Last week, the U.S. Supreme Court granted Microsoft’s petition for a writ of certiorari and agreed to decide whether class action plaintiffs can dismiss their individual cases with prejudice after class certification is denied and nonetheless appeal the class certification ruling without first going to trial on the merits. Baker v. Microsoft Corp., 797 F.3d 607 (9th Cir. 2015), cert. granted, No. 15-457 (U.S. Jan. 15, 2016). The Court framed the question as follows: Whether a federal court of appeals has jurisdiction under both Article III and 28 U. S. C. § 1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice. Chuck Casper of Montgomery McCracken is one of Microsoft’s lawyers.

In the Third, Fourth, Seventh, Tenth, and Eleventh Circuits, plaintiffs who lose class certification motions must take their individual cases to trial on the merits if they want to appeal. See Microsoft’s Petition for a Writ of Certiorari at 9-10. After final judgment is entered on the plaintiffs’ individual claims, they can appeal the denial of class certification.

But the Second and Ninth Circuits permit plaintiffs to skip the trial after class certification is denied, dismiss their case with prejudice, and appeal the class certification ruling as if it were a final judgment. The Third Circuit called this tactic a “procedural sleight of hand to bring about finality,” Camesi v. Univ. of Pittsburgh Med. Ctr., 729 F.3d 239, 245 (3d Cir. 2013), but it is becoming commonplace in the Ninth Circuit. See, e.g., Bobbitt v. Milberg LLP, 801 F.3d 1066 (9th Cir. 2015); Gannon v. Network Tel. Servs., Inc., — F. App’x —, 2016 WL 145811 (9th Cir. Jan. 12, 2016). Now the Supreme Court will decide whether it can continue.

The Supreme Court decided in 1978, in a unanimous opinion by Justice Stevens, that appellate jurisdiction was lacking when plaintiffs declared the denial of class certification the “death knell” of their case because their lawyers would not invest the time and expense required to try their individual case and secure a final judgment. A few circuits considered this economic “death knell” the equivalent of a final judgment and permitted an appeal. But the Supreme Court disagreed, even though a denial of class certification “may induce a party to abandon his claim before final judgment.” Coopers & Lybrand v. Livesay, 437 U.S. 463, 477 (1978).

Two years later, the Tenth Circuit decided that Livesay controlled and precluded appellate jurisdiction when a plaintiff allowed her individual case to be dismissed for lack of prosecution after class certification was denied. “So, what we have is a ‘death knell’ condition which is substantially similar to that which was present in Livesay.’” Bowe v. First of Denver Mortg. Investors, 613 F.2d 798, 801 (10th Cir. 1980). Ten years after that, the Second Circuit disagreed and upheld appellate jurisdiction, distinguishing Livesay because it did not involve a dismissal for failure to prosecute where “disappointed class representatives … risk forfeiting their potentially meritorious individual claims.” Gary Plastic Packaging Corp. v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 179 (2d Cir. 1990). According to the Second Circuit, the risk to the plaintiffs’ individual claims would ensure that appellate review “will not substantially undermine the policy against piecemeal review,” which underlies the statute permitting appellate review only of final judgments. Id. The Ninth Circuit joined the Second in Berger v. Home Depot USA, Inc., 741 F.3d 1061 (9th Cir. 2014), Baker v. Microsoft Corp., and several later cases.

The tactic of voluntarily dismissing after class certification is denied is a plaintiffs-only end-run around Rule 23(f) discretionary appeals. In enacting Rule 23(f) in 1998 to allow both plaintiffs and defendants to apply for review of class certification orders, Congress softened Livesay’s impact with an even-handed opportunity for an immediate appeal in the appellate court’s discretion. Justice Stevens noted in Livesay that the “death knell” appeals some circuits then allowed “operate[d] only in favor of plaintiffs even though the class issue—whether to certify, and if so, how large the class should be—will often be of critical importance to defendants as well.” Livesay, 437 U.S. at 476. The voluntary dismissal tactic the Second and Ninth Circuits permit shares the same vice—contrary to Rule 23(f). Indeed, the Baker plaintiffs applied for an immediate appeal under Rule 23(f) but when the Ninth Circuit denied their petition, they voluntarily dismissed, forcing the immediate appeal the court had just denied.

The Supreme Court will rule by the end of June unless it postpones argument to the Court’s next term beginning in October.