Groupon Defeats Class Action Strategy

Half the battle is having a strategy to win; the other half is winning the battle.

Erin Keena's lawyers had a strategy to get around an order to arbitrate. It was to request dismissal of their client's complaint, and then appeal from the final judgment.

The strategy may have worked in the past, but not in Keena v. Groupon. The U.S. Fourth Circuit Court of Appeals said it didn't have jurisdiction because the plaintiff voluntarily dismissed her case.

Groupon Class Action

Keena sued over a voucher she purchased for massage services from Groupon, the web-based company that arranges discounts for products and services. When she was unable to redeem the voucher, she filed a proposed class-action.

However, Groupon successfully moved to arbitrate based on an agreement the parties made at the time of purchase. Faced with the high costs of arbitration, her lawyers said, Keena elected not to arbitrate and instead asked the court to dismiss her complaint.

The judge obliged, and the plaintiff's attorneys pursued their strategy. But the appeals court didn't bite.

For non-starters, Justice Ruth Bader Ginsburg already said in Microsoft Corp. v. Baker last year that a "voluntary-dismissal tacit" contravenes the final judgment rule of federal procedure.

Final Judgment Rule

Class-action litigators saw Baker as one of the top cases in the field. Paul Karlsgodt said the case, which dealt with a class certification decision, "closed a loophole" that allowed plaintiffs to seek immediate mandatory appeal.

In Keena, the Fourth Circuit remarked that the plaintiff should have participated in the arbitration proceedings first and then secured a final judgment. Basically, she did it backwards.

"Keena's voluntary-dismissal tactic also fails to account for the longstanding principle that a party is not entitled to appeal from a consensual dismissal of her claims," the appeals panel said.

Related Resources:

• Sunken Pirate Ship Raised in Copyright Case (FindLaw's U.S. Fourth Circuit Blog)
• 'Disturbing' Law Seeks to Protect Students (FindLaw's U.S. Fourth Circuit Blog)
• United States Fourth Circuit Cases (FindLaw's Cases & Codes)