June 12, 2017

Supreme Court Decides Microsoft Corp. v. Baker

On June 12, 2017, the Supreme Court decided Microsoft Corp. v. Baker, No. 15–457, holding that federal courts of appeals lack jurisdiction under 28 U. S. C. §1291, to review orders denying class certification (and orders striking class allegations) after the named plaintiffs have voluntarily dismissed their claims with prejudice.

The Respondents in the Microsoft case were owners of Microsoft’s Xbox 360, who filed a putative class action alleging a design defect in the device. The district court struck Respondents’ class allegations from the complaint, and the Court of Appeals denied them permission to appeal that order under Rule 23(f), which authorizes “permissive interlocutory appeal” from adverse class-certification orders in “the sole discretion of the court of appeals.”

Then, instead of pursuing their individual claims to final judgment on the merits, Respondents stipulated to a voluntary dismissal of their claims with prejudice, but reserved the right to revive their claims should the Court of Appeals reverse the District Court’s certification denial. Respondents then appealed, challenging only the interlocutory order striking their class allegations. The Ninth Circuit held it had jurisdiction to entertain the appeal under §1291. It then held that the District Court’s rationale for striking Respondents’ class allegations was an impermissible one, but refused to opine on whether class certification was inappropriate for a different reason, leaving that question for the District Court on remand.

The Supreme Court reversed, identifying four bases for its decision. First, §1291, which empowers federal appellate courts to review only “final decisions,” preserves the proper balance between trial and appellate courts, minimizes the harassment and delay that would result from repeated interlocutory appeals, and promotes the efficient administration of justice. Attempts to secure appeals as of right from adverse class certification orders would erode the finality principle and disserve its objectives.

Second, Respondents’ voluntary-dismissal tactic served only to exacerbate the problem because it invites protracted litigation and piecemeal appeals: Under Respondents’ theory the decision whether an immediate appeal will lie resides exclusively with the plaintiff, who need only dismiss her claims with prejudice in order to appeal the district court’s order denying class certification. And she may exercise that option more than once, interrupting district court proceedings with an interlocutory appeal again, should the court deny class certification on a different ground.

Third, Respondents’ theory would allow indiscriminate appellate review of interlocutory orders, which would undercut Rule 23(f)’s discretionary regime. The Court rejected Respondents’ argument that Rule 23(f) was irrelevant because this case involved a final judgment, stating 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.

Fourth, the one-sidedness of Respondents’ voluntary-dismissal device reinforced the Court’s conclusion because the tactic permits only plaintiffs, and never defendants, to force an immediate appeal of an adverse certification ruling. However, the “class issue” may be just as important to defendants, as certification may force defendants to settle.

Justice Ginsburg delivered the opinion of the Court, in which Justices Kennedy, Breyer, Sotomayor, and Kagan joined. Justice Thomas filed an opinion concurring in the judgment, in which Chief Justice Roberts and Justice Alito joined. Justice Gorsuch took no part in the consideration or decision of the case.

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