U.S. Supreme Court Rejects Class Plaintiffs’ “Voluntary Dismissal” Tactic

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U.S. Supreme Court Rejects Class Plaintiffs’ “Voluntary Dismissal” Tactic

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Aphrodite Kokolis, Jamie L. Davis

The U.S. Supreme Court has decisively rejected a tactic used by class action plaintiffs to attempt to obtain federal appellate review as of right from orders denying class certification.

In Microsoft Corp. v. Baker, the Court held that federal courts of appeals do not have jurisdiction under 28 U.S.C. § 1291 (governing appeals from “final decisions”) to review orders denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.[1] (We previously discussed the facts and procedural history of Baker here.)

Baker is a significant victory for class action defendants. The decision levels the playing field for defendants, who could not employ this voluntary dismissal tactic to obtain review as of right from grants of class certification. Now, plaintiffs and defendants alike may obtain immediate review of class certification orders only through the discretionary appeal provisions of Federal Rule of Civil Procedure 23(f) and 28 U.S.C. § 1292(b). Furthermore, language from the concurring opinion that “[c]lass allegations, without an underlying individual claim, do not give rise to a ‘case’ or ‘controversy,’ ” could prove useful to class action defendants for other significant class issues, such as the ongoing debate over what constitutes a sufficient “injury” to class representatives and absent class members.

So why did class plaintiffs resort to voluntarily dismissing their own claims in order to appeal a class certification denial? The answer lies in the rules governing federal interlocutory review of class certification orders.

Federal Rule of Civil Procedure 23(f) gives appellate courts discretion to accept interlocutory appeals of orders granting or denying class certification.  An appeal as of right under 28 U.S.C. § 1291 is available only after a final judgment.

For this reason, class plaintiffs — like the plaintiffs in Baker — who were unable to obtain discretionary interlocutory review of class certification denials under Rule 23(f), but who did not want to litigate the case to final judgment before being able to appeal, often attempted to end-run Section 1291’s finality requirement by (i) dismissing their individual claims with prejudice, (ii) appealing under Section 1291 from that supposed “final decision,” and (iii) reserving the right to “revive” their individual claims if the appellate court reversed the denial of class certification. Several courts of appeals had rejected this tactic, but the Second and Ninth Circuits had allowed it; plaintiffs in the Ninth Circuit frequently used this tactic.

The Supreme Court in Baker resolved the circuit split by holding that the class plaintiffs’ voluntary dismissal tactic did not create a final—and therefore appealable—decision under 28 U.S.C. § 1291:

The tactic would undermine §1291’s firm finality principle, designed to guard against piecemeal appeals, and subvert the balanced solution Rule 23(f) put in place for immediate review of class-action orders. . . .

. . .

Plaintiffs in putative class actions cannot transform a tentative interlocutory order into a final judgment within the meaning of §1291 simply by dismissing their claims with prejudice—subject, no less, to the right to “revive” those claims if the denial of class certification is reversed on appeal . . . .

The Court also cited the “one-sidedness” of the tactic as further support for its Section 1291 holding:

[Plaintiffs’] theory permits plaintiffs only, never defendants, to force an immediate appeal of an adverse certification ruling. Yet the “class issue” may be just as important to defendants, for “[a]n order granting certification . . . may force a defendant to settle rather than . . . run the risk of potentially ruinous liability . . . .”

Thus, under Baker, plaintiffs and defendants faced with an adverse class certification decision have the same potential avenues of appellate review:  (1) petition the court of appeals for discretionary interlocutory review under Rule 23(f); (2) seek discretionary interlocutory review under 28 U.S.C. § 1292(b), which would require both the district court and the court of appeals to grant permission to appeal;[2] or (3) litigate the case to final judgment and then appeal as of right under 28 U.S.C. § 1291.

The majority limited its decision to 28 U.S.C. § 1291, and declined to address the constitutional issue whether the plaintiffs’ voluntary dismissal tactic deprived federal appellate courts of jurisdiction under Article III’s “case or controversy” requirement.

The concurring opinion addressed that constitutional issue. The concurrence concluded that although the voluntary dismissal did result in a “final decision” within the meaning of 28 U.S.C. § 1291, the appellate court lacked Article III jurisdiction to decide the plaintiffs’ individual claims.

The concurrence stated that, after the voluntary dismissal, the parties were no longer adverse to each other:

“Article III denies federal courts the power to decide questions that cannot affect the rights of litigants in the case before them, and confines them to resolving real and substantial controversies admitting of specific relief through a decree of a conclusive character.”

The plaintiffs’ appeal from their voluntary dismissal did not satisfy this jurisdictional requirement. When the plaintiffs asked the District Court to dismiss their claims, they consented to the judgment against them and disavowed any right to relief from Microsoft. The parties thus 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.

The concurrence rejected the plaintiffs’ argument that their interest in reversing the class certification denial was sufficient to satisfy Article III’s “case or controversy” requirement:

[Plaintiffs] misunderstand the status of putative class actions. Class allegations, without an underlying individual claim, do not give rise to a “case” or “controversy.” Those allegations are simply the means of invoking a procedural mechanism that enables a plaintiff to litigate his individual claims on behalf of a class.

The above language could provide support for class action defendants in other contexts. For example, the Supreme Court has not yet settled the proper scope of “no injury” class actions — in which plaintiffs challenge the alleged violation of mere procedural rights, like those under the Fair and Accurate Credit Transactions Act (FACTA) and the Telephone Consumer Protection Act (TCPA). Also unsettled is the issue whether putative class members who are not actually injured—for example, those who would not be entitled to overtime in Fair Labor Standards Act (FLSA) collective actions—have standing to obtain relief under a classwide judgment. The concurring opinion makes clear that bringing a case as a putative class action does not alter the substantive requirements that govern the named plaintiffs’ or class members’ claims.


[1] Justice Ginsburg delivered the opinion of the Court, in which Justices Kennedy, Breyer, Sotomayor, and Kagan joined.  Justice Thomas filed an opinion concurring in the judgment, in which Chief Justice Roberts and Justice Alito joined.  Justice Gorsuch took no part in the consideration of the case.

[2] Section 1292(b) provides for interlocutory review when a district judge is “of the opinion that [the challenged] order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation,” and the court of appeals, in its discretion, agrees to accept the appeal.