July 28, 2020 Top Story

Tender of Damages Can Moot Class Action Claim

Court must dismiss if tender paid and liability admitted before certification

By Josephine M. Bahn

A court must dismiss a putative class action lawsuit if the defendant makes an effective tender before the named plaintiff files a class certification motion, a state supreme court held. A defendant’s admission of liability and tender to the plaintiff of all the requested relief satisfies the named plaintiff’s individual claim but moots the plaintiff’s interest in the litigation. Thus, no controversy exists and the trial court must dismiss the case if no other plaintiff represents the class. In its ruling, the court distinguished a tender from an offer of judgment made under Federal Rule of Civil Procedure 68.

Two tenants sued their former landlord for failure to pay security interest earned on the tenants' security deposit

Two tenants sued their former landlord for failure to pay security interest earned on the tenants' security deposit

Credit: jaturonoofer | iStockphoto by Getty Images

Court Denies Plaintiff Remains Harmed, Dismisses Claim

In Joiner v. SVM Management, LLC, two former tenants filed a lawsuit against their former landlord for failure to pay security interest on the tenants’ security deposit. The landlord returned the tenants the full security deposit, but the tenants alleged that the landlord violated several state laws by, inter alia, its failure to pay any of the security interest on the deposit. The day after the landlord was served with the complaint, it tendered a cashier’s check for the full amount of the tenants’ maximum individual recovery, and all court costs and attorney fees. The tenants rejected the tender.

Although the tenants filed their claim on behalf of themselves and others similarly situated, they failed to file a motion for class certification. In its response to the pleadings, the landlord moved to dismiss the tenants’ claim. The landlord argued that even though the tenants rejected the tender, the tender mooted the tenants’ class action claim under Illinois state law that held that if a tender is made to the named plaintiff before the filing of a motion for class certification, the claims are mooted because the interests of the other class members are not before the trial court. The trial court dismissed the tenants’ allegation with prejudice.

On appeal to the Illinois Appellate Court, the tenants argued that the U.S. Supreme Court’s decision in Campbell-Ewald Co. v. Gomez overturned the state precedent, finding that a case becomes moot only when it is impossible for a court to grant any effectual relief to the prevailing party. Distinguishing Campbell-Ewald, the intermediate court found that the landlord made sufficient tender and therefore the lower court properly dismissed the tenants’ claim as moot.

Distinction Between Tender and Offer

The Illinois Supreme Court affirmed the intermediate court’s decision. It found that, “when a defendant tenders the full amount requested by a plaintiff purporting to represent a class before the named plaintiff files a class class-certification motion, the plaintiff’s claim becomes moot.”

In analyzing federal court precedent regarding mooting of class actions, the court explained that offers of judgment under Federal Rule of Civil Procedure 68 are distinguishable from tenders. Under Illinois Code of Civil Procedure Section 5-126, a defendant must tender sufficient amends for the injury done or actually pay the unliquidated damages or demands. The court contrasted Rule 68, which only requires a defendant to “offer to allow judgment on specified terms,” which a plaintiff is free to accept or reject. A tender is the actual, unconditional “proffer of money, as distinguished from the mere proposal or proposition to offer it,” the court explained.

Finally, the court held that where a defendant admits liability and provides the plaintiff with all its requested relief, there is no longer a controversy and the trial court must dismiss the case if the plaintiff fails to take other steps in representing the class.

Jurisdiction and Framing of Offer Make a Difference

ABA Section of Litigation leaders note that the distinction between tender and offer and the claimant’s jurisdiction matter. “Whether an offer of judgment would suffice to moot a plaintiff’s claim would depend on how it was framed and how it maps onto the plaintiff’s requested relief,” opines Adam Polk, San Francisco, CA, cochair of the Section of Litigation’s Class Actions & Derivative Suits Committee. “With an offer, all conditions are not satisfied, and a named plaintiff can still reject it, which would mean that his or her claim would not be moot. A tender, however, is unconditional and satisfies the entirety of the plaintiff’s claim regardless of his or her reaction to it,” Polk suggests.

Further, a tender is valid regardless of whether a plaintiff accepts or rejects it. “Rejection of the tender is irrelevant,” notes Howard K. Jeruchimowitz, Chicago, IL, cochair of the Section’s Real Estate, Condemnation & Trust Litigation Committee.

“As a practical matter, I do not think that a tender of payment or other performance occurs frequently in litigation. If a defendant were willing to tender full performance, the parties would most likely settle the case. The use of tendering payment to the class representative, to defeat a class action, is a special case,” says Steven Finell, Santa Rosa, CA, chair of the Appellate Rules Subcommittee of the Section’s Appellate Practice Committee. “More fundamentally, as a matter of policy, a defendant should not be able to void a class action by offering, or even tendering, a relatively small sum to the named plaintiff,” notes Finell.

 

Josephine M. Bahn is an associate editor for Litigation News.


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