Tag Archives: Appeal

Named Plaintiffs Can’t Voluntarily Dismiss Individual Claims in Order to Appeal Class Certification Denial

View David Wright's Complete Bio at robinsonbradshaw.comEarlier this year, we hazarded a guess that the Supreme Court was split 4-4 regarding a Ninth Circuit decision holding that a named plaintiff could achieve appellate review of a decision denying class certification by voluntarily dismissing his individual claims. It turns out, based upon the Supreme Court’s decision in Microsoft Corp. v. Baker [], that the internal debate was not so much over whether the Ninth Circuit erred in allowing the appeal, but whether that error had both statutory and constitutional implications. The Supreme Court had accepted certiorari to review “[w]hether a federal court of appeals has jurisdiction under both Article III and 28 U.S.C. Section 1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.” With Justice Gorsuch on the sidelines, the Court unanimously held that the named plaintiffs’ gamesmanship did not allow appellate review, but the justices differed in their reasons for that outcome.

Five members of the Court, led by Justice Ginsburg, concluded that such an appeal was inconsistent with F.R. App. P. 23(f). The majority reasoned that “[r]espondents’ voluntary-dismissal tactic . . . invites protracted litigation and piecemeal appeals,” and would – essentially – turn Rule 23(f)’s “discretionary regime” into a license for plaintiffs to force an interlocutory appeal of a ruling denying class certification. This, the Court noted, would upset “Rule 23(f)’s careful calibration” and “Congress[’] final decision rule would end up a pretty puny one.”

In our previous post, we sounded an alarm about the “one way street” that was a feature of the Ninth Circuit’s decision, noting that “This option—if allowed by the Supreme Court—works only for plaintiffs in class action cases, not defendants. If defendants suffer an adverse class certification ruling, and the appellate court does not exercise its discretion to accept the interlocutory appeal, defendants must litigate the case to judgment before obtaining review of the class determination.” Justice Ginsburg agreed with us on this point, observing in her opinion for the majority that “[t]he one-sidedness of respondents’ voluntary-dismissal device ‘reinforce[s] our conclusion [of no jurisdiction],” and that “the ‘class issue’ may be just as important to defendants.”

Although the majority founded its decision on 28 U.S.C. Section 1291, thereby avoiding the Article III issue, Justice Thomas, joined by Justice Alito and the Chief Justice, wrote a concurring opinion that took the constitutional issue head on. The concurrence argued that there was no Article III “case or controversy” following the named plaintiffs’ dismissal of their claims. Justice Thomas noted that “it has long been the rule that a party may not appeal from the voluntary dismissal of a claim,” and that the parties were “no longer adverse to each other on any claims” after that dismissal. A favorable ruling on class certification could not, the concurring opinion explained, “revive [the named plaintiffs’] individual claims.”

With deference to the Ninth Circuit jurists who proceeded to adjudicate the appeal in Baker, this was not a particularly hard case. In Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), the Supreme Court unanimously rejected the so-called “death-knell” doctrine, which had permitted plaintiffs to appeal as of right a district court order denying a motion for class certification. Given that decision, and the fact that Rule 23(f) appellate jurisdiction is discretionary, not mandatory, it is difficult to see how a voluntary dismissal gambit could ultimately succeed. Unfortunately now for Xbox gamers, they will have to litigate their ‘disc gouging’ claims one by one . . . .

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Pending Bill Would Permit Interlocutory Appeals of Class Certification Decisions Directly to NC Supreme Court

View Adam Doerr's Complete Bio at robinsonbradshaw.comGovernor Cooper vetoed House Bill 239 on April 21, rejecting the General Assembly’s effort to reduce the number of judges on the North Carolina Court of Appeals from 15 to 12. The bill has been quite controversial, and four former North Carolina Supreme Court justices have said it would “seriously harm our judicial system.”  Although the bill does not speak in partisan terms, its practical effect would be to prevent Governor Cooper from appointing three (or perhaps two) new judges to the Court of Appeals to replace Republican judges who will reach the mandatory retirement age during his term.1

Mostly overlooked in the public and legislative debate is a major change to appeals in class actions. The bill contains a provision that allows for an appeal of right from “Any trial court’s decision regarding class action certification under G.S. 1A-1, Rule 23.”

As we explained in our analysis of the Supreme Court’s decision in Fisher, North Carolina currently takes an unusual approach to appeals in class actions. An order denying class certification is immediately appealable because the courts have held that it affects a substantial right under N.C. Gen. Stat. 7A-27. An order granting class certification, by contrast, is generally not immediately appealable. Although the appellate courts have sometimes permitted such appeals, including in Fisher, the courts have avoided stating that orders granting class certification affect a substantial right. In Fisher, for example, the Court held that “that the subject matter of this case implicates the public interest to such a degree that invocation of our supervisory authority is appropriate.”

Our firm’s amicus brief for the NC Chamber in Fisher advocated for a ruling that an order granting class certification could affect a substantial right, permitting interlocutory review. The rationale for this approach is that an order granting class certification is often dispositive because defendants face enormous pressure to settle. Indeed, we have not identified a single post-judgment appeal of an order granting class certification against a private party since North Carolina’s enactment of Rule 23 in 1967.

The substantial rights approach, if adopted, would have been similar to the rule in federal courts, where Rule 23(f) provides that a “court of appeals may permit an appeal from an order granting or denying class-action certification.” To obtain review, the party seeking to appeal must file a petition requesting permission to appeal. Such appeals are infrequently granted; published studies estimate that appellate courts grant less than one in four Rule 23(f) petitions.2

This legislation would go further than the federal approach, and further than the law in other states with which we are familiar, in three important ways. First, appeals under this statute would not be discretionary, in contrast to federal Rule 23. All orders would be appealable, regardless of whether the appellate court thought that interlocutory review was appropriate.

Second, appeals would go directly to the North Carolina Supreme Court, bypassing the Court of Appeals. There are currently only two kinds of appeals that go directly to the Supreme Court: a death penalty conviction and decisions from the North Carolina Business Court. N.C. Gen. Stat. 7A-27(a).  And interlocutory appeals from the Business Court are limited to orders that affect a substantial right, effectively determine or discontinue the action, or grant or refuse a new trial.

Third, House Bill 239 would permit an appeal of “[a]ny trial court’s decision regarding class action certification.” Note the contrast with federal Rule 23(f), which permits appeal from an “order granting or denying class-action certification.” A “decision regarding” class action certification could be significantly broader. For example, is an order denying a motion for decertification a “decision regarding class action certification” that would allow an interlocutory appeal? How about a motion to strike class allegations? Even in federal court, with Rule 23(f)’s more limited language and the appellate court’s discretion as a check, there is litigation over the scope of the right to appeal.3 Here, given the breadth of the language and the Supreme Court’s lack of discretion to reject an appeal, there is significant potential for extensive litigation over the scope of the right to appeal, repetitive appeals, and gamesmanship.

House Bill 239 now goes back to the General Assembly. If it overrides Governor Cooper’s veto, as it did with a recent bill applying party labels to elections of District and Superior Court judges, major changes are coming to class action litigation in North Carolina state courts.

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1 One of the Republican judges, Judge McCollough, announced his retirement on April 24, just over a month early. If he had waited until reaching his mandatory retirement on May 28, the legislature might have overridden the Governor’s veto and the law would have prevented appointment of a successor. As Judge McCullough told the Raleigh News & Observer, he did not want his legacy to be an “impairment to the appeals court” by reducing its size. Governor Cooper has appointed Charlotte attorney John Arrowwood to fill the seat.

2 We have found that existing research misses a significant number of 23(f) petitions in the Fourth Circuit. These petitions are difficult to research, as the orders are generally not published and require significant effort in PACER to uncover. We plan to share the results of our own research on this issue in a future post.

3 Compare In re Complaint of Ingram Barge Co., 517 F.3d 246, 247 (5th Cir. 2008) (refusing to hear a 23(f) petition from an order granting a motion to strike class action allegations because it was not an order “granting or denying” certification) with In re Bemis Co., Inc., 279 F.3d 419, 421 (7th Cir. 2002) (accepting review of an order granting a motion to strike class allegations because it was the “functional equivalent of denying a motion to certify a case as a class action, a denial that Rule 23(f) makes appealable (at our discretion).”).

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House Passes Fairness in Class Action Act of 2017

View David Wright's Complete Bio at robinsonbradshaw.comLargely following party lines, the House of Representatives on March 9, 2017, passed H.R. 985: Fairness in Class Action Act of 2017, which we highlighted in this space. One central feature of this bill, which we noted, is an appeal as of right of class certification decisions. This provision represents a radical departure from current practice, in which discretionary appeals are infrequently granted to the U.S. Courts of Appeal. A study done several years ago, which looked at seven years of filings, concluded that less than one quarter of such appeals are granted.

As we have explained here, the limited appellate review of class certification decisions have resulted in a variety of procedural gyrations designed to achieve automatic appellate review, particularly in consumer class actions. If this bill is passed by the Senate, no such legerdemain will be required. Going forward, the Courts of Appeal will be required to review class certification decisions.

To be sure, one consequence of an appeal of right for class certification decisions will be the lengthening of class litigation, and with it the consequent expense. But, in purely financial terms, a federal district judge makes no decision that comes close to having the consequences of a decision to certify a class. Should millions of dollars rest on one judge’s determination with no real opportunity for review? The House said “no.” Let’s see whether the Senate agrees.

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Judge Gorsuch’s Class Action Opinions After Shook

View Susan Huber's Complete Bio at robinsonbradshaw.com View Kevin Crandall’s’s Complete Bio at robinsonbradshaw.comToday we continue our analysis of Judge Gorsuch’s class action opinions from the Tenth Circuit in an effort to better understand how he may rule if confirmed for the Supreme Court. Last week, we examined Judge Gorsuch’s decision in Shook v. Board of County Commissioners, and we will take up his remaining class action opinions below.

McClendon v. City of Albuquerque, 630 F.3d 1288 (10th Cir. 2011)

In McClendon v. City of Albuquerque, decided three years after Shook, Judge Gorsuch again demonstrates judicial restraint. In McClendon, prisoners brought a class action against the City of Albuquerque, Bernalillo County, and various individuals involved in operating the Bernalillo County Detention Center. The parties entered into a pair of settlement agreements in 2005, but four years later the district court issued an order withdrawing its approval of the settlement and giving the plaintiffs permission to rescind those agreements after it found that the County misrepresented certain facts during settlement negotiations. The Tenth Circuit held that the order was not a “final decision,” subject to appeal under 28 U.S.C. § 1291. A final decision, Judge Gorsuch reasoned, dissociates the court from the case and ends the litigation on the merits, while the order withdrawing a settlement approval does “[j]ust the opposite: the order ensures litigation on the merits will continue in the district court.”

Judge Gorsuch empathized with the defendants’ desire for an appeal that might avoid further litigation in a previously settled case that was already fifteen years old: “the delays and costs associated with civil litigation in modern America are substantial and worrisome, and even the most hard-boiled litigator may raise an eyebrow at a case lasting as long as this one.” But neither the utility of the appeal nor the advanced age of the case swayed Judge Gorsuch to take an appeal beyond the bounds of the express authority in § 1291: “Congress’s direction demands our respect, not our rewriting.” Judge Gorsuch concluded his opinion by emphasizing the importance of judicial restraint:

[O]ne thing we may never do is disregard the bounds of our legal authority and assert § 1291 jurisdiction over an appeal where it doesn’t exist. To do so in this case would compound any error the defendants imagine with an impropriety of our own, making matters worse not better. It is, after all, a “central principle of a free society that courts,” no less than the other branches of government, “have finite bounds of authority.” . . . We must respect that principle and those bounds no less when it is hard to do so than when it is easy.

Hammond v. Stamps.com, Inc., 844 F.3d 909 (10th Cir. 2016)

The Tenth Circuit’s holding in Hammond v. Stamps.com, Inc.—that the minimum amount in controversy under the Class Action Fairness Act need only be legally possible and not factually probable—is hardly noteworthy, as it falls squarely in line with the law from other Courts of Appeals. But in Judge Gorsuch’s opinion, his most recent in the class action arena, we see the hallmarks of conservative jurisprudence: interpreting statutory text (here, “in controversy”) with its “traditional meaning”; citation to the Federal Judiciary Act of 1789; and a nod toward the late Justice Antonin Scalia’s textualist approach with a citation to his book, Reading Law. Indeed, it is only after a three-page textual and historical deep dive that Judge Gorsuch cites in the final paragraph of the opinion the “several courts [that] have held as we do today.”

For those of you who yearn to know the facts of the case, Elizabeth Hammond brought a putative class action in New Mexico state court, alleging that Stamps.com engaged in misleading and unlawful trade practices by insufficiently disclosing its subscription fees to customers. She alleged that “hundreds or thousands of persons” called to cancel their Stamps.com subscriptions as a result of Stamps.com alleged wrongdoing, and each class member would “likely” receive $31.98 in damages (the cost of subscribing for two months) or $300 in statutory damages. Stamps.com presented uncontested evidence that 312,680 customers had cancelled their subscriptions during the likely class period, and the company removed the case to federal court because the amount in controversy well exceeded the $5 million threshold for the Class Action Fairness Act. The trial court granted Ms. Hammond’s motion to remand, ruling that the company had not met its burden of establishing the minimum amount in controversy because it failed to exclude from its calculations those customers who cancelled their subscriptions for reasons unrelated to the allegations in the complaint, or as Judge Gorsuch put it, “without proof from Stamps.com establishing how many of its customers were actually deceived, the district court thought the company couldn’t satisfy the $5 million ‘in controversy’ requirement.” The Tenth Circuit vacated and remanded the district court’s remand order, ruling that federal jurisdiction was proper under CAFA: the proponent of jurisdiction should not have to “argue against himself, task[ed] with the job of proving his own likely liability in a sufficient number of individual cases simply to get a foot in the door of the federal courthouse.”

BP America, Inc. v. Oklahoma ex rel. Edmondson, 613 F.3d 1029 (10th Cir. 2010)

In an earlier CAFA jurisdictional decision, the Tenth Circuit in BP America granted discretionary leave for the propane gas distributor to appeal an order remanding the case to Oklahoma state court. The merits of the jurisdictional question—whether the Attorney General’s lawsuit, brought on behalf of the state and not any individual consumers, constitutes a “mass action” involving monetary relief to 100 or more people under CAFA—were not at issue at this preliminary stage of the appeal.

Judge Gorsuch’s opinion adopts multiple factors to consider in deciding whether to grant discretionary leave to appeal under CAFA § 1453, including whether the appeal presents an important, unsettled, or at least “fairly debatable” CAFA-related question and a weighing of the relative harms to the parties should an appeal be refused or entertained.

Heller v. Quovadx, Inc., 245 F. App’x 839 (10th Cir. 2007)

Although it actually predates Shook, the unpublished decision of Heller v. Quovadx, Inc., is worth noting, if only to highlight the wry humor employed by Judge Gorsuch in dismissing a non-class member’s argument that denying him standing to object to a settlement would violate his Fifth Amendment rights. In addition to the fact that the non-class member presented “no evidence or relevant legal argument to support his contentions,” he also “spen[t] the bulk of his brief noting the inefficiencies and burdens of paper-based litigation.” Perhaps a sentiment with which class action lawyers and judges can relate all too well.

Substantively, the Tenth Circuit affirmed the district court’s determination that the non-class member lacked standing to object to the proposed settlement. Non-class members opposed to a proposed settlement cannot object directly and instead must seek to intervene under Rule 24.

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How Will Justice Gorsuch Rule in Class Actions? A Look at Shook and Judicial Restraint

View John Wester's Complete Bio at robinsonbradshaw.comThe nomination of Tenth Circuit Judge Neil M. Gorsuch for the Supreme Court has jurists and reporters forecasting how, if confirmed, he will rule in cases raising “hot” Constitutional issues. The “hot” question for those of us who litigate class actions is how Justice Gorsuch would engage the next landmark class action, especially since he would replace Justice Antonin Scalia on the Court, author of two of the most significant class action opinions in recent years, Comcast Corp. v. Behrend and Wal-Mart Stores v. Dukes.

We will be examining some of Judge Gorsuch’s opinions in an attempt to answer this question, beginning with the 2008 opinion he wrote for a unanimous panel of the Tenth Circuit, denying class certification, in Shook v. Board of County Commissioners, 543 F. 3d 557. The linchpin of the outcome in Shook was adherence to the abuse of discretion standard of review. Indeed, twice in his opinion, Judge Gorsuch observes that, were the court evaluating whether to certify the class in the first instance, it may well have allowed a class action to proceed. For example, he observed:

In this case, we believe the district court’s decision fell within the boundaries set out by Rule 23(b)(2), governing case law, and the facts as alleged. While we very well may have made a different decision had the issue been presented to us as an initial matter, and while other district courts perhaps could have chosen, or could choose, to certify similar classes, we cannot say the district court’s assessment was beyond the pale.

What comes through as a lodestar for Judge Gorsuch’s reasoning is his vigilance for honoring the rubric of Rule 23, separate from a merits analysis. Shook is a suit alleging violations of the Prison Litigation Reform Act. The 2008 opinion marked a return trip to the Tenth Circuit for the parties. In the first ruling denying class relief, the district court had “conflated” an analysis of the merits of the relief available to the plaintiffs with threshold class certification requirements of Rule 23. Judge Gorsuch was specific in describing this error: “the court focused entirely on the PLRA, reasoning that the relief plaintiffs sought was beyond its jurisdictional competence after the passage of the PLRA and that class certification is properly denied when the court lacks the authority to order the prospective remedy requested.” On remand, the district court repeated the outcome on class certification, denying it again, but, as Judge Gorsuch described the second round: “[the district court] did so this time with reference to Rule 23’s strictures. We find that the district court’s analysis of the Rule 23 framework is free of the legal errors we identified in its first effort.”

Judge Gorsuch’s opinion in Shook reflects careful scholarship—drawing support from leading Supreme Court class action precedent, from decisions by five other circuit courts, and from five law review articles—all evaluating detailed features of Rule 23—to explain why the present case, under an abuse of discretion standard, should remain in the “certification denied” column: “It is precisely these features that distinguish our case from the many and diverse civil rights cases whose certifications we have upheld and will continue to uphold.” His approach in Shook fits the overall reputation for scholarship, judicial restraint, and “rules-following” that Judge Gorsuch has earned during his judicial service.

Taking into account this reputation and his reasoning in Shook, those who labor in class action cases might wonder how far will Justice Gorsuch’s deference to trial court discretion run when the next Wal-Mart-themed case reaches the Supreme Court. Recognizing that the record for each case is distinctive, the trial court ruling in Wal-Mart stood on a significant volume of evidence—statistical and anecdotal—pointing to gender discrimination. As Justice Ginsburg observed in dissent, focusing on the commonality requirement:

The District Court’s identification of a common question, whether Wal-Mart’s pay and promotions policies gave rise to unlawful discrimination, was hardly infirm. The practice of delegating to supervisors large discretion to make personnel decisions, uncontrolled by formal standards, has long been known to have the potential to produce disparate effects. Managers, like all humankind, may be prey to biases of which they are unaware. The risk of discrimination is heightened when those managers are predominantly of one sex, and are steeped in a corporate culture that perpetuates gender stereotypes.

Would Judge Gorsuch’s adherence to abuse of discretion standard of review and his recognition that trial judges operate within a range of acceptable determinations lead to his siding with Justice Ginsburg’s dissenting view? Or, was Judge Gorsuch’s application of the abuse of discretion standard in Shook influenced by its context, an appeal arising from the district court’s denial of certification? Perhaps we’ll learn the answer with the next Supreme Court class action that pits judicial restraint against an inclination toward denial of certification.

We will continue our analysis of Judge Gorsuch’s class action opinions in future posts.

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