Lead Opinion
Order; Opinion by Judge RAWLINSON; Concurrence by Judge BEA.
ORDER
The slip opinion dated March 18, 2015 [
Page 11 [
Our decision in Huey v. Teledyne, Inc.,608 F.2d 1234 (9th Cir.1979), is not to the contrary. There, putative class plaintiff Huey’s motion for class certification was denied in the district court. Id. at 1236. Subsequently, Huey’s individual action was called for trial, but Huey made no appearance; accordingly,the district court dismissed Huey’s action for want of prosecution. Id. Huey attempted to appeal the denial of class certification, but this court explained that it lacked jurisdiction over the appeal. We explained that the strong policy of giving trial judges the ability “to achieve the orderly and expeditious disposition of cases” meant that plaintiffs who had failed to prosecute their claims lost the ability to appeal the denial of class certification. Id. at 1239 (quoting Sullivan v. Pacific Indem. Co.,566 F.2d 444 , 445-46 (3rd Cir.1977)).
However, Huey does not control here. Unlike that proceeding, Baker did not fail to appear before the district court after the class action allegations were struck. In fact, Baker stipulated to dismiss his individual claim, giving up a*609 valuable right in the process. Our cases recognize that a stipulated dismissal of an individual claim is an adverse and appealable final judgment, Berger [v. Home Depot USA ], 741 F.3d [1061] at 1065 [ (9th Cir.2014) ], as does a leading treatise. See 7B Charles Allan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice & Procedure § 1802 (3d ed.2005).
With this amendment, Judges Rawlinson and Bea voted, and Judge Hawkins recommended, to deny the Petition for En Banc Rehearing.
The full court has been advised of the Petition for En Banc Rehearing, and no judge of the court has requested a vote.
Microsoft Corporation’s Petition for En Banc Rehearing, filed on April 1, 2015, is DENIED. No farther petitions for rehearing or rehearing en banc will be accepted.
OPINION
Plaintiffs, a putative class of owners of Microsoft Corporation’s (Microsoft) Xbox 360® video game console (Xbox), appeal from the stipulated dismissal with prejudice of their lawsuit and from the order striking their class allegations. In striking the class allegations, the district court deferred to an earlier class certification denial order involving a similar putative class. See Baker v. Microsoft Corp.,
I. BACKGROUND
This case involves an alleged design defect in the Xbox console that gouges game discs. See Baker,
A. Scratched Disc Litigation
In 2007, other Xbox owners sued Microsoft, alleging claims similar to those asserted in this case. These cases were consolidated before United States District Judge John Coughenour. See Scratched Disc Litig.,
Judge Coughenour relied heavily on the reasoning from another district court decision, Gable v. Land Rover N. Am., Inc., No. CV07-0376,
In Scratched Disc Litigation, Judge Coughenour reasoned that, like the Land Rover owners in Gable, most Xbox owners have not experienced the purported defect. See Scratched Disc Litig.,
Judge Coughenour rejected the Xbox plaintiffs’ attempt to distinguish Gable on the basis that the design defect existed in every Xbox console and could only stem from one cause, whereas in Gable “only a fraction of the proposed class members had actually experienced the defect and because misalignment could have many different causes.” Id. Judge Coughenour observed that the Xbox plaintiffs and the Gable plaintiffs both asserted a defect involving a common design flaw. The circumstance that prevented class certification in both cases was the lack of uniform manifestation of the acknowledged design flaw. See id.
Although the district court in Gable refrained from engaging in an exhaustive causation analysis, Judge Coughenour nevertheless cited Gable for the notion that individual issues of causation predominate because differing causes may have produced the same defect. See id. According to Judge Coughenour, “[Ejven if one link of [the causation] chain is a design defect, the other links are unique to each plaintiff and require individual attention.... ” Id. The required individual attention to issues of law and fact ruled out class certification. See id.
B. Wolin Decision
Ten months after dismissal of Scratched Disc Litigation, we reversed the Gable decision upon which Judge Coughenour had so heavily relied in denying class certification. See Wolin,
[W]e rejected] Land Rover’s suggestion that automobile defect cases can categorically never be certified as a class. Gable and Wolin assert[ed] that the defect exists in the alignment geometry, not in the tires, that Land Rover failed to reveal material facts in violation of consumer protection laws, and that Land Rover was unjustly enriched when it sold a defective vehicle. All of these allegations are susceptible to proof by generalized evidence.
Id.
Land Rover also asserted that the claims of plaintiffs Gable and Wolin were not typical because the wear on their tires was not attributable to misalignment. See id. at 1175. We were not persuaded to this view because Land Rover failed to identify any defenses that were unique to Gable and Wolin. See id. We decided that regardless of when the premature tire wear was experienced, the fact remained that all class members at some point experienced the same injury due to the same defect. The timing of the defect affected the amount of damages, not the appropriateness of class certification. See id. In sum, we held that the requirement of typicality “can be satisfied despite different factual circumstances surtounding the manifestation of the defect.” Id. (citation omitted). We concluded that Gable, Wo-lin, and the other class members could have a viable claim against Land Rover regardless of how the defect manifested in the individual vehicles. See id. We ruled that the asserted alignment defect, the asserted violation of warranty, and the asserted unjust enrichment due to the lessened value of the vehicles were “issues common to all class members ...” Id. at 1176.
The district court in this case determined that our ruling in Wolin did not undermine the causation analysis articulated in Scratched Disc Litigation, and that comity required deferral to the earlier certification order. See Baker,
Plaintiffs initially petitioned for an interlocutory appeal, which was denied. The parties subsequently stipulated to dismiss the case with prejudice, and the district court approved the stipulation. Plaintiffs timely appealed.
A. Jurisdiction
Microsoft contends that we lack jurisdiction'to consider this appeal because the voluntary dismissal with prejudice did not create appellate jurisdiction. Because jurisdiction is a threshold issue, we resolve this matter before addressing the merits. See Maya v. Centex Corp.,
Microsoft takes the position that a voluntary dismissal with prejudice does not sufficiently affect the merits of the substantive claims to constitute an appealable final judgment.
As this case did not involve a settlement, Berger establishes that “[w]e have jurisdiction under 28 U.S.C. § 1291 because a dismissal of an action with prejudice, even when such dismissal is the product of a stipulation, is a sufficiently adverse — -and thus appealable — final decision.” Id.
B. Striking of Class Action Allegations From The Complaint
Judge Martinez struck the Xbox Plaintiffs’ class action allegations from the complaint based largely on Judge Cough-enour’s finding in Scratched Disc Litigation that individual issues of causation predominated in that earlier Xbox defect case.
Judge Martinez cited Judge Coughen-our’s description of the causation analysis in Gable for the notion that individual issues of causation predominated in this case. He observed that Judge Coughen-our found persuasive the analysis in Gable discussing alternative causes of tire defect manifestation, and that Judge Coughenour followed that reasoning in determining that individual issues of causation predominated in Scratched Disc Litigation. See id. at 1279. Judge Martinez’s order applied this same causation analysis to reach his conclusion that “[t]he discs at issue in this case are analogous to the tires at issue in GablefWolin because, as Judge Cough-enour recognized, both products may be damaged for any number of reasons ...” Id. This discussion reveals that Judge Martinez relied heavily on Gable for its causation analysis.
Judge Martinez determined that “nothing in Wolin undermines Judge Coughen-our’s causation analysis ...” Id. at 1280. However, our reading of Wolin leads to a different conclusion. In Wolin, we expressly and specifically rejected the notion that individual manifestations of the defect precluded resolution of the claims on a class-wide basis. We held that “[although individual factors may affect premature tire wear, they do not affect whether the vehicles were sold with-an alignment defect.”
Whether the alignment geometry was defective, whether Land Rover violated its Limited Warranty for defects within the vehicle, and whether Land Rover was unjustly enriched because consumers’ vehicles are worth less due to the defect are issues common to all class members and can be litigated together....
Id. at 1176.
Similarly in this case, although individual factors may affect the timing and extent of the disc scratching, they do not affect whether the Xboxes were sold with a defective disc system. Plaintiffs contend that (1) whether the Xbox is defectively designed and (2) whether such design defect breaches an express or an implied warranty are both issues capable of common proof. We agree that, as in Wolin, these issues are susceptible to proof by generalized evidence and do not require proof of individual causation. See id. at 1172-74,1176.
Among the common questions identified under the warranty claims are:
i. The existence of any express warranties made by Microsoft concerning the Xbox 360; •
ii. The application of any such express warranties to the claims asserted in this action;
*614 iii. Whether Microsoft has breached any of its express warranties, as alleged herein;
iv. The existence of any implied warranties made by Microsoft concerning the Xbox 360;
v. The application of any such implied warranties to the claims asserted in this action;
vi. Whether Microsoft has breached any of its implied warranties, as alleged herein; ...
Microsoft contends that plaintiffs’ express warranty claim is not amenable to class treatment because individual proof of causation is necessary to determine if there was a breach of its express warranty. According to Microsoft, like the Tire Warranty at issue in Wolin, a determination of whether the allegedly defective Xbox disc system caused a given disc to scratch requires proof specific to that class member. However, this analogy is inapt because plaintiffs’ position is that the design- defect itself breaches the express warranty.
The most that can be said of the holding in Wolin that would be of assistance to Microsoft is our recognition that “early tire wear cases may be particularly problematic for plaintiffs seeking class certification ...” Id. at 1173 (emphasis added). Nevertheless, in that case, we “reject[ed] Land Rover’s suggestion that automobile defect cases can categorically never be certified as a class.” Id. In Wolin, plaintiffs alleged the existence of a design defect, Land Rover’s failure to reveal material facts and Land Rover’s unjust enrichment due to the sale of defective vehicles. See id. We held that these allegations were “susceptible to proof by generalized evidence. Although individual factors may affect premature tire wear, they [did] not affect whether the vehicles were sold with an alignment defect.” Id.
Similarly, proof that the allegedly defective disc system caused individual damages is not necessary to determine whether the existence of the alleged design defect breaches Microsoft’s express warranty. Rather, plaintiffs’ breach of express warranty claim presents a common factual question — is there a defect? — and a common mixed question of law and fact — does that defect breach the express warranty? We conclude, as we did in Wolin, that the district court erred in finding that individual issues of causation predominate over these common questions. See id.
Microsoft attempts to further distinguish Wolin by arguing that, unlike the vehicles in Wolin, with their “duck-footed” tires that inevitably caused uneven, premature tire wear, the defect here may never manifest. Microsoft contends that it proved in the Scratched Disc Litigation that the alleged defect does not manifest in the vast majority of Xboxes. However, we debunked this argument in Wolin by referencing the rule from Blackie,
' What Microsoft is really arguing is that plaintiffs cannot prevail on the merits. See id. However, Microsoft’s merits-based contention has no place in the determination of whether an action may proceed on a class-wide basis. When the district court relied on Gable to conduct this merits-based analysis, see Baker,
Microsoft next argues that, “unlike the Wolin plaintiffs — who alleged the alignment defect made their luxury vehicles ‘worth less,’ ... — Plaintiffs neither claimed the alleged defect made Xbox 360 consoles worth less nor offered common evidence of damage or loss to the proposed
In a footnote, Microsoft also suggests that individual issues of state warranty law predominate for implied warranty claims. However, Microsoft has not identified any material differences in the applicable state implied warranty laws that would require an individualized inquiry regarding the commonly asserted defect. Indeed, Microsoft noted in its appellate brief the similarity among the implied warranty statutes in Washington, California, Illinois, New York and Michigan.
Finally, Microsoft seeks to characterize plaintiffs’ class action allegations as proceeding on the theory that Wolin created a per se rule requiring class certification of defect claims. Microsoft’s contention is premature and misses the mark. As an initial matter, in Wolin we did not adopt a per se rule requiring class certification of defect claims. Indeed, the converse is true. Rather than adopting a per se rule, we simply rejected Land Rover’s suggestion that we should categorically decline to certify classes in automobile defect cases. See Wolin,
We express no opinion on whether the specific common issues identified in this case are amenable to adjudication by way of a class action, or whether plaintiffs should prevail on a motion for class certification if such a motion is filed. We hold only that the district court committed an error of law and abused its discretion when it struck the class action allegations from the complaint in contravention of applicable Ninth Circuit precedent.
III. CONCLUSION
We conclude that we have jurisdiction over this appeal despite the parties’ stipulation to dismiss the case following the district court’s ruling striking the class action allegations. We hold that our decision in Wolin is controlling, and the district court’s decision striking the class
REVERSED and REMANDED for further proceedings consistent with this opinion.
Notes
. In particular, the plaintiffs contended that the front of each of the vehicle’s rear tires was farther out from the center line than the back of each tire, a condition the district court described as "duck-footed.” Gable,
. Courts have grappled with the balance between preventing repeated frivolous efforts to certify a class and preserving due process rights. See, e.g., In re Bridgestone/Firestone, Inc., Tires Products Liab. Litig.,
. Microsoft also contends that because the Plaintiffs unsuccessfully moved for interlocutory appeal under Rule 23(f), they must litigate the merits of their claims to final judgment to obtain appellate review. However, Microsoft has not presented a principled basis for this proposed distinction between the present case and Berger.
. Our decision in Huey v. Teledyne, Inc.,
However, Huey does not control here. Unlike that proceeding, Baker did not fail to appear before the district court after the class action allegations were struck. In fact, Baker stipulated to dismiss his individual claim, giving up a valuable right in the process. Our cases recognize that a stipulated dismissal of an individual claim is an adverse and appeal-able final judgment, Berger,
. Although no circuit has adopted the ALI rule since its publication in 2010 (nor did the Supreme Court endorse it in Smith), the district court misapplied the rule by relying on the wrong legal standard. The district court gave a presumption of correctness to Judge Coughenour’s prior ruling, but improperly determined that a change in law (our decision in Wolin) did not rebut the presumption. In other words, assuming arguendo the validity of the ALI rule, the district court's misreading of the prior ruling rendered application of the presumption of comity an abuse of discretion. See United States v. Hinkson,
Concurrence Opinion
concurring in the result:
This case presents an important question of first impression in the federal courts of appeal: What principles should guide a federal district court’s application of comity to a fellow district court’s earlier denial of class certification, when addressing a later motion for class certification by a similar class of plaintiffs? The parties asked this question of Judge Martinez in the district court, who answered (“[i]n the absence of any specific guidance” from our court) by adopting the American Legal Institute’s (“ALI”) suggestion that the earlier denial of class certification be accorded a rebuttable presumption of correctness. Baker v. Microsoft Corp.,
I believe our court owes it to district courts to give them the guidance which Judge Martinez found, quite correctly, was absent. Moreover, I respectfully disagree with the majority opinion’s assertion that this case can be decided on the “narrower and more well established ground” that Judge Martinez erred in basing his ruling on the tire defect cases. Maj. Op. at 615 n. 5 (citing Gable v. Land Rover North America, Inc.,
I. Background
First, a brief history of this action may be helpful to bring focus. In Gable,
A year later, District Judge Coughenour in In re Microsoft Xbox §60 Scratched
In 2010, the Ninth Circuit reversed Gable’s determination of the predominance question. We held the common question whether a defect existed in the wheel alignment predominated over the individual question of the manifestation of the defective wheel alignment through uneven tire wear.
The Supreme Court had recently held that federal district courts are expected “to apply principles of comity to each other’s class certification decisions when addressing a common dispute.” Smith v. Bayer, — U.S. -,
Was Judge Martinez’s application of comity correct? As I have noted, this is a question of first impression in this circuit, and a difficult one. And it puts the wrong question in this case to assert, as the majority does, that Judge Martinez misconstrued this court’s opinion in Wolin.
There is no governing precedent from the Supreme Court or from our court discussing application of principles of comity to orders of denials of class certification entered by district courts in cases involving similar class claims. But the notion of comity between federal district courts under federal common law is not new to our circuit.
Indeed, as Judge Martinez noted, comity between federal district courts in this circuit has long encompassed decisions by the courts designed to promote the smooth workings of the federal judiciary and to avoid the embarrassment of inconsistent results. Baker,
Since the recognition and application of comity to courts’ earlier decisions is a matter of federal common law, and no Supreme Court precedent guides our inquiry, this court has discretion to craft the rules of federal district court comity it thinks should apply. Since Judge Martinez’s de-
II. A Framework for Comity
I suggest the following framework for district courts faced with earlier class certification denials for the same or similar plaintiff classes. First, a district court that is faced with the earlier ruling of another district court denying class certification for a similar putative class should adopt as a rebuttable presumption that the litigation is not amenable to class action treatment.
A. An Earlier Denial of Certification of a Similar Class Should Give Rise to a Rebuttable Presumption That the Litigation is Not Amenable To Class Treatment
The basic posture of this case is not new: a defendant faces a putative class of plaintiffs, but there is substantial uncertainty as to whether the putative class will be able to satisfy Federal Rule of Procedure 23’s requirements for class treatment. As the Supreme Court has recognized, the decision 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. See, e.g., AT & T Mobility LLC v. Concepcion,
Thus, plaintiffs counsel need not present meritorious claims to achieve victory; they need obtain only a favorable class certification ruling. In 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
If in terrorem settlements are bad, du-plicative lawsuits employed to extract such a settlement are worse. It is no surprise, then, that appellate courts have long been trying to solve this problem. One solution was put forth by the Seventh Circuit in In re Bridgestone/Firestone, Inc. Tires Products Liability Litigation,
However, the Supreme Court abrogated Bridgestone/Firestone in Smith v. Bayer. Bayer,
•Thus, two principles guide application of comity in this context. First, a district court cannot treat an earlier denial of certification of class status to a similar plaintiff class as conclusive proof that the subject matter is not amenable to class treatment. Bayer,
In light of the need to distinguish between legitimate and illegitimate successive class certification request, 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, makes sense. . First, the district court is justified as a matter of. procedure in assuming that the earlier denial of certification was correct; if it was not, plaintiffs in the earlier action could have pursued an interlocutory appeal
In particular, when there has been a change in the law governing whether a matter is amenable to class treatment — as there was in the Range Rover wheel alignment case — that should be grounds for rebutting the presumption in favor of the earlier ruling which was based on abrogated law and which denied class certification. This is because there are pro-class action policy arguments that we should not ignore. In particular, class actions are an important way of resolving so-called “negative value claims”; that is, claims that are legitimate, but cost too much to litigate individually. Thus, denying class certification to claims that can be treated in the aggregate is equivalent to denying those claims on the merits. When the law has changed to recognize those claims as amenable to aggregate treatment, applying that change to give the new plaintiff an opportunity to represent the class makes sense. Moreover, since the change in the law has recognized a claim that would not otherwise have been viable, this is not a “second bite at the apple” of the sort animating claim preclusion principles. Instead, the change in the law has presented a different apple.
B. A Decision Which Applies Comity’s Presumption of Correct Denial of Certification Should Be Reviewed on an Abuse of Discretion Standard
It is settled law that the decision to apply principles of comity is discretionary, not mandatory. Bird v. Glacier Elec. Coop., Inc.,
Since the district court’s choice to apply principles of comity is discretionary, an abuse of discretion standard of review should be applied. Moreover, I see no justification for a less stringent standard of
III. This Case
Applying the framework enunciated above, I conclude that the rebuttable presumption that individual issues predominated over class-wide issues was rebutted here.
At the first step, Judge Martinez correctly applied comity’s rebuttable presumption in favor of Judge Coughenour’s earlier denial of class certification. At the second step, however, the district court erred by finding that Wolin was not a change in law that rebutted the presumption in favor of the earlier denial of class certification. The district court made this mistake because it misunderstood the grounds of Judge Coughenour’s earlier denial of class certification.
Judge Martinez concluded that the presumption had not been rebutted because the Gable/Wolin Land Rover litigation was distinguishable from the scratched disc litigation. However, the language he quoted from Judge Coughenour’s earlier denial was language justifying Judge Coughen-our’s conclusion that Gable could not be distinguished from the X-Box scratch case. In re Microsoft Xbox 360 Scratched Disc Litigation,
Thus, Judge Martinez abused his discretion by granting comity deference to an earlier denial of class certification despite an intervening change in the law that should have rebutted the presumption in favor of that denial. Notably, Microsoft made no argument in the district court in support of the motion to strike other than reliance on comity; its arguments about the propriety of class treatment in this ease were only to justify the “alternative relief’ of denial of certification. Since the district court has not yet opined on whether plaintiffs’ class should be certified, I agree that this issue should remain open on remand, where defendants will be free to renew their motion to deny certification.
IV. Conclusion
Our court should not misconstrue the district court rulings it reviews, and it should give guidance to district courts who face difficult questions of law. As the majority opinion does not satisfy either of
. See infra footnote 5 and accompanying text.
. Gable v. Land Rover North America, Inc.,
. The Ninth Circuit reversed under a different name. Wolin v. Jaguar Land Rover North Am., LLC,
. See ER 45 (making the comity argument as to the motion to strike, then arguing that “In the Alternative, the Court Should Deny Certification of Plaintiffs' Proposed Classes.”). Certification raises issues and procedures quite different from a motion to, strike, and defendants were unambiguous in relying on the comity argument alone for their motion to strike. Plaintiffs replied that “comity does not apply” because Wolin was an intervening change in law; as the ALI explains, the comity presumption of correctness is rebutted "when the basis for an earlier denial ... is no longer present.” Dkt. 23 at 17 (citing Am. Law. Inst., Principles of the Law of Aggregate Litigation § 2.11 cmt. c. (2010)).
.I agree that Judge Martinez misunderstood Wolin. See Part III, infra. He did not see Wolin as a change in the law, despite Judge Coughenour's reliance on the decision Wolin
. The more common federal comity case occurs when a federal district court declines jurisdiction over a case on the grounds that an action relating to the same subject matter has already been commenced in another district. The first-to-file rule is technically an abdication by the district court; if subject matter jurisdiction exists, the second court is not required by any constitutional principle to desist. It does so for the unremarkable reason that the public interest' — conservation of judicial resources and minimization of the risk of inconsistent decisions — is better served by so doing.
. Thus, I would have the district court presented with a motion to strike class allegations, as in this case, give comity deference to an earlier ruling on class certification as to similar class claims.
. Different named plaintiffs would be required because the original named plaintiff, as party to the suit, would be precluded from relitigating the matter. See Taylor v. Sturgell,
. An interlocutory appeal of this order is explicitly allowed under Federal Rule of Civil Procedure 23(f), which allows circuit courts to permit an immediate appeal from the denial of class certification "if a petition for permission to appeal is filed with the circuit clerk within 14 days" of the denial.
. Or, as in this case, plaintiffs could voluntarily dismiss their claims with prejudice and appeal as of right. I concur with the opinion’s jurisdictional and standing analysis based on Berger, so it is common ground that plaintiffs have created proper appellate jurisdiction in this manner.
. My suggestion balances the finality value of a definitive ruling in defendants' favor with the danger of an erroneous first denial of class certification curtailing legitimate claims by allowing the second district court to engage in clear-error review of the first court's ruling.
. Plaintiffs in this case allege that a rebutta-ble presumption serves to unduly constrain district court discretion. But discretion does not mean unbounded discretion, and the policy arguments against duplicative class actions recognized by the Supreme Court in Smith v. Bayer require some restrictions on the discretion' of district courts to certify a class.