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From Products Liability Law Daily,June 12, 2017

Microsoft scores Supreme Court win in game console defect action

By Susan Lasser, J.D.

A stipulation to a voluntary dismissal of claims with prejudice by a putative class of consumers of a manufacturer's video game console after the consumers were denied class certification by a federal district court in Washington did not qualify as a "final decision" under §1291 of the Judicial Code, by which the federal courts of appeals are empowered to review only final decisions of the district courts, the U.S. Supreme Court held, reversing a decision by the U.S. Court of Appeals for the Ninth Circuit, which had reversed the trial court's denial of class certification. The High Court determined that the voluntary dismissal "tactic" by the class "would undermine §1291’s firm finality principle, designed to guard against piecemeal appeals," and additionally would "subvert the balanced solution Rule 23(f)" under the Federal Rules of Civil Procedure, concerning appeals of class action certification decisions and authorizing "permissive interlocutory appeal" from adverse class certification orders in "the sole discretion of the court of appeals" (Microsoft Corp. v. Baker, June 12, 2017, Ginsburg, R.).

The consumers alleged a design defect in Microsoft Corporation’s Xbox 360 console that gouged game discs. Specifically, they alleged that the Xbox optical disc drive was unable to withstand even the smallest of vibrations, and that during normal game playing conditions discs spun out of control and crashed into internal console components, resulting in scratched discs that were rendered permanently unplayable.

Prior proceedings. The federal district court in Washington dismissed the class action lawsuit with prejudice, striking the class allegations, in deference to an earlier order denying class certification to a similar putative class, of which the trial court found that individual issues of damages and causation predominated over common issues. The earlier proposed class had petitioned the Ninth Circuit under Rule 23(f ) for leave to appeal the class-certification denial, but the Ninth Circuit denied the request and the plaintiffs settled their claims individually. The proposed class in the current case filed suit two years later in the same federal district court proposing a nationwide class of Xbox owners based on the same design defect alleged in the earlier litigation. This second proposed class argued that the class-certification analysis in the earlier case did not control because an intervening Ninth Circuit decision constituted a change in law sufficient to overcome the deference ordinarily due, as a matter of comity, the previous certification denial. The district court disagreed, however, and concluded that the cited Ninth Circuit decision had not undermined the first proposed class’s causation analysis. As such, the trial court found that comity required adherence to the earlier certification denial and, thus, struck the class allegations.

Instead of pursuing their individual claims to final judgment on the merits, the consumers stipulated to a voluntary dismissal of their claims with prejudice, reserving the right to revive their claims if the Ninth Circuit reversed the district court’s certification denial. The consumers then appealed, challenging only the interlocutory order striking their class allegations. Although Microsoft argued that the Ninth Circuit lacked jurisdiction to consider the proposed class’s appeal because the class’s voluntary dismissal with prejudice did not create appellate jurisdiction, the Ninth Circuit held that it had jurisdiction to hear the appeal under §1291. The appellate court then reversed the district court’s decision, finding that the lower court misapplied the law as established in another Ninth Circuit opinion. It held that the district court’s rationale for striking the consumers’ class allegations was an impermissible one, but did not opine as to whether class certification was inappropriate for a different reason, leaving that question for the lower court on remand (see Products Liability Law Daily’s March 19, 2015July 21, 2015; and January 19, 2016 analyses).

Voluntary dismissal not a "final decision." The Supreme Court ruled that the Ninth Circuit lacked jurisdiction under §1291 to review the denial of certification order following the consumers’ voluntary dismissal of their claims with prejudice because the dismissal did not qualify as a final decision. According to the High Court, the consumers’ voluntary dismissal "tactic" would undermine the finality principle of §1291; and the final judgment rule codified under §1291 "preserves the proper balance between trial and appellate courts, minimizes the harassment and delay that would result from repeated interlocutory appeals, and promotes the efficient administration of justice." The Court said that in its construction of §1291, "finality is to be given a practical rather than a technical construction" and that it had resisted attempts to allow appeals of right "that would erode the finality principle and disserve its objectives." The consumers’ "dismissal device" subverted the final judgment rule, as well as the process that Congress established for refining the rule and for determining when non-final orders can be immediately appealed. Instead of finality, the voluntary dismissal tactic invited protracted litigation and piecemeal appeals, in addition to indiscriminate appellate review of interlocutory orders. The Court maintained that "[p]laintiffs in putative class actions cannot transform a tentative interlocutory order … into a final judgment within the meaning of §1291 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." Furthermore, the Supreme Court rejected the "one-sidedness" of the voluntary dismissal tactic, which permitted only plaintiffs, and never defendants, to force an immediate appeal of an adverse certification ruling. Therefore, the Court held that the consumers’ voluntary dismissal tactic did not give rise to a final decision under §1291.

The case is No. 15–457.

Attorneys: Stephen M. Rummage (Davis Wright Tremaine, LLP) and Jeffrey L. Fisher (Stanford Law School) for Microsoft Corp. Brendan S. Maher (Stris & Maher LLP) for Seth Baker.

Companies: Microsoft Corp.

MainStory: TopStory SupremeCtNews JurisdictionNews ClassActLitigationNews ElectronicProductsNews HouseholdProductsNews

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