By now, most attorneys who handle class action litigation are familiar with the defense strategy commonly known as “mooting.”(This terminology is, frankly, imprecise, but we will save the semantics discussion for another day.) The cautious plaintiffs’ attorney will file a cursory motion for class certification with the complaint to minimize the likelihood of mooting.The defense attorney will serve an offer of judgment for full relief as soon as possible and immediately move to dismiss. But in light of conflicting circuit court decisions, the legal landscape is unclear on the ultimate effect of these maneuvers. Luckily, we’re here to help.
For the uninitiated, “mooting” (at least for our purposes) occurs when a defendant offers the plaintiff all the relief he or she has requested. Courts have long held that an individual plaintiff cannot continue to pursue a claim in court when that individual has been offered full and complete relief. The question the courts have wrestled with, however, is what this means in the class action context, where an individual plaintiff purports to bring an action on behalf of a putative class of similarly situated individuals, but full relief is offered before a class is certified. In many instances, it is more economically rational for the defendant to pay the named plaintiff the maximum recovery than it is to litigate a class action, even if the defendant has strong defenses on the merits. But many plaintiffs’ class action attorneys do not see it that way—they criticize this tactic as a way to “pick off” class representatives to avoid broader liability for alleged corporate malfeasance.
To balance these competing interests, federal circuit courts have created various tests:
- The most extreme position of the circuits is the position adopted by the Ninth and Eleventh Circuits, holding that an unaccepted offer of judgment is “a legal nullity with no operative effect.”Diaz v. First Am. Home Buyers Prot. Corp., 732 F.3d 948, 954-55; see also Jeffrey M. Stein, D.D.S., M.S.D., P.A. v. Buccaneers L.P., 2014 U.S. App. LEXIS 22603 (11th Cir. Dec. 1, 2014).
- The Eighth Circuit has not considered a scenario in which the plaintiff made an offer of complete relief before a class certification decision. In Alpern v. UtiliCorp United, Inc., 84 F.3d 1525, 1539 (8th Cir. 1996), the court held that an offer of individual judgment can moot the case “only where class certification has been properly denied.” But the district court in that case had ruled on the plaintiff’s motion for class certification. 84 F.3d at 1539.
- The Third, Fifth, and Tenth Circuits all recognize that an unaccepted offer for full relief can moot a case. See Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239, 1250 (10th Cir. 2011); Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 920-21 (5th Cir. 2008); Weiss v. Regal Collections, 385 F.3d 337, 348 (3d Cir. 2004). But these courts limit the applicability of this rule to cases in which the named plaintiff “unduly delays” seeking class certification.
- The Seventh Circuit also recognizes that “once the defendant offers to satisfy the plaintiff’s entire demand, there is no dispute over which to litigate, and a plaintiff who refuses to acknowledge this loses outright . . . because [he] has no remaining stake.” Damasco v. Clearwire Corp., 662 F.3d 891, 895 (7th Cir. 2012).The limitation placed on this general rule by the Seventh Circuit is that a plaintiff may preserve its class claims by filing a motion for class certification. Id.
But is any of these the right test? It seems counterintuitive—and unconstitutional—that a single plaintiff can obtain standing on behalf a putative class simply by making class allegations in a complaint or filing a cursory motion for class certification. In fact, as noted in our earlier blog post here, an Illinois court recently reached that exact conclusion, holding that a skeletal class certification motion was not enough to create class standing in the face of an offer of complete relief. This is consistent with Supreme Court precedent that has, for nearly 40 years, emphasized the actual certification decision (rather than a plaintiff’s motion for class certification or any other procedural maneuver) as the threshold for a class to acquire independent legal standing. This approach also is consistent with fundamental constitutional principles of Article III standing and due process. As renowned constitutional scholar Martin Redish has noted:
It is important to keep in mind that a lawsuit does not “arise” under Rule 23 of the Federal Rules of Civil Procedure, which governs class actions in the federal courts. The legal rights to be adjudicated, rather, are substantively created by some recognized legal authority — a legislative body, a court, or the Constitution.
Martin H. Redish, Wholesale Justice: Democracy and the Problem of the Class Action Lawsuit (Stanford Books 2009), at p. 3.
With these principles in mind, we believe the standard should be this: A class representative’s claim can be mooted by an offer of complete relief at any time before a class certification decision.So far no circuit has adopted this approach, but at some point the Supreme Court will need to address the growing divide among the circuits, and it certainly would not be unprecedented for the Supreme Court to side with a minority approach. We will continue to monitor this critical issue for class action litigators, so keep checking back for updates in the future.