Recently, the United States Supreme Court heard argument in Microsoft Corp. v. Baker,[1] a case that may significantly impact class-action defense and appellate jurisdiction. Plaintiff classes frequently want to immediately appeal orders denying class certification. But because these orders are interlocutory and not “final” under the relevant statute,[2] plaintiff classes cannot appeal until their individual claims are resolved and a final judgment is entered, which could be expensive and time-consuming. Consequently, some plaintiff classes bypass this process by voluntarily dismissing their claims with prejudice after class certification is denied, effectively converting the interlocutory order into a final, appealable order. In Baker, the Supreme Court may decide whether this tactic is permissible.

Prior to 1978, appellate courts would allow plaintiff classes to immediately appeal orders denying class certification if they “end[ed] the lawsuit for all practical purposes.”[3] This practice was known as the “death knell” doctrine. But in 1978, the Supreme Court in Coopers & Lybrand v. Livesay[4] unanimously rejected the death-knell doctrine, and held that an order denying class certification is interlocutory and not appealable as of right.[5]

Twenty years after Livesay, plaintiff classes were given the ability to petition for appellate review of a denial of class certification. Specifically, Federal Rule of Civil Procedure 23 was amended with paragraph (f), which gives appellate courts full discretion to review, upon petition, an order denying class certification.[6] But if their Rule 23(f) petition is denied, putative class members sometimes skirt the rule and voluntarily dismiss their claims with prejudice to create a final order from which to appeal.

This is precisely what happened in Baker. In 2011, Seth Baker and others brought a class action against Microsoft[7] (the creator and owner of Xbox) arising out of alleged defects with the Xbox video game console. The district court later struck the class allegations (the functional equivalent of denying class certification).[8] After the Ninth Circuit denied the plaintiffs’ Rule 23(f) petition, the plaintiffs moved to dismiss their individual claims with prejudice.[9] Microsoft stipulated to the dismissal, but objected to the plaintiffs’ ability to appeal the certification denial.[10] The plaintiffs, nevertheless, appealed the denial of class certification. The Ninth Circuit held the dismissal order was “final,” exercised jurisdiction, and reversed the certification denial.[11] Microsoft appealed, and the Supreme Court granted certiorari.[12]

At oral argument, Microsoft relied on Rule 23(f) and Livesay’s rejection of the death-knell doctrine. Microsoft argued that allowing the plaintiffs’ “voluntary dismissal tactic” would “upend” Rule 23(f)’s carefully crafted system of discretionary review. But even without Rule 23(f), Microsoft argued, the plaintiffs would be in exactly the same situation as the plaintiffs in Livesay, where the Court rejected the ability to immediately appeal certification denials. Microsoft also argued that the dismissal order was not final because the plaintiffs’ claims would spring back if the Ninth Circuit reversed the certification denial. Justice Kagan appeared to agree with Microsoft that if the claims could spring back, the dismissal order was not final.

In response, the plaintiffs argued that they properly appealed from a final order. They contended that the “Court has never held . . . that a technical final judgment for practical considerations is not final,” and that Rule 23(f) addresses only interlocutory appeals and not final judgments. Justice Ginsburg was skeptical, noting that the plaintiffs’ “device seems to be just a way to get around [Rule] 23(f).” On the issue of finality, the plaintiffs argued that the potential revival of their claims on appeal is irrelevant “because any judgment could spring back to life if you win on appeal.” Chief Justice Roberts dubiously responded that the plaintiffs could not argue on appeal that the judgment against them was improper because they told the district court to enter the judgment.

Overall, the Justices seemed critical of the plaintiffs’ position at oral argument. If the Court reverses the Ninth Circuit, plaintiff classes may no longer be able to manufacture a final, appealable-as-of-right judgment by dismissing their individual claims with prejudice after an interlocutory order denying class certification. Instead, putative class members would have only Rule 23(f) as a device for immediate appellate review.

[1] No. 15-457; see Baker v. Microsoft Corp., 797 F.3d 607 (9th Cir. 2015), cert. granted, 136 S. Ct. 890 (2016).

[2] See 28 U.S.C. § 1291.

[3] Eisen v. Carlisle & Jacquelin, 370 F.2d 119, 120 (2d Cir. 1966).

[4] 437 U.S. 463 (1978).

[5] Id. at 477 (analyzing 28 U.S.C. § 1291).

[6] Fed. R. Civ. P. 23(f) (providing that a “court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal” is properly filed); see Fed. R. Civ. P. 23(f) advisory committee’s note to 1998 amendment (“The court of appeals is given unfettered discretion whether to permit the appeal, akin to the discretion exercised by the Supreme Court in acting on a petition for certiorari.”).

[7] Baker v. Microsoft Corp., No. 2:11-cv-00722-RSM (W.D. Wash. Apr. 28, 2011).

[8] Baker v. Microsoft Corp., 851 F. Supp. 2d 1274, 1279–81 (W.D. Wash. 2012), rev’d, 797 F.3d 607 (9th Cir. 2015), cert. granted, 136 S. Ct. 890 (2016). Courts recognize that Rule 23(f) applies to orders denying class certification and orders striking class allegations because the two are “functional equivalent[s].” Scott v. Family Dollar Stores, Inc., 733 F.3d 105, 110 n.2 (4th Cir. 2013) (quoting In re Bemis Co., 279 F.3d 419, 421 (7th Cir. 2002)); see United Airlines, Inc. v. McDonald, 432 U.S. 385, 387–93 (1977) (characterizing order striking class allegations as a “denial of class certification”).

[9] See Baker v. Microsoft Corp., No. 2:11-cv-00722-RSM (W.D. Wash. Apr. 28, 2011), ECF No. 35.

[10] Microsoft stipulated that the district court could grant the plaintiffs’ motion to dismiss their claims under Federal Rule of Civil Procedure 41. See Baker v. Microsoft Corp., No. 2:11-cv-00722-RSM (W.D. Wash. Apr. 28, 2011), ECF No. 37 ¶ 5; Fed. R. Civ. P. 41(a)(1)(A)(i) (providing that “the plaintiff may dismiss an action without a court order by filing . . . a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment”).

[11] Baker, 797 F.3d at 612–16.

[12] See Microsoft Corp. v. Baker, 136 S. Ct. 890 (2016) (granting certiorari).