Supreme Court to Decide Whether Class Action Plaintiffs Can Ring Their Own “Death Knell” Bell

The United States Supreme Court heard oral argument last month on the issue of whether a federal court of appeals has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice. The case comes to the Supreme Court from the Ninth Circuit’s decision in Baker v. Microsoft Corp.

In Baker, a putative class of owners of Microsoft Corporation’s (Microsoft) Xbox 360® video game console filed suit, alleging that the console suffered from a design defect that gouged game discs. Microsoft opposed Plaintiffs’ motion to certify the class. The District Court denied certification, citing comity considerations and relying on the class certification denial in a similar case. Thereafter, Plaintiffs filed a 23(f) petition for interlocutory appeal with the Ninth Circuit, which was denied. The Plaintiffs then voluntarily dismissed the case with prejudice, with the express purpose of obtaining immediate Ninth Circuit review of the District Court’s denial of class certification. Plaintiffs filed an appeal from the final judgment, challenging the denial of class certification.

On appeal, Microsoft argued that the Ninth Circuit lacked jurisdiction because a voluntary dismissal with prejudice does not sufficiently affect the merits of the substantive claims to constitute an appealable final judgment. However, the Ninth Circuit had previously rejected a similar argument in Berger v. Home Depot USA, Inc., holding 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. . . .” The Baker court distinguished a stipulated dismissal without a settlement from a stipulated dismissal with a settlement, in that the former retains sufficient adversity to sustain an appeal and the latter does not. Accordingly, the Ninth Circuit in Baker held that it had  “jurisdiction under 28 U.S.C. § 1291 because a dismissal of an action with prejudice, even when such dismissal is the product of a stipulation, is a sufficiently adverse – and thus appealable – final decision.”

Microsoft filed a petition for a writ of certiorari, which the Supreme Court granted on January 15, 2016. Oral argument was held on March 21, 2017. The Supreme Court’s decision will hopefully clarify a common strategy of class action plaintiffs, who currently view the risk of losing their individual claims if their appeal is denied to be overshadowed by the ability to obtain immediate review of a denial of class certification. This practice would come to a fast halt if the Supreme Court sides with Microsoft, possibly depriving appellate jurisdiction to cases currently on appeal before the circuit courts.

Caroline E. Oks is an Associate in the Gibbons Business & Commercial Litigation Department.
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