Can Voluntary Individual Settlements Moot Class Actions? Yes, Depending on the Facts, According to the Ninth Circuit
The Ninth Circuit Court of Appeals recently clarified that a named plaintiff gives up his or her right to represent a class if, in an individual settlement, he or she does not carve out from the settlement a concrete financial interest in the putative class action. In so holding, the court explained that it was not enough for a plaintiff to generically carve out “class claims,” without identifying a more specific financial stake that would remain in the outcome of the class claims.
In Brady v. Autozone, Inc., plaintiff Michael Brady sued defendant for violations of Washington’s meal break laws, and, after months of litigation, filed a motion for class certification under Federal Rule of Civil Procedure 23. The court denied the motion and declined to reconsider. Shortly thereafter, Brady settled his individual claim against the defendant.
The settlement agreement resolved plaintiff’s claims for meal break, wage, and unfair business practice violations, for $5,000. The agreement also resolved Brady’s “claims to costs or attorneys’ fees.” Critically, however, the language in the agreement stated that the settlement “was not intended to settle or resolve Brady’s Class Claims.”
Ninth Circuit Decision
Brady appealed the denial of class certification to the Ninth Circuit. The question before the court was whether Brady’s “class claims,” purportedly carved out from the release, were moot. Answering the question in the affirmative, the court explained that when a plaintiff releases his or her individual claims, they ordinarily no longer have a “legally cognizable interest in the outcome” of the class claims, rendering the plaintiff’s class claims moot. To undo this, a plaintiff must maintain a specific financial interest by agreement with the defendant. Stated differently, because the settlement agreement did not contemplate any additional consideration that the plaintiff may receive as a class representative (e.g., attorneys’ fees, or enhancement awards), his class claims were entirely moot.
While the court’s exposition on the mootness doctrine is not groundbreaking law, the scenario presented and the court’s explanation are useful guides when contemplating an individual settlement in a case styled as a class action. Generic language that the agreement does not release “class claims” is not necessarily enough to overcome operation of the mootness doctrine. This knowledge can prove useful to employers involved in “give-and-take” drafting negotiations with plaintiffs’ counsel, particularly when the goal of settlement is to eliminate class claims brought under Rule 23.