July 15, 2019

July 15, 2019

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July 12, 2019

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Mooting Class Actions by Offer of Judgment – Episode 2: The Ninth Circuit Strikes Back

In Campbell-Ewald v. Gomez, 136 S. Ct. 663 (Jan. 20, 2016), the Supreme Court resolved a split among courts and held that an unaccepted settlement offer of complete individual relief does not moot the plaintiff’s lawsuit.  However, the Court expressly left open the question of “whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and then the court enters judgment for the plaintiff in that amount.”  136 S. Ct. at 672. 

The Ninth Circuit has recently decided this precise question.  In Chen v. Allstate Insurance Co., No. 13-16816 (9th Cir. Apr. 12, 2016), the plaintiff sued for alleged violation of the Telephone Consumer Protection Act (“TCPA”), complaining about automated calls to his cell phone without his consent.  Allstate initially made plaintiff a Rule 68 offer of judgment in the amount of $20,000, which more than satisfied his individual claim.  After Gomez, Allstate took the additional step of depositing this offer in a bank escrow account.  Allstate then filed a motion to dismiss plaintiff’s entire case for lack of subject matter jurisdiction, arguing that under the logic of Gomez the district court should be required to enter judgment against Allstate and order payment of the $20,000 to plaintiff.  The district court denied Allstate’s motion.

On appeal, the Ninth Circuit narrowly interpreted Gomez and affirmed the district court’s denial of Allstate’s motion to dismiss.  First, the Ninth Circuit held that Gomez did not overrule the governing Ninth Circuit precedent in Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011), which had held that a plaintiff could continue to represent a class despite a settlement offer for complete individual relief from defendant—provided that the plaintiff could still file a timely motion for class certification at the time the offer was made.  Chen extended the logic of Pitts from mere settlement offers to actual monetary deposits and held that, even assuming Allstate could fully satisfy plaintiff’s individual claims, plaintiff could still seek class certification despite the absence of a live claim.

Second, Chen held that, even if Pitts were not controlling and Allstate could moot the entire class action by mooting the plaintiff’s individual claims, the case was still not moot because plaintiff had not actually received the $20,000 parked in the escrow account.  In other words, the Chen Court concluded that depositing $20,000 in a bank escrow account was not enough to moot a claim because the plaintiff did not yet have the money in his possession.  This was in spite of the fact that Allstate had agreed to have judgment entered against it and earmarked $20,000 for the plaintiff upon an order from the court.

In the wake of Gomez, other courts have followed a different approach than the Ninth Circuit.    For example, the Southern District of New York recently granted a motion to dismiss a TCPA case after the defendant agreed to deposit payment with the court for the full amount of plaintiff’s claim.  See Leyse v. Lifetime Entm’t Servs., LLC, — F. Supp. 3d —-, 2016 WL 1253607 (S.D.N.Y. Mar. 17, 2016).  Leyse, however, did not address the implications for the class, because the court had already denied plaintiff’s motion for class certification.

Now that the Ninth Circuit has stricken back, it may soon again come time for the return of the Supreme Court, to address this issue once and for all, or at least until subsequent episodes.

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

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About this Author

David M. Poell, business law Lawyer, Sheppard Mullin
Associate

David Poell is an associate in the Business Trial Practice Group in the firm’s Chicago office with an emphasis in the areas of consumer privacy and class action litigation.

Areas of Practice

A large portion of Mr. Poell’s practice is devoted to defending companies against class and individual actions brought under various state and federal consumer protection statutes, including the Telephone Consumer Protection Act (TCPA) and the Fair and Accurate Credit Transactions Act (FACTA), as well as other consumer-privacy and unfair business practices laws and...

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Shannon Z. Petersen, Business Trial Legal Specialist, Sheppard Mullin
Partner

Shannon Z. Petersen is a partner in the Business Trial Practice Group in the firm’s Del Mar office and is co-chair of the firm’s consumer class action defense team and the firm’s TCPA class action defense team.

Areas of Practice

Dr. Petersen has substantial trial experience as a business litigator, including consumer class action defense. He has successfully represented clients in claims involving the federal Telephone Consumer Protection Act (TCPA), the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Acting (FCRA), the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Acts (RESPA); California's Unfair Competition Law (UCL), Consumers Legal Remedies Act (CLRA), Rosenthal Act, Automobile Sales Finance Act (ASFA or Rees-Levering), Vehicle Leasing Act, Confidentiality of Medical Information Act (CMIA); breach of contract, insurance bad faith, unfair business practices, false advertising, fraud, breach of fiduciary duty, negligence, wrongful foreclosure, wrongful repossession, unfair debt collection, unfair credit reporting, unjust enrichment, misappropriation of trade secrets, trademark infringement, quiet title, emotional distress, construction defect, privacy, and receiverships, among others.

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