Supreme Court ponders class action gamesmanship

March 18, 2016 | By DEBORAH LA FETRA

Everyone has received in the mail one of those letters from lawyers you’ve never heard of, informing you that you are part of a class action lawsuit against some company, say, a department store, and that you can mail in a form to reserve your share of the settlement or opt out of the class to reserve your right to sue on your individual claim. Of course, you didn’t feel aggrieved prior to receiving the letter and, if you are like more than 90% of the consumers who receive such letters, you will toss it without further ado. Regardless of your (in)action, the lawyers representing the class will be paid millions of dollars. Very few class actions go to trial—the vast majority settle soon after the trial court certifies the class, guaranteeing a large payday to the plaintiffs’ lawyers. Conversely, if a trial court refuses to certify a class, the plaintiff’s lawyers may well decide “game over.” In both cases, decisions about whether to litigate are lawyer-driven.

Class action certification rulings, although key to the litigation, are only procedural. That is, they determine how the case will proceed in court, but they do not—and cannot—change the substantive nature of the plaintiffs’ claims. In federal court, procedural rulings generally cannot be appealed until the case is over. This “final judgment rule” prevents piecemeal litigation with multiple trips up and down the courts over procedural rulings. In Coopers & Lybrand v. Livesay (1978), the Supreme Court held that plaintiffs seeking review of orders denying class certification typically must wait until after final judgment, even if the order sounds the “death knell” for the plaintiffs’ claims. The federal rules allow plaintiffs to request an immediate appeal, but whether to allow the appeal is wholly within the court’s discretion. In recent years, however, plaintiffs’ lawyers who cannot convince an appellate court to review denial of class certification came up with a way to evade the rules: They voluntarily dismiss the case for the purpose of creating a “final judgment” that they can then appeal.

Lawyers representing a purported class of Microsoft Xbox game console owners succeeded in this tactic when the Ninth Circuit held in Baker v. Microsoft that the plaintiffs could appeal the denial of certification after a voluntary dismissal. This creates several real problems, not the least of which is that a plaintiff who chooses to dismiss his own case no longer has a “case or controversy” that can be litigated in the federal courts under Article III of the U.S. Constitution. The Supreme Court granted cert in the case, and today PLF filed an amicus brief urging the Court to put a stop to this end-run around the final judgment rule.