Xbox Gamers Argue Strategy at Supreme Court

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By Perry Cooper

The U.S. Supreme Court is slated to hear arguments March 21 in a case alleging Microsoft’s Xbox 360 destroys video game discs. But don’t expect to hear anything about the video game console’s alleged defect.

Instead, the top court will weigh an inside-baseball litigation issue that is nonetheless important to all class actions: whether plaintiffs can voluntarily dismiss their cases to get class status denials automatically reviewed ( Microsoft Corp. v. Baker, U.S., No. 15-457, oral argument 3/21/17 ).

The class certification decision is critical to consumers’ ability to bring small-value claims. It allows plaintiffs to band together—here, the owners of more than 25 million Xbox units sold—to sue companies for wrongdoing when it wouldn’t make financial sense for them to sue individually.

The Xbox owners will argue that plaintiffs should be able to dismiss their suit to get an appeal right away. Class certification denial effectively ends small-value class actions and the only other avenue open for such review—a discretionary immediate appeal under Federal Rule of Civil Procedure 23(f)—is rarely granted.

The tactic worked for the gamers in this case. After the U.S. Court of Appeals for the Ninth Circuit rejected their Rule 23(f) appeal, the plaintiffs dismissed their case, creating a final judgment that they could immediately appeal.

The Ninth Circuit, one of only two federal appeals courts to allow the practice, subsequently revived the Xbox owners’ claims.

Microsoft Corp. asked the top court to weigh in. It argues that only the Second and Ninth circuits allow this second shot at immediate review—five other circuit courts have barred the strategy.

The company calls the voluntary dismissal tactic a way to “manufacture appellate jurisdiction.”

If plaintiffs can guarantee immediate review every time they lose a certification motion, it will add two years to every class litigation, Microsoft said. The prospect of continuing with expensive litigation will force companies to settle even flimsy claims.

Question of Fairness

“Neither side should have an unfair advantage in litigating class certification issues,” Jeffrey Fisher, a Stanford, Calif.-based attorney who will argue for Microsoft, told Bloomberg BNA.

“We look forward to explaining why plaintiffs who dismiss their own claims should not be allowed to continue seeking class certification so they can pursue the claims of others,” Fisher said in an email.

Microsoft argues that the voluntary dismissal tactic is only available to plaintiffs, whereas defendants don’t have a guaranteed way to challenge class certification grants.

They can only seek a discretionary appeal under Rule 23(f), which are granted less than a quarter of the time, according to a recent study by David L. Balser, Jonathan R. Chally, and other attorneys at King & Spalding in Atlanta.

But plaintiffs’ counsel, Brendan S. Maher, said he wasn’t moved by this argument. “Defendants can often agree with plaintiffs that they are going to settle the case conditionally and then take an appeal to resolve class cert,” he told Bloomberg BNA.

Maher, partner at Stris & Maher LLP in Dallas, also said it’s more efficient to have the class certification decided right away, rather than after the named plaintiff goes through the long process of having to litigate his individual claims to a final judgment.

“Our rule is not going to lead to a flood of ridiculous cases,” he said. “It will just preserve a small number of meritorious cases that otherwise would have been pushed out of the court system.”

The parties have waited more than a year for oral argument. The Supreme Court agreed to hear the case in January 2016.

Peter K. Stris of Stris & Maher LLP in Los Angeles will argue for the Xbox owners.

Fisher will argue 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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