Microsoft Corp. v. Baker suggested that litigants can no longer manufacture an appeal of an adverse, interlocutory decision by voluntarily dismissing their claims with prejudice. But the Ninth Circuit just said that Baker applies only when there are specific rules on interlocutory appeals.
April 19, 2022
Sometimes litigants are unsatisfied with the existing avenues for interlocutory appeals. So they try to manufacture a final decision, often by voluntarily dismissing some or all of their claims. Manufactured finality comes in a variety of forms. In 2017’s Microsoft Corp. v. Baker, the Supreme Court shut down one of them. The Court held that plaintiffs hoping to bring a class action cannot appeal an adverse class-certification decision by voluntarily dismissing their individual claims with prejudice. That form of manufactured finality was an attempted end-run around the rules governing interlocutory appeals from class-certification decisions, particularly Federal Rule of Civil Procedure 23(f).
Baker suggests that litigants can no longer manufacture an interlocutory appeal by voluntarily dismissing their claims and then trying to appeal an interlocutory district court decision that harmed—but did not resolve—those claims But in last week’s Trendsettah USA, Inc. v. Swisher International, Inc., the Ninth Circuit said that litigants could still use this tactic in most contexts. The district court in Trendsettah vacated a jury verdict and ordered a new trial. Rather than face that new trial, the plaintiff voluntarily dismissed its claims with prejudice and tried to appeal the new-trial decision. The Ninth Circuit held that the voluntary dismissal produced a final, appealable decision. Baker, the court thought, applied only when this tactic imperiled specific rules on interlocutory appeals.
I don’t buy it. Just like the plaintiffs in Baker and similar decisions, the plaintiff in Trendsettah was trying to avoid the normal limits on interlocutory appeals. That those limits apply generally (rather than to a specific context) should make no difference. And the plaintiff in Trendsettah had not lost on it claims. It instead decided that litigating further was not worth it. So the plaintiff got exactly what it asked for: a with-prejudice dismissal of its claims.
The Trendsettah Litigation
Simplifying a fair bit, Trendsettah involved an antitrust dispute between two cigar companies. A jury returned a verdict for the plaintiff and awarded about $15 million in damages, which the district court trebled to about $45 million. Sometime thereafter, the defendant learned that the plaintiff’s CEO had allegedly engaged in a scheme to avoid paying excise taxes. The defendant accordingly sought relief from the judgment under Federal Rule of Civil Procedure 60, arguing that this scheme amounted to newly discovered evidence and fraud might have affected the jury’s decision. The district court granted the Rule 60 motion and ordered a new trial.
The plaintiff then tried to obtain appellate review of the new-trial decision. It first asked the district court to certify the decision for an immediate appeal under 28 U.S.C. § 1292(b). The district court declined. The plaintiff then filed a petition for mandamus with the Ninth Circuit, which denied the petition.
In its last effort to secure some appellate review, the plaintiff moved to voluntarily dismiss its claims with prejudice. The district court granted the motion, and the plaintiff appealed.
Manufactured Finality & New-Trial Orders
In voluntarily dismissing its claims, the Trendsettah plaintiff was trying to manufacture an appeal.
Most appeals in federal court must wait until the end of district court proceedings. Granted, a variety of exceptions to the general rule exist. But grants of a new-trial motion are not among them. A district court decision vacating a judgment and ordering a new trial is not a “final decision” under 28 U.S.C. § 1291. Nor are there any exceptions for new-trial orders in statutes or procedural rules. Federal Practice & Procedure states the rule succinctly:
An order granting a new trial . . . ordinarily is not final; review is supposed to be available only after completion of the new trial. This rule is obeyed virtually without exception.
But as Federal Practice & Procedure also notes, “there are complications.”
Among those complications are manufactured appeals. Litigants are not always satisfied with the existing avenues for interlocutory appeals. So they try to create—or “manufacture”—an interlocutory appeal.
These manufactured appeals come in a variety of forms. Relevant to the present discussion is when litigants voluntarily dismiss their claims with prejudice after suffering an adverse interlocutory decision that severely harms—but does not entirely undercut—their case. The thought is that this voluntary dismissal creates an appealable final decision that would permit review of the adverse interlocutory order. These litigants are essentially gambling their claims in exchange for a right to appeal and a chance of reversal. If the court of appeals affirms, the voluntary dismissal stands and the claims are done. But if the court of appeals reverses, the litigant can presumably undo the voluntary dismissal and reinstate its claims.
Manufactured Finality & Baker
The Supreme Court shut down this tactic—at least in the context of class actions—in Baker. The district court in Baker had refused to certify a case as a class action, and the court of appeals declined to hear an appeal from that decision via Federal Rule of Civil Procedure 23(f). The plaintiffs then voluntarily dismissed their individual claims with prejudice and tried to appeal the district court’s class-certification decision.
The Supreme Court rejected this attempt at manufacturing an appeal. The Court gave several reasons for doing so. This voluntary-dismissal tactic increased the risk of multiple, piecemeal appeals. It undercut Rule 23(f)’s grant of discretionary appellate jurisdiction in favor of an absolute right to appeal. And it benefited only plaintiffs, not defendants.
Baker’s reasoning was a bit odd. The Court said that the voluntary dismissal was not “final” under § 1291 and thus not appealable. As I’ve explained before, district court proceedings were over, so the case was as “final” as it ever was going to be. Despite this questionable reasoning, Baker was correct in its outcome—the plaintiffs were trying to circumvent Rule 23(f) and manufacture the appeal of an order that they should not have been able to appeal.
Baker, Trendsettah & Specific Rules of Appellate Jurisdiction
Baker seemed to shut down the tactic of voluntarily dismissing all claims with prejudice to secure an appeal of an adverse interlocutory order, at least when that interlocutory order did not effectively determine those claims. But in Trendsettah, the Ninth Circuit held that litigants can still use this tactic in some—indeed, most—contexts.
The Ninth Circuit had generally approved of this tactic in Concha v. London, a pre-Baker decision. Concha held that that litigants could dismiss their claims with prejudice and then appeal adverse interlocutory decisions. Litigants who take this route risk losing their claims entirely. So, the Ninth Circuit thought, permitting appeals from these voluntary dismissals was “not likely to undermine [its] normal appellate practice.”
Baker abrogated a line of Ninth Circuit decisions that had approved of this voluntary-dismissal tactic in the class-action context. But after Baker, the Ninth Circuit held in Rodriguez v. Taco Bell Corp. that Baker did not affect Concha’s general rule. Baker, the court noted, “involved an attempt to use the voluntary dismissal mechanism to obtain an appeal as of right in order to review an earlier denial of class certification.” That is, Baker involved an attempted end-run around Rule 23(f). Rodriguez held that when a litigant is not trying to undermine Rule 23(f), Baker did not apply.
There was, however, the complication of the Ninth Circuit’s recent decision in Langere v. Verizon Wireless Services, LLC. The district court in Langere ordered that the parties arbitrate their dispute. Orders directing arbitration are normally not immediately appealable. The plaintiff in Langere tried to get around that prohibition by voluntarily dismissing its claims with prejudice. Before Baker, the Ninth Circuit had sanctioned this practice. Langare held that Baker now barred it, as it was an attempted end-run around the rules governing arbitration appeals. (You can read more about Langere in my post Manufactured Finality in Arbitration Appeals.)
Trendsettah read Rodriguez and Langere to mean that Baker applied only when the with-prejudice, voluntary-dismissal tactic “implicate[s] any similar statutory restrictions that would be adversely affected by permitting voluntary dismissal of claims with prejudice.” That is, Baker applied only in contexts with specific rules of appellate jurisdiction. In other contexts, litigants can still dismiss their claims with prejudice and then appeal adverse interlocutory decisions.
Trendsettah involved one of those other contexts. The plaintiff in Trendsettah was “not attempting to take an appeal midstream, such that success on appeal would allow it to continue litigating its claims in a preferred posture or forum.” That’s because the plaintiff’s claims had already been litigated to a judgment. Reversal on appeal would require only reinstating the jury’s verdict. The court of appeals went on to explain that regardless of how it decided the appeal, the case would be over. If it affirmed, the plaintiff’s voluntary, with-prejudice dismissal would stand. If it reversed, the court of appeals could reinstate the jury’s verdict.
A Specious Preservation of Manufactured Finality
I don’t agree with Trendsettah. I see at least two problems with it.
First is the reliance on general and specific appellate rules. Why should it matter that the Trendsettah plaintiff was dealing with the general rules for interlocutory appeals rather than context-specific rules? The plaintiff in Trendsettah was trying to avoid the limits on appellate jurisdiction just as much as the plaintiffs in Baker and similar cases. Indeed, the plaintiff in Trendsettah had tried and failed to secure an interlocutory appeal via established means (a certified appeal under § 1292(b)), just like the plaintiffs in Baker. Whether dealing with general or specific rules, litigants who use this voluntary-dismissal tactic are trying to create their own rules for appellate jurisdiction. The Supreme Court disapproved of these efforts in Baker.
Second, is the more general problem of allowing litigants to appeal judgments that they ask for. Litigants normally cannot appeal these sorts of judgments. (This is what Baker should have said, rather than holding that the voluntary dismissal did not produce a “final” decision.) But that’s precisely what happened in Trendsettah. And no exception to that normal rule should apply. The new-trial decision did not effectively resolve the plaintiff’s claims. The plaintiff accordingly could have kept litigating its claims in the new trial and maybe won again. The Trendsettah plaintiff didn’t want to continue. So the plaintiff ultimately got exactly what it asked for: a with-prejudice dismissal of its claims.
Trendsettah USA, Inc. v. Swisher International, Inc., 2022 WL 1123196 (9th Cir. Apr. 15, 2022), available at the Ninth Circuit and Westlaw.