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.