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May 31, 2016 Practice Points

Ninth Circuit Issues Ruling on Post-Campbell-Ewald Rule 68 Offers

The case is Chen v. Allstate Insurance Co.

by Adam E. Polk

On April 12, 2016, in Chen v. Allstate Insurance Co., No. 13-16816, the Ninth Circuit confronted the issue of whether, in a class action, a defendant’s Rule 68 offer of judgment and deposit of the full settlement value of the named plaintiff’s claims into an escrow account “pending entry of a final District Court order or judgment directing the escrow agent to pay the tendered funds” to the named plaintiff moots the case. The Ninth Circuit held that such an offer would not moot a class action.

The Chen case centers on allegations that Allstate Insurance Company directed unsolicited automated telephone calls to consumers in violation of the Telephone Consumer Protection Act. Before the plaintiffs moved for class certification, Allstate (1) issued a Rule 68 offer of judgment to the named plaintiffs, (2) deposited $20,000 into an escrow account in one of the named plaintiff’s names “in full settlement” of his claims, and (3) instructed the escrow agent to pay him as soon as the court entered judgment. Allstate then moved to dismiss the case as moot.  The district court denied Allstate’s motion, Allstate appealed, and the Ninth Circuit took the issue up on appeal. In an opinion authored by Circuit Judge Raymond C. Fisher, the Ninth Circuit rejected Allstate’s argument and affirmed the lower court’s decision denying Allstate’s motion to dismiss on two grounds: (1) even assuming that Allstate’s offer mooted the named plaintiff’s claims, he would still be permitted to move for class certification under Pitts v. Terrible Herbst Inc., 653 F.3d 1081 (9th Cir. 2011); and (2) ignoring the fact that Pitts is good law, the named plaintiff’s claims were not yet moot because the funds were only placed in an escrow account, and he had not yet accepted the defendant’s offer.

The salient takeaway from Chen is that Pitts remains good law in the Ninth Circuit, and consistent with the Supreme Court’s decision in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), named plaintiffs who are afforded, but do not actually accept and receive, complete relief via Rule 68 offers on individual claims are still permitted to seek class certification.

Adam E. Polk is an associate with Girard Gibbs LLC in San Francisco, California.

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