Tender of Complete Relief Not Enough to Moot Class Suit

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By Perry Cooper

April 12 — Tender of complete relief into an escrow account still isn't enough to moot a plaintiff's individual or class claims, the U.S. Court of Appeals for the Ninth Circuit ruled April 12.

The decision answers a question left open by the U.S. Supreme Court in Campbell-Ewald Co. v. Gomez, 135 S. Ct. 2311 (2016) .

There, the justices held that defendants can't defeat class actions by offering to pay off the lead plaintiff, but they left open the possibility that a tender of funds would moot the case.

Counsel for the plaintiffs, F. Paul Bland Jr., called the ruling “very important and very powerful.”

“If it is followed broadly, it's going to have an enormous impact on the pick off maneuver that some companies have engaged in,” he told Bloomberg BNA April 12. Bland is executive director of Washington-based Public Justice, which often supports consumers in class action cases.

Defense attorney David Almeida said this unanswered question “is likely on the fast track back to the Justices,” maybe even with this case.

Almeida is a partner in Sheppard, Mullin, Richter & Hampton LLP's Chicago office who specializes in consumer class actions.

Briefcase of Cash

The last resort for defendants could be handing plaintiffs a briefcase full of cash, as Justice Samuel A. Alito Jr. mentioned at oral argument in Campbell-Ewald.

But Bland said when plaintiffs request injunctive relief, “it's hard to have true mootness” because there's still something left for a court to do.

Almeida called the Ninth Circuit's reading of Campbell-Ewald “extremely narrow.”

Receipt of the money is what’s crucial under Chen,” he said. “However, [Campbell-Ewald] imposes no such ‘direct deposit' requirement, and it remains an open question whether parking the money in an escrow account and waiting for a final order from the district court is enough to moot a plaintiff’s case.”

Bland pointed to the Ninth Circuit's holding that even if the named class representative has been made totally whole, he still would have a right to represent the class. So picking off a plaintiff can't kill the class action.

Almeida said the court “is essentially saying it is ok for attorneys to pursue headless class actions without a class representative who possesses a live claim.”

Bland called these defense tactics a “stunt.”

“It's not a very attractive rule of law,” he said. “They need to actually lean on the merits in cases. At some point the law really needs to move in this direction to get rid of the ploy.”

But Almeida said he expects defendants will continue to try varying methods to force settlement payments on plaintiffs, “either by depositing the money in escrow, depositing the money with the court, or just tendering directly to the plaintiff.”

Tender After Campbell-Ewald

Florencio Pacleb filed a class action against Allstate Insurance Co. alleging the company made unsolicited calls to his mobile phone in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227(b)(1)(A).

Allstate offered Pacleb $10,000, plus attorneys' fees and costs, and promised not to call anymore. Pacleb refused.

The district court denied Allstate's motion to dismiss, finding that even if the offer made Pacleb's individual claims moot, he never got an opportunity to move for class certification.

While the decision was on appeal, the Supreme Court handed down its ruling in Campbell-Ewald. There, the court declined to decide “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 the court then enters judgment for the plaintiff in that amount.”

Allstate seized on this hypothetical and deposited $20,000 in a bank escrow account to be paid out to Pacleb when the court entered a judgment.

No Actual Relief

But the Ninth Circuit said that's not enough—depositing the money into an escrow account doesn't afford Pacleb any actual relief.

“As we read Campbell-Ewald, a lawsuit—or an individual claim—becomes moot when a plaintiff actually receives all of the relief he or she could receive on the claim through further litigation,” the court said.

Allstate retains interest in the funds unless and until the district court dismisses the action as moot, the court said. But the court shouldn't enter judgment on the individual claims over the plaintiff's objection until the plaintiff has had a fair opportunity to move for class certification.

And even if Pacleb's individual claims were otherwise fully satisfied, he could continue to seek class certification under the Ninth Circuit's decision in , 653 F.3d 1081 (9th Cir. 2011) , the court concluded.

Judge Raymond C. Fisher wrote the opinion. Judges Barry G. Silverman and Richard C. Tallman also served on the panel.

Todd M. Friedman in Beverly Hills, Calif.; Seyed Abbas Kazerounian of Kazerouni Law Group APC in Costa Mesa, Calif.; Joshua Swigart and Robert L. Hyde, both of Hyde & Swigart in San Diego; and F. Paul Bland Jr. and Karla Gilbride, both of Public Justice P.C. in Washington, represented the plaintiffs.

Scott M. Pearson in Los Angeles and Mark J. Levin in Philadelphia, both of Ballard Spahr LLP, represented Allstate.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bna.com

To contact the editor responsible for this story: Jeffrey D. Koelemay at jkoelemay@bna.com

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