Class-Actions: Plaintiffs cannot use voluntary-dismissal tactic to appeal adverse ruling on class certification
The U.S. Supreme Court has ruled that plaintiffs may not voluntarily dismiss their class action lawsuit “with prejudice” in order to immediately appeal the denial of class certification, while simultaneously reserving the right to re-file their claim if the appellate court ruled in favor of certification. Microsoft Corp. v. Baker, No. 15-457 (June 12, 2017).
The U.S. Court of Appeals for the Ninth Circuit had sided with the plaintiffs and held that, “in the absence of a settlement, a stipulation that leads to a dismissal with prejudice does not destroy the adversity in that judgment necessary to support an appeal” of a class certification denial. The Supreme Court unanimously rejected the Ninth Circuit’s reasoning, and reversed and remanded the case.
Writing for a court majority, Justice Ruth Bader Ginsburg stressed that the final judgment rule (now codified in 28 U.S.C. § 1291) preserves the proper balance between trial and appellate courts, minimizes harassment and delay that would result from repeated interlocutory appeals, and promotes the efficient administration of justice. The majority found that plaintiffs’ voluntary-dismissal tactic did not give rise to a “final decision” under § 1291 because the tactic:
- “invites protracted litigation and piecemeal appeals” that undermine the final judgment rule and the process Congress established for refining that rule and for determining when non-final orders may be immediately appealed;
- severely subverts Rule 23(f)’s careful calibration regarding class certification and class action litigation;
- permits only plaintiffs (and never defendants) to force an immediate appeal of an adverse certification ruling; and
- encourages plaintiffs with weak claims to dismiss their cases and immediately appeal, in the hopes of obtaining additional settlement leverage.
Because the appellate court lacked jurisdiction under § 1291, the case was reversed and remanded.
The concurrence, led by Justice Clarence Thomas, agreed with the majority that the Court of Appeals lacked jurisdiction over the plaintiffs’ appeal, but would have grounded that conclusion in Article III of the Constitution and the fact that the plaintiffs’ voluntary dismissal with prejudice ended any case and controversy between the parties.
While this decision is not surprising, a different outcome would have had severe consequences for companies defending against class actions.
Immigration: Gender-based distinctions in immigration law violate equal protection
The Supreme Court also ruled unanimously that a federal citizenship statute setting different residency requirements for U.S. citizen fathers and mothers seeking to transmit birthright citizenship to their non-marital children born outside the U.S. violates the Equal Protection Clause of the Constitution. Sessions v. Morales-Santana, No. 15-1191 (June 12, 2017).
In this case, the plaintiff sought to avoid deportation by arguing that he would be considered a U.S. citizen if the Immigration and Nationality Act (“INA”) treated men and women equally. At the time of the plaintiff’s birth, the INA provided that a child born outside the U.S. to one U.S. citizen parent is a U.S. citizen, provided that the U.S. citizen parent lived in the U.S. for at least 10 years, and five of those years were after the age of 14. However, 8 U.S.C. § 1409(c) made an exception for unwed U.S. citizen mothers, requiring that they only live in the U.S. for one year after the age of 14.
The Court agreed that § 1409(c) made unconstitutional distinctions based on gender. It said that “[p]rescribing one rule for mothers, another for fathers” is unconstitutional unless there is an “exceedingly persuasive justification.” The Court found no such justification, opining that the disparate rules had been based on stereotypical assumptions about women’s roles as caregivers. The Court then struck § 1409(c) as unconstitutional, rejecting the plaintiff’s invitation to force the general rule to conform with the exception, as inconsistent with Congress’ intent when passing the INA. As a result, the plaintiff won the legal argument, but failed to benefit from it.
Thousands of individuals born outside of the U.S. prior to 1986 to unwed U.S.-citizen fathers might have been granted U.S. citizenship if the U.S. Supreme Court had decided differently.
ERISA: Pension Plans of Religiously Affiliated Organizations are Exempt from ERISA
Reversing several appellate court decisions, the Supreme Court again unanimously ruled that “church plan” exemption under the Employee Retirement Income Security Act applies to pension plans maintained by church-affiliated organizations such as healthcare facilities, even if the plans were not established by a church. Advocate Health Care Network v. Stapleton, No. 16-74 (June 5, 2017).
The plaintiffs in these cases argued that, under ERISA, a plan only qualified as a “church plan” if it was created by a church. The defendant healthcare employers, countered that, under a 1980 amendment, their plans are “church plans” and exempt from ERISA’s strict reporting, disclosure, and funding obligations They also argued that the plans had received confirmation from the IRS over the years that their plans qualified for the exemption, even though the plans were created by hospitals and not churches, because of the entities’ religious affiliation.
Siding with defendants, the Court found the 1980 amendment expanded the “church plan” exemption to include pensions maintained by “principal-purpose” organizations.
Whether an organization is a “principal-purpose” organization may be the subject of future litigation. For now, however, religiously affiliated organizations are not subject to the strict requirements under ERISA.
Arbitration Agreements: A contract like any other
In Kindred Nursing Centers Limited Partnership, et al. v. Clark, et al., 137 S. Ct. 1421 (2017), the U.S. Supreme Court held that the Kentucky Supreme Court violated the Federal Arbitration Act when it refused to enforce arbitration agreements that agents with powers of attorney had executed on behalf of their elderly relative.
It held the Kentucky Supreme Court’s insistence that a power of attorney clearly state, and “specifically” include, the power to execute binding arbitration agreements in order for the arbitration agreement to be enforceable, violated the FAA’s equal-treatment provisions by discriminating against arbitration agreements and holding them to a higher standard than other kinds of contracts and agreements. The decision was 7-1.
For additional information, see http://www.jacksonlewis.com/publication/us-supreme-court-round-2016-2017.