No Lives Left for Xbox Players As SCOTUS Blasts Strategy

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By Perry Cooper

Microsoft Corp. notched a win for big business when the U.S. Supreme Court held June 12 that plaintiffs can’t get an immediate appeal of an adverse class status ruling by voluntarily dismissing their case ( Microsoft Corp. v. Baker , 2017 BL 198036, U.S., No. 15-457, 6/12/17 ).

Xbox owners used the strategy to get a second shot at appellate review after the lower court refused to let them proceed as a class with their allegations that the gaming consoles destroy discs.

The Supreme Court’s rejection of the plaintiffs’ tactic was predicted by many after oral argument March 21. Two justices who often side with plaintiffs, Ruth Bader Ginsburg and Stephen G. Breyer, posed tough questions for the owners.

Ginsburg followed up here by writing a statute-based opinion that will please many businesses facing class actions, especially in the Ninth and Second circuits where the practice had been allowed.

But the ruling isn’t nearly as detrimental to class-action plaintiffs as it would have been if the top court had followed the lack-of-standing path favored by three of its justices, some court watchers say.

Leveled Field or Unintended Consequences?

Microsoft said in a June 12 blog post that the case was about leveling the playing field for parties on both sides of class litigation.

“This case was about following procedural rules that Congress established and that work for everyone,” David Howard, attorney for Microsoft, wrote. “No party should be able to do an end-run around these rules and have rights that the other party doesn’t get.”

But Peter K. Stris of Stris & Maher LLP in Los Angeles, who argued for the plaintiffs, warned that the ruling could have unintended consequences.

The ruling will prohibit not only unilateral dismissals by plaintiffs, as here, but also bilateral dismissals where the parties agree to immediate appeal of a class certification denial, he told Bloomberg BNA in an email.

Most people agree that bilateral dismissals are efficient, he said. “Without them, parties who both want immediate resolution of the class certification issue are forced to waste resources litigating a case to merits judgment without knowledge of the stakes.”

Two Routes, Same Destination

The eight justices participating in the decision agreed that the tactic is an impermissible end-run around Rule 23(f). Federal Rule of Civil Procedure 23(f) gives appellate courts the discretion to immediately review certification decisions, but such review is rare.

The five-member majority and the three-member concurrence took different paths to reach that result.

Ginsburg’s majority opinion, joined by justices Anthony M. Kennedy, Breyer, Sonia Sotomayor, and Elena Kagan, took the statutory route: the plaintiffs’ voluntary dismissal didn’t create a final judgment that could be immediately appealed under 28 U.S.C. §1291.

Ginsburg also relied on policy arguments, saying the tactic is one-sided, and “invites protracted litigation and piecemeal appeals.”

Justice Clarence Thomas’s concurrence, joined by Chief Justice John G. Roberts Jr. and Justice Samuel A. Alito Jr., made the constitutional argument: the plaintiffs couldn’t appeal because the appeals court lacked jurisdiction under Article III of the Constitution.

The plaintiffs consented to the judgment against them when they asked the district court to dismiss their claims, Thomas wrote. “The parties thus were no longer adverse to each other on any claims.”

The Washington Legal Foundation advanced both the statutory and constitutional arguments in its amicus brief on behalf of Microsoft.

Cory Andrews, WLF’s senior litigation counsel, told Bloomberg BNA the majority’s reliance on the statutory argument “will help head off other creative attempts to manufacture appeals going forward.” WLF is a free-market oriented public-interest law firm based in Washington.

Concurrence Ramifications

Class action boosters and critics alike say Thomas’s concurrence could have broad ramifications.

The majority didn’t reach the question of whether lead plaintiffs have standing to continue pursuing a class action after their individual claims go away. This is the “big story,” Adam Zimmerman, professor of complex litigation at Loyola Law School in Los Angeles, told Bloomberg BNA in an email.

The concurrence shows that the conservative justices were prepared to say the lead plaintiff would lose standing, he said. “If so, it would reverse nearly thirty years of precedent and possibly impact other kinds of class action lawsuits, like cases seeking declaratory or injunctive relief.”

Zimmerman and fellow law professor Sergio Campos of the University of Miami School of Law in Coral Gables, Fla., made this argument in an amicus brief on behalf of the plaintiffs.

The concurrence also addresses absent-class-member standing, class defense attorney Archis A. Parasharami of Mayer Brown in Washington told Bloomberg BNA in an email. He was not involved in this case.

“Absent class members who are not injured lack standing and therefore cannot recover from a litigated class action judgment in federal court,” Parasharami said. “Or, as Justice Thomas puts it in Baker, ‘without an underlying individual claim,’ there is no case or controversy.”

Zimmerman and Parasharami expect that these Article III issues will be on the table in future cases before the Supreme Court, which now has a conservative majority with the recent addition of Justice Neil M. Gorsuch.

Gorsuch, who wasn’t yet a member of the court when the case was argued, didn’t participate in the decision.

Ginsburg: Procedure Queen

Ginsburg has expressed distaste for procedural tactics in the past.

She wrote an opinion last term criticizing another class-action procedural tactic—one employed by the defense bar. In Campbell-Ewald Co. v. Gomez, the court barred defendants from paying off lead plaintiffs to defeat class cases.

Her interest in procedure is no surprise—she taught civil procedure when she was a law professor at Columbia Law School in New York.

“Justice Ginsburg has earned a reputation for being someone who cares a lot about procedures—that procedures are proper and that they are fair,” Andrews said. He pointed to her ruling in Gomez, as well as her recent rulings on personal jurisdiction in Daimler AG v. Bauman and BNSF R. Co. v. Tyrrell.

Microsoft was one of two Ginsburg-authored decisions issued June 12.

“Writing the Court’s opinion in a sex discrimination case *and* a civil procedure case in the same day is a special sort of heaven for RBG,” Samuel Bagenstos, who teaches constitutional and civil rights law at the University of Michigan Law School in Ann Arbor, Mich., said on Twitter.

Peter K. Stris of Stris & Maher LLP in Los Angeles argued for the owners.

Jeffrey Fisher in Stanford, Calif., argued for Microsoft.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bna.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bna.com

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