Chen v. Allstate: “Pick-Off” Attempt to Moot Class Claims Fails in 9th Cir.

RSS Feed

In Chen v. Allstate Insurance Co., Allstate asked the Ninth Circuit Court of Appeals to answer the hypothetical question raised in Campbell-Ewald v. Gomez, 136 S. Ct. 663 (Jan. 20, 2016) (previously covered on the ILJ here): whether a defendant can defeat a class action by depositing the full amount of the named plaintiff’s individual claim in an escrow account payable to the plaintiff, followed by entry of judgment for the plaintiff in that amount, thereby mooting the plaintiff’s individual claims. No. 13-16816 (9th Cir. April 12, 2016) (slip op. available here). Holding that such a tactic does not moot the class’s claims under Article III, the Ninth Circuit declined to direct the district court to enter judgment on the named plaintiff’s individual claims before he had a fair opportunity to move for class certification.

Plaintiff Florencio Pacleb sued Allstate for violations of the Telephone Consumer Protection Act stemming from automated calls made to his cell phone without his consent. In April of 2013, before a motion for class certification had been filed, Allstate initially made Plaintiff Pacleb a Rule 68 offer of judgment in the amount of $20,000 (including reasonable attorneys’ fees and costs accrued to date), which allegedly more than satisfied his individual claim. When the two named plaintiffs did not accept the offer within 14 days, Allstate then filed a motion to dismiss the plaintiffs’ entire case for lack of subject matter jurisdiction, arguing that, under Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), the district court should be required to enter judgment against Allstate and order payment to the plaintiff. While the motion to dismiss was pending, the other named plaintiff accepted the offer, though Pacleb did not; then, the district court denied Allstate’s motion. After the Supreme Court decided Campbell-Ewald, Allstate took the additional step of depositing the $20,000 in a bank escrow account and offering to cease sending Pacleb non-emergency telephone calls and text messages.

On appeal, Allstate argued that the judgment to which it consented would offer complete relief to the plaintiff and that the district court should be compelled to enter judgment on those terms, thus mooting the plaintiff’s individual claims and rendering the remaining class allegations insufficient to preserve a live controversy. The Ninth Circuit agreed with Allstate’s first contention only (that the offer of relief was apparently “complete”), but affirmed the district court’s denial of their motion to dismiss. The court noted that even if the district court entered judgment affording Pacleb complete relief on his individual damages and injunctive relief claims, effectively mooting those claims, Pacleb would still be able to seek certification under Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011). Pitts held that a plaintiff could continue to represent a class despite a settlement offer for complete individual relief from defendant, as long as the plaintiff could still file a timely motion for class certification at the time the offer was made. Chen now expands the logic of Pitts from mere settlement offers to actual monetary deposits and holds that, even if Pitts were not binding and Allstate could moot the plaintiff’s individual claims, the plaintiff could still seek class certification despite the absence of a live individual claim. Following the circuit’s prior analysis in Gomez, the panel determined that Pitts remained good law after the Supreme Court’s decision in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), because Genesis Healthcare concerned collective actions brought under the Fair Labor Standards Act rather than class actions under Rule 23 (of the Federal Rules of Civil Procedure) and that “courts have universally concluded that the Genesis discussion does not apply to class actions.” Id. at 16 (internal citations omitted).

Second, assuming Pitts was not controlling and Allstate could moot the plaintiff’s individual claims for damages and injunctive relief, the court rejected Allstate’s attempt to moot the action prior to a fair opportunity to move for class certification. The Chen court noted that placing funds in an escrow account was not the same as the actual receipt of all relief by a plaintiff and concluded that the depositing of funds into an escrow account was not enough to moot the claim because the plaintiff did not yet have the money in his possession. Lastly, the Ninth Circuit considered whether to order the district court to enter judgment before the plaintiff has had an opportunity to move for certification and concluded that doing so would be inconsistent with Campbell-Ewald:

. . . Campbell-Ewald clearly suggests it would be inappropriate to enter judgment under these circumstances. As Campbell-Ewald explained, “[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.” Campbell-Ewald, 136 S. Ct. at 672. Accordingly, when a defendant consents to judgment affording complete relief on a named plaintiff’s individual claims before certification, but fails to offer complete relief on the plaintiff’s class claims, a court should not enter judgment on the individual claims, over the plaintiff’s objection, before the plaintiff has had a fair opportunity to move for class certification.

Id. at 22-23 (internal citations omitted). Thus, the appeals court affirmed the district court’s ruling and denied Allstate’s motion to dismiss for lack of subject matter jurisdiction, a victory for the plaintiffs’ bar foreclosing defendant “pick-off” tactics in the Ninth Circuit.

Authored by: 
Daniela Saspe, Associate