Co-authored by: Erica L. Cook
As we reported earlier this year in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 672 (2016), the Supreme Court held that a putative class action does not become moot when a defendant merely offers a named plaintiff full relief on his or her individual claims under Fed. R. Civ. P. 68. Left unanswered was the question whether the outcome would be different if a defendant deposited "the full amount of the plaintiff's individual claims into an account payable to the plaintiff, and the court then entered judgment for the plaintiff in that amount." Id. The Ninth Circuit is the first circuit court to examine the use of Rule 68 to moot a putative class action post-Campbell-Ewald.
In Chen v. Allstate Insurance Co., 819 F.3d 1136 (9th Cir. 2016), two plaintiffs brought a class action complaint against Allstate Insurance Company (Allstate), alleging violations of the Telephone Consumer Protection Act (TCPA). Allstate tendered an offer of judgment of $25,000 plus attorney fees and injunctive relief to the plaintiffs before the plaintiffs moved for class certification. When the plaintiffs did not accept the offer, Allstate moved to dismiss the plaintiffs' complaints for lack of subject matter jurisdiction, arguing that the claims were rendered moot by the offer. Id. While the motion to dismiss was pending, one of the plaintiffs accepted Allstate's Rule 68 offer; the other did not. Id. The district court denied Allstate's motion to dismiss, holding that even if the Rule 68 offer fully satisfied a plaintiff's individual claims, a plaintiff still had the opportunity to move for class certification when the action as a whole remained a justiciable controversy. Id. The district court relied on the Ninth Circuit's decision in Pitts v. Terrible Herbst, Inc., 653 F. 3d 1091 (9th Cir. 2011), which held that an unaccepted Rule 68 offer that was made before class certification and fully satisfied a named plaintiff's individual claims did not moot a class action claim when the defendant used tactics to "pick off" named plaintiffs to avoid a class action.
The Ninth Circuit granted Allstate interlocutory appeal to review whether Pitts was still good law in light of the Supreme Court's decision in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), which held that a collective action claim under the Fair Labor Standards Act was no longer justiciable when the defendant's Rule 68 offer satisfied the only named plaintiff's individual claims. While the appeal was pending, the Supreme Court issued its decision in Campbell-Ewald. Id. at 1141. At that point, Allstate deposited funds into an escrow account pending a district court order or judgment directing the escrow agent to pay the funds to the plaintiff, providing the plaintiff injunctive relief, and dismissing the case as moot. Id. at 1144, 1146.
The Ninth Circuit rejected this approach. The court reasoned that as it understood Campbell-Ewald, a claim becomes "moot when a plaintiff actually receives all the relief he or she could receive on the claim through further litigation," and the plaintiff here had not and would not actually receive the relief until the district court ordered the funds to be released and dismissed the entire action as moot. Id. at 1144-46. The court also noted that under the common law doctrine of tender, the funds might have been treated as an actual receipt of payment if Allstate had deposited the funds in the court rather than an escrow account with conditions on payment. Id.
Next, the Ninth Circuit held that Pitts was still good law in light of Genesis Healthcare based on its prior decision in Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), which held that Pitts was irreconcilable with Genesis Healthcare due to the fundamental differences in class action and collective action claims. Id. at 1143. The court went on to explain that because the Gomez decision was not clearly irreconcilable with the intervening Supreme Court authority in Genesis Healthcare, the court was bound by the controlling circuit precedent in Gomez. Id. at 1143-44. Thus, the Ninth Circuit concluded that the class claims would be unaffected even if Allstate's deposit into escrow had mooted the named plaintiff's individual claims.
The Ninth Circuit also held that even if Pitts were not binding, a district court should "decline to enter judgment affording complete relief on a named plaintiff's individual claim, over the plaintiff's objection, before the plaintiff has had a fair opportunity to move for class certification." Id. at 1148. The court reasoned that such judgments would be inconsistent with Campbell-Ewald's holding that a would-be class representative with a live claim must be afforded a fair opportunity to show that class certification is warranted. Id. at 1447.
Thus, while the Ninth Circuit partially closed the door that Campbell-Ewald left open by finding that a deposit into escrow was insufficient to moot a named plaintiff's claims, it left open the possibility that these claims could be mooted by the plaintiff's actual receipt or an "unconditional relinquishment" of funds satisfying the claim. Even if actual receipt can moot the named plaintiff's claims before certification, however, it may still have no effect on the plaintiff's ability to seek class certification in circuits with precedent like Pitts, which allow class claims to go forward even if the named plaintiff's claims are completely satisfied. It remains to be seen whether the Ninth Circuit's analysis will be adopted by other courts, and we will continue to follow developments in this area.