United States: Baker v. Microsoft Corporation Revisited: Microsoft Seeks To Stop Class Action Plaintiffs From Shortcutting The Appeals Process

We recently reported on a Ninth Circuit Court of Appeals opinion reversing a district court's decision to strike class action allegations in a putative class action against Microsoft.ⁱ  In Baker v. Microsoft Corporation, the Ninth Circuit held that proof that individual class members were damaged by an alleged defect (here, a defect in Xbox 360 video game consoles that allegedly resulted in scratched game discs) was not necessary for a class action to be certified.ⁱⁱ  You can read the full article here.

Microsoft has petitioned the Ninth Circuit for a rehearing en banc (which means that instead of a panel of three judges, at least 11 of the 29 judges currently sitting on the Ninth Circuit would rehear and decide the case).  Microsoft's petition puts a spotlight on a strategy class action plaintiffs have employed to "end-run" the appeals process if class certification is denied.  Instead of pursuing individual claims to a final judgment and then appealing the denial of class certification, plaintiffs voluntarily dismiss the entire case so that they can immediately appeal the order denying class certification.

This strategy reflects the importance of certification in class action cases.  Frequently, whether a case is certified to proceed as a class action or not is the most important event in the case.  Class actions are most often brought in situations in which individual damages are small, but may add up because many people are potentially affected.  If class certification is granted, the case will generally settle.  If class certification is denied, the case will generally not be pursued.

Class certification orders (granting or denying class certification) are not immediately appealable as a matter of right.  In general, appellate courts only have jurisdiction over final judgments.ⁱⁱⁱ  So, in federal court, a party can typically either seek an interlocutory appeal under Federal Rule of Civil Procedure 23(f) – which is completely up to the Court's discretion – or litigate the case until a final judgment is entered, and then appeal the class certification order.  Some class action plaintiffs are trying to skip directly to an appeal by voluntarily dismissing the case if class certification is denied.

In Baker, the plaintiffs voluntarily dismissed the lawsuit after the district court ordered the class action allegations stricken and the plaintiffs unsuccessfully moved for a Rule 23(f) interlocutory appeal of that order.^iv  The Ninth Circuit held there was appellate jurisdiction following a voluntary dismissal, citing Berger v. Home Depot USA, Inc., 741 F.3d 1061, 1065 (9th Cir. 2014).^v

In its petition, Microsoft argues that the Ninth Circuit should rehear the issue of appellate jurisdiction because the panel decision conflicts with other decisions by the United States Supreme Court,^vi the Ninth Circuit itself,^vii and decisions from other federal appellate courts.^viii

Whether the Ninth Circuit grants Microsoft's petition for rehearing en banc, and how it handles the shortcut strategy to appellate jurisdiction, could significantly affect how class actions are litigated in the Ninth Circuit.  As noted, a class certification order often decides whether the case is settled or dismissed.  Plaintiffs and counsel may be reluctant to pursue class actions if they have to pursue cases to judgment before they can challenge the denial of class certification.  Stay tuned along with us to see how it all pans out.

A copy of Microsoft's petition can be accessed here.

Footnotes

i Baker v. Microsoft Corp., No. 12-35946, 2015 U.S. App. LEXIS 4317 (9th Cir. Mar. 18, 2015).

ii Id. at *20.

iii 28 U.S.C. § 1291.

iv Baker, 2015 U.S. App. LEXIS 4317 at *11-12.

v Id.

viCoopers & Lybrand v. Livesay, 437 U.S. 463 (1978), holding that, in line with Congressional policy against piecemeal appeals, the fact an interlocutory order may induce a party to abandon its claim before final judgment is not sufficient to consider the order a "final decision" under 28 U.S.C. § 1291.

vii Huey v. Teledyne, Inc., 608 F.2d 1234 (9th Cir. 1979), a Ninth Circuit opinion finding appellate jurisdiction lacking under similar procedural facts as Baker.

viii See Camesi v. Univ. of Pittsburgh Med. Ctr., 729 F.3d 239, 245-46 (3d Cir. 2013); Rhodes v. E.I. du Pont de Nemours & Co., 636 F.3d 88, 100 (4th Cir. 2011); Telco Grp., Inc. v. AmeriTrade, Inc., 552 F.3d 893, 893-94 (8th Cir. 2009) (per curiam); Bowe v. First of Denver Mortg. Investors, 613 F.2d 798, 800-02 (10th Cir. 1980).

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