One tactic some defendants have tried to use in defending a class action is providing or offering to the named plaintiff the full relief requested on his or her individual claim.  Typically a named plaintiff’s individual claim in a class action is worth a relatively small sum, much smaller than the costs of defending the case even if the defendant prevails on an early dispositive motion.  The concept is that if the defendant provides or offers to provide full relief to the named plaintiff, the case is moot.  This is sometimes referred to as “picking off” the named plaintiff.  It’s a tactic that has been used probably since the advent of class actions; there is case law on this going back at least 40 years.  Most, but not all, courts have disapproved of this tactic essentially because, if this were allowed, it potentially could eviscerate the class action device.  But the Supreme Court has never squarely addressed the issue and courts have taken different approaches to it.  Even where the law is unsettled in a particular jurisdiction, there are good reasons a defendant might not want to attempt this.  Unless it is clear that the offer or tender of payment is protected as a settlement communication and could never come into evidence, if the case is ever tried the offer may not play well to a jury.  (But of course class action trials are rare.)  Recent decisions in both the Seventh and Federal Circuits addressed this issue and are worthy of discussion here.

Seventh Circuit Decision

The Seventh Circuit recently held that an offer of full relief to the named plaintiff does moot a putative class action, as long as it is made before a motion for class certification is filed.  In Damasco v. Clearwire Corp., No. 10-3934, 2011 U.S. App. LEXIS 23093 (7th Cir. Nov. 18, 2011), the plaintiff brought a putative class action under the federal Telephone Consumer Protection Act, claiming that the defendant violated that statute by sending unsolicited text messages to cellphone users.  After suit was filed, the defendant offered to settle the case by giving the named plaintiff (and up to ten other affected people) the maximum statutory penalty of $1,500 per text message, plus court costs.  The defendant also offered to cease sending unsolicited text messages (the injunctive relief sought).  Id. at *2.  After making this offer, the defendant moved to dismiss the case as moot, and the plaintiff filed a motion for class certification.  The district court granted the motion to dismiss the case as moot. 

The Seventh Circuit affirmed, relying on prior case law from that circuit concluding that an offer made to the named plaintiff before a motion for class certification is filed renders the entire suit moot, but an offer made after a motion for class certification is filed does not moot the putative class claims, and the plaintiff can still pursue the class action.  The court noted that several other circuits – the Third, Fifth, Ninth and Tenth – had disagreed with this approach and refused to allow a tender of payment to a named plaintiff to moot a putative class action even if no motion for certification has been filed.  The Seventh Circuit disagreed with those other circuits, reasoning that “[t]o allow a case, not certified as a class action and with no motion for class certification even pending, to continue in federal court when the sole plaintiff no longer maintains a personal stake defies the limits on federal jurisdiction expressed in Article III.”  Id. at *10.

The Seventh Circuit further explained that the solution is for a plaintiff to file a motion for class certification with the complaint, and then ask the court to defer a ruling on the motion until after relevant discovery has been completed:

A simple solution to the buy-off problem that Damasco identifies is available, and it does not require us to forge a new rule that runs afoul of Article III: Class-action plaintiffs can move to certify the class at the same time that they file their complaint. The pendency of that motion protects a putative class from attempts to buy off the named plaintiffs.  Damasco argues that this solution would provoke plaintiffs to move for certification prematurely, before they have fully developed or discovered the facts necessary to obtain certification.  But this objection is unpersuasive. If the parties have yet to fully develop the facts needed for certification, then they can also ask the district court to delay its ruling to provide time for additional discovery or investigation. In a variety of other contexts, we have allowed plaintiffs to request stays after filing suit in order to allow them to complete essential activities.   . . . We remind district courts that they must engage in a “rigorous analysis”—sometimes probing behind the pleadings—before ruling on certification.  Although discovery may in some cases be unnecessary to resolve class issues, in other cases a court may abuse its discretion by not allowing for appropriate discovery before deciding whether to certify a class . . . .

Id. at *11-13 (citations omitted).

Following this decision, defendants will have some interesting options in the Seventh Circuit (and perhaps also some other jurisdictions where courts have not squarely ruled on this issue).  Sophisticated plaintiffs’ counsel will now, as a matter of practice, file their motion for certification with their complaint.  But not all plaintiffs’ counsel are fully up to date on their research, so some will miss this decision and defendants will have the opportunity to moot the case if they move swiftly.  When the “shotgun” motion for class certification is filed with the complaint, perhaps together with a motion to defer a ruling on it, the defendant has an interesting strategic decision to make.  If the case is subject to an argument that class certification is improper as a matter of law absent any discovery, the defendant might want to file a prompt opposition on that ground and seek a ruling on that before discovery.  (See, for example, the Sixth Circuit’s recent decision affirming a decision striking the class allegations on the pleadings, Pilgrim v. Universal Health Card, LLC, 2011 U.S. App. LEXIS 22715 (6th Cir. Nov. 10, 2011).)  This decision and the manner in which it will change the way class actions are litigated (at least in the Seventh Circuit) may also encourage judges to move more quickly to resolution of the class certification issue and focus and limit the discovery.  District judges generally don’t like to have motions pending for six months or a year, when that happens it usually winds up on lists that the circuits review (sometimes that problem is prevented by denying a motion without prejudice to renewal later).

Federal Circuit Decision

The Federal Circuit also spoke on this issue shortly after the Seventh Circuit’s opinion.  In Russell v. United States, 2011 U.S. App. LEXIS 23830 (Fed. Cir. Dec. 1, 2011), a servicemember brought a putative class action against the United States asserting that the Army and Air Force Exchange Service had charged an interest rate on credit card accounts higher than the rate permitted by the credit agreements.  The claim apparently had some merit because in response to the suit the government made adjustments to the accounts of many thousands of servicemembers, including the named plaintiff.  In light of the government’s action, the Northern District of California dismissed the case as moot.  The Federal Circuit concluded that the named plaintiff’s individual claim was moot but that, under Ninth Circuit law (which the Federal Circuit was required to follow in this kind of case coming from a California federal district court), the named plaintiff potentially could still pursue class certification (even though he had not yet filed a motion for certification).  The Ninth Circuit is one of the circuits that disagrees with the Seventh on this issue, as noted above.

The Federal Circuit suggested, however, that the putative class claims still might be moot if they were all provided adequate relief by the government.  The facts on that were unclear and thus the case was remanded to the district court for further factual development.  For more thoughts on defendants’ ability to provide complete relief to the class and thereby moot a class action, see my prior posts on September 2, 2011 and September 16, 2011.

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.