Until 2017, in the Ninth Circuit, plaintiffs could voluntarily dismiss their claims in order to appeal lower court rulings. The plaintiffs in Henson v. Fidelity National Financial, Inc. did just that, entering into a negotiated stipulation of dismissal so they could appeal, in part, the denial of class certification.
During the pendency of the appeal, however, the U.S. Supreme Court held in Microsoft Corp. v. Baker that “[p]laintiffs in putative class actions cannot transform a tentative interlocutory order into a final judgment . . . simply by dismissing their claims with prejudice—subject, no less, to the right to ‘revive’ those claims if the denial of class certification is reversed on appeal.”
In so holding, the Supreme Court reversed the Ninth Circuit rule relied on by the Henson plaintiffs. Ultimately, the U.S. Court of Appeals for the Ninth Circuit found that the Henson plaintiffs should have been granted relief under Federal Rule of Civil Procedure 60(b)(6). ABA Section of Litigation leaders found the court’s analysis surprising and advise litigators to proceed with caution when relying on circuit precedent.
After the Microsoft decision, the circuit court sua sponte remanded the appeal in Henson “to allow the parties to seek appropriate relief in the district court in the first instance.” On remand, the plaintiffs sought to vacate the prior dismissal under Rule 60(b)(6), which allows courts to grant relief from a final judgment for “any . . . reason that justifies relief.” The district court analyzed the Rule 60(b)(6) factors laid out in Phelps v. Alameida although the Ninth Circuit had not previously ruled on whether those factors applied outside the habeas corpus context. Ultimately, the district court denied the Rule 60(b)(6) motion, and the parties found themselves before the Ninth Circuit again.
The appellate court also considered the Phelps factors but found that, “correctly analyzed,” those factors “heavily tip[ped] the scale in favor of granting Rule 60(b)(6) relief.” The court reversed and remanded for further proceedings.
While the Federal Rules are often viewed as predictable, the appellate court’s decision was somewhat unusual. “I was struck by the fact that the court acknowledged this is an abuse of discretion standard and then went through its own analysis of the six Phelps factors,” says Thomas J. Donlon, Stamford, CT, Section of Litigation Division III cochair for Amicus Curiae Briefs and vice-chair of the Section’s Appellate Practice Committee. “The appellate court really did not give much credence at all to the supposed discretion of the district court,” he adds.
Instead, “what the appellate court is saying is that not allowing relief in this case is just unfair,” Donlon explains.
Litigants should now be on alert that “the six non-exhaustive Phelps factors for evaluating relief under Rule 60(b)(6) are not limited to habeas corpus cases—they apply to all civil cases generally,” says Mary-Christine “M.C.” Sungaila, cochair of the Section’s Appellate Practice Committee. While Rule 60(b)(6) “by its terms is designed to be evaluated on a case-by-case basis, in general a case qualifying for Rule 60(b)(6) relief should satisfy all of the Phelps factors, or as many of them as possible,” she explains.
A second takeaway is that “the analysis under Rule 60(b)(6) is not limited to the six Phelps factors,” Sungaila adds. Rather, “other circumstances may be relevant to whether relief from a final judgment is justified, and litigants should not feel themselves strapped to a ‘rigid’ analysis of the six factors,” she says.
In Donlon’s view, however, “the only real value of the Henson case going forward is in the Ninth Circuit itself.” Within that jurisdiction, it “clarifies that the six Phelps factors are going to be applied outside the habeas context,” he adds. Going forward, Ninth Circuit practitioners must address the Phelps factors regardless of the basis of a Rule 60(b)(6) motion, he advises.
A crucial takeaway for all practitioners is that “litigants relying on circuit precedent—even well-established circuit precedent—should check whether there is a pending Supreme Court case with the potential to undermine reliance on that circuit precedent,” cautions Sungaila. If so, “it may later become relevant to the Rule 60(b)(6) analysis,” she adds.
Sungaila’s final point is emphasized by a more recent Ninth Circuit decision. Strafford v. Eli Lilly & Co. involved “the same issue as in Henson where the plaintiffs had voluntarily dismissed to bring an appeal of a class action denial, then the Microsoft decision came down, and they filed in the district court under Rule 60(b)(6),” Donlon observes. But in Strafford, the appellate court affirmed the district court’s denial of relief.
In Strafford, however, unlike in Henson, the voluntary dismissal occurred after the filing of the certiorari petition in Microsoft. The appellate court looked in part to that fact to determine that “plaintiffs ‘should have known that the law might change in an unfavorable way.’”
Going forward, the Ninth Circuit Court of Appeals will presumably apply “what we would think of as a traditional abuse of discretion standard giving broad authority to the district court,” Donlon says. Under that standard, “you would expect in the overwhelming majority of cases that the district court would be affirmed,” he concludes.
