Microsoft Corp. v. Baker is one of those cases that only a lawyer could love. At issue was whether a federal appellate court has jurisdiction to review a class-certification order if the plaintiffs have voluntarily dismissed all of their claims, with prejudice.
Class-action plaintiffs have long sought the right to immediately appeal from orders denying class certification. In the 1960s and 1970s, some federal courts of appeals began allowing such an immediate right of appeal under the so-called death-knell doctrine. Under that judicially created rule, if the plaintiffs could show that the denial of class certification—if left unreviewed—would end the lawsuit for all practical purposes, the appeals court would grant review of that interlocutory order.
In other words, if plaintiffs could demonstrate that, absent class certification, the value of their individual claims made it economically impractical to litigate them on their own, some federal appeals courts deemed the denial orders to be “final” orders under 28 U.S.C. § 1291 (and therefore appealable).
But in 1978, in Coopers & Lybrand v. Livesay, the US Supreme Court unanimously rejected that practice. The Court held that the death-knell doctrine wasted judicial resources by encouraging inefficient, piecemeal appeals, and that it unfairly disadvantaged defendants—who had no similar right to an appeal from orders granting class certification.
Following the Court’s unanimous holding in Livesay, Federal Rule of Appellate Procedure 23(f) was enacted to give both plaintiffs and defendants the ability to request an interlocutory appeal from a class-certification order, but vesting absolute discretion in the appeals court on whether to grant such review.
Many of the concerns that animated Livesay and inspired Rule 23(f) were back before the Court this term in Baker. The case arose in the context of a putative consumer class action against Microsoft Corporation. The class-action complaint alleged that Microsoft’s Xbox 360 was defectively designed because game discs could become scratched if the game console were jostled too much.
On Microsoft’s motion, the district court struck the plaintiffs’ class allegations from the complaint, having concluded that neither causation nor damages could be proven in one stroke by common evidence. Plaintiffs then petitioned the Ninth Circuit for interlocutory review under Rule 23(f), but the appeals court denied the petition, leaving the plaintiffs to pursue their individual claims on the merits in the district court.
Rather than pursue their individual claims to finality, plaintiffs moved to voluntarily dismiss their claims, with prejudice, declaring their intention to appeal the district court’s order striking the complaint’s class allegations. Although Microsoft stipulated to the dismissal, it made clear its belief that plaintiffs would have no right to appeal the court’s interlocutory order striking class allegations after entry of dismissal. The district court granted the dismissal with prejudice, reserving to all parties their arguments as to the propriety of any appeal.
On appeal, the Ninth Circuit exercised jurisdiction and reversed the district court’s order striking class allegations. The appeals court reasoned that in the absence of a settlement, a stipulation that leads to a dismissal with prejudice does not destroy the adversity in that judgment necessary to support an appeal of a class-certification denial. Thus, the plaintiffs’ voluntary-dismissal tactic created a final judgment giving the appeals court jurisdiction to decide whether certification was properly denied.
After languishing on the Supreme Court’s merits docket for more than a year, Baker was decided early last week. In an 8-0 ruling (Justice Gorsuch had not yet been confirmed by the time of oral argument), the Court reversed the Ninth Circuit. The Court’s combined reasoning largely tracks the arguments Washington Legal Foundation made in its amicus curiae brief.
Writing for the majority, Justice Ginsburg explained the Ninth Circuit’s holding is utterly inconsistent with the Court’s decision in Livesay, which held that allowing a plaintiff to appeal a class-certification denial immediately as of right, rather than from a final judgment after an adverse trial on the merits, violates Congress’s longstanding policy against multiple, piecemeal appeals. Such appeals are impermissible, Livesay explained, even when the denial of class certification sounds the “death knell” for the plaintiffs’ entire case. Here, plaintiffs’ voluntary dismissal lacked finality under § 1291 because plaintiffs could resume litigating their claims without benefit of any appellate decision relating to the merits of their claims.
In addition, the Court held that the Ninth Circuit’s expansive reading of § 1291 is wholly inconsistent with the proper understanding of Rule 23(f), which grants both plaintiffs and defendants the right to request interlocutory review of class-certification orders, but provides appeals courts with absolute, unreviewable discretion to deny that request. If the Court were to adopt the reasoning of the Ninth Circuit, Justice Ginsburg explained, Rule 23(f) would be rendered a dead letter. And where Rule 23(f) applies regardless of which side prevailed on the class-certification issue, the Ninth Circuit’s voluntary-dismissal tactic benefits only plaintiffs.
In a separate concurrence, Justice Thomas (joined by Chief Justice Roberts and Justice Alito) explained that because plaintiffs’ claims were extinguished forever when they were voluntarily dismissed with prejudice, they cannot under any circumstances spring back to life. In other words, they opined, the case no longer presents a justiciable case or controversy because plaintiffs’ voluntary dismissal, with prejudice, rendered any appeal moot. Neither party contended that the district court erred in entering its final judgment disposing of the action with prejudice—plaintiffs specifically requested it, and Microsoft wisely agreed to it. As a result of that invited dismissal, to which all parties stipulated, Article III’s adversity requirement is utterly lacking, and a live dispute between the parties no longer exists to support federal jurisdiction—appellate, or otherwise.
The Court’s decision brings a welcome and deserved end to an unfairly manipulative practice by the plaintiffs’ bar. Had the voluntary-dismissal tactic been allowed to continue, there could be no principled way to limit the practice solely to interlocutory class-certification decisions. Under the Ninth Circuit’s same reasoning, any time a plaintiff is dissatisfied with a discovery or other interlocutory order, he could simply dismiss all his claims, take an appeal, and obtain immediate review of the order. Sanctions orders, discovery orders, even evidentiary orders on motions in limine, could all be appealed via this artifice. Permitting litigants to undertake piecemeal appeals whenever they disagree with adverse interlocutory decisions would unduly delay the resolution of litigation and needlessly burden the courts of appeals.
Unsurprisingly, the decision may already be paying rich dividends for defendants. Baker is most likely to impact several Ninth Circuit appeals from food misbranding decisions, including Jones v. ConAgra, which reached the Ninth Circuit through this same voluntary-dismissal tactic.
Also published by Forbes.com on WLF’s contributor page.