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Microsoft Corp. v. Baker

United States Supreme Court

June 12, 2017

MICROSOFT CORPORATION, PETITIONER
v.
SETH BAKER, ET AL.

          Argued March 21, 2017

         ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 15-457.

         Orders granting or denying class certification are inherently interlocutory, hence not immediately reviewable under 28 U.S.C. §1291, which empowers federal courts of appeals to review only "final decisions of the district courts." In Coopers & Lybrand v. Livesay, 437 U.S. 463, a 1978 decision, this Court held that the death-knell doctrine-which rested on courts' recognition that a denial of class certification would sometimes end a lawsuit for all practical purposes- did not warrant mandatory appellate jurisdiction of certification orders. Id., at 470, 477. Although the death-knell theory likely "enhanced the quality of justice afforded a few litigants, " it did so at a heavy cost to §1291's finality requirement. Id., at 473. First, the potential for multiple interlocutory appeals inhered in the doctrine. See id., at 474. Second, the death-knell theory forced appellate courts indiscriminately into the trial process, circumventing the two-tiered "screening procedure" Congress established for interlocutory appeals in 28 U.S.C. § 1292(b). Id., at 474, 476. Finally, the doctrine "op-erat[ed] only in favor of plaintiffs, " even though the class-certification question may be critically important to defendants as well. Id., at 476.

         Two decades later, in 1998, after Congress amended the Rules Enabling Act, 28 U.S.C. §2071 et seq., to empower this Court to promulgate rules providing for interlocutory appeal of orders "not otherwise provided for [in §1292], " § 1292(e), this Court approved Federal Rule of Civil Procedure 23(f). Rule 23(f) authorizes "permissive interlocutory appeal" from adverse class-certification orders in "the sole discretion of the court of appeals." 28 U.S.C. App., p. 815. This discretionary arrangement was the product of careful calibration on the part of the rulemakers.

         Respondents, owners of Microsoft's videogame console, the Xbox 360, filed this 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 respondents permission to appeal that order under Rule 23(f). 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.

         Held:

Federal courts of appeals lack jurisdiction under §1291 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. Pp. 11-17.

         (a) Section 1291's final-judgment rule 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. This Court has resisted efforts to stretch §1291 to permit appeals of right that would erode the finality principle and disserve its objectives. See, e.g., Mohawk Industries, Inc. v. Carpenter, 558 U.S. 100, 112. Attempts to secure appeal as of right from adverse class certification orders fit that bill. Pp. 11-12.

         (b)Respondents' voluntary-dismissal tactic, even more than the death-knell theory, invites protracted litigation and piecemeal appeals. Under the death-knell doctrine, a court of appeals could decline to hear an appeal if it determined that the plaintiff "ha[d] adequate incentive to continue" despite the denial of class certification. Coopers & Lybrand, 437 U.S., at 471. Under respondents' theory, however, the decision whether an immediate appeal will he 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.

         Respondents contend that their position promotes efficiency, observing that after dismissal with prejudice the case is over if the plaintiff loses on appeal. But plaintiffs with weak merits claims may readily assume that risk, mindful that class certification often leads to a hefty settlement. And the same argument was evident in the death-knell context, yet this Court determined that the potential for piecemeal litigation was "apparent and serious." Id., at 474. That potential is greater still under respondents' theory, where plaintiffs alone determine whether and when to appeal an adverse certification ruling. Pp. 12-14.

         (c)Also like the death-knell doctrine, respondents' theory allows indiscriminate appellate review of interlocutory orders. Beyond disturbing the " 'appropriate relationship between the respective courts, '" Coopers & Lybrand, 437 U.S., at 476, respondents' dismissal tactic undercuts Rule 23(f)'s discretionary regime. This consideration is "[o]f prime significance to the jurisdictional issue" in this case, Swint v. Chambers County Comm'n, 514 U.S. 35, 46, because Congress has established rulemaking as the means for determining when a decision is final for purposes of §1291 and for providing for appellate review of interlocutory orders not covered by statute, see §§2072(c) and 1292(e).

         Respondents maintain that Rule 23(f) is irrelevant, for it concerns interlocutory orders, whereas this case involves an actual final judgment. Yet permitting respondents' voluntary-dismissal tactic to yield an appeal of right would seriously undermine Rule 23(f)'s careful calibration, as well as Congress' designation of rulemaking "as the preferred means for determining whether and when prejudgment orders should be immediately appealable, " Mohawk Industries, 558 U.S., at 113. 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. Finality "is not a technical concept of temporal or physical termination." Cobbledick v. United States, 309 U.S. 323, 326. It is one "means [geared to] achieving a healthy legal system, " ibid., and its contours are determined accordingly. Pp. 14-16.

         (d)The one-sidedness of respondents' voluntary-dismissal device reinforces the conclusion that it does not support mandatory appellate jurisdiction of refusals to grant class certification. The tactic permits only plaintiffs, never defendants, to force an immediate appeal of an adverse certification ruling. Yet the "class issue" may be just as important to defendants, Coopers & Lybrand, 437 U.S., at 476, for class certification may force a defendant to settle rather than run the risk of ruinous liability. P. 17.

797 F.3d 607, reversed and remanded.

          GlNSBURG, J., delivered the opinion of the Court, in which KENNEDY, BREYER, SOTOMAYOR, and Kagan, JJ., joined. THOMAS, J., filed an opin- ion concurring in the judgment, in which ROBERTS, C. J., and ALITO, J., joined. GORSUCH, J., took no part in the consideration or decision of the case.

          OPINION

          GINSBURG JUSTICE.

         This case concerns options open to plaintiffs, when denied class-action certification by a district court, to gain appellate review of the district court's order. Orders granting or denying class certification, this Court has held, are "inherently interlocutory, " Coopers & Lybrand v. Livesay, 437 U.S. 463, 470 (1978), hence not immediately reviewable under 28 U.S.C. §1291, which provides for appeals from "final decisions." Pursuant to Federal Rule of Civil Procedure 23(f), promulgated in 1998, however, orders denying or granting class certification may be appealed immediately if the court of appeals so permits. Absent such permission, plaintiffs may pursue their individual claims on the merits to final judgment, at which point the denial of class-action certification becomes ripe for review.

         The plaintiffs in the instant case, respondents here, were denied Rule 23(f) permission to appeal the District Court's refusal to grant class certification. 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.

         We hold that the voluntary dismissal essayed by respondents does not qualify as a "final decision" within the compass of §1291. The tactic would undermine §1291's firm finality principle, designed to guard against piecemeal appeals, and subvert the balanced solution Rule 23(f) put in place for immediate review of class-action orders.

         I

         A

         Under §1291 of the Judicial Code, federal courts of appeals are empowered to review only "final decisions of the district courts." 28 U.S.C. §1291.[1] Two guides, our decision in Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), and Federal Rule of Civil Procedure 23(f), control our application of that finality rule here.

         1

         In Coopers & Lybrand, this Court considered whether a plaintiff in a putative class action may, under certain circumstances, appeal as of right a district court order striking class allegations or denying a motion for class certification. We held unanimously that the so-called "death-knell" doctrine did not warrant mandatory appellate jurisdiction of such "inherently interlocutory" orders. 437 U.S., at 470, 477. Courts of Appeals employing the doctrine "regarded [their] jurisdiction as depending on whether [rejection of class-action status] had sounded the 'death knell' of the action." Id., at 466. These courts asked whether the refusal to certify a class would end a lawsuit for all practical purposes because the value of the named plaintiff's individual claims made it "economically imprudent to pursue his lawsuit to a final judgment and [only] then seek appellate review of [the] adverse class determination." Id., at 469-470. If, in the court of appeals' view, the order would terminate the litigation, the court deemed the order an appealable final decision under §1291. Id., at 471. If, instead, the court determined that the plaintiff had "adequate incentive to continue [litigating], the order [was] considered interlocutory." Ibid. Consequently, immediate appeal would be denied.

         The death-knell theory likely "enhance[d] the quality of justice afforded a few litigants, " we recognized. Id., at 473. But the theory did so, we observed, at a heavy cost to §1291's finality requirement, and therefore to "the judicial system's overall capacity to administer justice." Id., at 473; see id., at 471 (Section 1291 "evinces a legislative judgment that 'restricting appellate review to final decisions prevents the debilitating effect on judicial administration caused by piecemeal appeal disposition.'" (quoting Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 170 (1974) (alterations and internal quotation marks omitted))). First, the potential for multiple interlocutory appeals inhered in the doctrine: When a ruling denying class certification on one ground was reversed on appeal, a death-knell plaintiff might again claim "entitle[ment] to an appeal as a matter of right" if, on remand, the district court denied class certification on a different ground. Coopers & Lybrand, 437 U.S., at 474.

         Second, the doctrine forced appellate courts indiscriminately into the trial process, thereby defeating a "vital purpose of the final-judgment rule-that of maintaining the appropriate relationship between the respective courts." Id., at 476 (internal quotation marks omitted); see id., at 474. The Interlocutory Appeals Act of 1958, 28 U.S.C. § 1292(b), we explained, had created a two-tiered "screening procedure" to preserve this relationship and to restrict the availability of interlocutory review to "appropriate cases." 437 U.S., at 474. For a party to obtain review under § 1292(b), the district court must certify that the interlocutory order "involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation." The court of appeals may then, "in its discretion, permit an appeal to be taken from such order." The death-knell doctrine, we stressed, "circumvent[ed] [§1292(b)'s] restrictions." Id., at 475.

         Finally, we observed, the doctrine was one sided: It "operate[d] only in favor of plaintiffs, " even though the class-certification question is often "of critical importance to defendants as well." Id., at 476. Just as a denial of class certification may sound the death knell for plaintiffs, "[certification of a large class may so increase the defendant's potential damages liability and litigation costs that he may find it economically prudent to settle and to abandon a meritorious defense." Ibid.[2]

         In view of these concerns, the Court reached this conclusion in Coopers & Lybrand: "The fact that an interlocutory order may induce a party to abandon his claim before final judgment is not a sufficient reason for considering [the order] a 'final decision' within the meaning of §1291." Id., at 477.[3]

         2

         After Coopers & Lybrand, a party seeking immediate review of an adverse class-certification order had no easy recourse. The Federal Rules of Civil Procedure did not then "contain any unique provisions governing appeals" in class actions, id., at 470, so parties had to survive §1292(b)'s two-level inspection, see id., at 474-475, and n. 27; supra, at 3-4, or satisfy the extraordinary-circumstances test applicable to writs of mandamus, see Will v. United States, 389 U.S. 90, 108 (1967) (Black, J., concurring) ("[In] extraordinary circumstances, mandamus may be used to review an interlocutory order which is by no means 'final' and thus appealable under federal statutes."); cf Coopers & Lybrand, 437 U.S., at 466, n. 6.

         Another avenue opened in 1998 when this Court approved Federal Rule of Civil Procedure 23(f). Seen as a response to Coopers & Lybrand, see, e.g., Blair v. Equifax Check Services, Inc.,181 F.3d 832, 834 (CA7 1999); Soli-mine & Hines, Deciding To Decide: Class Action Certification and Interlocutory Review by the United States Courts of Appeals Under Rule 23(f), 41 Wm. & Mary L. Rev. 1531, 1568 (2000), Rule 23(f) authorizes "permissive interlocutory appeal" from adverse class-certification orders in the discretion of the court of appeals, Advisory Committee's 1998 Note on subd. (f) of Fed. Rule Civ. Proc. 23, 28 U.S.C. App., p. 815 (hereinafter Committee Note on Rule 23(f)). The Rule was adopted pursuant to ยง 1292(e), see Committee Note on Rule 23(f), which empowers this Court, in accordance with the Rules Enabling Act, 28 U.S.C. ...


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