Door Slam

Handed down January 20, 2016, the Supreme Court’s decision in Campbell-Ewald Co. v. Gomez was a major blow to what class action practitioners call the pick-off strategy: using a Rule 68 offer of complete relief to “pick off” a putative class representative, thereby mooting the class action suit. In Campbell-Ewald the Court rejected this tactic by a 6-3 vote, holding that an unaccepted offer of judgment under Rule 68 does not moot a class action, even where the offer provides everything the named plaintiff has asked for—that is, where the plaintiff “won’t take ‘yes’ for an answer.”

In reaching this decision, though, the Court left open the important 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 the court then enters judgment for the plaintiff in that amount.” This was a wrinkle that had plainly intrigued several of the justices.

Writing in dissent, for example, Chief Justice John Roberts pointedly noted that the “good news” was that “the majority’s analysis may have come out differently if [the defendant] had deposited the offered funds with the District Court.” Justice Samuel Alito likewise noted in dissent that the majority’s decision “does not prevent a defendant who actually pays complete relief—either directly to the plaintiff or to a trusted intermediary—from seeking dismissal on mootness grounds.” And at oral argument, even Justices Anthony Kennedy and Stephen Breyer—who ultimately voted with the majority—mused whether “the case is over” if the defendant not only makes an offer of complete relief but deposits a certified check in the full amount of the judgment with the court or in an independent account.

The ink has barely dried on the Campbell-Ewald opinion, but already at least one court, the Ninth Circuit, has answered the door left open by the decision. Its response: slamming it shut.

Decided on April 12, 2016, Chen v. Allstate Insurance Company involved a putative class action under the Telephone Consumer Protection Act seeking damages as well as an injunction. “Taking a cue” from the signals in the Campbell-Ewald decision, Allstate deposited $20,000—the full amount of the class representative’s 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 the plaintiff and requiring Allstate to cease the challenged conduct.

Once the court approved the proposed order and entered judgment against Allstate, the funds would be released from escrow, and the named plaintiff would receive all the relief—monetary and injunctive alike—that he sought. This deposit thus mooted not only the representative’s claims, Allstate argued, but the claims of the putative class, as well.

The Ninth Circuit disagreed. First, the court explained, “a claim becomes moot [only] when a plaintiff actually receives complete relief on that claim, not merely when that relief is offered or tendered.” Simply depositing the funds in escrow was not enough; Allstate had to surrender unconditionally all rights to those funds, which the plaintiff then had to claim.

The Ninth Circuit reasoned further that, because the plaintiff had chosen to bring his suit as a class action, the court “should not enter judgment on [his] individual claims, over the plaintiff’s objection, before the plaintiff ha[d] had a fair opportunity to move for class certification.” The court based this decision on Supreme Court precedent—as well as its own 2011 decision in Pitts v. Terrible Herbst—“disapproving of the ‘picking off’ of named plaintiffs to deny a would-be class representative a fair opportunity to seek class relief.”

As the Ninth Circuit explained, if putative representatives could be so easily picked off, the claims of the class would become “inherently transitory” and evade review—justifying an exception to the mootness rule:

A named plaintiff exhibits neither obstinacy nor madness by declining an offer of judgment on individual claims in order to pursue relief on behalf of members of a class. As the Supreme Court has recognized, the class action device is often the only effective means of pursuing relief on behalf of injured persons.

So what impact will the Chen v. Allstate decision have on the Rule 68 landscape going forward? For now, not much: the Ninth Circuit was already one of the jurisdictions most inhospitable to the pick-off strategy, as reflected by Pitts v. Terrible Herbst and the decision below in Campbell-Ewald, so the decision is not exactly a sea-change. Defendants may still test the deposit strategy in other jurisdictions and explore other options, like voluntary recall and refund programs, that help address class members’ claims while obviating the need for costly litigation. And with other circuits likely to weigh in on the issue, it seems inevitable that the High Court itself will have reason to revisit the question again sooner rather than later.

 

Photo courtesy of Flickr/David Goehring