U.S. Supreme Court Asked to Decide Whether Plaintiffs May Appeal an Order Denying Class Certification After Voluntarily Dismissing Their Claims With Prejudice

Say a federal district court strikes a plaintiffs’ class allegations, because it finds that individual issue predominate and a class cannot be certified. And say the court of appeals declines to review the district court’s order denying class certification under Federal Rule of Civil Procedure 23(f), despite plaintiffs’ insistence that the denial of class certification effectively ends their case, because it would be economically irrational to proceed to final judgment on an individualized basis. Can plaintiffs then voluntarily dismiss their individual claims with prejudice and appeal that judgment pursuant to 28 U.S.C. § 1291, in order to obtain appellate review of the district court’s order denying class certification?

In Baker v. Microsoft Corp., 797 F.3d 607 (9th Cir. 2015), the court, relying on prior circuit precedent, reaffirmed that a voluntary dismissal with prejudice “sufficiently affect[s] the merits of the substantive claims to constitute an appealable final judgment” under § 1291. See id. at 612 (footnote omitted); Berger v. Home Depot USA, 741 F.3d 1061, 1065 (9th Cir. 2014). The court “distinguished a stipulated dismissal without a settlement,” which “retains sufficient adversity to sustain an appeal” under § 1291, from “a stipulated dismissal with a settlement,” which does not. Baker, 797 F.3d at 612.

After concluding it had appellate jurisdiction, the Ninth Circuit in Baker determined that the district court “abused its discretion when it struck the class action allegations from the complaint in contravention of applicable Ninth Circuit precedent.” Id. at 615.

Microsoft has now petitioned the U.S. Supreme Court for review. It argues that the Third, Fourth, Fifth, Tenth, and Eleventh Circuits would have effectively dismissed such an appeal for lack of jurisdiction. According to Microsoft, only the Second and Ninth Circuits would hear an appeal from a voluntary dismissal with prejudice. What is more, Microsoft argues that the Ninth Circuit’s rule conflicts with Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), which held that an order refusing to certify, or decertify, a class is not a final appealable order for purposes of § 1291.

Microsoft’s petition makes much of § 1291’s policy of avoiding piecemeal litigation, which it claims would be thwarted were plaintiffs allowed to appeal from a voluntary dismissal with prejudice. But it is hard to see why that would be. By stipulating to a dismissal with prejudice, plaintiffs gave up on their individual claims, and there really is nothing left for the district court to do but execute the judgment. See Ray Haluch Gravel Co. v. Cent. Pension Fund of Int’l Union of Operating Engineers & Participating Employers, 134 S. Ct. 773, 779 (2014). Putting aside the individual claims, the “flexible character” of Article III permits a putative class representative to litigate the denial of class certification on appeal even if his individual claim is moot, because he retains an interest in obtaining a final decision on class certification. See U.S. Parole Comm’n v. Geraghty, 445 U.S. 388, 400-01 (1980).

Although Microsoft repeatedly touts the policy of avoiding piecemeal litigation, if anything, that policy should undercut Microsoft’s jurisdictional theory, because it is likely to have the effect of producing more piecemeal appeals. This is so because Microsoft’s rule would simply increase the pressure on appellate courts to grant petitions for interlocutory appeal pursuant to Federal Rule of Civil Procedure 23(f)—otherwise, district court rulings denying class certification may escape appellate review if it is not financially possible for plaintiffs to pursue their individual claims to final judgment.

Perhaps that’s the point. Microsoft’s preferred jurisdictional rule would force plaintiffs to litigate, to final judgment, individual claims which are too small to warrant litigating on an individual basis—all because a voluntary dismissal with prejudice is somehow not sufficiently “final.” We all know some plaintiffs are unlikely to be able to procced to final judgment on their individual consumer claims, as “only a lunatic or a fanatic sues for $30.” See Carnegie v. Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004). A flawed district court ruling on class certification, such as the one ultimately reversed here, would then be insulated from appellate review.

A response to Microsoft’s petition is due on December 14, 2015.