In a significant victory for class action defendants, whose success often depends on whether a class is certified, the US Supreme Court has ruled that federal courts of appeals lack jurisdiction under 28 USC §1291 to review orders denying class certification or striking class allegations after the representative plaintiff voluntarily dismisses her claims with prejudice.
The Court reasoned that allowing a plaintiff to manufacture appellate jurisdiction in this way would subvert §1291 and Federal Rule of Civil Procedure 23(f), which requires the appellate court's permission to take an interlocutory appeal of the denial of class certification. The case is Microsoft Corp. v. Baker, No. 15-457, and a unanimous Court issued its ruling on Monday. This ruling reversed and remanded a decision of the US Court of Appeals for the Ninth Circuit, which had found jurisdiction to consider the plaintiff's class certification appeal, and resolved a split among the federal courts of appeals on the issue.
The respondents were plaintiffs that brought a putative class action alleging a design defect in Microsoft's Xbox 360 gaming system that, according to the plaintiffs, scratched game discs. The district court struck the plaintiffs' class allegations. The Ninth Circuit then denied plaintiffs' request for permission to take an interlocutory appeal of that decision. The plaintiffs then voluntarily dismissed their individuals claims with prejudice and sought a direct appeal. The Ninth Circuit concluded that, because the plaintiffs were appealing from a final order, it had jurisdiction under §1291 and reversed the lower court's decision to strike the plaintiffs' class allegations.
In an opinion by Justice Ruth Bader Ginsburg, the Supreme Court reversed the Ninth Circuit's decision that it had jurisdiction to consider the respondents' appeal of the district court's decision to strike the class allegations. The Court began with the basic premise that the whole case should be decided in a single appeal, which "preserves the proper balance between trial and appellate courts, minimizing the harassment and delay that would result from repeated interlocutory appeals, and promotes the efficient administration of justice." That "final judgment rule" was codified in §1291, and the respondents' voluntary dismissal tactic "subverts" that rule because it invites protracted litigation and piecemeal appeals. All a plaintiff would need to do is voluntarily dismiss her claims, and she could appeal a denial of class certification. Then, if an appellate court reverses the denial of class certification and the district court then denies class certification again on a different ground, the plaintiff could dismiss her claims and file another appeal. Serial appeals as a litigation tactic to keep the case going is antithetical to the finality rule embodied in §1291.
The Court also rejected the respondents' argument that their tactic actually promoted efficiency because many plaintiffs would not take the risk of a voluntarily dismissal. That "overlook[ed] the prospect that plaintiffs with weak merits claims may readily assume that risk, mindful that class certification often leads to a hefty settlement."
The Court next explained how the respondents' voluntary dismissal tactic would undermine Rule 23(f). "Rule 23(f) reflects the rulemakers' informed assessment, permitting . . . interlocutory appeals of adverse certification orders, whether sought by plaintiffs or defendants, solely in the discretion of the courts of appeals." The respondents had argued that Rule 23(f) was irrelevant to the question presented because they appealed from a final judgment, and did not request an interlocutory appeal. The Court rejected that argument, explaining that the voluntarily dismissal tactic "could yield an appeal of right," which would undermine "Rule 23(f)'s careful calibration," as well as Congress's determination that rulemaking, not judicial decisions, is the "preferred means for determining whether and when prejudgment orders should be immediately appealable."
Lastly, the Court buttressed its reasoning by recognizing that the voluntary dismissal device is completely one sided. Congress, the Court concluded, chose to use the rulemaking mechanism to dictate how and when an interlocutory order could be appealed, and Rule 23(f) reflects a settlement of the interests of plaintiffs, defendants, and the courts vis-à-vis appeals of class certification, and "it is not the prerogative of litigants for federal courts to disturb that settlement."
Although the judgment was unanimous, the reasoning was not. Justice Clarence Thomas, joined by Chief Justice John Roberts and Justice Samuel Alito, agreed that the federal courts of appeals lacked jurisdiction, but not for finality reasons under §1291, which, in their view, were satisfied by the voluntary dismissal. Justice Thomas instead reached the question the majority declined to consider: whether federal courts of appeals have Article III jurisdiction to consider such appeals. On that question, Justice Thomas opined that the Article III "case or controversy" requirement limits federal jurisdiction to issues presented "in an adversary context in which the parties maintain an actual and concrete interest." The respondents' voluntary dismissal removes any actual controversy because they consented to the judgment against them. Justice Thomas rejected the argument that the respondents' interest in reversing the denial of class certification was sufficient to satisfy Article III. Class allegations are a procedural tool to assert individual claims. Thus, viable individual claims are a necessary condition of a class action. Because the individual claims were voluntarily dismissed with prejudice, there could no longer be a case or controversy for any class claims or issues.
The Court's opinion shuts down the voluntary dismissal avenue for review of denials of class certification. Plaintiffs in such cases are now left with three options for interlocutory review: Rule 23(f), § 1292(b), and a writ of mandamus. Rule 23(f), as noted, requires the appellate court's permission to appeal. Section 1292(b) requires both the district court's and appellate court's permission for an interlocutory appeal. And a writ of mandamus generally requires a party to show extraordinary circumstances to obtain review and reversal of a district court's decision. Accordingly, the Court's elimination of a mechanism for obtaining early appellate review as a matter of right limits a class action plaintiff's ability to control the course of the proceedings.
Find out more about the implications of this decision by contacting any of the authors.