One-Way Loop Hole in Class Action Certification Appeal

Cartoon by Dan Rosandich - https://danscartoons.com/

Written by: Charlie Hearn

Associate Editor, American Journal of Trial Advocacy

The U.S. Supreme Court granted certiorari in Microsoft Corporation v. Baker[1] regarding “[w]hether a federal court of appeals has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their claims with prejudice.”[2] By statute, “[t]he courts of appeals . . . shall have jurisdiction of appeals from all final decisions of the district courts of the United States . . . .”[3]  The Supreme Court’s ruling will likely resolve a circuit split on whether plaintiffs may voluntarily dismiss their claims with prejudice to create the finality necessary to appeal the denial of class certification without the expense of trying each individual case, separately.  The split, which involves a procedural loophole benefiting only plaintiffs, arises in situations when a district court denies class certification and an appellate court subsequently denies the plaintiffs’ petition for interlocutory appeal of the class certification order.  Under the Federal Rules of Civil Procedure “[a] court of appeals may permit an [interlocutory] appeal from an order granting or denying class-action certification,” so long as certain time requirements are met.[4]  Thus, although a party has the right to petition for appeal regarding class certification prior to trial, the appellate courts are not required to grant these interlocutory appeals.

If the appellate court denies the plaintiff’s petition for interlocutory appeal, this creates an issue for plaintiffs, specifically those similar to the plaintiffs in Microsoft, who are seeking class certification of claims economically insufficient to bring individually (such as the case may be with class actions).  Claims are economically insufficient if the cost of litigation is greater than the potential award.  However, the aggregate of these economically insufficient claims creates a claim that is economically viable despite the financial costs associated with litigating the claim.  Thus, if a district court denies class certification and the court of appeals denies the plaintiffs’ petition for interlocutory appeal, this may result in the death of the claims in some circuits.  This “death knell” arises because plaintiffs are then forced to litigate each economically insufficient individual claim separately.  Thus, the plaintiff benefits if permitted to voluntarily dismiss the initial claim seeking class certification, with prejudice, creating finality of the claim, and then appeal.  However, this procedural loophole forces the appellate court into reviewing the issue of class certification, simply because the plaintiffs are dissatisfied with the interlocutory class certification order.  This procedural loophole seems to stand contrary to the Supreme Court’s viewpoint in Eisen v. Carlisle & Jacqueline,[5] in which the Court stated: “[r]estricting appellate review to ‘final decisions’ prevents the debilitating effect on judicial administration caused by piecemeal appeal disposition of what is, at practical consequence, but a single controversy.”[6]

Relevant Supreme Court Discussion

The Supreme Court, discussing the topic of “finality,” finds “finality is to be given a ‘practical rather than a technical construction.’”[7]  The Court continued: “[t]he inquiry requires some evaluation of the competing considerations underlying all questions of finality—‘the inconvenience and costs of piecemeal review on the one hand and the danger of denying justice by delay on the other.’”[8]

In Coopers & Lybrand v. Liversay,[9] the Supreme Court addressed the “death knell” argument.[10]  Here the Court analyzed the “death knell” argument without the added element of a voluntary dismissal with prejudice.[11] Determining that “[u]nder the ‘death knell’ doctrine, appealability turns on the court’s perception of” the economic sufficiency of the individual case.[12]  The economic sufficiency of each case, individually, impacts the determination of whether the decision is interlocutory, or a final appealable decision.[13]  In discussing the logistics of making these determinations, the Court determined that although inquiry would reveal some instances of orders ending litigation without final judgment, “this incremental benefit is outweighed by the impact of such an individualized jurisdictional inquiry on the judicial system’s overall capacity to administer justice.”[14]  This viewpoint has influenced the decisions of the majority of the circuits regarding plaintiffs’ attempts to voluntarily dismiss with prejudice and then appeal interlocutory orders regarding class certification.

Majority Opinion

This majority includes the Third, Fourth, Seventh, Tenth, and Eleventh Circuits.[15]   These circuits have held that  a voluntary dismissal of one’s claim does not grant jurisdiction for appellate review of the class certification order.[16]  Possibly the best justification of this viewpoint comes from the Third Circuit, stating this type of action “constitute[s] [an] impermissible attempt to manufacture finality” with respect to the denial of class certification.[17]  Traditionally, the “merger rule” merges interlocutory decisions with final judgments, thus allowing the review of the interlocutory decisions on appeal.[18]  However, in this situation, the procedural action amounts to Plaintiffs appealing from an outcome they requested.  This procedural act sidesteps the discretion granted appellate courts under Federal Rule 23(f), effectively allowing Plaintiffs to disregard the set standards for appealing class certification orders, the same set standards the Defendants must follow.[19]

Under the set standards, Plaintiffs have two options if their request for class certification is denied: (1) “obtain[] appellate review of the decertification order by proceeding to final judgment on the merits of their individual claims,” or (2) “ask[] the District Courts to certify their interlocutory orders for appeal.”[20]  The second option does not guarantee appellate review.  However, if voluntarily dismissing the claim allows for appeal of the case, including the interlocutory class certification order, the appellate court must review the decision.  This effectively guarantees Plaintiffs a review of the class certification order by the appellate court without having to incur the expenses associated with the continued litigation of each claim, individually.  As stated, the majority of circuits disagree with this route of appealing class certification orders, siding in favor of the set standards.

Minority Opinion

In contrast to the majority opinion, two circuits give plaintiffs the option of voluntarily dismissing the claims and appealing.  The Second and Ninth Circuits allow plaintiffs, following the denial of class certification, and potentially a subsequent denial of plaintiffs’ petition for interlocutory appeal, to file a motion to dismiss with prejudice and then appeal.  The Second Circuit has limited this approach to cases in which denial of class certification effectively ends the claim.[21]  This dismissal operates as final judgment, allowing the plaintiffs to appeal the interlocutory denial of class certification to the court of appeals, which then must hear the case.[22]  The Ninth Circuit holds, a voluntary dismissal of claim with prejudice is a “sufficiently adverse—and thus [an] appealable—final decision.”[23]  The adverse nature arises from the dismissal of claims “with prejudice,” preventing the plaintiffs from bringing the same claim again in the future.[24]  As a result, the court views this as sufficient finality to allow appeal.

Future Decision

With oral arguments scheduled for March 21, 2017, the Supreme Court is set to resolve this circuit split.  However, with Justice Scalia’s passing, and Judge Gorsuch’s confirmation looming, it is difficult to determine the outcome with only an eight-member court.  If the Court does arrive at a 4-4 split the lower court’s decision in Microsoft would be affirmed.  However, this affirmation would not set precedent for which all circuits would be bound.[25]


[1] 797 F.3d 607 (9th Cir. 2015), cert. granted, 136 S. Ct. 890 (U.S. Jan. 15, 2016) (No. 15-457).

[2] Microsoft, 797 F.3d 607 (9th Cir. 2015), cert. granted, 136 S. Ct. 890 (U.S. Jan. 15, 2016) (No. 15-457).

[3] 28 U.S.C.A. § 1291.

[4] Fed. R. Civ. Pro. 23(f) (emphasis added).

[5] 417 U.S. 156 (1974).

[6] Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 170 (1974).

[7] Eisen, at 171 (quoting Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949)).

[8] Eisen, at 171 (quoting Dickinson v. Petroleum Conversion Corp., 338 U.S. 507, 511, (1950)).

[9] 437 U.S. 463 (1978).

[10] Coopers v. Livesay, 437 U.S. 463, 470-73 (1978).

[11] See Id.

[12] Id. at 471-72.

[13] Id. at 472.

[14] Id. at 473.

[15] See Camesi v. Univ. of Pittsburgh Med. Ctr., 729 F.3d 239, 245-47 (3rd Cir. 2013) (finding, voluntary dismissal of named plaintiffs’ claims, with prejudice, “constituted an impermissible attempt to manufacture finality with respect to the interlocutory decertification order”); Rhodes v. E.I. DuPont de Nemours & Co., 636 F.3d 88, 100 (4th Cir.) (finding, when plaintiffs voluntarily dismiss claims the court of appeal does not have the jurisdiction to question the district court in denying class certification)  cert. denied, 132 S. Ct. 499 (2011); Chavez v. Ill. State Police, 251 F.3d 612, 629 (7th Cir. 2001) (finding, the court of appeal will not review a lower court’s denial of class certification involving claims in which plaintiffs voluntarily dismissed); Woodard v. STP Corp., 170 F.3d 1043, 44 (11th Cir. 1999); Bowe v. First of Denver Mortg. Investors, 613 F.2d 798, 801 (10th Cir. 1980) (finding dismissal of plaintiffs’ case for lack of prosecution does not amount to final judgment necessary for a review of class certification).

[16] Eisen, 417 U.S. at 170.

[17] Camesi v. Univ. of Pittsburgh Med. Ctr., 729 F.3d 239, 245-47 (3rd Cir. 2013).

[18] Id. at 245-46.

[19] Fed. R. Civ. Pro. 23(f).

[20] Camesi, 729 F.3d at 245.

[21] See Shannon v. General Electric Co., 186 F. 3d. 186, at 192 (2nd Cir. 1999) referencing Allied Air Freight, Inc. v. Pan American World Airways, Inc., 393 F. 2d 441 (2nd Cir. 1968).

[22] See Berger v. Home Depot USA, Inc., 741 F.3d 1061, 1064 (9th Cir. 2014).

[23] Id. at 1070.

[24] Dismissed with prejudice, Black’s Law Dictionary (10th ed. 2014).

[25] See In re Diet Drugs (Phentermine/Fenfluramine/Dexfenfluramine) Products Liability Litigation, 385 F. 3d 386, 395 (3rd Cir. 2004).

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