Tag Archives: Standing/Mootness

Named Plaintiffs Can’t Voluntarily Dismiss Individual Claims in Order to Appeal Class Certification Denial

View David Wright's Complete Bio at robinsonbradshaw.comEarlier this year, we hazarded a guess that the Supreme Court was split 4-4 regarding a Ninth Circuit decision holding that a named plaintiff could achieve appellate review of a decision denying class certification by voluntarily dismissing his individual claims. It turns out, based upon the Supreme Court’s decision in Microsoft Corp. v. Baker [], that the internal debate was not so much over whether the Ninth Circuit erred in allowing the appeal, but whether that error had both statutory and constitutional implications. The Supreme Court had accepted certiorari to review “[w]hether a federal court of appeals has jurisdiction under both Article III and 28 U.S.C. Section 1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.” With Justice Gorsuch on the sidelines, the Court unanimously held that the named plaintiffs’ gamesmanship did not allow appellate review, but the justices differed in their reasons for that outcome.

Five members of the Court, led by Justice Ginsburg, concluded that such an appeal was inconsistent with F.R. App. P. 23(f). The majority reasoned that “[r]espondents’ voluntary-dismissal tactic . . . invites protracted litigation and piecemeal appeals,” and would – essentially – turn Rule 23(f)’s “discretionary regime” into a license for plaintiffs to force an interlocutory appeal of a ruling denying class certification. This, the Court noted, would upset “Rule 23(f)’s careful calibration” and “Congress[’] final decision rule would end up a pretty puny one.”

In our previous post, we sounded an alarm about the “one way street” that was a feature of the Ninth Circuit’s decision, noting that “This option—if allowed by the Supreme Court—works only for plaintiffs in class action cases, not defendants. If defendants suffer an adverse class certification ruling, and the appellate court does not exercise its discretion to accept the interlocutory appeal, defendants must litigate the case to judgment before obtaining review of the class determination.” Justice Ginsburg agreed with us on this point, observing in her opinion for the majority that “[t]he one-sidedness of respondents’ voluntary-dismissal device ‘reinforce[s] our conclusion [of no jurisdiction],” and that “the ‘class issue’ may be just as important to defendants.”

Although the majority founded its decision on 28 U.S.C. Section 1291, thereby avoiding the Article III issue, Justice Thomas, joined by Justice Alito and the Chief Justice, wrote a concurring opinion that took the constitutional issue head on. The concurrence argued that there was no Article III “case or controversy” following the named plaintiffs’ dismissal of their claims. Justice Thomas noted that “it has long been the rule that a party may not appeal from the voluntary dismissal of a claim,” and that the parties were “no longer adverse to each other on any claims” after that dismissal. A favorable ruling on class certification could not, the concurring opinion explained, “revive [the named plaintiffs’] individual claims.”

With deference to the Ninth Circuit jurists who proceeded to adjudicate the appeal in Baker, this was not a particularly hard case. In Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), the Supreme Court unanimously rejected the so-called “death-knell” doctrine, which had permitted plaintiffs to appeal as of right a district court order denying a motion for class certification. Given that decision, and the fact that Rule 23(f) appellate jurisdiction is discretionary, not mandatory, it is difficult to see how a voluntary dismissal gambit could ultimately succeed. Unfortunately now for Xbox gamers, they will have to litigate their ‘disc gouging’ claims one by one . . . .

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Can a Class Action Proceed when the Named Plaintiff’s Claim Becomes Moot? A Recent View from the North Carolina Business Court

View Mark Hiller’s Complete Bio at robinsonbradshaw.comIn this post we talk about two of our favorite things (relatively speaking): class actions and mootness.  We last looked at these issues when covering the U.S. Supreme Court’s decision in Campbell-Ewald Company v. Gomez, 136 S. Ct. 663 (2016).  There, the Court rejected the defendant’s attempt to “pick off” the named plaintiff in a class action case.  The defendant had made a Rule 68 offer to settle the case for the full value of the plaintiff’s claim.  The plaintiff declined, but the defendant argued that its offer nonetheless mooted the claim.  The Supreme Court rejected that argument, holding that an unaccepted Rule 68 offer does not moot a claim—at least if the defendant does not deposit the Rule 68 money with the court.

But what if the named plaintiff’s claim does become moot?  Can the case stay alive based on the claims of the class?  The Supreme Court has been wrestling with that question for decades, and the answer turns in large part on timing—when did the named plaintiff’s claim become moot?  If it became moot after the class was certified, then the class action is not rendered moot because, at that point, the class has acquired a legal status independent of the plaintiff’s.  See Sosna v. Iowa, 419 U.S. 393 (1975).  The same rule applies if the named plaintiff’s claim became moot after the trial court denied class certification.  If the denial is later reversed, the reversal will relate back to the time of the trial court’s erroneous certification decision.  See U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 (1980).  In both of these situations, the named plaintiff had a live claim at the time the trial court ruled on certification.

That leaves open a third scenario: a named plaintiff whose claim becomes moot before the trial court makes any certification ruling.  What then?  Chief Judge Gale of the North Carolina Business Court faced this question in the recent case of Chambers v. Moses H. Cone Memorial Hospital.  To simplify the facts and procedural history, the plaintiff received emergency treatment at a hospital and then objected to the amount of the bill he received.  The plaintiff claimed that the hospital charged uninsured patients, like himself, more for emergency services than the hospital charged its insured patients.  He brought a class action complaint on behalf of himself and other uninsured patients who received emergency services at the hospital.  His initial complaint alleged common law claims and sought damages.  But he later amended the complaint to seek only a declaratory judgment that the hospital may collect only “reasonable payments” for its emergency services, rather than the “regular rates” the hospital charged in its form contract.

Judge Gale first held that the plaintiff’s declaratory judgment claim was moot because the hospital was not seeking to recover the unpaid amount of the plaintiff’s bill.  (The hospital had been seeking to do so earlier in the case, but the hospital dismissed its counterclaims with prejudice after the plaintiff dropped his damages claims.)

That left the more difficult question: Even though the plaintiff no longer had a live claim, could the case continue based on the claim of the putative class?  Judge Gale began by noting that the case did not come within the holdings of Sosna or Geraghty because the court had not ruled on certification at the time the plaintiff’s claim became moot.  (It appears the plaintiff had not yet filed a certification motion.)

Judge Gale then addressed whether the putative class claim could proceed based on an exception to the mootness doctrine for claims that are “so inherently transitory that the trial court will not have even enough time to rule on a motion for class certification before the proposed representative’s individual interest expires.”  Judge Gale explained that the classic example of an “inherently transitory” claim was one that inevitably becomes moot with the passage of time, such as a challenge to pretrial detention.  In those cases, dismissing a case as moot would mean that no plaintiff could challenge the defendant’s conduct, because any plaintiff’s individual claim would become moot before the case could be fully litigated.  Judge Gale said that the plaintiff’s claim—challenging the hospital’s emergency-services rates for uninsured patients—doesn’t fit into that passage-of-time category for “inherently transitory” claims.

But that left another possibility—one that circles us back to Campbell-Ewald: Can a claim be “inherently transitory” when the claim becomes moot, not because it is time-sensitive, but because the defendant has “picked off” the claim by offering to pay its full amount before the trial court makes a decision on certification?  Judge Gale noted that the Ninth Circuit has applied the “inherently transitory” exception in this scenario (as have several other federal circuit courts).  But ultimately, Judge Gale did not have to decide whether to follow this interpretation of the “inherently transitory” exception, because he concluded that there was no evidence showing that the hospital tried to pick off the plaintiff’s claim.  To the contrary, Judge Gale stated, the plaintiff’s claim became moot only when the plaintiff decided to dismiss his claims seeking damages.  Judge Gale agreed with the hospital that, had the plaintiff maintained those claims, then the hospital’s dismissal of its counterclaims “would not have mooted [plaintiff’s] declaratory claim.”

Conclusions

So, what to take away from all this?

First, class action law is complicated, especially when mootness is thrown into the mix.

Second, the law is pretty clear that a class action is not rendered moot when the named plaintiff has a live claim at the time the trial court decides whether to certify the class.

Third, the law is less clear whether the class action is rendered moot when the named plaintiff’s claim becomes moot before the trial court makes a certification decision.  In that scenario, the issues will likely focus on whether the case fits into exceptions to the mootness doctrine, such as the “inherently transitory” exception discussed above.

Fourth, there will likely be continued developments in the law as to whether a defendant’s effort to pick off a named plaintiff succeeds in mooting the plaintiff’s claim, and if so, whether that effort satisfies the “inherently transitory” exception such that a live case or controversy still exists.

We’ll keep you updated as the law develops.

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Seventh Circuit Weighs in on Offers of Judgment

View David Wright's Complete Bio at robinsonbradshaw.comIn this space, we concentrate on class action decisions in the Carolinas, as well as Fourth Circuit and United States Supreme Court precedent. Occasionally, though, we venture beyond these jurisdictions to highlight issues of particular note, including those where courts are divided. We’ve previously reported here how offers of judgment interact with mootness. In Campbell-Ewald Co. v. Gomez, the United States Supreme Court held that an unaccepted settlement offer, even if it offers all relief sought in the case, does not render a case moot when the affected party seeks relief on behalf of a class. Last Friday, the Seventh Circuit considered a question not resolved by Gomez: What happens when the named representative accepts a Rule 68 offer of judgment? Can he still appeal the denial of class certification? Like the question of appellate standing upon which the Supreme Court accepted certiorari in Microsoft, the answer is significant.

In Wright v. Calumet City, Illinois, No. 14-cv-10351 (7th Cir. Feb. 17, 2017), the Seventh Circuit acknowledged a split of authority on this question: “Where the Rule 68 offer is accepted but by its terms exempts the class certification issue, courts are divided as to whether the plaintiff retains a concrete interest sufficient to meet the case or controversy requirement of Article III.” The Seventh Circuit noted that Wright’s claim to standing was particularly strained because he accepted the Rule 68 offer without reservation, and he preserved no interest in receiving an incentive award. Wright argued that he had a sufficient interest in the case because his offer of judgment did not include attorney’s fees for the class claim (as opposed to his individual claim), but – as the Seventh Circuit observed – Lewis v. Continental Bank Corp.,  494 U.S. 472, 480 (1990) holds that “an interest in attorneys’ fees is, of course, insufficient to create an Article III case or controversy where none exists.” The court noted that there is some tension between Lewis and Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980), in which the Supreme Court allowed plaintiffs, whose individual claims had been satisfied, to appeal the denial of class certification based on their asserted interest in shifting attorney’s fees to the class members. But the court distinguished Wright’s case from Roper on the ground that Wright had accepted the Rule 68 offer “as satisfaction of all of the relief that he sought in the district court.” In Roper, by contrast, the district court entered judgment for the plaintiffs in the amount tendered by the defendant, even though the plaintiffs had refused that offer. Thus, even under Roper, Wright’s claims are moot.

There will likely be more permutations on the Rule 68/mootness issues, so stay tuned.

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Experian Petitions Fourth Circuit to Review Certification of 88,000-Member Class

View Stuart Pratt’s Complete Bio at RBH.comExperian recently petitioned the Fourth Circuit to immediately review a district court’s order certifying an 88,000-member, nationwide class of consumers who requested Experian credit reports that listed accounts with the now-defunct Advanta Bank. In this case, Dreher v. Experian Information Solutions, Inc., No. 14-325 (4th Cir. July 3, 2014), Experian requested an interlocutory appeal under Rule 23(f), contending that, among other things, the district court’s order that certified a class with members that had suffered no injury and found Rule 23’s predominance requirement to be satisfied was “manifestly erroneous.”

In January 2012, the plaintiff filed a class-action complaint in the Eastern District of Virginia, alleging Experian had committed multiple violations of the Fair Credit Reporting Act (“FCRA”) by failing to provide notice and accurate information about accounts with the defunct Advanta Bank listed on his and other consumers’ credit reports. Specifically, the plaintiff claimed that Experian erroneously reported that Advanta had supplied the credit-report information, when, in fact, Cardworks, a newly appointed servicer of the Advanta accounts, had given Experian this information. For these violations, the plaintiff sought statutory damages and attorneys’ fees and costs.

Upon the plaintiff’s motion, the district court, in June 2014, issued an order and opinion finding that the plaintiff had satisfied the class-action requirements of Rule 23 and certifying a class of individuals who had received a credit report from Experian after August 1, 2010, that identified Advanta as the sole source of information for an account entry. The district court rejected Experian’s arguments that issues of individual statutory damages would predominate over common issues of liability, concluding that the damages calculation for each class member would simply be based on the number of discrete statutory violations, and not, as Experian contended, based on each member’s individualized actual harm. The district court did not address Experian’s argument that most of the potential class members lacked Article III standing because they had not suffered an injury-in-fact.

Experian’s petition to the Fourth Circuit for interlocutory review focused on these two issues: Article III standing and predominance. Experian first argued that interlocutory review was appropriate because the district court—despite recognizing that “it is unlikely that anyone suffered actual injury”— ignored Experian’s Article III standing argument. The Fourth Circuit, Experian said, recently held that “deprivation of [a] statutory right” was not “sufficient to constitute injury-in-fact for Article III standing.” David v. Alphin, 704 F.3d 327, 338 (4th Cir. 2013). Thus, Experian contended that the district court’s admission about the lack of actual injury meant the class members did not have Article III standing and the class should not have been certified.

Second, Experian claimed that the certification order erroneously found that common issues predominated over individual members’ issues. Experian said the district court justified this conclusion by improperly adopting a “Trial by Formula” approach—using a mathematical calculation based on the FCRA’s statutory-damages limits to determine the class’s total damages. Again, Experian argued that the district court’s decision conflicted with a previous Fourth Circuit decision, this time Soutter v. Equifax Information Services, LLC, 498 F. App’x 267 (4th Cir. 2010). Instead of using a math formula to determine a class’s statutory damages under FCRA, Experian asserted that Soutter requires a court to typically do an “individualized inquiry” to determine damages. Further, Experian said the district court’s “Trial by Formula” approach was improper under Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), because the Dukes Court had rejected using such formulas to adjudicate class actions.

The plaintiff’s response to Experian’s petition is due in August. Then, it will be up to the Fourth Circuit to decide whether to allow an interlocutory appeal. We’ll continue to monitor and report on this case as it progresses in the courts.

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Can an offer of judgment to the named plaintiff moot a class action lawsuit? District of South Carolina says “No”

View David Wright's Complete Bio at RBH.comIt is often expedient for a defendant to make an offer of judgment in order to avoid the expense of lengthy proceedings, particularly when the plaintiff’s damages claim is small. But what happens when the offer of judgment is made to a class representative? Does that mean that the individual no longer has standing? And does it make any difference if the offer is made before or after the class certification motion is filed? Judge Currie grappled with these issues last week in a Fair Debt Collection Practices Act case, Chatham v. GC Services, LP, No. 3:14-cv-00526 (D.S.C. July 16, 2014), lamenting that “neither party [had] cite[d] to any Fourth Circuit or United States Supreme Court authority on this precise issue,” namely: “Do the presence of class allegations in the Complaint and the pendency of a motion for class certification . . . preclude the offer of judgment from rendering the Plaintiff’s class action moot?”

Although most circuits have rebuffed this defense tactic, there appears to be a bit of light in the Supreme Court’s decision in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013). But that was a Fair Labor Standards Act case, and rules for collective actions are different. In the end, Judge Currie aligned herself with the majority rule, finding that “an offer of judgment will not moot a named plaintiff’s claim if the offer is made while a motion to certify the class is pending.”

It remains to be seen whether or not the filing of the class certification motion is dispositive in this line of cases. If it is, you can expect to see in consumer class actions simultaneous filings of class certification motions with the complaint.

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