After an interlocutory order that appears to have precluded the plaintiff from prevailing, the plaintiff asked the district court to enter summary judgment against it. The Sixth Circuit held that this didn’t produce a final decision.
April 12, 2023
In Ohio Public Employees Retirement System v. Federal Home Loan Mortgage Corp., the Sixth Circuit held that an invited summary-judgment decision was not final because the plaintiff was trying to circumvent Rule 23(f). The district court had denied class certification. The plaintiff then tried to manufacture a final, appealable decision by asking the district court to enter judgment against it. As the Sixth Circuit saw things, the case was no different from Microsoft Corp. v. Baker.
But there appears to be an important distinction in the underlying order that the Sixth Circuit overlooked. In Microsoft, the district court had merely denied class certification, and the named plaintiffs were free to pursue their individual claims. But in Ohio Public Employees, it looks as though the district court’s class-certification decision effectively precluded the plaintiff from prevailing on even its individual claims. If that’s the case, Ohio Public Employees extends Microsoft to a different variety of manufactured finality. In doing so, it shuts down a valuable and long-recognized tool for accelerating the inevitable end of district court proceedings.
The Ohio Public Employees Litigation
Ohio Public Employees stemmed from a securities-fraud class action against Freddie Mac. The district court denied class certification. It also excluded the plaintiff’s expert witness and decided several issues against the plaintiff on its theories of recovery and methods of proof. The plaintiff asked the Sixth Circuit to review the class-certification decision under Federal Rule of Civil Procedure 23(f). But the Sixth Circuit denied that petition.
The plaintiff then asked the district court to “sua sponte” enter summary judgment against it. The plaintiff argued that the class-certification decision prevented the plaintiff from proving loss causation and thus from proceeding any further on the claim. The district court agreed and entered judgment in favor of Freddie Mac. The plaintiff then appealed.
The Sixth Circuit’s Dismissal
Freddie Mac moved to dismiss the appeal for a lack of jurisdiction, arguing that the plaintiff had improperly manufactured an appeal. A motions panel of the Sixth Circuit denied that request in January 2022. (I wrote about the motions panel’s decision in a prior roundup, though I thought at the time that the plaintiff sought only to appeal the class-certification denial.) But the merits panel reconsidered the issue. And it ultimately held that there was no final, appealable decision.
The reason was the Supreme Court’s decision in Microsoft. In that case, plaintiffs who were denied class certification voluntarily dismissed their individual claims. They then tried to appeal the class-certification denial, thinking that a reversal on class certification would let them reinstate their claims or litigate on behalf of the class.
Not so, said the Supreme Court. The plaintiffs’ voluntary-dismissal tactic undermined the established rules for interlocutory appeals (specifically Rule 23(f)), risked piecemeal appellate review, and was available only to plaintiffs. The Supreme Court ultimately held that the voluntary dismissal did not produce a final decision. As I’ve written several times, that’s an odd conclusion—the action was over in the district court and thus as final as it was ever going to get. A much better reason for disallowing the appeal would have been waiver. But that’s the rule until the Supreme Court re-explains Microsoft.
The Sixth Circuit thought that the Ohio Public Employees plaintiff’s tactic implicated the same concerns. It would invite piecemeal appeals, as the plaintiff’s victory on appeal would result in further district court proceedings and probably another appeal. The tactic was one sided, as only plaintiffs could use it. And the tactic undermined Rule 23(f). The Sixth Circuit also distinguished the case from its decisions in Raceway Properties, Inc. v. Emprise Corp. and Innovation Ventures, LLC v. Custom Nutrition Laboratories, LLC. The court said that both cases relied on the Supreme Court’s decision in United States v. Procter & Gamble Co., which the Microsoft Court had deemed inapplicable because it did not involve a class action or a similar voluntary-dismissal tactic.
Erroneously Extending Microsoft?
If the plaintiff in Ohio Public Employees had not effectively lost—that is, if it could have pursued its individual claims to a final judgment and possibly won, even after the district court’s decisions—then the case is not meaningfully different from Microsoft. The only distinction would be the means of ending district court proceedings—Microsoft involved a voluntary dismissal, while Ohio Public Employees involved an invited, adverse summary-judgment decision. But that distinction is irrelevant. In both situations, plaintiffs were trying to create an interlocutory appeal in a case that they had not effectively lost.
But it looks like the plaintiff in Ohio Public Employees had effectively lost on the merits. Granted, the district court’s decisions were nominally interlocutory as they didn’t purport to resolve the case. But if the district court’s decisions prevented the plaintiff from winning on the merits, then the Sixth Circuit wrongly extended Microsoft to a new context.
Manufactured finality comes in a variety of forms. (I’m currently working on an article about these various forms and Microsoft’s impacts on them.) One difference among those forms is the underlying order that led to the attempt to manufacture finality. Microsoft involved what I call an “adverse interlocutory decision”: a decision that made litigating a claim to a final judgment less attractive but did not technically or effectively decide who wins. Other kinds of manufactured finality involve what I call “dispositive interlocutory decisions”: decisions that, while not purporting to do so, effectively resolve a claim. Although courts have not always clearly distinguished between these (and other) types of manufactured finality, courts have long treated them differently. And for good reason—they implicate different interests.
Ohio Public Employees appears to have involved a dispositive interlocutory decision. If it did, the plaintiff’s invitation for the district court to rule against them should not create any problems. For one thing, the nominally interlocutory decision effectively ends the case, so there is no concern that the case is not actually over. For another, no rule of appellate jurisdiction is being undermined. All the plaintiff did was accelerate the inevitable end of district court proceedings. Had it instead been Freddie Mac that sought summary judgment, the district court would have granted it—probably without opposition. No one would have suspected that such a decision was not final. And to the extent this kind of manufactured finality is one sided, that’s because only the losing side can use it.
The Impact of Microsoft
Microsoft’s outcome—barring the plaintiffs from appealing—was correct. And some of its reasoning is persuasive. But Microsoft’s holding—that the voluntary dismissal did not produce a final decision because the plaintiffs were trying to circumvent Rule 23(f)—has left the courts of appeals struggling with the decision’s impact in ways that threaten long-standing, pragmatic doctrines like the one allowing manufactured appeals after dispositive interlocutory decisions.
I think Ohio Public Employees is the first decision to apply Microsoft to bar a manufactured appeal after a dispositive interlocutory order. (A dissenting Fourth Circuit judge wanted to do so a few years ago.) And it’s an unfortunate decision. I hope the plaintiff seeks rehearing.
Ohio Public Employees Retirement System v. Federal Home Loan Mortgage Corp., 2023 WL 2806242 (6th Cir. Apr. 6, 2023), available at the Sixth Circuit and Westlaw