The Complex Litigator

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Allstate tests new method for mooting class claims; falls short in Chen v. Allstate Ins. Co.

Normal people see laws as barriers. Lawyers see laws as an agility course.  After Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011) and Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), aff’d, 136 S. Ct. 663 (2016), you'd have to forgive ordinary citizens for thinking that the question of whether you can moot a class action by offering up full individual relief to the putative class representative was pretty well settled. But where some see finality, Allstate insurance saw...opportunity.  Specifically, Allstate looked to Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016) for the secret to mooting class representative claims.  In Chen v. Allstate Inc. Co. (9th Cir. Apr. 12, 2016), the Ninth Circuit sent the wily insurance coyote back to the drawing board.

The plaintiffs filed a class action complaint against Allstate, alleging he received unsolicited automated telephone calls to his cellphone, in violation of the Telephone Consumer Protection Act (TCPA). Before a motion for class certification had been made, Allstate made an offer of judgment to the plaintiffs under Rule 68 of the F.R.C.P., depositing $20,000 in full settlement of individual monetary claims in an escrow account “pending entry of a final District Court order or judgment directing the escrow agent to pay the tendered funds to Pacleb, requiring Allstate to stop sending non-emergency telephone calls and short message service messages to Pacleb in the future and dismissing this action as moot.”  Slip op. at 4, 7.  Allstate extended the Rule 68 offer beyond 14 days and then moved for entry of judgment and dismissal.  One plaintiff accepted the offer while the motion was pending.

The district court denied the motion, holding that, under Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011), the plaintiff's class allegations presented a justiciable controversy and rejected the notion that Pitts was no longer good law.  The district court later certified the issue for interlocutory appeal.

On appeal, Allstate asked the Court to take up the hypothetical issue raised in Campbell-Ewald, which was whether the deposit of the full amount of a plaintiff's individual claim in an account payable to the plaintiff, followed by entry of judgment for the plaintiff in that amount, is sufficient to moot the case.  Allstate argued that the judgment it consented to would offer complete relief, the district should be compelled to enter judgment on those terms, mooting the plaintiff's individual claims, and the remaining class allegations would then be insufficient to preserve a live controversy.  While the Court agreed with the first contention, it rejected the second and third contentions.

The Court began by reviewing the relief that Allstate had consented to in the district court.  Considering both the monetary and injunctive aspects of that relief, the Court found that complete individual relief was offered.  Slip op., at 12-14.

Next, the Court considered whether the decision in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) vitiated Pitts.  The Court concluded that it did not:

In Gomez, 768 F.3d at 875–76, however, we squarely rejected that very argument. Because Genesis Healthcare concerned collective actions brought under the Fair Labor Standards Act (FLSA) rather than class actions under Federal Rule of Civil Procedure 23, Gomez held Pitts was not clearly irreconcilable with Genesis Healthcare. See id. Although Genesis Healthcare “undermined some of the reasoning employed in Pitts . . . , courts have universally concluded that the Genesis discussion does not apply to class actions.” Id. at 875. “In fact, Genesis itself emphasizes that ‘Rule 23 [class] actions are fundamentally different from collective actions under the FLSA.’” Id. at 875–76 (alteration in original) (quoting Genesis Healthcare, 133 S. Ct. at 1529).

Slip op., at 16.  The Court then held that it was bound by Gomez, which was decided en banc.

Next, the Court went further, holding that even if Pitts were not controlling, the Court would reject an attempt to moot the action prior to a fair opportunity to move for class certification.  The Court noted that placing funds in an escrow account was not the same as the actual receipt of all relief by a plaintiff.  This will likely just bait the next enterprising defendant into actually tendering the funds into an account in the name of the plaintiff to see if the outcome is any different (remember, there are no obstacles, only new paths).

Finally, the Court considered whether to order the district court to enter judgment.  The Court concluded that doing so would be inconsistent with Campbell-Ewald, which affords a putative class representative with a live claim a fair opportunity to show certification is warranted:

Even if that is true, however, Campbell-Ewald clearly suggests it would be inappropriate to enter judgment under these circumstances. As Campbell-Ewald explained, “[w]hile a class lacks independent status until certified, a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” Campbell-Ewald, 136 S. Ct. at 672 (emphasis added) (citation omitted) (citing Sosna, 419 U.S. at 399). Accordingly, when a defendant consents to judgment affording complete relief on a named plaintiff’s individual claims before certification, but fails to offer complete relief on the plaintiff’s class claims, a court should not enter judgment on the individual claims, over the plaintiff’s objection, before the plaintiff has had a fair opportunity to move for class certification.

Slip op., at 22-23.  The Court noted the long-recognized principle that class relief is the only feasible relief in many circumstances and concluded that "a district court should decline to enter a judgment affording complete relief on a named plaintiff’s individual claims, over the plaintiff’s objection, before the plaintiff has had a fair opportunity to move for class certification." Slip op., at 26.

The Court affirmed the district court.

If you anticipate that the Supreme Court will take up the first case to test its Genesis Healthcare hypothetical, don't hold your breath. If anything, the Supreme Court would want to see more than one Circuit tackle the issue and see if a significant split develops before wading back into these waters. That doesn't mean that enterprising defendants won't look for another way to moot class claims before certification.