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Microsoft Wins Class Action Decision in the U.S. Supreme Court

June 15, 2017


On June 12, 2017, the United States Supreme Court decided Microsoft Corp. v. Baker and ruled unanimously that the federal courts of appeals lack jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their claims with prejudice.

The ruling is a significant victory for Microsoft as it places plaintiffs and defendants on an even playing field when it comes to appealing decisions about class certification. The Supreme Court reversed a 2015 Ninth Circuit decision that permitted plaintiffs, but not defendants, to take an immediate appeal of a class certification ruling rather than take their case to trial and appeal only after a final judgment.

The majority opinion, written by Justice Ginsburg, recognizes that a class certification order is not a final judgment, and holds that plaintiffs cannot create one by dismissing their case voluntarily after class certification is denied. Except in rare cases, only final judgments may be appealed. Not wanting to spend the time needed to go to trial on their individual claims before appealing the class certification denial, the plaintiffs voluntarily dismissed their individual claims with prejudice and then appealed.  But the Supreme Court majority rejected the plaintiffs’ tactic as an end run around Federal Rule of Civil Procedure 23(f), the 1998 rule that permits courts of appeals, in their discretion, to grant or deny immediate appeals of class certification orders. As Justice Ginsburg wrote, “Plaintiffs in putative class actions cannot transform a tentative interlocutory order … into a final judgment … simply by dismissing their claims with prejudice—subject, no less, to the right to ‘revive’ those claims if the denial of class certification is reversed on appeal.” This “voluntary-dismissal tactic” would undermine “Rule 23(f)’s evenhanded prescription.”

In an opinion concurring in the judgment, Justice Thomas, joined by Chief Justice Roberts and Justice Alito, agreed that the plaintiffs could not appeal, but for a different reason. When the plaintiffs voluntarily dismissed their claims, they relinquished their individual stakes in the case and no longer had a “Case” or “Controversy” under Article III of the Constitution and no longer had standing to sue.

Montgomery McCracken’s involvement in this matter began in 2007 with a predecessor case. In 2011, the plaintiffs filed this lawsuit against Microsoft claiming the Xbox 360 console had a design defect that caused it to scratch game discs and make them unplayable. But Microsoft introduced evidence that only 0.4% of Xbox 360 users reported disc scratching of that sort. Two federal district judges in Seattle denied class certification due to individual issues of causation, and the Ninth Circuit denied two petitions under Rule 23(f) for an immediate appeal. After the Ninth Circuit denied their request for an immediate appeal, the plaintiffs here moved to dismiss their case with prejudice and then appealed nonetheless.

Only the Ninth and Second Circuits permitted plaintiffs to do this.  Five other Circuits did not.  The Supreme Court granted Microsoft’s request to take the case and resolve this conflict.

The case came to a conclusion when all eight justices found that the Ninth Circuit had improperly allowed the plaintiffs to appeal the class certification denial after voluntarily dismissing their individual claims instead of taking them to trial.

Jeffrey Fisher, co-director of Stanford University Law School’s Supreme Court Litigation Clinic, argued the case for Microsoft. Montgomery McCracken partner Charles B. Casper has been one of Microsoft’s lawyers since the case began.

The Montgomery McCracken Class Action Defense team also included partner John Papianou, of counsel Patrick Ryan, associate Jeremy Gunn, and paralegal Denise LeGendre. We worked closely with Steve Rummage and Fred Burnside of Davis Wright Tremaine LLP in Seattle.

The widely watched case received nationwide media attention and was featured in articles in The Associated Press and many newspapers that carry its stories including The New York Times; Bloomberg News; The Wall Street Journal; Reuters; Fox Business; National Law Journal; Law360 and many more.

About Montgomery McCracken

Montgomery McCracken is a full-service law firm with offices in Pennsylvania, New York, New Jersey and Delaware. The firm represents leading businesses, multinational corporations, nonprofit organizations and individuals across a wide range of industries in complex litigation matters, significant corporate transactions and challenging disputes. Follow the firm on Twitter at @MMWR_Law.