The Xbox 360 is designed for gaming. Appellate litigation, gamers learned, is not. On behalf of a putative class of purchasers of the Xbox 360, a group of gamers brought suit alleging a defect with the consoles. After the district court struck the class allegations, plaintiffs sought permission to appeal under Rule 23(f), which the Ninth Circuit denied. Rather than proceeding in litigation to final judgment, plaintiffs instead voluntarily dismissed their claims, with prejudice, while reserving a right to appeal the order striking class allegations. Plaintiffs then appealed the order under Section 1291. On appeal, the Ninth Circuit held that it had appellate jurisdiction and thus the case was still “sufficiently adverse” to be heard under §1291. The Supreme Court granted certiorari on the question of whether courts of appeals “have jurisdiction under §1291 and Article III . . . to review an order denying class certification (or, as here, an order striking class allegations) after the named plaintiffs have voluntarily dismissed their claims with prejudice.” Writing for the majority in Baker, Justice Ginsburg reasoned that permitting plaintiffs’ back door to the appellate courts to remain open would defeat the even-handedness codified as part of the final judgment rule under §1291 and in the Federal Rules of Civil Procedure. For similar reasons, Justice Ginsburg wrote, the Court previously rejected the judicially-created “death-knell doctrine”—under which an appellate court could review an order refusing to certify a class when the rejection of class certification “sounded the ‘death knell’ of the action”—because it served only to favor the plaintiffs. Describing plaintiffs’ circumvention tactic as a “voluntary dismissal device,” the Court held that permitting only plaintiffs to immediately appeal adverse class certification orders would be manifestly unfair and upset the balance between the parties. Indeed, as the Court noted, “the ‘class issue’ may be just as important to defendants . . . for an order granting certification . . . may force a defendant to settle rather than . . . run the risk of potentially ruinous liability.” Yet plaintiffs’ tactic would confer no right to immediate appeal on defendants. Moreover, the Court held, plaintiffs’ voluntary dismissal tactic would “undercut[] Rule 23(f)’s discretionary regime,” which states that interlocutory appeals of grants or denials of class certification may be permitted by a federal court of appeals, but do not create an obligation on the part of Article III courts. The primary drafters of this rule believed that creating a right to interlocutory appeal could be abused, and instead granted such a decision “to the sole discretion of the court of appeals.” Plaintiffs’ maneuver to manufacture appellate jurisdiction would subvert this discretion by impermissibly “transform[ing] a tentative interlocutory order . . . into a final judgment claims with prejudice—subject, no less, to the right to ‘revive’ those claims if the denial of class certification is reversed on appeal.” To embrace plaintiffs’ reasoning would render “Congress’ final decision rule . . . a pretty puny one.” The majority concluded that “Congress chose the rulemaking process to settle the matter, and the rulemakers did so by adopting Rule 23(f )’s evenhanded prescription. It is not the prerogative of litigants or federal courts to disturb that settlement.” Taking a more narrow view, in his concurrence, Justice Thomas wrote that though he disagreed with the majority’s interpretation of §1291—because “[w]hether a dismissal with prejudice is ‘final’ depends on the meaning of §1291, not Rule 23(f )”—plaintiffs nevertheless could not appeal because the court lacked Article III jurisdiction. By voluntarily dismissing their claims, “the plaintiffs asked the District Court to dismiss their claims, they consented to the judgment against them and disavowed any right to relief from Microsoft,” including their right to appeal the order on class certification. Baker serves as an important reminder to litigants to consider both the purpose and intent of the Federal Rules of Civil Procedure, which take an even-handed approach. The downstream effects of an alternative ruling would have been significant, as defendants could face undue and increased pressure to settle potentially meritless cases rather than risk incurring the large expense of litigating a judicially-created, one-sided appellate process. There is no appellate “cheat code” available only to plaintiffs, and the Supreme Court has helped ensure that one of the most seminal moments in class litigation remains a fair game.
This post was contributed by Stephen R. Chuk of Proskauer Rose LLP.