Can an Offer of Judgment Moot a Putative Class Action?*
In the past, some defendants in class actions under Federal Rule of Civil Procedure 23 have attempted to deprive courts of subject matter jurisdiction by making a pre-class certification offer of judgment to the class representative in full satisfaction of his claims. This was done on the theory that a defendant could moot the class representative’s claims by giving him everything he was demanding and thereby get rid of the entire class action since no class had yet been certified.
The Ninth Circuit has rejected this strategy. In Pitts v. Terrible Herbst, Inc., the court held that a rejected Rule 68 offer in full satisfaction of a putative class representative’s claim, made before class certification, would not serve to moot the class action complaint. Rather, “[i]f the named plaintiff can still file a timely motion for class certification, the named plaintiff may continue to represent the class until the district court decides the class certification issue.” Thus, it was clear that, as the Pitts court put it, “a defendant may moot a class action through an offer of settlement only if he satisfies the demands of the class; an offer to one cannot moot the action because it is not an offer to all.”
The Supreme Court’s April 16, 2013 decision in Genesis Healthcare Corp. v. Symczyk may have called the Pitts ruling into question. In Genesis, the lower court concluded that a defendant’s Rule 68 offer of judgment in full satisfaction of the named plaintiff’s claim rendered that claim moot under the Fair Labor Standards Act (FLSA). The Supreme Court assumed without deciding that the plaintiffs’ claim was indeed moot, and held that the collective-action allegations in the complaint were therefore appropriately dismissed for lack of subject matter jurisdiction.
Although the Court in Genesis distinguished cases arising under Rule 23 as “fundamentally different” from FLSA collective actions, it did so based on the fact that a Rule 23 class has independent legal status upon certification. Courts following Genesis have questioned its impact on Rule 23 cases where a class has not yet been certified. In Chen v. Allstate Insurance Co., the defendant served a pre-certification offer of judgment on the two named plaintiffs that completely satisfied their claims. One of the plaintiffs accepted the offer; the other rejected it; and the defendant moved to dismiss the action as moot.
After the Northern District of California district court denied the motion under Pitts, the defendant sought and recently obtained interlocutory review to determine whether Pitts remains good law and would therefore allow the putative class representatives to move for class certification. If the Ninth Circuit finds that Pitts has been overruled and that an offer to a class representative in full satisfaction of his claim will serve to moot that claim, this may greatly increase the importance of Rule 68 offers in the early stages of Rule 23 class actions by opening the door for defendants to get rid of the entire case by making offers of judgment to the class representatives alone.
*This post is a follow up to my September 10, 2013 post on Federal Rule of Civil Procedure 68 offers of judgment. It addresses such offers in the context of class actions, an area in which the operation of Rule 68 is in flux.