June 15, 2017
Microsoft Corp. v. Baker: Another Supreme Court Defense Win in Class Actions
Plaintiffs in class actions were dealt another blow on June 12th in Microsoft v. Baker,2 as the Court unanimously, but in two very different approaches, rejected their efforts to obtain appellate review of their class allegations after an appeals court had previously declined to hear the issues on an interlocutory appeal. Although the opinion of Justice Ginsburg for the majority and Justice Thomas for the concurrence employed conflicting analyses, they reached the same conclusion: plaintiffs could not use the method they chose to obtain appellate review. What is most troubling is that there is no obvious and realistic avenue by which the denial of class certification can ever be raised in situations like this–and no Justice seemed to care.
The claim at issue is that the defendant’s Xbox, which retailed for between $149 and $479.99 (depending on configuration), was manufactured in a defective manner so that, in ordinary use, it caused scratches on the surface of the disks that it employs, rendering them useless. Whatever the merits of the claim, no one seriously disputes that it could be litigated only in a class context, with hundreds of thousands of dollars expended before any trial could take place. The present suit was nearly identical to one brought several years before, for which class certification was denied. The individual plaintiff in the prior case settled the individual claims, and the case was dismissed.
Thereafter, the Ninth Circuit issued an opinion in another class action case involving a different product, with similar class action certifications problems, but it upheld certification. The present case was filed with new plaintiffs, but the district court did not think that the more recent opinion changed the result, and so it struck the class allegations in the new suit. Plaintiffs sought interlocutory appeal under Rule 23(f), citing the more recent opinion, but the Ninth Circuit declined to exercise its discretion to hear the appeal. At that point, plaintiffs tried the maneuver that was rejected by the Court today: they dismissed their individual claims with prejudice, while reserving the right to take an appeal. That gave them a final judgment from which an appeal could then be taken and, they hoped, review of the denial of class certification obtained as of right. Over defendant’s objections, the Ninth Circuit agreed that it could review the denial of class certification, but then sent the case back to the district court to re-consider the issue in light of the intervening opinion. Microsoft’s petition for certiorari was granted, and the Supreme Court reversed, concluding that the Court of Appeals should not have heard the case.
Justice Ginsburg, writing for the majority, relied on the availability of interlocutory appeal under Rule 23(f), which she saw as a comprehensive solution to how to deal with grants or denials of class certification motions. According to Justice Ginsburg, allowing the plaintiff here to voluntarily dismiss the lawsuit and then obtain an absolute right to review of the denial of class certification would provide an end run around the discretionary review that Rule 23(f) provided. The majority opinion went into considerable detail on the history of Rule 23(f), and how it was intended to deal with the decision in Coopers & Lybrand v. Lindsay,3 which made denials of class certification motions unappealable before final judgment, even where the result was a “death knell” to the plaintiff’s case. However, the majority pointed to nothing in that history that showed that Rule 23(f) was intended to be the exclusive means for obtaining review of a denial of class certification, even at the time of final judgment, which was the situation here.
In his concurrence, Justice Thomas, joined by the Chief Justice and Justice Alito, concluded that Rule 23(f) had nothing to say about the question presented since the review here was of a final decision, not an interlocutory order.4 But that did not save the plaintiffs because they had voluntarily dismissed their claims with prejudice and, according to Justice Thomas, had thereby relinquished all rights to appeal, including on the class certification ruling. As between the two arguments for reversal, that of Justice Thomas is much more convincing because it does not ascribe to Rule 23(f) a tradeoff in which discretionary interlocutory appeals are granted, for which the apparent price is losing an appeal on the issue when there is an adverse final judgment.
What is troubling about the result is that neither opinion seems concerned that there was no realistic way that this plaintiff could ever obtain review of the adverse class certification ruling. Justice Ginsburg observed that plaintiffs had “several options”:
The problem with those “options” is that none of them is remotely realistic. Take the settlement option: suppose defendant offered the full price of the Xbox and plaintiffs accepted. Would plaintiffs have the right to appeal the class certification denial then or would Rule 23(f) and settlement preclude it? And if that approach were allowed, why would accepting $350 or even $1, be the difference between being permitted to appeal the certification denial, but deny it here, and why?
Section 1292(b) certification is even less likely because it would require agreement by the district court and the court of appeals that denial of class certification was an important issue on which there were grounds for differences of views, when the court of appeals had already rejected the appeal under Rule 23(f) which is, as Justice Ginsburg correctly recognized, an easier path to appellate review than is section 1292(b).6 Similarly, what rational litigant or lawyer would expect the district court to reverse its position on certification, especially after the court of appeals turned down discretionary review?
The final option–litigation of the individual claims by the five remaining named plaintiffs–would require plaintiffs to spend at least several hundred thousand dollars in discovery and motion practice to recover a few hundred dollars per claimant. Even if they won at trial and on appeal on the merits, and also prevailed on the class certification issue, the defendant would almost certainly insist on a new trial for the class (and presumably much more discovery). But if plaintiffs lost at trial or on appeal, they or their lawyers might have been liable for costs and attorneys’ fees, on top of all the money spent in losing at trial. Thus, as Judge Posner has observed, “only a lunatic or a fanatic” would pursue these claims individually.7
The decision raises several questions worth further consideration. Do neutral policy-makers consider the result to be fair, both as applied to a plaintiff who has sought and failed to obtain Rule 23(f) review, and one who never tried for an interlocutory appeal under that Rule, but then consented to an adverse judgment against it? If not, is there a change in the Rules or the jurisdictional statutes which would avoid not only the adverse impact of Rule 23(f), but the lack of basis for an appeal from a consented-to adverse judgment of dismissal, other than making interlocutory review of class actions rulings mandatory and not discretionary, which seems unlikely to pass the various Rules Committees? None come immediately to mind, which itself is troubling, unless one believes that there are too many unjustified class actions already filed and that the courts are doing a good job on weeding out them, and only them.
Finally, Justice Ginsburg chided the plaintiffs and the Ninth Circuit for what she saw as a one-way benefit of the ruling below as favoring only plaintiffs and not defendants, unlike Rule 23(f) itself. In that, she is probably correct, but her result is one way the opposite way: if a defendant loses a certification motion and an interlocutory appeal is denied, defendant will still have the right to appeal that order when there is a final judgment unless it settles the whole case. Otherwise, it can take up all Rule 23 orders as part of the final judgment, just what plaintiffs here tried to do but were told that they could not.
The other significant question relates to what will happen in the next case involving the issue in Campbell-Ewald Co. v. Gomez.8 The defendant there made an offer to pay the named plaintiff in a class action all of the individual damages the named plaintiff sought, in an unabashed effort to moot the class part of the case. The Court concluded that, because the defendant had not paid the money into court or taken other steps to complete the tender, the trial court was in error in concluding that the case was moot, over three dissents and a concurrence by Justice Thomas on a narrow ground. But in the next cases–and there surely will be some, especially after Microsoft v. Baker–the defendant will take further steps, such as paying all the money claimed (and then some) into court and then move to dismiss all of the individual claims on the ground that the named plaintiffs have no further injury since all their claims have been satisfied in full. Plainly, Rule 23(f) will not answer the question presented in that situation, but unless the Court’s attitude toward class actions changes from this case, the defense bar may have hit the new magic bullet to rid their clients of many if not most class actions, even if they also have to pay class counsel a reasonable fee for winning the case for the named class representatives.
There is one potential side benefit to counsel for plaintiffs in future Rule 23(f) requests for interlocutory review. In the past, there was always the possibility, perhaps unstated, of future review of class certification denials, but no longer. Plaintiffs can now make the “now or never” point explicitly when seeking review under Rule 23(f), and perhaps that will tip the scales in some cases in their favor. Or perhaps not, since the appeals court will know that if it does not have to deal with a hard question now, it will not come back later.
Dean Alan B. Morrison is the Lerner Family Associate Dean for Public Interest & Public Service Law, The George Washington University Law School, where he teaches civil procedure and constitutional law. Dean Morrison is an experienced Supreme Court advocate, having argued 20 cases before the Court. He frequently does moot courts for advocates and files amicus briefs in the Supreme and other courts. He is a former President of the American Academy of Appellate Lawyers and is a regular High Court commenter for On the Docket and other publications.
- The author consulted with and assisted counsel for the plaintiffs in this case.
- No. 15-457, slip op. (U.S. June 12, 2017).
- 437 U.S. 463 (1978).
- See id. at 1 (Thomas, J., concurring).
- Microsoft, slip op. at 9-10 (citations omitted).
- Id. at 6.
- Carnegie v. Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004).
- 136 S. Ct. 663 (2016).
Recommended Citation Alan Morrison, Response, Microsoft Corp. v. Baker: Another Supreme Court Defense Win in Class Actions, Geo. Wash. L. Rev. On the Docket (June 15, 2017), http://www.gwlr.org/microsoft-corp-v-baker/.