Commentators have questioned whether, after the Supreme Court’s decision last year in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), a defendant could, by making a settlement offer or offer of judgment on a named plaintiff’s claim, render the case moot and prevent the certification of a class.  The Seventh Circuit has now addressed that question, although only in part, and in the context of a case with an unusual procedural history.  The Seventh Circuit reversed a trial court’s dismissal on mootness grounds, but appeared to retain its existing rule that a settlement offer or offer of judgment can potentially render a case moot if the offer is made before a motion for class certification is filed. 

In McMahon v. LVNV Funding, LLC, Nos. 12-3504, 13-2030, 2014 U.S. App. LEXIS 4592 (7th Cir. Mar. 11, 2014), the district court initially dismissed the class claims on substantive grounds and later denied reconsideration.  Its ruling on reconsideration, however, granted the plaintiff leave to amend to allege narrower class claims.  Shortly after that ruling, the defendant made a settlement offer on the plaintiff’s individual claims, which was rejected.  The district court found that the offer was for complete relief, rendered the case moot, and dismissed the case.  The Seventh Circuit reversed.

In Genesis Healthcare, the named plaintiff sought to bring a collective action under the Fair Labor Standards Act.  The Supreme Court assumed, without deciding (because the issue had not been challenged below, or raised in a cross-petition for certiorari), that the named plaintiff’s individual claim had been mooted by an offer of judgment on her individual claims.  The Supreme Court then held that the plaintiff, whose individual claim was moot, could not seek collective action treatment (this is roughly similar to an opt-in class action).  In reaching this result, the Court distinguished several of its previous precedents on mootness in class actions, including a case that had held that a named plaintiff could still pursue an appeal of the denial of class certification after the plaintiff’s own claim had become moot.

In McMahon, the Seventh Circuit acknowledged, and did not revisit, its pre-Genesis Healthcare precedent under which an unaccepted offer of judgment made before a motion for class certification is filed can render a named plaintiff’s claim moot.  This effectively requires a named plaintiff to file a motion for class certification together with the complaint.  (The court noted that some other circuits have disagreed on this point, and found it unnecessary to revisit the issue.) 

On the facts of McMahon, the court applied by analogy the Supreme Court’s prior precedent in the context of mootness after a denial of certification.  The court reasoned that: “Had McMahon tried to appeal from the original denial of class certification, even assuming [defendant’s] offer was comprehensive enough to moot his case, he would have been in exactly the same position as the Roper plaintiff.  We conclude, therefore, that McMahon’s decision to reject [defendant’s] settlement offer did not moot his interest in the case for purposes of his ability to serve as a class representative.”  Id. at *22.

The court did not address the more critical question of whether the majority’s reasoning in Genesis Healthcare means that an offer of judgment or settlement offer for full relief on a named plaintiff’s claim renders a case moot.  The following excerpt from Genesis Healthcare, for example, potentially can be used by defendants to make an argument that there is no exception to mootness applicable in class actions prior to certification of a class:

Nor can a defendant’s attempt to obtain settlement [on the named plaintiff’s claim] insulate such a claim from review, for a full settlement offer addresses plaintiff’s alleged harm by making the plaintiff whole. While settlement may have the collateral effect of foreclosing unjoined claimants from having their rights vindicated in respondent’s suit, such putative plaintiffs remain free to vindicate their rights in their own suits. They are no less able to have their claims settled or adjudicated following respondent’s suit than if her suit had never been filed at all.

Genesis Healthcare, 133 S. Ct. at 1531.