9th-circuitBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In Baker v. Microsoft Corp., No. 12-35946, 2015 U.S. App. LEXIS 4317 (9th Cir. Mar. 18, 2015), the U.S. Court of Appeals for the Ninth Circuit considered whether to adopt a rule creating a principle of comity between different federal district courts under which denial of class certification in one district court would create a rebuttable presumption in other district courts that denial of class certification was the correct result.  While the Ninth Circuit did not decide the issue explicitly in this non-workplace class action, employers nonetheless can use this proposed principle when attempting to defeat class or collective action certification bids in federal court where similar class or collective actions brought in other federal district courts have been denied certification.

Case Background

The plaintiffs brought a putative class action against Microsoft, claiming that Microsoft’s Xbox had a design defect.  Id. at 3-4.  Microsoft moved to dismiss the class allegations, and the district court granted that motion.  Id. at 3.

The district court found that a putative class action had been filed against Microsoft in another district court with claims similar to those in the Baker action.  Id.  The district court then decided to apply the principle of comity between federal district courts as adopted by the American Law Institute in 2010.  Id. at 10.  Under this principle of comity, “a prior denial of class certification on the same subject matter by a different district court judge [is] given a rebuttable presumption of correctness.”  Id.  Finding that the Baker plaintiffs had not overcome this rebuttable presumption of correctness, the district court dismissed the class allegations.  Id. Plaintiffs subsequently appealed.

Ninth Circuit’s Opinion

The Ninth Circuit did not decide whether the principle of comity should apply to class actions filed in different federal courts.  Rather, the Ninth Circuit found that the prior putative class action on which the district court relied used a legal standard that had been overruled by the Ninth Circuit.  Id. at *20-21.  It thus found that the district court’s decision was erroneous regardless of whether the comity principle were valid.  Id. at 21.

In a concurring opinion, Judge Carlos T. Bea persuasively argued that the Ninth Circuit should adopt the principle of comity rather than leaving the question for another day.  Id. at 22.  Judge Bea reasoned that “whether or not the class is certified is usually the most important ruling in such a case; once a class is certified, plaintiffs who brought claims of even dubious validity can extract an ‘in terrorem’ settlement from innocent defendants who fear the massive losses they face upon an adverse jury verdict.”  Id. at 31 (citing AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1752 (2011)).  He pointed out that “[i]n light of the minimal costs of filing a class complaint, an obvious strategy suggests itself: keep filing the class action complaint with different named plaintiffs until some judge, somewhere, grants the motion to certify.  So long as such a decision is reached while the plaintiffs who have not yet filed are numerous enough to justify class treatment, the plaintiffs will have a certified class that they can use to extract an in terrorem settlement.”  Id. at 32.

Balancing this concern against Smith v. Bayer Corp., 131 S.Ct. 2368 (2011), in which the Supreme Court held that individuals who are not before a district court cannot be bound by its judgment, Judge Bea asserted that there was a need to create a rule that would provide district courts “a way to clear their dockets of questionable successive class certification requests, while ensuring that putative class members who have unearthed new evidence or new law in favor of certification, or clear error in the earlier ruling, not be foreclosed by the failed efforts of their predecessors.”  Id. at 34.  He therefore proposed adopting a rule whereby there would be “a presumption of correctness to earlier denials of certification that can be rebutted by a showing of changed factual or legal circumstances, or earlier clear error.”  Id.  Judge Bea then applied this rule and held that the district court erred in dismissing the class claims in Baker because there had been a change in the law after the case the district court in Baker relied upon was decided.  Id. at 36.

Implications For Employers

While not a workplace class action, this ruling provides employers with a potential argument to combat successive class or collective actions.  Even though the principle of comity between different federal district courts has not yet been adopted – or rejected – by the federal circuits, it has been adopted by the American Law Institute and endorsed by Judge Bea of the Ninth Circuit.  In addition, Judge Bea’s excellent analysis of why comity should be adopted should prove helpful for employers crafting their own arguments encouraging courts apply the principle.  With this argument now available, we expect the issue to be decided in one of the federal courts of appeal in the near future.  Stay tuned.