Can a Consumer Products Company Moot Class Actions by Offering a Refund?
Many lawsuits over consumer products involve allegations that a product didn’t work as advertised, or that the manufacturer failed to adequately disclose how to use the product. These cases often are filed by plaintiffs who have spent just a few dollars on the product and suffered no real damages, other than possibly the price of the product, assuming their allegations can be proven. Thus, these cases frequently are seen in the form of class actions. The Supreme Court’s decision in Symczyk v. Genesis Healthcare Corp., 133 S.Ct. 1523 (2013) and cases since have raised the issue of whether a defendant’s unaccepted offer of judgment for complete relief can moot individual claims or even class actions before a class is certified, which in turn raises the issue of whether such cases can be mooted by a simple offer of a full refund.
In Symczyk, the plaintiff brought a collective action under the Fair Labor Standards Act. No other employees “opted into” the lawsuit, the plaintiff failed to accept the defendant’s offer of judgment under Federal Rule of Civil Procedure 68 for the full amount of the plaintiff’s alleged damages, and the Supreme Court held that the District Court lost subject matter jurisdiction. However, based on procedural issues with the plaintiff’s appeal, the Supreme Court assumed, without deciding, that the unaccepted Rule 68 offer mooted the plaintiff’s individual claim.
By holding that the case was not justiciable based on this assumption, the Court essentially ensured further litigation in lower courts over whether an unaccepted Rule 68 offer for complete relief can moot a case. Lower courts are split over the issue. For example, the Seventh Circuit holds that such an offer moots the claim and the plaintiff loses outright. The Sixth Circuit agrees that the offer moots the claim, but favors entry of judgment against the defendant pursuant to its Rule 68 offer. And the Ninth Circuit, in Diaz v. First Amer. Home Buyers Protection Corp., 732 F.3d 948 (9th Cir. 2013), held that the offer does not moot a claim.
Lower courts also are split over the issue of whether such a Rule 68 offer to named plaintiffs can moot class actions before a class is certified. The Third, Fifth, Ninth and Tenth Circuits say no. The Seventh Circuit disagrees.
But the Supreme Court’s reasoning in Symczyk, while in the context of FLSA collective actions and not class actions, suggests that the Court may be open to siding with the Seventh Circuit on this issue, explaining that a full settlement offer makes the plaintiff whole and only forecloses claimants who have not opted into the suit from resolving their claims in the plaintiff’s suit, i.e., they remain free to assert their claims in their own suits (or the suit of another named plaintiff in a collective action). On the other hand, Justice Kagan, in her dissent, states that an unaccepted Rule 68 offer for full relief cannot possibly moot a claim, since settlement offers are void if not accepted.
In sum, the Supreme Court may soon address these issues based on the split among the lower courts, and it is possible it could hold that “picking off” named plaintiffs via unaccepted Rule 68 offers for full relief could moot class actions before certification. If that happens, class action defendants in consumer products cases may be able to moot claims simply by offering a refund of the purchase price.