On June 12, 2017, the United States Supreme Court issued an important decision limiting a plaintiff's options when challenging a district court's adverse class certification decision.
In Microsoft Corp. v. Baker (Case No. 15-457), the plaintiffs sued Microsoft, alleging that its Xbox 360 video game console scratched and destroyed their game discs during normal playing conditions, and proposed a nationwide class of Xbox owners. The district court struck the plaintiffs' class allegations, which was "functionally equivalent" to denying class certification. Opinion at 9, n. 7. The plaintiffs petitioned the Ninth Circuit Court of Appeals for permission to appeal the ruling pursuant to Federal Rule of Civil Procedure 23(f), which grants appellate courts discretion to accept direct appeals from class certification orders. The plaintiffs' petition observed that the striking of their class allegations "effectively kill [ed] the case" because the small value of their individual claims rendered it "economically irrational to bear the cost of litigating . . . to final judgment." Id. at 9. This "death knell," as the plaintiffs put it, justified review. The Ninth Circuit denied the petition. Id.
Rather than continuing to litigate their individual claims, settling their individual claims, or petitioning the district court to certify its order for interlocutory appeal the order pursuant to 28 U.S.C. §1292(b), the plaintiffs voluntarily dismissed their claims with prejudice. They then appealed from the dismissal, challenging only the order striking their class allegations. The Ninth Circuit held that the plaintiffs' voluntary dismissal constituted a "final decision" under 28 U.S.C. §1291, thereby triggering their right to an appeal. The Ninth Circuit proceeded to decide the appeal, and reversed the order striking the class allegations.
In an Opinion authored by Justice Ginsburg (arguably, the Court's most distinguished civil procedure scholar), the Supreme Court reversed the Ninth Circuit's judgment. To allow the appellate tactic at issue, the Court reasoned, would invite plaintiffs to voluntarily dismiss their claims following any and all district-level class certification setbacks, causing "protracted litigation and piecemeal appeals." Op. at 12. Such a result would upend the finality and efficiency achieved by 28 U.S.C. §1291, as well as the "careful calibration" of Rule 23(f), which authorizes interlocutory review of adverse certification orders "solely in the discretion of the courts of appeals." Id. at 15. The Court also observed that the voluntary dismissal maneuver was "one-sided" as it helped only plaintiffs, even though a class certification order may expose defendants to such great damages and litigation costs that it could pressure them to settle on a class-wide basis and abandon any meritorious defenses. Such one-sidedness, the Court deduced, upsets the "evenhanded prescription" of Rule 23(f), which treats plaintiffs and defendants alike. Id. at 17.
Justice Thomas, joined by Chief Justice Roberts and Justice Alito, disagreed with the Court's reasoning, and concurred in the judgment only. Specifically, Justice Thomas found a decision to be "final" if it "ends the litigation on the merits and leaves nothing for the court to do but execute judgment," and that the district court order dismissing the plaintiffs' claims met that definition. Conc. at 2. Nevertheless, Justice Thomas believed that the plaintiffs' voluntary dismissal amounted to "disavowal of any right to relief from Microsoft." Id. at 3. Given that the parties were no longer adverse to each other, there existed no case or controversy for the Ninth Circuit to adjudicate, and it thus lacked jurisdiction under Article III of the Constitution to hear the plaintiffs' appeal. Id.
Baker puts class action plaintiffs in a difficult position if the district court denies class certification and the circuit court does not grant a petition under Rule 23(f). This difficulty is particularly biting when, as here, the circuit court ultimately finds that the substance of the appeal it had previously rejected was meritorious. As discussed, there are only a few unpleasant options: continue litigating an individual claim even when economically questionable; settle the individual claims of the plaintiffs, which will often only be for relatively small amounts of money and which will not prevent the defendant from continuing its challenged actions; or moving the district court for an order allowing an interlocutory appeal under §1292(b), which may not be successful.