United States: Tenth Circuit Finds Plaintiffs' Settle And Dismiss Strategy Unappealing

Last Updated: October 9 2018
Article by Christine A. Stoddard and Kristin A. Shepard

Following Supreme Court precedent, the Tenth Circuit recently held that plaintiffs' settlement and voluntary dismissal of their claims did not transform the court's interlocutory order denying class certification into a final, appealable order under 28 U.S.C. § 1291.

Plaintiff trusts brought a putative class action against an energy company, alleging various claims related to royalty interests under gas leases, and sought to certify a class. The district court denied the motion for class certification as well as plaintiffs' subsequent motion to reconsider. Thereafter, plaintiffs settled their individual claims and voluntarily dismissed the action but reserved their right to appeal the class certification order, which they then did. However, relying on the Supreme Court's decision in Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), the Tenth Circuit found it had no jurisdiction and dismissed the appeal.

The Tenth Circuit explained that plaintiffs seeking review of orders denying class certification have three options. First, plaintiffs may litigate their individual claims on the merits and then appeal the order after the final judgment under 28 U.S.C. § 1291, which provides for appellate court jurisdiction over final decisions and prevents the automatic appeal of interlocutory orders like class certification decisions. Second, plaintiffs can seek to pursue an interlocutory appeal under 28 U.S.C. § 1292(b). This provision enables district court judges to permit such an appeal if they determine the order involves a controlling question of law on which there is a difference of opinion and the appeal would materially advance the termination of the case. Lastly, a plaintiff may also petition an appellate court for review under Federal Rule of Civil Procedure 23(f), which gives appellate courts discretion to accept appeals of class certification orders.

The court then relied on the Supreme Court's decision in Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017) to assess its jurisdiction to decide the appeal in this case. In Baker, after the district court struck plaintiffs' class allegations, they moved to voluntarily dismiss their claims with prejudice. They then appealed the resulting final judgment under § 1291 but only challenged the order striking the class allegations. The Ninth Circuit held it had Article III jurisdiction over the appeal because, without a settlement, the parties were still adverse. The Supreme Court granted certiorari and determined appellate courts do not have jurisdiction to hear such appeals. The Court held that allowing appeals of class certification decisions following voluntary dismissals would lead to "protracted litigation and piecemeal appeals," create an appeal as of right that undercuts the discretion inherent in Rule 23(f), and give plaintiffs an unfair advantage because defendants did not have a parallel right.

In this case, unlike in Baker, the plaintiffs settled their claims with the defendant rather than acting unilaterally in voluntarily dismissing the case. However, the Tenth Circuit found that the Baker reasoning still applied under this settlement approach, which presented virtually the same scenario. Not only did the threat of protracted litigation remain, but, the settlement approach also enabled plaintiffs to bypass the discretionary Rule 23(f) regime. As in Baker, the court found that even if the appeal was a "technically compliant final judgment under § 1291," it would undercut Rule 23(f) and therefore "doesn't further a healthy legal system." Additionally, because defendants do not have a corresponding right to enter a settlement and then appeal a grant of class certification, this would unfairly advantage plaintiffs. The court noted that plaintiffs could have chosen one of the three paths that allow for appeal of certification orders. However, settling their individual claims did not turn the class certification denial into a final, appealable order. For that reason, the Tenth Circuit found it had no jurisdiction and dismissed the appeal.

Anderson Living Trust v. WPX Energy Production, LLC, No. 17-2029 (10th Cir. Sept. 21, 2018)

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