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Xbox Class Action Will Finally Get Some Play Time in SCOTUS

By Casey C. Sullivan, Esq. on March 15, 2017 6:57 AM

Well over a year after cert was granted, a dispute over Microsoft's Xbox video game console will finally be heard in the Supreme Court. The Supreme Court agreed to take up the case way back in January of 2016. But the dispute, which involves disgruntled gamers, scratched game discs, and civil procedure roadblocks in class action cases, has languished untouched since then. That is, until this upcoming Tuesday, when the parties will argue before the Court.

There's more at stake than just video games, of course. The case could settle a significant circuit split over the appealability of class certification decisions.

Up, Up, Down, Down, Left, Right, Left, Right, B, A, Your Honor

The case, Microsoft Corp. v. Baker, started after seven Xbox 360 owners sued Microsoft in a putative class action, alleging that the Xbox's disc drive was defective and "unable to withstand even the smallest of vibrations," resulting in scratches to their game disks.

The scratched discs aren't the issue in the Supreme Court case, however, but some gamey legal maneuvering is. When the district court refused to certify the class, the plaintiffs stipulated to dismiss the case with prejudice. The move was an attempt to work around the Supreme Court's 1978 Coopers & Lybrand v. Livesay.

There, the Supreme Court ruled that a denial of class certification didn't create the finality necessary for appellate review. Plaintiffs may pursue a discretionary appeal under Federal Rule of Civil Procedure 23(f), but if the appeal isn't granted (and it wasn't here), plaintiffs are largely out of luck. A stipulated dismissal, then, can create the finality needed to appeal.

Your Final Decision Is in Another Castle?

The strategy is controversial, but not entirely uncommon. It's the approach plaintiffs used here, winning the approval of the Ninth Circuit. But circuits are split 5-2 over whether such dismissals create a sufficient adverse and final judgment. Both the Ninth and Second Circuits have allowed the strategy; the Third, Fourth, Seventh, Tenth, and Eleventh Circuits have rejected it. Microsoft's appeal marks the first time the Supreme Court will tackle the issue directly.

Microsoft argues that such voluntary dismissals "cannot be squared with Livesay." Further, the tactic essentially undermines the policy determination expressed in Rule 23(f). Finally, the conditional nature of the dismissal precludes finality. If the plaintiffs' individual claims can be revived later, "then this case is exactly like Livesay in every way that matters," the company says.

The Xbox plaintiffs, with plaintiff Seth Baker at the helm, argue that Microsoft relies entirely on "misguided and misdirected" policy arguments and that its position "would frustrate the efficient resolution of disputes." All final judgments are reviewable, whether their finality was through stipulated voluntary dismissal or not, they claim. "The relevant question is not how a judgment became final," they argue, "but whether it is final."

Depending on how oral arguments go on Tuesday, this could be "game over" for the plaintiffs, or just one more level in a long-running match.

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