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Supreme Court Holds That Voluntary Dismissal Does Not Permit Appellate Review of Class Certification Orders

Us-supreme-court-building-2225765_1920By Alexander M. Smith

This morning, the Supreme Court held 8-0 in Microsoft Corp. v. Baker that the named plaintiffs in a class action cannot appeal a denial of class certification (or the granting of a motion to strike class allegations) by voluntarily dismissing their claims.  A five-Justice majority held that this tactic was barred because a voluntary dismissal under these circumstances does not constitute a “final order” under 28 U.S.C. § 1291, while three Justices concurred in the judgment on the basis that such a voluntary dismissal extinguishes the adversity necessary to give rise to Article III standing.  (The Consumer Law Roundup has covered Baker in three previous posts.) 

In Baker, the plaintiffs had filed a putative class action against Microsoft alleging that a defect in the Xbox 360 resulted in scratched discs.  After the district court granted Microsoft’s motion to strike the plaintiffs’ class allegations, the named plaintiffs voluntarily dismissed their claims against Microsoft so that there would be a “final decision” from which they could appeal the denial of class certification.  The Ninth Circuit held, inter alia, that a stipulated dismissal of an individual claim is an adverse and appealable final judgment.  The Supreme Court granted certiorari to address this jurisdictional issue and subsequently reversed.

Writing for a five-justice majority, Justice Ginsburg began from the premise – established in Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978) –  that a denial of class certification is an interlocutory order that is generally not immediately appealable.  As the Court explained, there are exceptions to this rule:  28 U.S.C. § 1292(b) allows district courts to certify certain interlocutory orders for appellate review, while Federal Rule of Civil Procedure 23(f) authorizes appellate courts, in their sole discretion, to choose to review interlocutory orders granting or denying class certification.  But the Court made clear that the plaintiffs could not manufacture a “final order” – and thereby obtain an appeal as of right – by voluntarily dismissing their claims following a denial of class certification.  In so holding, the Court made clear that this tactic would “invite[] protracted litigation and piecemeal appeals” and “allow indiscriminate appellate review of interlocutory orders” without the safeguards imposed by either Section 1292(b) or Rule 23(f).  The Court emphasized that these provisions were “the product of careful calibration,” and it held that the plaintiffs’ voluntary-dismissal tactic would “severely undermine[]” the balance that Congress and the Federal Rules Advisory Committee had attempted to strike.  Accordingly, the Court concluded that “Plaintiffs in putative class actions cannot transform a tentative interlocutory order . . . into a final judgment within the meaning of § 1291 simply by dismissing their claims with prejudice.” 

Justice Thomas, joined by Chief Justice Roberts and Justice Alito, concurred only in the judgment.  Justice Thomas disagreed that the plaintiffs’ voluntary dismissal lacked the finality required for appellate review under Section 1291:  because the “order here dismissed all of the plaintiffs’ claims with prejudice and left nothing for the District Court to do but execute the judgment,” he explained, it constituted a “final order” sufficient to create appellate jurisdiction under Section 1291.  Nonetheless, Justice Thomas concluded that the plaintiffs’ voluntary dismissal of their claims deprived them of Article III standing because it destroyed the adversity necessary to create standing.  In so doing, Justice Thomas rejected the plaintiffs’ argument that “their interest in reversing the order striking their class allegations is sufficient to satisfy Article III’s case-or-controversy requirement,” reasoning that the plaintiffs’ class allegations were “simply the means of invoking a procedural mechanism that enables a plaintiff to litigate his individual claims on behalf of a class” and did not give rise to a case or controversy in the absence of an underlying individual claim.

The Court’s decision is available here.