On The Case

Lurking in latest SCOTUS class action ruling: long-running question of standing

(Reuters) - All eight of the U.S. Supreme Court justices who decided Microsoft v. Baker on Monday agreed that class action plaintiffs cannot engineer appellate review of a decision denying class certification by dismissing their individual claims. But the justices split on why – and a concurrence by three conservatives could signal renewed interest in the critical class action issue of constitutional standing for uninjured class members.

Plaintiffs’ lawyers in the Baker case attempted a bit of procedural hocus pocus. In 2012, a federal district judge in Seattle struck classwide design defect claims by Microsoft Xbox users who contended the console scratched game disks inserted into it. The named plaintiffs asked the 9th U.S. Circuit Court of Appeals to review the trial court ruling, which had the same effect as a decision denying class certification. When the 9th Circuit rejected the interlocutory appeal, the plaintiffs dismissed their individual claims in the trial court and returned to the 9th Circuit.

This time, they argued they had an automatic right to appeal the final decision dismissing their case – but they asked the 9th Circuit only to review the ruling that struck their classwide claims, not their voluntary dismissal of individual claims. The 9th Circuit agreed it had jurisdiction over the appeal and revived the class claims for reconsideration by the trial court.

The Supreme Court, in an opinion by Justice Ruth Bader Ginsburg, held the 9th Circuit did not have jurisdiction under the Federal Rules of Civil Procedure, which limit the automatic right of review to cases shut down by a final ruling. To allow plaintiffs to circumvent the “death-knell” doctrine, Justice Ginsburg wrote, “would erode the finality principle and disserve its objectives,” resulting in “protracted litigation and piecemeal appeals.”

The federal rules strike a careful balance in permitting discretionary appellate review of intermediate trial-court orders, Justice Ginsburg wrote. The court, she said, cannot countenance a procedural end-run that would give class action plaintiffs a unilateral right to obtain appellate review of rulings they don’t like.

Justice Ginsburg was joined by Justices Anthony Kennedy, Stephen Breyer, Sonia Sotomayor and Elena Kagan. Chief Justice John Roberts and Justices Clarence Thomas and Samuel Alito agreed with the majority’s judgment but not its reasoning. (Justice Neil Gorsuch did not participate in the decision.)

In a concurrence written by Justice Thomas and joined by Roberts and Alito, the conservative justices argued that the named plaintiffs in the Microsoft case lost their constitutional right to sue when they dismissed their individual claims. Under Article III, Justice Thomas wrote, federal courts can only resolve “real and substantial controversies” presenting specific, resolvable issues.

“The plaintiffs’ appeal from their voluntary dismissal did not satisfy this jurisdictional requirement,” the concurrence said. “When the plaintiffs asked the district court to dismiss their claims, they consented to the judgment against them and disavowed any right to relief from Microsoft. The parties thus were no longer adverse to each other on any claims, and the Court of Appeals could not ‘affect their rights’ in any legally cognizable manner.”

That might seem to be an extremely narrow point, but Justice Thomas went on to explain that class action plaintiffs can’t pursue classwide claims unless they have individual standing. “The plaintiffs contend that their interest in reversing the order striking their class allegations is sufficient to satisfy Article III’s case-or-controversy requirement, but they misunderstand the status of putative class actions,” the concurrence said. “Class allegations, without an underlying individual claim, do not give rise to a ‘case’ or ‘controversy.’ Those allegations are simply the means of invoking a procedural mechanism that enables a plaintiff to litigate his individual claims on behalf of a class. Thus, because the Court of Appeals lacked Article III jurisdiction to adjudicate the individual claims, it could not hear the plaintiffs’ appeal of the order striking their class allegations.”

Mayer Brown’s Class Defense Blog hypothesized on Twitter that Justice Thomas was getting at a long-running class action question the Supreme Court has danced around but never answered directly: Can a class be certified if it includes class members who don’t meet constitutional standing requirements?

As you probably recall, when Tyson Foods took a wage-and-hour case to the Supreme Court in 2015, it argued that the jury verdict for workers at an Iowa meat-packing plant would reward employees who weren’t actually injured by the company’s overtime policies. Tyson first argued that classes cannot be certified if the class definition sweeps in uninjured class members. It subsequently modified its position a bit, asserting that plaintiffs must provide a reasonable mechanism for culling uninjured class members.

The Supreme Court decided the Tyson case on other grounds, but in a concurrence, the chief justice emphasized that class action plaintiffs have to meet constitutional standing requirements. “Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not,” he wrote.

The Supreme Court has not revisited the predicament of uninjured class members since the Tyson case, despite invitations to do so. That could be because of the death of Justice Antonin Scalia, the Supreme Court’s biggest class action skeptic, or because of the long delay in filling his seat. As I’ve written, it’s not clear whether Justice Scalia’s replacement, Justice Gorsuch, has as hearty an appetite for class action issues as his predecessor.

But the Thomas concurrence shows at least three justices are still thinking about the standing of uninjured class members, just as plaintiffs in a case that raises the issue are about to file a response to a petition for Supreme Court review by Conagra Brands. If Justice Gorsuch sides with Roberts, Thomas and Alito, the court will confound conventional wisdom and take the Conagra case.

I reached out to Peter Stris of Stris & Maher, whose firm represented the plaintiffs suing Microsoft at the Supreme Court. Via a Twitter direct message, Stris agreed that the majority opinion avoided addressing the constitutional right of class members to pursue classwide claims when they’ve dropped individual claims. (He also said - no surprise – that he disagrees with the concurrence’s standing analysis.) Stris said that by ducking on standing and focusing instead on finality, the Supreme Court has made it harder for defendants, as well as plaintiffs, to pursue once-and-for-all appeals on class certification.