Microsoft Corporation v. Baker

LII note: The U.S. Supreme Court has now decided Microsoft Corporation v. Baker.


If plaintiffs have voluntarily dismissed their claims with prejudice after defeat of a class certification, can a federal appellate court review a district court order denying class certification under both Article III and 28 U.S.C. § 1291?

Oral argument: 
March 21, 2017

This case will determine whether a federal appellate court has appellate jurisdiction to review an order denying class certification after the plaintiffs voluntarily dismissed their individual claims with prejudice. Microsoft Corporation argues that a federal court of appeals does not have jurisdiction to review an order that denies class certification because it disregards the Supreme Court’s decision in Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), and impedes the discretionary review created by the Court in Federal Rule of Civil Procedure 23(f). Microsoft also maintains there is no jurisdiction under the Constitution’s Article III’s mootness doctrine because a voluntary dismissal eliminates any adverse interests that the plaintiffs had in the case. Seth Baker et al. assert that the voluntary dismissal with prejudice created a final judgment allowing the federal appellate court to review the adverse class certification ruling under 28 U.S.C. § 1291. Furthermore, Baker argues that there is no Article III barrier preventing appellate review in this case because the individual plaintiff’s claims were impaired by the ruling and they still maintain an adverse interest in the case. The outcome of this case could impact the procedures that plaintiffs must follow when seeking a class certification.

Questions as Framed for the Court by the Parties 

Does a federal court of appeals have jurisdiction under both Article III and 28 U.S.C. § 1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their claims with prejudice?


Respondents Seth Baker et al. allege that a design defect in Petitioner Microsoft Corporation’s Xbox 360 game scratched the disks required for playing the console. In 2007, multiple Xbox 360 owners sued Microsoft alleging similar claims and the cases were consolidated before Judge John Coughenour in the Central District of California with the intentions of creating a class-action lawsuit. Judge Coughenour relied heavily on Gable v. Land Rover N.A., Inc., No. CV07-0376, 2008 WL 4441960 (C.D. Cal. Sept. 29, 2008), to deny certification of the class on the basis that individual use may have caused the same defect. In Gable, the district court denied certification of a class who claimed that a design defect resulted in uneven, premature tire wear because the plaintiffs failed to demonstrate that the purported defect manifested in most vehicles. Judge Coughenour reasoned that like Gamble most Xbox owners did not experience the purported defect. Judge Coughenour held that the need to consider damages on an individual basis precluded certification of the class of Xbox 360 owners and dismissed the cause of action.

The plaintiffs subsequently sought interlocutory review to appeal the class-certification ruling under Federal Rule of Civil Procedure 23(f), arguing that the class certification denial resulted in the termination of the litigation because the individual claims were too small to justify litigating individually. The Ninth Circuit denied review and remanded the case to the district court. The plaintiffs voluntarily settled their individual claims with Microsoft with the express purpose of appealing the district court’s unfavorable class-certification ruling. The district court then dismissed the cases with prejudice.

Ten months after dismissal, the Ninth Circuit reversed the Gable decision, which Judge Coughenour relied upon heavily to deny the earlier class certification attempt. In Wolin v. Jaguar Land Rover North America, LLC, 617 F.3d 1168 (9th Cir. 2010), the Ninth Circuit announced that the timing of a defect does not affect appropriateness of class certification, but rather the amount of damages. The appropriateness of the class was based on all class members experiencing the same injury from the same defect at some time.

In 2011, the same lawyers from the original consolidated litigation filed a new lawsuit on behalf of respondents—Xbox 360 owners who did not join in the original action. Respondents submitted the same claims as their predecessors and requested certification of a nationwide class. Respondents argued that the Wolin decision now allowed certification of their proposed class. The district court struck respondents’ class allegations and found the reasoning in the first class certification denial persuasive on the basis that nothing in Wolin undermined the causation analysis. Invoking Rule 23(f), respondents asked for permission to appeal. The Ninth Circuit denied the petition. Upon receipt of the Ninth Circuit’s order, respondents chose not to continue arguing their individual claims; instead, they promptly moved the district court to dismiss their claims with prejudice. The district court granted the dismissal with prejudice, “reserving to all parties their arguments as to the propriety of any appeal.” The Ninth Circuit denied Microsoft’s motion to dismiss the appeal and assumed jurisdiction. On appeal, Microsoft contended that the Ninth Circuit lacked jurisdiction because the voluntary dismissal with prejudice did not create appellate jurisdiction. The Ninth Circuit held that it had jurisdiction under 28 U.S.C. § 1291 because a dismissal of an action with prejudice is an appealable final decision. The U.S. Supreme Court granted certiorari on January 15, 2016.



Microsoft Corporation (“Microsoft”) asserts that federal appellate courts lack jurisdiction under 28 U.S.C. § 1291 to review the order denying class certification. Microsoft argues that a plaintiff’s voluntarily dismissal with prejudice does not satisfy the law’s final judgment rule. Microsoft argues that the finality requirement under § 1291 prevents a federal court of appeals from reviewing anything but a final decision, and an order denying class certification is not final because Baker could easily revive the case with a successful appeal. Furthermore, Microsoft maintains that this Court should rely on its decision in Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), which rejected the death-knell doctrine. Microsoft contends that the death-knell doctrine gave plaintiffs a right to appeal an order denying class certification if that order would unambiguously end the case. Microsoft posits that the Court in Livesay ruled against the death knell doctrine asserting that it was irrelevant whether plaintiffs would abandon their claims altogether after an adverse class certification ruling and that such a ruling was interlocutory and not a final judgment. According to Microsoft, if this Court finds that there is jurisdiction to hear the case, then it would overturn its long-standing decision in Livesay.

Seth Baker et al. (“Baker”) counter that the voluntary dismissal with prejudice under § 1291 did create a final judgment, which allows an appellate court to review the adverse class certification ruling. Baker maintains that the order is a final judgment based the actual text itself, which states: “close the case.” Baker argues that Livesay should not apply here because that case addressed interlocutory orders and not final judgments; thus, allowing an appeal here would not break from the Court’s decision in Livesay. Baker asserts that the Court rejected the death-knell doctrine in Livesay because it went against § 1291’s requirement that a judgment be final, which Baker argues is not an issue in this case.


According to Microsoft, if the Court allows an appeal from a denial of class certification, the Court would frustrate the discretionary review set forth under Federal Rule of Civil Procedure 23(f) (“Rule 23(f)”), which guides appeals in class action cases. Microsoft argues that Rule 23(f) applies exactly to the situation Baker faces here; allowing appellate courts to review adverse class certification rulings would allow plaintiffs like Baker to circumvent the compromise struck under Rule 23(f). Microsoft claims that Baker must rely on Rule 23(f), which would require Baker to adjudicate the claims on the merits, receive a final judgment, and then seek review in an appellate court.

Baker counters that Rule 23(f) does not limit the situations in which an appeal can occur; it merely states one situation where an appeal can exist. According to Baker, Rule 23(f) explains how a party can assert an interlocutory appeal, but it says nothing about allowing an appeal in a final judgment. According to Baker, the adverse class certification ruling is a final judgment; therefore, this case would not destroy the underlying purpose of Rule 23(f).


Microsoft maintains that even if the Court decides that the voluntary dismissal is in fact a final judgment, there should not be jurisdiction under Article III of the U.S. Constitution because the case would be moot. Microsoft argues that Article III’s “case or controversy” requirement requires Baker to have a personal interest that is adverse to the other party throughout the entirety of the suit, not just when the lawsuit first begins. Article III allows a court to review a voluntary dismissal only when the court enters a ruling that is adverse to a plaintiff and is decided on the merits. Microsoft asserts that a court order denying class certification does not affect the merits of a claim but only pertains to court procedures. Microsoft posits that Baker was free to move forward with the lawsuit and have a decision made on the merits but instead elected to dismiss the claims voluntarily. According to Microsoft, Baker’s voluntary dismissal deprives Baker of any stake in the lawsuit; thus, the case is moot.

Baker counters that a voluntary dismissal with prejudice does not strip the adversity between the parties; therefore, the case is not moot. Baker maintains that the order denying class certification was an adverse ruling to Baker, so the case is not moot. Furthermore, Baker argues it was made explicit to the court that in seeking a voluntary dismissal with prejudice, they intended to appeal the court’s rulings and revive their claims if the appeal was successful. Baker claims that explicitly reserving their right to appeal the ruling eliminated any possibility that Baker waived this right, which also satisfies Article III’s “case or controversy” requirement. Baker also counters that there is no Article III requirement that a case “destroy, rather than impair” a party’s interest; Article III only requires the parties to disagree about a particular legal issue. Baker also argues that even if the voluntary dismissal made the case moot with respect to each individual plaintiffs’ claim, it did not moot the entire lawsuit. Baker still has two interests in seeking an appeal that are separate from the money damages they hope to recover: the ability to also receive a reward if the class is successful and an interest in having the class certified.



DRI—The Voice of the Defense Bar contends that if the Ninth Circuit decision is affirmed, it will require defendants to spend substantial resources defending class certification appeals before they even begin to litigate on the merits, thereby favoring plaintiffs in such actions. As a result, plaintiffs could immediately appeal an order denying class certification, while defendants could not, unless a court of appeals decides to consider an appeal on an interlocutory basis under Rule 23(f). The Washington Legal Foundation et al. note that if the Court is to adopt a rule that favors plaintiffs over defendants, defendants may find it economically prudent to settle and abandon meritorious defenses because of the costs associated with appealing the certification of the class.

Contrastingly, Public Citizen, Inc. notes that plaintiffs who move forward with their meritorious claims also ask a district court to enter a judgment in the event that they decide to appeal denial of the class certification. Thus, Public Citizen, Inc. argues that it is irrelevant whether plaintiffs decide to resolve their individual claims or successfully litigate a case on the merits because they have the same interest in class certification.


Pacific Legal Foundation (“PLF”) notes that if the Ninth Circuit decision is affirmed, it would result in a slow and disjointed appeals process. PLF contends that it would lead to rampant dismissals followed by appeals in every case involving an unsuccessful class-certification bid. Thus, plaintiffs would have an additional layer of appeal in every case involving an adverse class-certification ruling. The Product Liability Advisory Council, Inc. argues that this prolonged class-action litigation process would create greater uncertainty in defending against potential class actions to the detriment of American manufacturers and ultimately consumers

However, a group of complex litigation law professors argue that class actions typically include incentives for class representatives to remain with the class to compensate monetary risks and non-monetary risks, which, in turn, promotes the finality of any class judgment. Furthermore, the law professors argue that if a class representative cannot appeal the denial of class certification upon voluntarily dismissing an action, it would introduce needless confusion into the law of Article III justiciability. This is because determining whether a representative voluntarily dismissed a claim is often difficult to decipher and could result in subsequent litigation.


PLF argues that a court’s decision to deny class certification is procedural in nature and does not address the merits of a plaintiff’s claim. Rather, PLF notes that the decision to certify a class will often intersect with the merits of a plaintiff’s underlying claim. PLF contends that a district court’s decision to deny class certification is not appealable simply because it terminates litigation as a result of a plaintiff’s finding it uneconomical to proceed on his or her individual claim. PLF notes that litigants can always bring their claims in small claims court; thus, litigation costs do not always determine when an unsuccessful class representative wants to stop litigation.

The complex litigation law professors contend that the modern class actions determine whether parties have sufficient Article III claims. The law professors argue that in Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326 (1980), the Court concluded that so long as the plaintiffs retained an economic interest in class certification, the parties had an Article III justiciable issue. This is because Rule 23(b)(3) is understood as a procedural tool that allows claimants to consolidate claims against a common defendant that are too small to be litigated separately. The class action aggregates individual claims and distributes the expense of representation across all claimants so it is more worthwhile. Furthermore, the law professors note that in U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 (1980), the Court recognized an interest in class certification so long as the representative retained a ‘personal stake’ in obtaining class certification as to not undermine Article III values. The law professors contend that the Court recognized an interest in class representation beyond economic considerations because the decision to recognize a class promotes vigorous advocacy from counsel. Thus, the law professors argue that the class action structure does not invent a justiciable controversy where none exists, but rather ensures that there are incentives in place to litigate certain types of cases.

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