Keywords: Chen v. Allstate Ins. Co., Deposit Guaranty Nat'l Bank v. Roper, Fed. R. Civ. P. 68, Genesis Healthcare Corp. v. Symczyk, Greisz v. Household Bank (Ill.) N.A., Lewis v. Continental Bank Corp., McCauley v. Trans Union L.L.C., mootness, N.D. Cal., Ninth Circuit, O'Brien v. Ed Donnelly Enters. Inc., offer of judgment, Pitts v. Terrible Herbst Inc., Rules Enabling Act, Second Circuit, Seventh Circuit, Sixth Circuit, Supreme Court, Telephone Consumer Protection Act, Third Circuit, Weiss v. Regal Collections
Before the Supreme Court's decision last Term in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), the Ninth Circuit had held that a named plaintiff can continue to pursue a putative class action even after the defendant has extended that plaintiff an offer of judgment for the full individual relief sought in the complaint, including reasonable attorneys' fees and costs. See Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011). In a case that bears watching, a federal district judge in California recently certified for interlocutory review the question whether Pitts's mootness holding remains good law. See Chen v. Allstate Ins. Co., No. 4:13-cv-00685-PJH (N.D. Cal. July 31, 2013).
Chen is a putative class action under the Telephone Consumer Protection Act, 47 U.S.C. §§ 227 et seq. The plaintiffs, Richard Chen and Florencio Pacleb, allege that defendant Allstate Insurance Co. improperly called them (and other members of a putative class) on their cell phones.
At the very outset of the case, Allstate sent each plaintiff an offer of judgment under Federal Rule of Civil Procedure 68 for the full amount of individual damages requested in the complaint, plus "reasonable attorney's fees and costs." Chen accepted the offer, but Pacleb did not. Allstate then moved to dismiss Pacleb's individual claims, and consequently the entire putative class action, for lack of subject-matter jurisdiction. Allstate contended that because its Rule 68 offer would fully satisfy Pacleb's individual claims, those claims are moot, depriving him of any remaining interest in the outcome of the putative class action.
The district court denied Allstate's motion under the Ninth Circuit's decision in Pitts, which held that putative class claims qualify for the exception to mootness for so-called "inherently transitory" claims—not because the claims themselves are inherently transitory, but because the defendant's offer of judgment made them so. In Pitts, the Ninth Circuit also relied on statements from the Supreme Court's earlier decision in Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980), that allowing defendants to "pick off" named plaintiffs would "frustrate the objectives" of the class-action device.
Our take: The Ninth Circuit's rationale in Pitts is undermined by the Supreme Court's decision in Genesis Healthcare. (We've previously blogged about Genesis Healthcare.) To begin with, the Supreme Court rejected a virtually identical argument that a plaintiff to whom an offer of judgment was extended can invoke the "inherently transitory" exception to mootness. Indeed, the respondent in Genesis Healthcare cited Pitts to the Supreme Court for that very proposition.
Pitts's reliance on Roper runs into the same buzz saw: The Genesis Healthcare Court characterized the portions of Roper cited by the Ninth Circuit as "dicta" and explained that Roper's holding "turned on a specific factual finding" absent in Chen: the offer of judgment in Roper didn't include attorneys' fees, and so the plaintiff had a "continuing economic interest in shifting attorney's fees and costs to" the putative class. Moreover, the Supreme Court observed that this portion of Roper likely was abrogated by a later decision holding that an interest in recovering fees is "insufficient to create an Article III case or controversy where none exists on the merits of the underlying claim." Lewis v. Continental Bank Corp., 494 U.S. 472, 480 (1990).
We'll see whether the Ninth Circuit grants certification in Chen. If it does, a key issue on appeal will be whether Genesis Healthcare is limited to the Fair Labor Standards Act context in which it was decided. As we have mentioned before, the logic of Genesis Healthcare sweeps more broadly. And it's hard to see how Rule 23 could require a different result. The Rules Enabling Act specifies that the federal rules—including Rule 23—don't "abridge, enlarge, or modify" the parties' "substantive right[s]." Accordingly, before a class has been certified, the mere fact that a plaintiff happened to plead a putative class action shouldn't change the substantive rules regarding mootness.
The Ninth Circuit likely will also confront an important threshold issue: whether (as four circuits have held) an unaccepted offer of judgment for full relief satisfies the named plaintiff's individual claims such that they should be either dismissed as moot or have judgment entered in accordance with the unaccepted offer. If the individual claims survive, then the putative class action wouldn't be moot. Although Genesis Healthcare did not reach this issue, footnote 4 of the majority decision gives a strong hint as to how five Justices believe the question should be answered:
While we do not resolve the question whether a Rule 68 offer that fully satisfies the plaintiff's claims is sufficient by itself to moot the action, supra, at 5, we note that Courts of Appeals on both sides of that issue have recognized that a plaintiff's claim may be satisfied even without the plaintiff's consent. Some courts maintain that an unaccepted offer of complete relief alone is sufficient to moot the individual's claim. E.g., Weiss, supra, at 340; Greisz v. Household Bank (Ill.), N. A., 176 F. 3d 1012, 1015 (CA7 1999). Other courts have held that, in the face of an unaccepted offer of complete relief, district courts may "enter judgment in favor of the plaintiffs in accordance with the defendants' Rule 68 offer of judgment." O'Brien v. Ed Donnelly Enters., Inc., 575 F. 3d 567, 575 (CA6 2009); see also McCauley v. Trans Union, LLC, 402 F. 3d 340, 342 (CA2 2005). Contrary to the dissent's assertion, see post, at 8 (opinion of Kagan, J.), nothing in the nature of FLSA actions precludes satisfaction—and thus the mooting—of the individual's claim before the collective-action component of the suit has run its course.
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