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Wednesday, May 4, 2016

Chen v. Allstate: Depositing Money into Escrow Account Does Not Moot Putative Class Action; Plaintiff Must Have "Fair Opportunity" to Move for Certification

In Campbell-Ewald Co. v. Gomez (SCOTUS 1/21/16) (discussed here), the Supreme Court of the United States held that an unaccepted offer to satisfy the named plaintiff ’s individual claim does not render a putative class action moot. The Court did not decide the following issue: 
We need not, and do not, now 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. That question is appropriately reserved for a case in which it is not hypothetical.
Chen v. Allstate Insurance Company (9th Cir. 4/12/16) is that case. Two plaintiff filed a putative class action against Allstate for violation of the Telephone Consumer Protection Act (TCPA). Before the plaintiffs moved for class certification, Allstate made a Rule 68 offer of judgment to satisfy their individual monetary and non-monetary demands. One plaintiff accepted the offer, but the other, Pacleb, rejected. Allstate moved to dismiss the case, arguing that it was now moot, the district court denied the motion, and the Ninth Circuit gave Allstate permission to appeal. 

While the appeal was pending and shortly after the Supreme Court issued its decision in Campbell-Ewald, Allstate deposited $20,000 into an escrow account pending entry of an order or judgment granting full monetary and injunctive relief to Pacleb. Allstate then added this as a basis to reverse the district court's order. The Ninth Circuit declined to do so, holding as follows: 

The judgment that Allstate offered would afford Pacleb complete relief on his individual claims for damages and injunctive relief. Pacleb did not seek an admission of liability or declaratory relief, and an admission of liability is not required to afford him complete relief. And although Allstate's offer would not necessarily preclude Pacleb from obtaining nation-wide injunctive relief, Pacleb failed to show that injunctive relief limited to him personally would be inadequate. 

Regardless, "Even if, as Allstate proposes, the district court were to enter judgment providing complete relief on Pacleb's individual claims for damages and injunctive relief before class certification, fully satisfying those individual claims, Pacleb still would be entitled to seek certification." 

Pitts v. Terrible Herbst, 653 F.3d 1081 (2011) (discussed here), in which the Ninth Circuit held that an unaccepted offer in full satisfaction of a plaintiff's claims does not moot a putative class action, remains good law after Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523 (2013) (discussed here), in which the Supreme Court held that when a named plaintiff's individual claims are moot in a collective action under the Fair Labor Standards Act (FLSA), the action was no longer justiciable based solely on the collective action allegations made in the complaint. Genesis Healthcare is limited to FLSA collective actions, rather than Rule 23 class actions. 

Allstate did not afford any "actual relief" to Pacleb by placing $20,000 in an escrow account. Pacleb did not actually receive the money, and a court still could award him "effectual relief." Allstate did not deposit the money with the court or relinquish all interest in it. 

Assuming, without deciding, that "a court has authority in an appropriate case to enter judgment for complete relief on a plaintiff’s individual claims over the plaintiff’s objection," a court should not do so until the plaintiff has "a fair opportunity to show that certification is warranted." 

In conclusion:
We hold the judgment Allstate has consented to would afford Pacleb complete relief on his individual claims for damages and injunctive relief. To date, however, Pacleb has not actually received complete relief on those claims. Those claims, therefore, are not now moot. In addition, because “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted,” id., we will not, as Allstate urges, direct the district court to enter judgment on Pacleb’s individual claims before Pacleb has had a fair opportunity to move for class certification. Finally, even if Pacleb’s individual claims were otherwise fully satisfied, he could continue to seek class certification under Pitts.
The opinion is available here

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