Supreme Court to Decide Fate of Plaintiff’s Voluntary Dismissal Tactic

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Supreme Court to Decide Fate of Plaintiff’s Voluntary Dismissal Tactic

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The Supreme Court will decide whether a federal court of appeals has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their claims with prejudice. Baker v. Microsoft Corp., 797 F.3d 607 (9th Cir. 2015), cert. granted, 84 U.S.L.W. 3214 (U.S. Jan. 15, 2016) (No. 15-457).

Federal Rule of Civil Procedure 23(f) gives courts of appeals discretion to hear interlocutory appeals of orders granting or denying class certification. An appeal as of right under 28 U.S.C. § 1291 is available only after an adverse final judgment. For this reason, class plaintiffs who are unable to obtain discretionary interlocutory appellate review of class certification denials sometimes attempt to manufacture a final judgment by voluntarily dismissing their individual claims with prejudice.

Currently, five circuits hold that a voluntary dismissal with prejudice is not an adverse final decision creating a right to appellate review. Two circuits (including the Ninth) take the opposite position. The Ninth Circuit’s minority rule gives plaintiffs an unfair advantage over defendants in obtaining immediate appellate review of adverse class certification decisions. Under the minority rule, class action plaintiffs have an immediate right to appeal the denial of class certification. Defendants, on the other hand, do not have an immediate right to appeal the grant of class certification; instead, they must persuade the circuit court to accept a discretionary appeal. The Supreme Court’s decision could resolve this circuit split and create a level playing field for class action plaintiffs and defendants.

Background

Plaintiffs, a group of Xbox 360 purchasers, alleged that the popular gaming console scratched discs and rendered them permanently unplayable. This was not the first time Xbox owners had sued Microsoft over damaged discs. In an earlier suit by the same plaintiffs’ counsel, the U.S. District Court for the Western District of Washington denied class certification because the alleged defect manifested in less than 1% of the consoles sold, and factors other than the alleged defect—such as an “overzealous gamer” striking the Xbox—could have caused the damage claimed.[1]

In Baker, the district court struck the class allegations based on the Xbox decision. Plaintiffs argued that an intervening Ninth Circuit decision, Wolin v. Jaguar Land Rover North America, LLC, 617 F.3d 1168 (9th Cir. 2010), now required certification of their proposed class. The district court was persuaded by the reasoning in the Xbox case and held that nothing in Wolin undermined the certification denial.

Plaintiffs immediately sought interlocutory appellate review under Rule 23(f). The Ninth Circuit denied the petition using its discretionary authority. Rather than continue to pursue their individual claims, the plaintiffs instead moved to dismiss their claims with prejudice. Plaintiffs then sought immediate appeal of the district court’s class certification order. The Ninth Circuit assumed jurisdiction over the plaintiffs’ appeal. It then reversed and remanded for further proceedings and denied Microsoft’s petition for rehearing en banc. The Supreme Court granted certiorari.

Supreme Court’s Grant of Certiorari

This case tests the boundaries of longstanding Supreme Court precedent holding that a denial of class certification is not appealable as a matter of right. Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978). Since Livesay, courts of appeals have split over whether plaintiffs are entitled to appellate review of a denial of class certification when they voluntarily dismiss their claims to create an adverse final judgment.

Five circuits have held that a court of appeals lacks jurisdiction under these circumstances: the Third, Fourth, Seventh, Tenth, and Eleventh Circuits.[2] The Second and Ninth Circuits disagree, and permit plaintiffs to obtain appellate review of class certification denials by voluntarily dismissing their individual claims with prejudice.[3]

One Supreme Court Justice has already acknowledged the circuit split: Writing for the majority in the Second Circuit, then-Judge Sotomayor recognized that other circuits have rejected jurisdiction over denials of class certification after voluntary dismissal.[4]


[1] In re Microsoft Xbox 360 Scratched Disc Litig., No. C07-1121-JCC, 2009 U.S. Dist. LEXIS 109075 (W.D. Wash. Oct. 5, 2009).

[2] See, e.g., Camesi v. Univ. of Pittsburg Med. Ctr., 729 F.3d 239 (3d Cir. 2013); Rhodes v. E.I. du Pont de Nemours & Co., 636 F.3d 88 (4th Cir. 2011); Chavez v. Illinois State Police, 251 F.3d 612 (7th Cir. 2001); Bowe v. First of Denver Mortg. Inv’rs, 613 F.2d 798 (10th Cir. 1980); Druhan v. Am. Mut. Life, 166 F.3d 1324 (11th Cir. 1999).

[3] See, e.g., Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176 (2d Cir. 1990); Berger v. Home Depot USA, Inc., 741 F.3d 1061 (9th Cir. 2014).

[4] Shannon v. General Elec. Co., 186 F.3d 186, 193 (2d Cir. 1999).