Anderson Living Trust v. WPX Energy Production , 904 F.3d 1135 ( 2018 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS September 21, 2018
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
THE ANDERSON LIVING TRUST, f/k/a
The James H. Anderson Living Trust;
ROBERT WESTFALL; MINNIE
PATTON SCHOLARSHIP
FOUNDATION TRUST,
Plaintiffs - Appellants,
and
THE PRITCHETT LIVING TRUST;
CYNTHIA W. SADLER; LEE WILEY
MONCRIEF 1988 TRUST; KELLY COX
TESTAMENTARY TRUST 7/1238401;
SWMF PROPERTIES, INC.,
Plaintiffs,
v. No. 17-2029
WPX ENERGY PRODUCTION, LLC,
f/k/a WPX Energy San Juan, LLC and
Williams Production Company, LLC;
WPX ENERGY ROCKY MOUNTAIN,
LLC, f/k/a Williams Production RMT
Company, LLC,
Defendants - Appellees.
_________________________________
Appeal from the United States District Court
for the District of New Mexico
(D.C. No. 1:12-CV-00040-JB-WPL)
_________________________________
Bradley Brickell, Brickell & Associates, P.C., Norman, Oklahoma, for Plaintiffs-
Appellants.
Mark F. Sheridan, Holland & Hart LLP, Santa Fe, NM, (Stephen G. Masciocchi, Denver,
CO, and Robert J. Sutphin, Jr., with him on the briefs), for Defendants-Appellees.
_________________________________
Before BRISCOE, HARTZ, and PHILLIPS, Circuit Judges.
_________________________________
PHILLIPS, Circuit Judge.
_________________________________
In this case, we address the immediate appealability of a district court’s denial
of class certification. The named plaintiffs are the Anderson Living Trust (formerly
known as the James H. Anderson Living Trust), Robert Westfall, and the Minnie
Patton Scholarship Foundation Trust (collectively, the Trusts),1 and the defendants
are WPX Energy, Inc., and two of its subsidiaries (collectively, WPX).
Two years after the district court denied class certification, the parties settled
the Trusts’ individual claims. After settling, the parties jointly asked the court to
enter a stipulated judgment dismissing with prejudice the Trusts’ individual claims,
and the court did so. In the judgment, the Trusts reserved any right they may have to
appeal the district court’s class-certification denial. The Trusts now appeal that
denial, contending that the class-certification order merged with the stipulated
judgment dismissing their individual claims, resulting in a final, appealable order
under 28 U.S.C. § 1291.
1
The Pritchett Living Trust, Cynthia W. Sadler, the Lee Wiley Moncrief 1988
Trust, the Kelly Cox Testamentary Trust 7/1238401, and SWMF Properties, Inc.
were also named plaintiffs. But they haven’t joined this appeal.
2
Relying on Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), we hold that we
lack statutory appellate jurisdiction to review the district court’s order denying class
certification. Voluntarily dismissing the Trusts’ individual claims with prejudice after
settling them doesn’t convert the class-certification denial—an inherently
interlocutory order—into a final decision under 28 U.S.C. § 1291. We dismiss this
appeal.2
BACKGROUND
The Trusts and more than 1,000 putative class members (as lessors), and WPX
(as lessee), are signatories to 507 separate gas leases covering 3,157 gas wells in the
San Juan Basin—2,889 in New Mexico and 268 in Colorado. WPX holds the working
interests in these leases, entitling it to develop and produce the hydrocarbons beneath
the leased land. For their part, the Trusts and putative class members retain royalty
interests, overriding royalty interests, or both, in the hydrocarbons produced.3
On December 5, 2011, the Trusts filed a putative class action against WPX in
New Mexico state court, alleging seven claims: (1) that WPX underpaid royalties and
2
We deny the Trusts’ motion to certify to the New Mexico Supreme Court the
question “whether the marketable condition rule applies to private royalty leases and
overriding royalty instruments in New Mexico.” Appellants’ Mot. to Certify at 4; see
also Anaconda Minerals Co. v. Stoller Chemical Co., 990 F.2d 1175, 1177 (10th Cir.
1993) (“The Court will certify only questions which are both unsettled and
dispositive.”).
3
A royalty interest in a gas lease is a real-property interest that vests when the
developer extracts the gas. An overriding royalty interest is different. It is created by
an assignment of the lessee’s interest and bears no relationship to the lessor’s royalty
interest.
3
overriding royalties; (2) that WPX committed fraud, misstated the value of the
hydrocarbons, and wrongly participated in affiliate sales;4 (3) that WPX breached its
duty to market the hydrocarbons developed from the leases; (4) that WPX violated
the New Mexico Oil and Gas Proceeds Payment Act; (5) that WPX breached the
lease contracts by acting in bad faith; (6) that WPX unjustly enriched itself; and (7)
that WPX converted the Trusts’ and putative class members’ royalties and overriding
royalties. WPX removed the case to the United States District Court for the District
of New Mexico.
Two years into the litigation, the Trusts moved to certify their claims as a class
action. Among the issues the Trusts sought to certify were these two: (1) whether
WPX, under the terms of the leases, should be paying royalties and overriding
royalties to the Trusts and putative class members based on “the price WPX and its
affiliates received in the first arm’s length sale . . . from the hydrocarbons produced
and sold from their wells” and (2) whether WPX, under the terms of the leases, could
pay royalties to the Trusts and putative class members based on an index value “when
WPX and its affiliates receive[d] a higher value for said hydrocarbons.”5 Appellants’
App. vol. 3 at 657 ¶¶ 5, 7. WPX opposed the motion. On March 19, 2015, the district
4
WPX allegedly transfers title to the hydrocarbons it produces on the leased
land to two of its affiliate companies for a contracted “price” (though no money ever
changes hands)—an alleged affiliate “sale”—before selling the hydrocarbons to
unaffiliated companies (arms-length sales).
5
The industry considers the index value to be the “market value” for the
hydrocarbons at the time and location of delivery. Appellants’ App. vol. 7 at
1629:24–1630:2.
4
court declined to certify the class. The Trusts filed a Motion to Reconsider, which the
court also denied.
Four months later, the Trusts filed a Fifth Amended Complaint, alleging an
additional class claim: that WPX had breached its duty to sell the Trusts’ and putative
class members’ hydrocarbons at the highest obtainable price and to pay them
royalties and overriding royalties based on that price. Citing Fed. R. Civ. P.
23(d)(1)(D), WPX moved to strike the Fifth Amended Complaint’s class allegations
bearing on the new claim—the duty to sell the hydrocarbons at the highest obtainable
price—arguing that the court had already denied class certification. But, noting that
the Trusts hadn’t asserted this highest-obtainable-price claim in their first
certification motion, the court refused to strike the class allegations based on this
additional claim. The district court said the Trusts could move to certify the new
claim.6
Instead of moving to certify this additional class claim, the Trusts settled with
WPX. The parties jointly moved to enter a stipulated judgment dismissing the Trusts’
individual claims, advising that “[a]ll Plaintiffs’ claims for relief alleged in this
Action are hereby dismissed with prejudice pursuant to the settlement between the
parties.” Appellants’ App. vol. 11 at 2836 ¶ 1. In the judgment, the Trusts reserved
“any rights [they] may have to appeal the Court’s Order . . . denying their motion for
class certification, including the Court’s denial of Plaintiffs’ motion for
6
The Trusts never moved to certify the highest-obtainable-price claim, and
that claim is not part of this appeal.
5
reconsideration thereof.” Id. at 2836–37 ¶ 2. A month later, the Trusts appealed the
orders denying class certification and reconsideration.
After oral argument in the Trusts’ appeal, we ordered supplemental briefing on
whether we have jurisdiction to decide the appeal. In our order, we observed that
“[i]n Microsoft Corp. v. Baker, 137 S. Ct. 1702, 1711 (2017), the majority opinion
identified some of the options the Baker plaintiffs had other than voluntarily
dismissing their claims with prejudice.” Suppl. Br. Order at 1. As one option, the
Baker majority listed the settlement of the named plaintiffs’ individual claims—the
option that the Trusts chose here. Baker, 137 S. Ct. at 1711. So we asked each party
to file a brief answering the following questions:
1. Did the plaintiffs in the present case settle their individual claims for
full and fair value?
2. If so, how does that affect this court’s jurisdiction under 28 U.S.C.
§ 1291 to hear the present appeal under Baker?
3. Even if fully and fairly settling their individual claims would give this
court jurisdiction under 28 U.S.C. § 1291, would this court still lack
jurisdiction under Article III of the United States Constitution’s case-or-
controversy requirement?
Suppl. Br. Order at 1–2.
The parties timely submitted their briefs. The Trusts contend (1) that the parties
settled for full and fair value; (2) that we have jurisdiction under 28 U.S.C. § 1291 to
review their appeal without transgressing Baker; and (3) that we have Article III
jurisdiction to review their appeal. WPX disputes the Trusts’ claims, arguing (1) that
whether the settlement figure constituted full and fair value for the Trusts’ individual
6
claims can’t be determined; (2) that Baker establishes that we have no statutory appellate
jurisdiction under § 1291; and (3) that we lack Article III jurisdiction over the Trusts’
appeal.
DISCUSSION
We first consider the options available to named plaintiffs seeking appellate
review of orders denying class certification. Next, we examine the Supreme Court’s
Baker decision. Finally, we apply Baker’s framework to the Trusts’ attempted § 1291
appeal to determine whether we have jurisdiction.
A. Options to Appeal Adverse Class-Certification Orders
Named plaintiffs seeking appellate review of an order denying class
certification have three options. See Baker, 137 S. Ct. at 1709, 1711. First, they may
litigate “their individual claims on the merits to final judgment,” and then appeal the
order denying class certification under 28 U.S.C. § 1291. Id. at 1706. Section 1291
provides appellate jurisdiction from “final decisions of the district courts.” 28 U.S.C.
§ 1291. “A ‘final decision’ is one which ends the litigation on the merits and leaves
nothing for the court to do but execute the judgment.” Catlin v. United States, 324
U.S. 229, 233 (1945) (citing St. Louis, I.M. & S. Ry. Co. v. S. Express Co., 108 U.S.
24, 28 (1883)).
This finality principle precludes immediate review of interlocutory orders,
such as class-certification orders, unless Congress provides otherwise. See Mohawk
Indus., Inc., v. Carpenter, 558 U.S. 100, 106 (2009) (noting that, to preserve § 1291’s
finality principle, only a small class of collateral rulings are immediately appealable);
7
see also Vallario v. Vandehey, 554 F.3d 1259, 1261 (10th Cir. 2009) (noting that no
appeal of right exists for an adverse class-certification order). The principle thus
guards against “piecemeal, prejudgment appeals,” which “undermine[] ‘efficient
judicial administration’ and encroach[] upon the prerogatives of district court judges,
who play a ‘special role’ in managing ongoing litigation.” Mohawk Indus., 558 U.S.
at 106 (quoting Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374 (1981)).
Preventing such appeals thus preserves “a healthy legal system.” Baker, 137 S. Ct. at
1715 (quoting Cobbledick v. United States, 309 U.S. 323, 326 (1940)). And § 1291’s
general prohibition of interlocutory appeals of class-certification orders aligns with
this goal. See id. at 1712, 1715.
Second, named plaintiffs may pursue an interlocutory appeal under 28 U.S.C.
§ 1292(b)’s two-step process. Id. at 1711. Section 1292(b) permits interlocutory
appeals (1) if the district-court judge certifies that the interlocutory order involves “a
controlling question of law as to which there is substantial ground for difference of
opinion and that an immediate appeal . . . may materially advance the ultimate
termination of the litigation” and (2) if the court of appeals “permit[s] [the] appeal to
be taken.” 28 U.S.C. § 1292(b).
Third, they may petition the court of appeals for review under Fed. R. Civ. P.
23(f). Baker, 137 S. Ct. at 1709. Rule 23(f) gives courts of appeals unfettered
discretion to “permit an appeal from an order granting or denying class-action
certification.” Fed. R. Civ. P. 23(f). And a court of appeals may grant an appeal “on
the basis of any consideration that [it] finds persuasive.” Fed. R. Civ. P. 23(f)
8
advisory committee’s note to 1998 amendment. The advisory committee anticipated
that “[t]he courts of appeals w[ould] develop standards for granting review.” Id. It
also predicted that appellate courts would “most likely” grant permission in two
instances: “when the certification decision turns on a novel or unsettled question of
law, or when, as a practical matter, the decision on certification is likely dispositive
of the litigation.” Id.
The rules committee adopted Rule 23(f) after the Supreme Court, in Coopers
& Lybrand v. Livesay,7 struck down the “‘death-knell’ doctrine.” Baker, 137 S. Ct. at
1707, 1709. The death-knell doctrine had allowed a named plaintiff to appeal an
order denying class certification under § 1291 if the denial was “likely to sound the
‘death knell’ of the litigation.” Coopers & Lybrand, 437 U.S. at 469. But the
Supreme Court determined that orders appealed under the doctrine don’t satisfy
§ 1291’s finality requirement. Id. at 477.
“After Coopers & Lybrand, a party seeking immediate review of an adverse
class-certification order had no easy recourse.” Baker, 137 S. Ct. at 1708. So the civil
rules advisory committee drafted, and the Supreme Court approved, Rule 23(f). Id. at
1709. Noting that “[a] grant or denial of [class] certification can ‘make or break’ the
litigation, and the need for review at times will be greatest in situations that are least
likely to lead to district-court certification,” the rule’s drafters gave the courts of
appeals broad discretion, independent of the district courts, to entertain class-
7
437 U.S. 463, 476 (1978), superseded by rule as stated in Baker, 137 S. Ct.
at 1708–09.
9
certification appeals. Judicial Conference of the U.S., Advisory Comm. on Civil
Rules, Minutes of Nov. 9–10, 1995. But because an absolute right to appeal class-
certification orders “would lead to abuse,” the drafters gave no such right. Id. After
all, they reasoned, “[a]ppeals in such cases are likely to do little more than increase
delay and expense.” Id. The drafters anticipated “that permission to appeal, although
discretionary in the court of appeals, [would] rarely be given.” Id.
B. Microsoft Corp. v. Baker
Forty years after Coopers & Lybrand, the Supreme Court decided Baker. In
Baker, the named plaintiffs had filed a putative class action against Microsoft
alleging that its videogame console, the Xbox 360, scratched game discs during play.
137 S. Ct. at 1710. The named plaintiffs sought class certification, but the district
court struck their class allegations. Id. As a matter of comity, the district court
concluded that a previous certification denial by the same federal district court in a
separate case concerning the same putative class controlled its certification decision.
Id. The named plaintiffs attempted to secure immediate appellate review of the
district court’s decision to strike their class allegations by petitioning the Ninth
Circuit under Rule 23(f). Id. at 1711. But that court refused to hear their appeal. Id.
Returning to their menu of appellate options, the named plaintiffs attempted to
obtain a final judgment under 28 U.S.C. § 1291. Id. But they took a novel approach.
Rather than incurring the expense and delay of litigating the case on the merits to
final judgment, they moved voluntarily to dismiss their individual claims with
prejudice. Id. But they reserved what they contended was their right to appeal the
10
order striking their class allegations. Id. Microsoft stipulated to the dismissal but
maintained that the named plaintiffs couldn’t appeal the district-court order striking
their class allegations. Id. After considering the named plaintiffs’ request, the district
court entered a final judgment dismissing their individual claims. Id. The named
plaintiffs then appealed from that final judgment under § 1291, contesting only the
district court’s striking of their class allegations—not the final order dismissing their
individual claims. See id. On appeal, the Ninth Circuit held that it had Article III
jurisdiction over the named plaintiffs’ class-certification appeal because, absent a
settlement, the parties remained adverse. Baker v. Microsoft Corp., 797 F.3d 607, 612
(9th Cir. 2015), rev’d, 137 S. Ct. 1702.
The Supreme Court granted certiorari in Baker to resolve this question: “Do
federal courts of appeals have jurisdiction under § 1291 and Article III of the
Constitution to review an order denying class certification (or, as here, an order
striking class allegations) after the named plaintiffs have voluntarily dismissed their
claims with prejudice?” Baker, 137 S. Ct. at 1712. Avoiding the constitutional issue,
the Court answered no under § 1291.8 Id. The Supreme Court identified three
drawbacks to what it characterized as the named plaintiffs’ “voluntary-dismissal
tactic.” Id. at 1713.
8
A three-justice minority concluded that the named plaintiffs’ appeal qualified
as a final decision under 28 U.S.C. § 1291 but that the Court lacked Article III
jurisdiction to hear the appeal. Baker, 137 S. Ct. at 1715–16 (Thomas, J. concurring,
joined by Roberts, C.J., and Alito, J.).
11
First, the Court said the voluntary-dismissal tactic would invite “protracted
litigation and piecemeal appeals.” Id. The Court rejected the named plaintiffs’
contention that the voluntary-dismissal tactic would promote efficiency. Id. at 1713–
14. The Court warned that because “class certification often leads to a hefty
settlement,” “plaintiffs with weak merits claims may readily assume [the] risk” of
“losing their claims for good” to appeal as of right the district court’s refusal to
certify a proposed class. Id. at 1713 (quoting Br. for Resp’ts at 35–36) (citing
Coopers & Lybrand, 437 U.S. at 476). And named plaintiffs employing the tactic
may “exercise that option more than once, stopping and starting the district court
proceedings with repeated interlocutory appeals.” Id. (citing Coopers & Lybrand, 437
U.S. at 474).
Second, the Court said that the tactic would “undercut[] Rule 23(f)’s
discretionary regime” by creating a means to obtain an appeal as of right for class-
certification denials. Id. at 1714. The tactic would allow named plaintiffs to
“altogether bypass Rule 23(f) [and] force an appeal by dismissing their claims with
prejudice.” Id. The rule’s drafters “studied the data on class-certification rulings and
appeals, weighed various proposals, received public comment, and refined the draft
rule.” Id. (citing Michael E. Solimine & Christine Oliver Hines, Deciding to Decide:
Class Action Certification and Interlocutory Review by the United States Courts of
Appeals Under Rule 23(f), 41 Wm. & Mary L. Rev. 1531, 1564–66 & nn. 178–89,
and Fed. Judicial Ctr., T. Willging, L. Hooper, & R. Niemic, Empirical Study of
Class Actions in Four Federal District Courts: Final Report to the Advisory
12
Committee on Civil Rules 86, 80–87 (1996)). Their study yielded “a ‘measured,
practical solutio[n]’”: Rule 23(f). Id. (alteration in original) (quoting Mohawk Indus.,
558 U.S. at 114). Allowing named plaintiffs to bypass Rule 23(f) would run contrary
to the intent of the rule drafters, who settled when courts may permit interlocutory
appeals of adverse certification orders. Id. So the Court rejected any runarounds of
Rule 23(f), observing that “[i]t is not the prerogative of litigants or federal courts to
disturb [the rule drafters’] settlement.” Id. at 1715.
Third, the tactic’s “one-sidedness” would give the named plaintiffs an
unfair advantage, “permit[ting] plaintiffs only, never defendants, to force an
immediate appeal of an adverse certification ruling.” Id. And “[y]et the ‘class
issue’ may be just as important to defendants, for ‘[a]n order granting
certification . . . may force a defendant to settle rather than . . . run the risk of
potentially ruinous liability.’” Id. (second alteration in original) (citation
omitted) (quoting Coopers & Lybrand, 437 U.S. at 476, and Fed. R. Civ. P.
23(f) advisory committee’s note to 1998 amendment).
Because of these drawbacks to the voluntary-dismissal tactic, the Court
determined that a judgment obtained through this sleight of hand doesn’t “qualify as
a ‘final decision’ within the compass of § 1291.” Id. at 1707. So though the Baker
named plaintiffs created a final judgment under § 1291 in a “technical” sense by
voluntarily dismissing their individual claims with prejudice, the Court determined
that “practical” considerations—namely, § 1291’s finality principle and preserving
13
Rule 23(f)’s balanced solution—precluded appellate jurisdiction. Id. at 1712 (quoting
Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 171 (1974)).
C. Application of Baker
Like the named plaintiffs in Baker, the Trusts seek appellate review under
§ 1291 of an order denying class certification. But unlike the named plaintiffs in
Baker, the Trusts didn’t act unilaterally—they first settled their individual claims
against WPX for consideration, and then voluntarily dismissed their claims with
prejudice. Emphasizing this distinction, the Trusts contend that Baker doesn’t control
this case. The settlement, they claim, puts them “in no different posture than had they
litigated their claims to a positive, final judgment by jury trial.” Appellants’ Suppl.
Br. at 7. Guided by Baker’s three-drawback framework, we disagree.9
1. Protracted Litigation and Piecemeal Appeals
First, as in Baker, the danger of protracted litigation and piecemeal appeals
remains even when named plaintiffs have settled their individual claims. If we
sanction the settlement approach, named plaintiffs who settle their individual claims
would have a right to appeal earlier denials of class certification under § 1291. If
those named plaintiffs so appeal, and the appeals court then reverses and remands the
district court’s order denying class certification, the district court might decline to
9
Because 28 U.S.C. § 1291 doesn’t “countenance jurisdiction by these means,
we do not reach the constitutional question”—whether we have Article III
jurisdiction to review an order denying class certification after the named plaintiffs
settle their individual claims and then voluntarily dismiss them with prejudice. Baker,
137 S. Ct. at 1712.
14
certify the class “on a different ground.” See Baker, 137 S. Ct. at 1713. The named
plaintiffs could then seek a second piecemeal appeal. The settlement approach would
thus bring with it the “stopping and starting [of] the district court proceedings with
repeated” piecemeal interlocutory appeals, as does the voluntary-dismissal tactic. See
id.
2. Rule 23(f)’s Discretionary Appellate-Review Regime
Second, like the Baker named plaintiffs’ voluntary-dismissal tactic, the Trusts’
settlement approach would disturb Rule 23(f)’s discretionary appellate-review
regime. Baker, 137 S. Ct. at 1714. In Baker, the Supreme Court warned that
sanctioning the voluntary-dismissal tactic by granting jurisdiction would let plaintiffs
“altogether bypass Rule 23(f).” Id. Here, the Trusts tried to do just that, and they did
so purposefully, admitting in their reply brief that “[g]iven the uncertain and tenuous
nature of a request for permissive appeal under [Rule] 23(f), the only absolute right
to seek this Court’s review of the denial of class certification [was] following a final
judgment under 28 U.S.C. § 1291.” Appellants’ Reply Br. at 8 (emphasis removed).
But Rule 23(f)’s drafters intended appellate review to be discretionary with the courts
of appeals. Judicial Conference of the U.S., Advisory Comm. on Civil Rules, Minutes
of Nov. 9–10, 1995.
Nevertheless, the Trusts contend that Rule 23(f) is irrelevant to their class-
certification appeal because the post-settlement stipulated judgment dismissing their
individual claims “fulfills the requirements of a final decision under 28 U.S.C.
§ 1291.” Appellants’ Suppl. Br. at 6. The Baker named plaintiffs made a similar
15
claim. They argued that their appeal technically complied with § 1291 because it
involved “an actual final judgment,” not an interlocutory order from which they
could petition a court of appeals under Rule 23(f). Baker, 137 S. Ct. at 1714 (quoting
Br. for Resp’ts at 26, 28). So, the Baker named plaintiffs reasoned, Rule 23(f) didn’t
apply and the Ninth Circuit had jurisdiction over their appeal under § 1291. Id.
But the Supreme Court rejected the Baker named plaintiffs’ “technical[ly]”
compliant § 1291 appeal. Id. at 1712 (quoting Eisen, 417 U.S. at 171). It did so
because there, appellate review would have sanctioned the voluntary-dismissal tactic,
and that tactic wouldn’t further a healthy legal system. Id. at 1714–15. So, too, have
the Trusts presented us a technically compliant final judgment under § 1291 that fails
to preserve Rule 23(f)’s discretionary-review regime and thus doesn’t further a
healthy legal system. By contrast, a hypothetical plaintiff who litigates her claims on
the merits to final judgment isn’t circumventing Rule 23(f) with a low-risk, high-
reward strategy that taxes § 1291’s finality requirement, so our jurisdiction follows.
3. One-Sidedness
Third, the Trusts’ settlement approach, like the voluntary-dismissal tactic,
gives plaintiffs the advantage. See id. at 1715. Defendants enjoy no symmetrical right
to settle named plaintiffs’ individual claims and then appeal a class-certification
grant.10 Once the district court grants certification, “the entire class is the actual
10
Coopers & Lybrand explained the need for symmetrical opportunities
for plaintiffs and defendants to appeal adverse class-certification orders:
16
plaintiff.” Erwin Chemerinsky, Federal Jurisdiction 155 (7th ed. 2016). But “[c]lass
members that have already settled their claims prior to [a] class action settlement
are . . . no longer class members . . . .” 4 William B. Rubenstein, Newberg on Class
Actions § 13:23 (5th ed. 2018). So when named plaintiffs settle their individual
claims before a class settlement, they forego their class-member status and their
interests become “divorce[d]” from the class. Muro v. Target Corp., 580 F.3d 485,
491 (7th Cir. 2009). And that divorce means that an interlocutory order granting class
certification wouldn’t merge into a stipulated final judgment disposing of the
formerly named plaintiffs’, now non-class members’, individually settled claims. Cf.
West v. Capitol Fed. Sav. and Loan Assoc., 558 F.2d 977, 980 (10th Cir. 1977)
(noting that an order denying class certification merges into a final judgment,
The class issue—whether to certify, and if so, how large the class
should be—will often be of critical importance to defendants as well [as
plaintiffs]. Certification of a large class may so increase the defendant’s
potential damages liability and litigation costs that he may find it
economically prudent to settle and to abandon a meritorious defense.
Yet the Courts of Appeals have correctly concluded that orders granting
class certification are interlocutory.
437 U.S. at 476 (emphases added); see also Baker, 137 S. Ct. at 1715 (“Respondents’
theory permits plaintiffs only, never defendants, to force an immediate appeal of an
adverse certification ruling.” (emphasis added)); Tr. of Oral Arg. at 23:16–20,
Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017) (No. 15-457) (“[D]efendants [are]
being forced to undergo a tactic that it [sic] does not have when the converse is the
case. In other words, where there’s a grant of class certification, defendants have no
way to manufacture an automatic right to appeal.” (emphasis added)); Br. for Pet’rs
at 28–29, Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017) (No. 15-457) (“‘[T]he
class issue . . . will often be of critical importance to defendants . . . .’ Yet just like
the death-knell doctrine, the voluntary dismissal tactic ignores the symmetrical
impacts of class certification decisions . . . . This one-way ratchet distorts litigation
and settlement incentives in these high-stakes cases.” (emphasis added) (citations
omitted) (quoting Coopers & Lybrand, 437 U.S. at 476)).
17
rendering the class-certification denial reviewable) (citing Monarch Asphalt Sales
Co. v. Wilshire Oil Co. of Tex., 511 F.2d 1073, 1077 (1975)). So the asymmetry of
the Trusts’ settlement approach reinforces our conclusion that it doesn’t support
appellate jurisdiction under § 1291. See Baker, 137 S. Ct. at 1715 (quoting Coopers
& Lybrand, 437 U.S. at 476).
Litigation on the merits to final judgment, though, doesn’t create the same
lopsided opportunities as the Baker named plaintiffs’ voluntary-dismissal tactic and
the Trusts’ settlement approach. Unlike settling, litigating on the merits to final
judgment and then appealing under § 1291 provides symmetrical opportunities to
plaintiffs and defendants. Then, dissatisfied named plaintiffs or dissatisfied
defendants can appeal an adverse certification order.
Similarly, Rule 23(f) provides symmetrical appeal opportunities for thwarted
named plaintiffs and thwarted defendants. We have found it “generally appropriate”
to grant a Rule 23(f) petition from a class-certification grant when “a defendant’s
potential liability [is] so enormous that settlement ‘becomes the only prudent
course.’” Vallario, 554 F.3d at 1263 (quoting Carpenter v. Boeing Co., 456 F.3d
1183, 1189 (10th Cir. 2006)). Likewise, we have found it “generally appropriate” to
grant Rule 23(f) petitions of class-certification denials “where the high costs of
litigation grossly exceed an individual plaintiff’s potential damages, [and] the denial
of class certification sounds the death knell of that plaintiff’s claims.” Id. So
plaintiffs and defendants can both seek relief from an adverse class certification order
under Rule 23(f).
18
And whatever differences may exist between permitting a plaintiff to force an
immediate appeal of an adverse certification order versus permitting a defendant to
do the same, balancing those differences is a “question[] of policy for Congress.”
Baker, 137 S. Ct. at 1715 (quoting Coopers & Lybrand, 437 U.S. at 476). For now,
Congress has chosen “the rulemaking process to settle the matter, and the rulemakers
did so by adopting Rule 23(f)’s evenhanded prescription.” Id. We won’t disturb that
settlement.
D. Options Available to the Trusts Post-Baker
The Trusts argue that “no alternative existed” to dismissing their claims with
prejudice once the district court denied their class-certification motion. Appellants’
Reply Br. at 8. This is untrue. They had four options—though only three created a
path to appellate review. Their choices included: (1) “settl[ing] their individual
claims;” (2) seeking district-court certification of the interlocutory class-certification
order and then this court’s permission to appeal that order under 28 U.S.C. § 1292(b);
(3) petitioning for interlocutory review of the class-certification order under Rule
23(f); or (4) litigating on the merits to final judgment and then appealing under 28
U.S.C. § 1291. Baker, 137 S. Ct. at 1709, 1711. They chose option one, which creates
no path to appellate review. We can’t widen the scope of § 1291’s final-judgment
rule and extend “appellate review of interlocutory orders not covered by statute” to
include the Trusts’ settlement approach. Id. at 1714. Any changes must “come from
rulemaking, . . . not judicial decisions in particular controversies or inventive
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litigation ploys.” Id. (citing Swint v. Chambers Cty. Comm’n, 514 U.S. 35, 48
(1995)).
Finding daylight between the Baker named plaintiffs’ voluntary-dismissal
tactic and the Trusts’ settlement approach requires splitting hairs. Voluntary
dismissal is functionally a settlement for nothing. That the Trusts managed to procure
a price for the dismissal of their individual claims is simply a new take on the old
voluntary-dismissal tactic. The Trusts can’t turn the district court’s class-certification
denial, an “inherently interlocutory” order, into a final, appealable order within the
compass of 28 U.S.C. § 1291 by settling their individual claims. Id. at 1707 (quoting
Coopers & Lybrand, 437 U.S. at 470). To hold otherwise would disrupt Rule 23(f)’s
careful calibration.11
CONCLUSION
For the reasons above, we dismiss this appeal for lack of jurisdiction. We deny the
Trusts’ motion to certify. We grant WPX’s motion for leave to file the settlement
agreement in support of their response to the Trusts’ motion to certify, deny WPX’s
11
We acknowledge that the Ninth Circuit has reached a different conclusion in
an analogous case, Brown v. Cinemark USA, Inc., 876 F.3d 1199, 1201 (9th Cir.
2017). In Brown, after the district court denied class certification, the named
plaintiffs, like the Trusts here, sought to appeal the class-certification denial as of
right under 28 U.S.C. § 1291. 876 F.3d at 1200–01. The Ninth Circuit permitted this.
Id. at 1201. That court distinguished Baker from Brown based on the difference
between settling claims for consideration and voluntarily dismissing them. Id. Unlike
the Brown court, we apply Baker’s three-drawback framework to decide our appeal.
For us, this leads to a different outcome.
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motion to file a sur-reply to the Trusts’ reply brief, and we deny the Trusts’ motion for
leave to file a reply to WPX’s response to the Trusts’ Rule 28(j) letter.
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