May 01, 2016 Practice Points

Rule 68 Offer of Judgment Is Not Tool to Moot Plaintiff's Claims Before Class Certification

By Lacy Triplett

The Ninth Circuit recently answered a hypothetical question left open by the U.S. Supreme Court when it found in Chen v. Allstate Insurance Co. that a defendant who tenders payment of full relief to an individual plaintiff does not moot the class action because (1) the plaintiff has not “actually received” the relief and (2) the plaintiff has not yet sought class certification and is still permitted to do so. 2016 U.S. App. LEXIS 6627 (9th Cir. Apr. 12, 2016).

In 2013, Richard Chen and Florencio Pacleb filed a class complaint against Allstate for violations of the Telephone Consumer Protection Act (TCPA). Before Chen and Pacleb filed a motion for class certification, Allstate made an offer of judgment under Rule 68 for Chen and Pacleb’s individual claims in the amount of $15,000 and $10,000, respectively.

Allstate filed a motion to dismiss the plaintiffs’ claims as moot because it made an offer of judgment in an amount that more than satisfied the plaintiffs’ individual claims. While the motion was pending, Chen accepted its Rule 68 offer, which removed him from the litigation. The motion was denied, and the Ninth Circuit agreed to hear an interlocutory appeal.

While Allstate’s appeal was before the Ninth Circuit, the Supreme Court decided Campbell-Ewald Company v. Gomez, and confirmed that “an unaccepted settlement offer has no force.” 136 S. Ct. 663, 666 (2016). An unaccepted offer to satisfy the named plaintiff’s individual claim is insufficient “to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated.” Yet, the Court left open the 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 then the court enters judgment for the plaintiff in that amount.”

Shortly thereafter, Allstate deposited $20,000 in escrow “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.” The Ninth Circuit found that this deposit did not moot Pacleb’s claims.

The Ninth Circuit stated that “a claim becomes moot once the plaintiff actually receives all of the relief to which he or she is entitled on the claim,” and that “a case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” As such, Pacleb’s individual claims were not moot because he had not yet received any relief on his individual claims. Despite the $20,000 in escrow, Pacleb’s claims were wholly unsatisfied, and it remained entirely possible for a court to grant him effectual relief.

Allstate also sought for the district court to order monetary and injunctive relief on Pacleb’s individual claims, which would moot them before he could move for class certification; however, the Ninth Circuit disagreed. The Ninth Circuit held 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 because a live controversy would persist until the question of class certification could be addressed.

Prior Supreme Court decisions support the Ninth Circuit on this issue. Campbell-Ewald explained that “[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.” 136 S. Ct. at 672. In addition to Campbell-Ewald, the Court said in Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 339 (1980), “requiring multiple plaintiffs to bring separate actions, which effectively could be ‘picked off’ by a defendant’s tender of judgment before an affirmative ruling on class certification could be obtained, obviously would frustrate the objectives of class actions.”

Both the Ninth Circuit and the Supreme Court decisions prove instructive to practitioners. When attempting to defeat a class action prior to certification, making a Rule 68 offer of judgment to the named plaintiffs will not suffice. Although other circuits have not decided this issue, there is a strong likelihood after Campbell-Ewald that they would follow the logic of the Ninth Circuit to find that a live controversy was present and afford plaintiffs the opportunity to move for class certification.

Lacy Triplett, Bressler, Amery & Ross, P.C., Birmingham, AL


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