Due to Intervening Change in Law, Ninth Circuit Allows Plaintiffs Another Opportunity to Pursue Class Claims After They Voluntarily Dismissed Their Claims with Prejudice

King & Spalding

The Ninth Circuit recently clarified what standard applies when a party seeks relief from judgment under Rule 60(b). In so doing, the court allowed two plaintiffs who had previously voluntarily dismissed their class action claims with prejudice another chance to bring their claims due to what plaintiffs claimed was an intervening change in the law.

  • In Henson v. Fidelity National Financial, the plaintiffs originally sued Fidelity for alleged violations of the Real Estate Settlement Procedures Act, alleging that Fidelity received kickbacks from overnight delivery companies in exchange for referring its escrow customers to those vendors.
  • The plaintiffs moved for class certification, which the court denied, finding that individual issues would predominate. Plaintiffs then voluntarily dismissed their action to seek an immediate appeal of the adverse class certification ruling, relying on settled Ninth Circuit precedent providing that a stipulated voluntary dismissal of a class action was a sufficiently adverse final order to confer non-discretionary appellate jurisdiction to review the district court’s denial of class certification.
  • While the plaintiffs’ appeal was pending, the U.S. Supreme Court decided Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), which held that plaintiffs in putative class actions cannot transform an interlocutory order into an appealable final judgment by voluntarily dismissing their claims with prejudice. According to the Court, a contrary ruling would undermine 28 U.S.C. § 1291’s “firm finality principle” and subvert Rule 23(f), which gives appellate courts discretion to permit an interlocutory appeal of a class certification order. In so holding, the Supreme Court reversed the Ninth Circuit’s rule.
  • After the Microsoft ruling, Fidelity moved to dismiss the plaintiffs’ appeal. The Ninth Circuit denied the motion and remanded the case to the district court so the parties could first seek appropriate relief there. Plaintiffs then moved to vacate their prior dismissal pursuant to Fed. R. Civ. P. 60(b)(6), contending that Microsoft was an intervening change in the law that entitled them to relief.
  • The district court denied the plaintiffs’ Rule 60(b) motion and the plaintiffs appealed. On appeal, the Ninth Circuit reversed, holding that the district court erred in applying the factors relevant to a Rule 60(b)(6) analysis.
    • Specifically, the Court held that district courts must consider six factors in determining whether to grant relief from a final judgment due to an intervening change in the law: (1) the nature of the intervening change in the law; (2) the petitioner’s exercise of diligence in pursuing his claim for relief; (3) whether granting the relief sought would upset the parties’ interest in the finality of the case; (4) the delay between the finality of the judgment and the Rule 60(b) motion for relief; (5) the closeness of the relationship between the decision resulting in the original judgment and the subsequent decision that represents a change in the law; and (6) concerns of comity. In addition to these six factors, district courts should consider other relevant circumstances in deciding whether to grant Rule 60(b) relief.
  • After analyzing the six factors, the Ninth Circuit concluded that “all the relevant circumstances … heavily tip the scale in favor of granting Rule 60(b)(6) relief,” and reversed the district court’s denial of the plaintiffs’ Rule 60(b) motion, allowing the plaintiffs another opportunity to pursue their claims against Fidelity.
  • The court’s analysis largely turned on the plaintiffs’ legitimate reliance on the Ninth’s Circuit’s settled law at the time they stipulated to the dismissal—and before the Supreme Court granted certiorari in Microsoft—and the inequities that would result if their provisional dismissal (which was intended to facilitate appeal) were converted into an irrevocable dismissal. Moreover, the court found that traditional “finality” interests were largely illusory in this scenario, as “Fidelity could not reasonably have believed that the dismissal was immutably final.”

Read the Ninth Circuit’s opinion here.

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King & Spalding

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