United States: Supreme Court Rejects Plaintiffs' Tactic For Appealing Class Certification Denials

The U.S. Supreme Court issued a unanimous 8-0 opinion in Microsoft Corp. v. Baker, reversing the U.S. Court of Appeals for the Ninth Circuit and holding that federal courts lack jurisdiction under 28 U.S.C. § 1291 to hear the appeal of an order denying class certification after plaintiffs voluntarily dismiss their claims with prejudice. The June 12 ruling will have a significant impact on lawsuits following a denial of class action certification.

Orders denying class certification are not final district court decisions—since the claims of the individual plaintiffs survive—and therefore are not immediately reviewable under Section 1291. But without a certified class, many lawsuits are not financially viable to pursue when individual claims are meager. Nevertheless, in its 1978 opinion in Coopers & Lybrand v. Livesay, the Supreme Court affirmed the basic rule that such denials do not permit interlocutory appeal. In 1998, the Advisory Committee amended the Federal Rule of Civil Procedure on class actions to authorize permissive interlocutory appeals for adverse class certification decisions at the discretion of the court of appeals. FRCP 23(f). In Microsoft v. Baker, the plaintiffs attempted to circumvent the FRCP 23(f) procedure by voluntarily dismissing their claims with prejudice after the district court struck the class allegations, arguably rendering the class allegation striking decision final and therefore reviewable. But the Supreme Court held that the plaintiffs could not transform the district court's class certification denial into a "final decision" for purposes of jurisdiction.

Facts and Procedural History

In 2007, the plaintiffs in Microsoft v. Baker filed a putative class action in the Western District of Washington based on design defects in Microsoft's Xbox 360 videogame console that scratched game discs. The district court denied class certification, holding that individual issues on damages and causation predominated over common issues. In 2009, the plaintiffs petitioned the Ninth Circuit under FRCP 23(f) for leave to appeal the class-certification denial, but the Ninth Circuit denied the request.

In 2011, plaintiffs filed another putative class action based on the same alleged design defect. The plaintiffs argued that a change in Ninth Circuit law required a new class-certification analysis. The district court disagreed and struck the class allegations. Instead of pursuing individual claims and appealing the final district court judgment, plaintiffs stipulated to a voluntarily dismissal of their claims with prejudice, but reserved the right to revive their claims should the Ninth Circuit reverse the district court's ruling. After the district court granted the stipulated motion to dismiss, plaintiffs then appealed the district court's order striking their class allegations. The Ninth Circuit held that it had jurisdiction to entertain the appeal under Section 1291, finding the stipulated dismissal to be a sufficiently adverse—and thus appealable—final decision. The Ninth Circuit held that the district court had abused its discretion in striking the class allegations and remanded the case to the district court.

The Supreme Court Decision

The Supreme Court reversed the Ninth Circuit's decision and held that the plaintiffs' voluntary dismissal did not qualify as a "final decision" under Section 1291 and, as a result, the Ninth Circuit lacked jurisdiction to review the order striking class allegations.

The Supreme Court explained that, under Section 1291, federal courts of appeals are empowered to review only "final decisions of the district courts." 28 U.S.C. § 1291. The Court further noted that two guides—the Supreme Court's decision in Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978) and FRCP 23(f)—controlled the Court's application of that finality rule in this case.

First, the Court reviewed its decision in Coopers & Lybrand, wherein the Court considered whether a plaintiff in a putative class action may appeal as of right a district court order striking class allegations or denying class certification. The Court held that the "death-knell" doctrine did not warrant mandatory appellate jurisdiction of such "inherently interlocutory" orders. The Court explained that under the death-knell doctrine, a court of appeals could decline to hear an appeal if it determined that the plaintiff had adequate incentive to continue the litigation despite the denial of class certification. If the court of appeals determined that the order would terminate the litigation, the court deemed the order an appealable final decision under Section 1291. As a basis for its decision in Coopers & Lybrand, the Court reasoned that the death knell doctrine (1) created the potential for multiple interlocutory appeals; (2) forced appellate courts indiscriminately into the trial process; and (3) was one-sided, operating only in favor of plaintiffs. The Court held that, "[t]he fact that an interlocutory order may induce a party to abandon his claim before final judgment is not a sufficient reason for considering [the order] a 'final decision' within the meaning of § 1291."

Next, the Court discussed the enactment in 1998 of FRCP 23(f), which authorized "permissive interlocutory appeals" from adverse class-certification orders in the discretion of court of appeals. After Coopers & Lybrand, but before the enactment of FRCP 23(f), a party seeking immediate review of an adverse class certification ruling had to either meet Section 1292(b)'s two-level inspection or satisfy the extraordinary circumstances test applicable to writs of mandamus. With the enactment of FRCP 23(f), the decision whether to permit interlocutory appeal from an adverse class certification ruling is left to the sole discretion of the court of appeals.

Having given the background for the two guides, the Court explained that the plaintiffs' voluntary-dismissal tactic, even more than the death-knell theory, invited protracted litigation and piecemeal appeals. The plaintiffs' tactic would permit only plaintiffs—never defendants—to force an immediate appeal of an adverse class certification ruling. And a plaintiff could exercise that option on multiple occurrences in the event that the court denied class certification on a different ground. The Court also recognized that plaintiffs with poor merit claims might prefer interlocutory review to force an appellate decision on class certification before a merits trial for additional settlement leverage.

The Court further held that, like the death-knell doctrine, the plaintiffs' theory allowed indiscriminate appellate review of interlocutory orders. The Court noted that the dismissal tactic also undercut FRCP 23(f)'s discretionary regime. The Court noted that FRCP 23(f) struck a compromise through "careful deliberation": a district court cannot unilaterally block a class certification appeal, but the litigants have no absolute right to an interlocutory appeal. The Court noted that this rule "balance[s] the benefits of immediate review against the costs of interlocutory appeals," allowing the court of appeals to decide if class certification is case dispositive or otherwise a critical inquiry. The Court held that FRCP 23(f) reflects the rulemakers' informed assessment and such assessment "warrants the Judiciary's full respect."

Considering these legal and practical issues, the Court concluded that the plaintiffs' voluntary dismissal did not give to a "final decision" under Section 1291 because it would subvert the "final-judgment rule" of deciding the entire case in a single appeal, which 1) preserves the proper balance between trial and appellate courts; 2) minimizes the harassment and delay that would result from repeated interlocutory appeals, and 3) promotes the efficient administration of justice. Thus, "plaintiffs in putative class actions cannot transform a tentative interlocutory order" into a final judgment "simply by dismissing their claims with prejudice."


This decision signals the Court's willingness to take a holistic, practical approach to ensure efficient use of judicial resources and may further encourage litigants before the Supreme Court to focus on practical ramifications in addition to legal argumentation. It may also suggest a broader condemnation of litigation tactics employed by parties in an attempt to evade well-reasoned legal rules. Indeed, Justice Ginsburg in oral argument specifically noted that plaintiffs' dismissal scheme was "just a way to get around" FRCP 23(f). Finally, it reduces the pressure that putative class action plaintiffs can bring to bear on defendants following a denial of class action certification. Voluntary dismissal now marks the end, not the middle, of class action litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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