High Court Signals Defeat for Xbox 360 Gamers

WASHINGTON (CN) – A group of gamers trying to hold Microsoft liable for their scratched-up Xbox 360 discs may have run out of lives Tuesday at Supreme Court oral argument.

With the gaming landscape dominated by Xbox Ones for the past four years, the case before the high court this morning involves a decade-old debate about what causes scratched discs. Microsoft blames the phenomenon on user mishandling, but gamers say it is defective consoles that scuff up their discs after even the slightest disturbance.

When gamers failed to win class certification in the first round of scratched-disc litigation, a federal judge cited precedent from a case against Land Rover.

Round II of scratched-disc litigation erupted shortly after the Land Rover ruling was overturned on appeal. Five gamers led by a man named Seth Baker filed suit against Microsoft in Washington, but the trial court denied them certification as well, again relying on the Land Rover precedent.

When the Ninth Circuit declined to hear the appeal, the gamers sidestepped the procedure by dismissing their case with prejudice and then appealing from that.

Microsoft balked at the manipulation of jurisdiction, but the Ninth Circuit sided with the gamers, finding that the rejection of their class claims was an abuse of discretion.

A footnote of the ruling notes finds the interim appeal “explicitly allowed” under Federal Rule of Civil Procedure 23(f).

The Supreme Court signaled otherwise, however, Tuesday

“This device seems to be just a way to get around Rule 23(f),” Justice Ruth Bader Ginsburg said.

The rule at issue, as noted in the Ninth Circuit’s ruling “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.”

Microsoft’s attorney Jeffrey Fisher urged the justices to block what he called a blatant attempt to unravel the Supreme Court’s 1978 rejection of the so-called “death-knell doctrine.”

Expounding on this in his brief to the court, the Stanford Law School attorney argued that the doctrine invites an unending cycle of “protracted litigation and piecemeal appeals.”

Fisher told the justices that the plaintiffs plaintiffs should not be allowed to dismiss their case just to appeal it.

“If they believe in their case, they should go forward,” Fisher said. “The district judge might reconsider his view. The plaintiffs might want to repackage the way they’re making their arguments, whether it’s certification of the class or the particular claims they’re bringing. If that fails, they should go ahead, maybe motions practice will end the case.”

The justices seemed swayed by this argument, questioning the wisdom of allowing plaintiffs to give up their cases in the hopes of winning technical victories before a court even digs into the merits of the case.

“An order cannot be final unless it defeats everything you ask for,” Justice Samuel Alito said. “So any possibility that you would get attorney’s fees or an incentive award or anything else, if you are keeping that still on the table, if that is still on the table, then the order isn’t final I would say.”

Fisher said the system of leaving class-certifications appeals to the discretion of an appeals court while the underlying case goes forward is best to move litigation along, while still protecting small plaintiffs seeking class actions.

But Peter Stris, an attorney for the gamers with the Los Angeles firm Stris Maher, emphasized the small payoffs at stake for plaintiffs like Baker.

When an appeals court decides not to hear an appeal of a lower court’s class-certification decision, that effectively kills the case.

He said the plaintiffs are still taking on great risk by asking for a dismissal, essentially “betting” their case on the narrow question of class certification.

“Our theory is that we’re entitled to litigate on a class basis – of course, if we satisfy Rule 23,” Stris said. “And so our theory is that when the class allegations were stricken, we were deprived of that substantial right.”

The Supreme Court rejected the “death knell” doctrine in its 1978 decision Coopers & Lybrand v. Livesay.

Fisher struck a chord with the court in arguing that the committee behind the Federal Rules of Civil Procedure adopted 23(f) to give plaintiffs better footing after Livesay.

Justice Ruth Bader Ginsburg said: ”If the rule makers wanted to have these class-action decisions go up on appeal as of right, they could have made it, or asked Congress to make it, one of the interlocutory orders that is immediately appealable, like a preliminary injunction.”

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