Ninth Circuit Underscores The Importance Of Carefully Crafting Class Action Settlements

Matthew Peck
March 6, 2018

In Brown v. Cinemark USA, Inc., 876 F.3d 1199 (9th Cir. 2017), the Ninth Circuit considered an issue of first impression: whether it had jurisdiction to consider an appeal of an order denying class certification where the individual plaintiffs seeking to represent the class settled their individual claims.

In Brown, Plaintiffs Silken Brown and Mario De La Rosa filed a class action complaint against Defendants Cinemark USA, Inc. and Century Theater, Inc. alleging various wage and hour claims.  The Defendants removed the case to federal court, where it was then consolidated with similar pending actions.

The district court dismissed the Plaintiffs’ direct wage statement claim and denied certification of Plaintiffs’ meal and rest break, reporting pay, off the clock work, derivative wage statement, and direct wage statement claims. Defendants then moved for summary judgment on the remaining individual claims, and the district court issued a tentative ruling granting in part and denying in part the motion.  Thereafter, the parties stipulated to the tentative ruling and settled the Plaintiffs’ remaining individual claims.  Importantly, the settlement agreement reserved the Plaintiffs’ rights to challenge the district court’s ruling denying certification of the Plaintiffs’ direct wage claim and dismissing Brown’s direct wage statement claim.

Plaintiffs appealed the issues reserved by the parties’ settlement agreement to the Ninth Circuit. On appeal, Defendants argued that the Ninth Circuit lacked jurisdiction under 28 U.S.C. § 1291 to consider an appeal of the district court’s interlocutory judgment in light of the Supreme Court’s decision in Microsoft Corp. v. Baker, 582 U.S. ____, 137 S.Ct. 1702, 198 L.Ed.2d 132 (2017).¹ The Ninth Circuit distinguished Baker, first noting that appeal pursuant to terms of the parties’ settlement agreement did not raise the same concerns as the voluntary dismissal in Baker because, unlike the Baker plaintiffs, the Brown Plaintiffs continued litigating their remaining individual claims following denial of certification.  Moreover, in stark contrast to Baker, no facts before the Circuit suggested that the Brown Plaintiffs engaged in “sham tactics” to achieve an appealable final judgment because the appeal resulted—not from a unilateral dismissal of claims—but pursuant to the terms of a bargained-for settlement  between the parties, which expressly preserved certain claims for appeal.  That is, Plaintiffs did not “openly intend[] to sidestep Rule 23(f) when they voluntarily dismissed their  claims.”

As a result, the Ninth Circuit concluded that it had jurisdiction under 28 U.S.C. § 1291 to consider the class certification ruling in Brown on the merits.  By contrast, in Bobbit v. Milberg, ____ Fed.Appx. ____, 2018 WL 654157, at *1 (9th Cir., Feb. 1, 2018), the Circuit ruled, on remand from the Supreme Court, that Baker compelled it to dismiss for want of jurisdiction an appeal of a ruling denying class certification where the individual plaintiffs had stipulated to voluntary dismissal of their personal claims and allowed another party to intervene for the purpose of pursuing the appeal. In contrast to Brown, the plaintiffs did not agree to preserve any claims for appeal.

The clear lesson is that settlements of individual claims in the class action context must be carefully drafted to avoid the creation of avenues to appellate relief that might otherwise be unavailable.


¹ In Baker, the district court denied class certification, and the appellate court declined discretionary interlocutory review of that denial.  The plaintiffs then voluntarily dismissed their own claims to create an appealable final judgment.  The Supreme Court ruled that the voluntary dismissal did not qualify as a “final decision” and noted that approval of such tactics would undermine 28 U.S.C. § 1291’s firm finality principal which is “designed to guard against piecemeal appeals, and subvert the balanced solution Rule 23(f) put in place for immediate review of class-action orders.”