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SCOTUS Unanimously Restricts Ability of Putative Class Action Plaintiff to Appeal Denial of Class Certification

On June 12, 2017, the Supreme Court of the United States issued its opinion in Microsoft v. Baker, Case No. 15-457.  In an 8-0 opinion, the Court reversed and remanded a Ninth Circuit Court of Appeals decision regarding class certification on the basis that the appeals court lacked jurisdiction under 28 U.S.C. § 1291.    It should be noted that Justice Gorsuch abstained from this matter. 

As a general premise, federal Circuit Courts of Appeal cannot review district court determinations until a final decision or judgment has been entered.  This premise is particularly troubling for some litigants in the context of class actions since the “death knell” decision to grant or deny class certification often occurs prior to entry of final judgment on an individual’s claim.  Specifically, an individual’s claims and potential recovery may not justify the costs of litigation whereas a class action would and the denial or granting of class action often substantially impacts the outcome of a case.

Rule 23 was revised in 1998 in an effort to address these concerns by permitting litigants to seek and obtain the consent of the Circuit Court to appeal an interlocutory order granting or denying certification.  See Rule 23(f).  However, in some Circuit Courts, including the Ninth Circuit, class action plaintiffs have employed an alternative strategy to seek review of denials of class certification without obtaining the consent of the appeals court.   Specifically, such litigants would voluntarily dismiss their individual claims and then appeal the denial of class certification as one from a final judgment.   This was the tactic at issue in Microsoft v. Baker. Although the Court unanimously held that appellate jurisdiction cannot be created by class action plaintiffs voluntarily dismissing their individual claims, it reached that conclusion through two separate camps. 

Justice Ginsburg, writing for the majority and joined by Justices Kennedy, Breyer, Sotomayor and Kagan, held that the plaintiffs impermissibly side-stepped existing Supreme Court jurisprudence and the federal rules concerning the appellate review of class certification determinations.  Specifically, the Court held:  “[p]laintiffs in putative class actions cannot transform a tentative interlocutory order … into a final judgment … simply by dismissing their claims with prejudice – subject, no less, to the right to revive those claims if the denial of class certification is reversed on appeal.”   The majority further rejected policy claims by the plaintiffs that denial of class certification would force them to abandon their individual claims noting that the plaintiffs could have settled their individual claims, further litigated the matter in order to revisit the issue of certification or otherwise seek review of the denial after final judgment was entered.  Finally, Justice Ginsburg noted that the rejected tactic to circumvent the final judgment rule was one-sided and benefited only plaintiffs since defendants cannot voluntarily dismiss a case.  In this respect, she acknowledged the substantial pressure that class action defendants face following an order granting class certification, which further emphasized how unfair it would be to afford only plaintiffs an end-around to seek appellate review of an adverse class certification holding. 

Justice Thomas wrote a concurring opinion, joined by Justice Roberts and Alito.   There, Justice Thomas opined that once the plaintiffs dismissed their claims they no longer had Article III standing to seek relief and were not adverse to the defendant to pursue an appeal or any other claim. 

The decision should have particular significance to class action litigants in the Second and Ninth Circuit Courts of Appeals, where the voluntary-dismissal tactic was still permitted. Moreover, it strengthens the position of class action defendants that have successfully challenged applications for class certification in the district courts and provides more certainty for the course and duration of the litigation. 

A copy of the Court’s decision in Microsoft v. Baker can be obtained here

  • Partner

    Andrew Sayles defends financial institutions and their service partners in complex litigation and class actions, with a particular emphasis on issues related to consumer financial services regulation. He also advises clients in ...

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