Source: https://www.classactioncountermeasures.com/2017/06/articles/certification/no-appellate-gamesmanship/
Timestamp: 2019-04-23 15:53:28+00:00

Document:
Resolving a current split amongst multiple federal circuits, the United States Supreme Court recently ruled in Microsoft Corp. v. Baker that federal courts of appeals lack jurisdiction to review orders denying class certification after plaintiffs voluntarily dismiss their claims with prejudice. Justice Ginsburg wrote the majority opinion, joined by Justices Kennedy, Breyer, Sotomayor, and Kagan, overturning the United States Court of Appeals for the Ninth Circuit, citing a lack of jurisdiction under 28 U.S.C. § 1291 (“§ 1291”). In a separate opinion concurring in the judgment, Justice Thomas, joined by Chief Justice Roberts and Justice Alito, agreed that the Ninth Circuit lacked jurisdiction, but cited incongruity with the standing requirements of Article III of the U.S. Constitution (“Article III”) rather than § 1291. Justice Gorsuch did not participate.
Respondents, owners of Microsoft’s Xbox 360 (“Xbox”) game console, sued Microsoft in 2011, alleging that a design defect in the console scratched various game discs. Microsoft moved to strike the class allegations, arguing that only 0.4% of Xbox owners reported disc scratching, mostly resulting from consumer misuse rather than product defect. The district court, ruling in Microsoft’s favor, concluded that comity required it to defer to an earlier class certification denial from another district court decision involving a similar putative class. There, because not all Xbox owners had sustained damages due to the alleged defect, the court ruled that the need to consider individualized damage questions precluded certifying a class of Xbox owners. The Respondents unsuccessfully petitioned for an interlocutory appeal of the denial under Federal Rule of Civil Procedure 23(f). Once the Rule 23(f) petition was denied, both Respondents and Microsoft stipulated to dismiss the case with prejudice, and the district court entered a final order dismissing the case. Respondents then immediately appealed that order to the Ninth Circuit.
The Ninth Circuit concluded that it had jurisdiction over this appeal under § 1291. Relying on its 2014 decision in Berger v. Home Depot USA, Inc., the court claimed jurisdiction under § 1291 “because a dismissal of an action with prejudice, even when such dismissal is the product of a stipulation, is a sufficiently adverse – and thus appealable – final decision.” The Ninth Circuit reversed the district court’s denial of certification and remanded for further proceedings. It also denied Microsoft’s petition for rehearing en banc.
Microsoft petitioned the Supreme Court to address the following question: “Whether a federal court of appeals has jurisdiction under both Article III and 28 U.S.C. § 1291 to review an order denying class certifications after the named plaintiffs voluntarily dismiss their individual claims with prejudice.” The Supreme Court granted certiorari on January 15, 2016 and the parties argued before the Court on March 21, 2017.
The Ninth Circuit lacked jurisdiction to review the order denying class certification because under § 1291, a federal appeals court should only consider an adverse final decision for an appeal. An order denying class certification is not a final decision because Respondents could revive the merits of the case with a proper appeal.
The Supreme Court should rely on its previous decision in Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), which rejected the “death-knell doctrine” that allows federal courts to hear cases occasionally under § 1291 if the denial of certification would, for all practical purposes, terminate a lawsuit.
There is already a discretionary review set forth under Rule 23(f), granting federal appeals courts the ability to consider interlocutory appeals of orders granting or denying class certification.
Article III allows a court to hear matters when there is a “case” or “controversy” component that requires parties to be adverse throughout the entire lawsuit. Here, because of the Respondents’ voluntary dismissal, Respondents’ interest in the suit was over, rendering the case moot.
Section 1291’s final-judgment rule preserves the proper balance between trial and appellate courts, minimizes the harassment and delay that would result from repeated interlocutory appeals, and promotes the efficient administration of justice.
Respondents’ voluntary-dismissal tactic, even more than the death-knell doctrine, invites protracted litigation and piecemeal appeals.
(quoting Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100 (2009)).
The majority’s opinion did not address the Article III question, but Justice Thomas’s concurrence (joined by Chief Justice Roberts and Justice Alito) did. According to Justice Thomas, once the plaintiffs had agreed to the dismissal, they had no interests adverse to Microsoft, meaning there was no live case or controversy for the appellate court to consider.
Regardless of the ground, the Supreme Court clearly rejected a procedural tactic employed by some plaintiffs’ counsel to sidestep the discretionary review standard of Rule 23(f). This blow to procedural gamesmanship should subtly even the playing field for defendants in class action claims, ensuring that both parties have an equal chance to challenge class certification, and affirming that both parties are bound by the spirit of the Federal Rules.

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