Takeaway: The United States Supreme Court has rejected a tactic used by the plaintiffs’ bar to obtain appellate court review of an order denying class certification despite a settlement of the named plaintiffs’ claims. Justice Ginsburg held that “the voluntary dismissal essayed by [class representatives] does not quality as a ‘final decision’ within the compass of 28 U.S.C. § 1291,” such that an order denying class certification could be reviewed even where the appeals court had rejected an interlocutory appeal of the certification ruling. Microsoft v. Baker, No. 15-457, 2017 WL 2507341 (U.S. June 12, 2017).
In Microsoft v. Baker, consumers sought to bring a class action against Microsoft based on an alleged Xbox defect that caused game discs to be scratched during normal use. After the district court denied certification, the consumers petitioned for interlocutory review of the certification order under Rule 23(f), which the Ninth Circuit denied. The named plaintiffs then dismissed their individual claims with prejudice and appealed, claiming the Court of Appeals possessed appellate jurisdiction over final judgments under 28 U.S.C. § 1291.
Justice Ginsburg emphasized the broad discretion of appellate courts to accept or decline petitions for immediate review of class certification rulings under Rule 23(f). Justice Ginsburg explained that “[c]ourts of appeals wield ‘unfettered discretion’ under Rule 23(f), akin to the discretion afforded circuit courts under § 1292(b).” 2017 WL 2507341, at *7.
Once the appellate court denied their Rule 23(f) petition, the disappointed consumers retained several procedural options for seeking review of the certification ruling. They could settle their individual claims; seek discretionary interlocutory review of the class certification decision under § 1292(b); request that the district court revisit the class certification order; or litigate their individual claims through judgment and then appeal both the final judgment and the order denying class certification. Id. at *9.
The Baker plaintiffs utilized none of these procedures. Instead, they stipulated to the dismissal of their individual claims with prejudice and then appealed the order denying class certification §1291. The Ninth Circuit held it had appellate jurisdiction and reversed the order striking class allegations. The Supreme Court granted certiorari to address a Circuit on the appellate jurisdiction issue. Id. at *10 & n.8.
Recognizing as foundational the principle that all issues be decided in a single appeal, the Supreme Court rejected the consumers’ strategy: “Because respondents’ dismissal device subverts the final-judgment rule and the process Congress has established for refining that rule and for determining when nonfinal orders may be immediately appealed, the tactic does not give rise to a ‘final decision[n]’ under § 1291.” Id. at *11. Rather than enhancing efficiency, the consumers’ approach “invites protracted litigation and piecemeal appeals,” in violation of the final judgment rule and the interlocutory appeal balance struck by Rule 23(f). Id. Accordingly, the Supreme Court reversed the Ninth Circuit’s exercise of appellate jurisdiction. Id.
Justice Thomas, joined by Chief Justice Roberts and Justice Alito, issued a concurring opinion arguing the appeal should have been rejected because of a lack of Article III standing. Justice Thomas disagreed with the majority that an appeal from a voluntary dismissal did not constitute a final judgment under § 1291. 2017 WL 2507341, at *16-*17 (Thomas, J., dissenting). Rather, the consumers’ appeal should have been rejected because, once the consumers dismissed their claims, the parties “were no longer adverse to each other on any claims, and the Court of Appeals could not ‘affect the[ir] rights’ in any legally cognizable manner.” Id. at *17. Because the Court of Appeals lacked jurisdiction over the consumers’ individual claims, “it could not hear plaintiffs’ appeal of the order striking their class allegations.” Id. at *18.
The Supreme Court’s ruling in Baker should put to bed class representatives’ tactic of dismissing their claims to secure immediate review of an adverse class certification ruling, as well as laying out the logical framework for challenging appeals generated through other litigation stratagems. And the concurring opinion may give class defendants greater ammunition to challenge class certification appeals by named plaintiffs with Article III standing issues. We will stay tuned for the next chapter in the Supreme Court’s class certification jurisprudence.