp.2d, at 1276. In Scratched Disc, that Court had denied a motion for class certification based upon a likely predominance of individual instead of class-based issues of both causation and damages. Id., at 1276-77. The proof in Scratched Disc indicated that less than one percent of Xbox 360 consoles had been subject to complaints about scratched discs. Id.
The Baker Court also noted that a few months after the decision in Scratched Disc, the 9th Cir. had reversed in part the primary case relied upon in theScratched Disc decision. Id. at 1277, citing Wolin v. Jaguar Land Rover North Am., LLC, 617 F.3d 1168 (9th Cir.2010). A key point for the 9th Cir. in Wolin was the principle that "proof of the manifestation of a defect is not a prerequisite to class certification." Id. (citation omitted).
Considering Scratched Disc in light of Wolin, the Baker Court struck the Plaintiffs' class allegations as a matter of comity with Scratched Disc. Although dismissal of class allegations does not have preclusive effect as to un-named members of an uncertified class, "[f]or over a century, federal courts have recognized that “[c]omity ... is something more than mere courtesy ... it has a substantial value in securing uniformity of decision, and discouraging repeated litigation of the same question.” 851 F. Supp.2d, at 1278, quoting Mast, Foos & Co. v. Stover Mfg. Co., 177 U.S. 485, 488–489 (1900). Baker also noted that more recently, the Supreme Court observed that “our legal system generally relies on principles of stare decisis and comity among courts to mitigate the sometimes substantial costs of similar litigation brought by different plaintiffs.” Id., quotingSmith v. Bayer Corp., ___ U.S. ___, 131 S.Ct. 2368, 2381 (2011).
Baker therefore applied a rebuttable presumption of comity to decide whether to follow Scratched Disc and strike the class allegations. 851 F. Supp.2d, at 1278,adopting ALI, Principles of the Law Aggregate Litigation, § 2.11, at 179 ("denial of class certification should raise a rebuttable presumption against the same aggregate treatment in another court. The basis for this presumption is not preclusion but, rather, comity.”). Baker observed that Wolin had repudiated quantitative proof of class-based damages at the class certification stage. Nevertheless, the Baker Court found that, as in Scratched Disc, individual proof of causation -- specifically, how class members' consoles had been used during the period that one or more discs had become scratched -- could predominate over class-wide theories involving defective design. Id., at 1279-80. "Thus, even when taking for granted that all Xbox 360 consoles contain an inherent defect, and even when assuming that a number of Xbox 360 consoles actually manifested that defect ... individual issues of causation preclude class certification. ... Plaintiffs have therefore failed to overcome the presumption against aggregate treatment."Id., at 1280 (emph. in original).
On appeal, the 9th Cir. sidestepped the question of comity by holding that "the district court’s misreading of the prior ruling [in Wolin] rendered application of the presumption of comity an abuse of discretion.” Slip Op. at 17, n.4. “Given that we can decide this case on a narrower and more well established ground, there is no reason to adopt the ALI rule here.” Id. Instead, the Court of Appeals interpretedWolin to hold that “although individual factors may affect the timing and extent of the disc scratching, they do not affect whether the Xboxes were sold with a defective disc system. Plaintiffs contend that (1) whether the Xbox is defectively designed and (2) whether such design defect breaches an express or an implied warranty are both issues capable of common proof. We agree that, as in Wolin, these issues are susceptible to proof by generalized evidence and do not require proof of individual causation.” Id., at 14. “Similarly, proof that the allegedly defective disc system caused individual damages is not necessary to determine whether the existence of the alleged design defect breaches Microsoft’s express warranty.” Id., at 14-15.
In sum, the 9th Cir. reinstated the class allegations because the Baker Plaintiffs had made common allegations of defect and warranty that plausibly could be appropriate for class adjudication. The Court of Appeals reiterated that quantification of damages was not prerequisite to class certification. However, the 9th Cir. observed that comity eventually may be an appropriate consideration: “our ruling that the district court’s application of comity was misplaced means that these arguments are better addressed if and when plaintiffs move for class certification.” Slip Op., at 16. On a motion for class certification, it is more appropriate for the District Court “to undertake a ‘rigorous analysis’ of ‘whether proposed classes are sufficiently cohesive to warrant adjudication by representation.’” 851 F. Supp.2d, at 1280, quoting Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1019 (9th Cir.2011) (citations omitted). “That analysis requires district courts to assess, among other things, whether individual issues of damages and causation render aggregate treatment inappropriate.” Id. (emph. in original).
Baker also may foreshadow increased use of comity as a basis for denying class treatment of serial claims: “This case presents an important question of first impression in the federal courts of appeal: What principles should guide a federal district court’s application of comity to a fellow district court’s earlier denial of class certification ... litigants in other cases have added to the chorus of voices requesting guidance, reinforcing just how important this question is to effective adjudication of class action litigation.” Slip Op. at 18 (Bea, J., concurring) (citations omitted).