Are Pre-Certification Claims Mooted By Deposited Full Settlement Offers? Don’t Pick Me Off
On January 20, 2016, the Supreme Court held in Campbell-Ewald v. Gomez, 136 S. Ct. 663, 672, 193 L. Ed. 2d 571 (2016) that an unaccepted pre-certification settlement offer of complete relief in a putative class action, made to an individual plaintiff, does not moot that plaintiff’s claims. As discussed in our previous coverage of Campbell-Ewald, the Supreme Court’s decision resolved a circuit split on that issue.
Campbell-Ewald stopped short of deciding the issue of whether a defendant actually tendering settlement funds (by sending a check or depositing the full offer of complete relief into an account payable to the individual plaintiff) would moot the plaintiff’s claims. So far, although lower courts are not all in agreement, they have tended to hold that such a deposit or tender, if unaccepted, does not moot a plaintiff’s claims. The issue has not made its way back to the Supreme Court, and given vigorous dissenting opinions from Chief Justice Roberts and Justice Alito, the Supreme Court may yet stop this trend.
The day after Campbell-Ewald was decided, the Eastern District of New York in Brady v. Basic Research, LLC became the first court to address this issue in the post-Campbell-Ewald landscape. The Eastern District denied the defendants’ request for permission to deposit their settlement offer with the court under Rule 67(a) and thereby moot the plaintiffs’ claims. Quoting Justice Ginsberg’s opinion of the court in Campbell-Ewald, the Brady court opined that a “would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted” and that it would be inappropriate to enter a judgment against the defendants over plaintiffs’ objection before plaintiffs had the opportunity to file a class certification motion.
More recently, two circuit courts of appeal have also turned to this question. Last month, in Diana Mey v. North American Bancard, LLC, 2016 WL 3613395 (6th Cir. July 6, 2016), the Sixth Circuit held that a defendant could not moot pre-certification class claims by mailing a cashier’s check for the monetary amount of its full settlement offer to the plaintiff, where the check was promptly returned uncashed.
Similarly, in Chen v. Allstate Ins. Co., 819 F.3d 1136 (9th Cir. 2016), the Ninth Circuit held that a pre-certification full settlement offer, where the monetary amount is deposited in escrow, does not moot individual claims. Like the Brady court, the Ninth Circuit emphasized Campbell-Ewald’s statement that a “would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” The Ninth Circuit clarified that, in its view, an individual claim becomes moot when a plaintiff actually receives all of the relief claimed, and that, under Campbell-Ewald, an “unaccepted settlement offer has no force.”
District courts in other circuits have reached similar conclusions. See Kilpatrick v. Caribbean Cruise Line, Inc. et al., No. 14-cv-61572 (S.D. Fla. Aug. 1, 2016); Bais Yaakov of Spring Valley v. Varitronics, LLC, No. 14-5008 (D. Minn. July 28, 2016); Family Med. Pharmacy, LLC v. Perfumania Holdings, Inc., No. 15-0563 (S.D. Ala. July 5, 2016); Ung v. Universal Acceptance Corp., No. 15-127 (D. Minn. June 3, 2016); O’Neal v. Am.’s Best Tire LLC, No. 16-00056 (D. Ariz. June 2, 2016); Tegtmeier v. PJ Iowa, L.C., No. 15-00110 (S.D. Iowa May 18, 2016); Fauley v. Royal Canin U.S.A., Inc., 143 F. Supp. 3d 763 (N.D. Ill. 2016); S. Orange Chiropractic Ctr., LLC v. Cayan LLC, No. 15-13069 (D. Mass. Apr. 12, 2016). And on remand in the Campbell-Ewald case itself, the Central District of California likewise found that plaintiff Gomez’s claims remained “live,” even after defendants attempted to tender the full settlement amount.
However, some district court decisions have come out the other way. The District of Maryland, in Gray v. Kern, 143 F. Supp. 3d 363 (D. Md. 2016) and in Price v. Berman’s Auto., Inc., No. 14-763 (D. Md. Mar. 18, 2016), has held that depositing a full settlement offer would moot an individual plaintiff’s claims against individual defendants. Gray v. Kern cited the Alito dissent for support, and Price v. Berman’s Auto. read Justice Ginsberg’s opinion as conceding that cases involving offers of settlement are critically distinguishable from those involving actual payment. The Southern District of New York in Leyse v. Lifetime Entm’t Servs., LLC, No. 13-5794 (S.D.N.Y. Mar. 17, 2016) reached the same result, holding that once defendant has “furnished full relief,” plaintiff cannot object to the entry of judgment in its favor. In support, Leyse v. Lifetime Entm’t Servs., LLC observed that “a party can always incur a default judgment and liability without any factual findings,” and reasoned that a plaintiff is not entitled to an admission of liability.
In sum, a growing number of federal courts have found that unaccepted pre-certification settlement offers do not moot plaintiffs’ claims, even where the full amount claimed is deposited or tendered to would-be class plaintiffs, so long as the plaintiffs do not accept the offer. But not all lower courts are in agreement, and the Supreme Court may ultimately rule that an actually tendered settlement offer would moot plaintiffs’ claims. All eyes, and accounts payable to putative class plaintiffs, now turn to the remaining circuit courts that have not yet addressed this issue. Watch this space for further developments.