WASHINGTON (Legal Newsline) – The U.S. Supreme Court recently addressed a legal loophole in which a plaintiff denied class certification could voluntarily dismiss the claim with prejudice, and then appeal the adverse judgment against class certification.
Originally in the Microsoft Corp. v. Baker case, when the district court refused to grant class certification, the plaintiffs voluntarily dismissed but tried to retain the right to recuperate their claim if the appeal overturned the denial.
However, the U.S. Court of Appeals for the Ninth Circuit determined that the lower court abused its discretion in denying the class complaint.
On June 12, the U.S. Supreme Court determined that such a plaintiff cannot dismiss and then apply the general rule that an appeal can be taken from a final judgment. It said once plaintiffs dismissed their claims, they lost the right to seek relief from Microsoft. The Ninth Circuit judgment was therefore overturned and returned for further proceedings.
“The majority was concerned that if the plaintiffs’ voluntary dismissal tactic was allowed, Rule 23(f) (and the intent behind it) would be 'severely undermined,’” Stephanie Adler-Paindiris, co-leader of the Class Actions and Complex Litigation Practice Group at Jackson Lewis, told Legal NewsLine.
“Justice Ruth Ginsburg alluded to this concern (of) an interlocutory ruling on class action status. She questioned how the voluntary dismissal device was anything other than a way to get around this process. In this same light, plaintiffs’ attempt to secure appeals as of right any time they received an adverse class-certification order stretched § 1291 too far.”
Adler-Paindiris said the ruling means this technique wouldn’t tip too far in plaintiffs’ favor.
“(It) simultaneously (threatens) to overburden our already congested judicial system,” she said. “Under plaintiffs’ theory, they would be able to force an immediate appeal of an adverse certification ruling at any time, while defendants would not be afforded that same luxury.
"This is contrary to the final judgment rule (codified in § 1291), which seeks to minimize delay and promote the efficient administration of justice.”
She said plaintiffs who tried to “outmaneuver” adverse class certification, used it to as weight to pressure the defense to settle quickly, even securing a heftier payout.
“(It’s) interesting,” Adler-Paindiris said, “that while the majority and the more conservative justices who authored the concurrence reached the same result as the majority and agreed on the outcome, it was for two very different reasons.
"While the majority focused on § 1291 and 23(f), as well as the associated congressional policies, the concurrence instead focused on Article III of the Constitution. Once the plaintiffs asked the district court to dismiss their claims, there was no longer a 'case' or 'controversy,' as required in Article III.
"However, ultimately, all of the justices (other than Justice [Neil] Gorsuch, who did not participate in this decision) agreed that the court of appeals lacked jurisdiction over the plaintiffs’ appeal.”