The Supreme Court has granted cert to decide whether or not class action defendants can make the claims of named plaintiffs invalid by offering early settlements.
This practice, known as “mooting” an action or the “pick-off” strategy, occurs when, prior to class certification, a defendant offers a class representative a full settlement, completely covering any of the named plaintiff’s damages. Even if the named plaintiff does not accept the offer, defendants may then argue that the claims are moot because full relief was offered (and, therefore, no need for a lawsuit) and seek dismissal.
The Supreme Court is poised to hear an appeal of the Ninth Circuit’s decision in Campbell-Ewald Co. v. Gomez, in which the panel rejected defendant’s argument that an unaccepted offer to settle the named plaintiff’s claim under the Telephone Consumer Protection Act mooted his personal and putative class action claims. Citing its decision in Diaz v. First Am. Home Buyers Prot. Corp., the Ninth Circuit held that the unaccepted offer was “insufficient” to render plaintiff’s personal claims moot and did not moot the class claims because it was rejected prior to class certification.
The high court’s decision could resolve a marked split in the circuits as to the legality of the “pick-off” strategy. Currently, the Seventh and Fourth Circuits allow settlement offers to moot class claims, because an unaccepted offer of full relief means there is no longer a live controversy. The Second and Sixth Circuits have held similarly, but require entry of judgment for the plaintiff to ensure that he or she has obtained full relief, even though the offer was rejected. Individual claims (but not class claims) can also be mooted in the Third, Fifth and Tenth circuits via the “pick-off” strategy.
This is the second time the Court will have the chance to decide this issue. In the 2013 decision in Genesis Healthcare v. Symczyk, the Court had the opportunity to take up the question, but instead declined to resolve the split based on a finding that the plaintiff failed to properly challenge the Third Circuit’s finding. In her dissent, Justice Kagan stridently rebuked the majority for dodging the issue. At least for clarity’s sake, class action practitioners hope that the Court takes this opportunity to resolve the split, although we can be sure that Justice Kagan will be seeking to “moot” the “pick-off” strategy.
Although it will be a victory for the defense bar if the strategy is proclaimed legal, it still does not mean the end of class actions. If a named plaintiff is effectively picked off, determined plaintiff’s counsel can simply find another representative, and another, and another. Depending on the cost to settle individual claims, this strategy could be death by a thousand cuts for some smaller companies that cannot afford multiple individual settlements.
While this is a concern, if the “pick-off” strategy survives, it will continue to be a useful weapon for the class action defense practitioner, keeping less tenacious plaintiff attorneys at bay.