TCPA

Never Surrender – The Ninth Circuit’s Follow-Up to the Campbell-Ewald Anti-Pickoff Rule

** Insurer Fails to Convince Circuit Court that Escrow Payment Moots TCPA Case **                                                                                                                                                                                                                                                                                

Definition of the word escrow from a law text book

As we’ve posted about recently, in February 2016 the U.S. Supreme Court in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 193 L. Ed. 2d 571 (2016) resolved a circuit split over whether a defendant can “pick off” the lead plaintiff in a putative class action lawsuit via a Rule 68 offer of judgment that affords the plaintiff with complete relief prior to class certification.  The majority, relying on “first-year law student” contract law, held that if the plaintiff doesn’t accept the offer of judgment – “however good the terms” (i.e., total surrender) — the defendant’s offer is a “legal nullity” and, therefore, the case or controversy remains.  In reaching its decision, the Court felt compelled to distinguish “a trio of 19th-century railroad tax cases” (as if the fact that they were 19th-century railroad tax cases wasn’t enough) where the defendants actually paid the amounts alleged by the plaintiffs to be owed.  The Court did so thusly: “In all three cases, the railroad’s payments had fully satisfied the asserted tax claims, and so extinguished them.” 136 S. Ct. at 671.  This distinction, however, opened a small can of worms.  What if the defendant deposited the full amount of the plaintiff’s claim into an account payable to the plaintiff, and the court then entered judgment in that amount?  While the majority raised this hypothetical, they declined to answer it.

Acting with lightning speed, Allstate Insurance Company — embroiled in a putative TCPA class action in the Northern District of California — deposited $20,000 in a bank escrow account “pending entry of a final District Court order or judgment directing the escrow agent to pay the tendered funds to [the lead plaintiff], requiring Allstate to stop sending non-emergency telephone calls and short message service messages to [the plaintiff] in the future and dismissing this action as moot.”  Chen v. Allstate Ins. Co., No. 13-16816, 2016 WL 1425869, at *1 (9th Cir. Apr. 12, 2016).  Unfortunately for Allstate, the matter was already on appeal to the Ninth Circuit on the Rule 68 offer of judgment issue subsequently decided by the Supreme Court, so the district court wasn’t given first crack at deciding whether to enter Allstate’s proposed judgment.

On April 12, 2016 – before the ink was dry on the Campbell-Ewald opinion – the Ninth Circuit slammed shut the mootness door the Supreme Court left open.  The court first observed that Allstate had not met the Supreme Court’s requirement that the plaintiff actually receive the complete relief offered – Allstate’s money was in escrow and it could get it back.  2016 WL 1425869, at *7.  Allstate rejoined that all the court of appeals needed to do was order the district court to enter its proposed order and the money would be out of its hands for all eternity.  The Ninth Circuit said no.  If the plaintiff doesn’t want complete relief, he shouldn’t be forced to accept it – as long as he’s not bullheaded or crazy.  And “[a] named plaintiff exhibits neither obstinacy nor madness by declining an offer of judgment on individual claims in order to pursue relief on behalf of members of a class.”  2016 WL 1425869, at *9.  While the Ninth Circuit distinguished Allstate’s relationship to its money from the situation where a defendant deposited the money in the court registry and could not reclaim it, the distinction is without a difference because Federal Rule of Civil Procedure 67 requires notice to the plaintiff and a court order permitting the deposit.

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Supreme Court Alert

No standing street sign in New York.

** Supreme Court Holds in TCPA Case That a Rule 68 Offer or Relief Does Not Moot Class Claims Under Rule 23 ** . . .                                                                                                               

In the case of Campbell-Ewald Co. v. Gomez (No. 14-857), the Supreme Court issued a writ of certiorari to  the Ninth Circuit to resolve a circuit split on the issue of whether a Rule 68 offer of judgment for complete relief to a putative class representative moots his claim thereby preventing him from serving as a class representative under Rule 23See previous post.  The underlying case concerns unsolicited text messages from an advertising company prohibited by the Telephone Consumer Protection Act (TCPA) 47 U.S.C. § 227.  The defendant company offered Mr. Gomez the statutory TCPA remedy (trebled) and even agreed to a stipulated injunction prohibiting it from further violations the TCPA.   Gomez rejected the offer.  The defendant argued that its offer, which provided complete relief, mooted Gomez’s claim and he therefore did not have Article III standing.  The Supreme Court ruled on January 20, 2016 (in a 6-3 decision) that an unaccepted settlement offer does not moot a plaintiff’s case.  Campbell-Ewald Co. v. Gomez, 577 U. S. ____ (2016).  The conservative-leaning court in recent years has issued rulings that put restrictions on class action lawsuits but did not continue that trend in this case.  Justice Ginsburg delivered the opinion of the Court joined by Justices Kennedy, Breyer, Sotomayor, and Kagan with Justice Thomas concurring.  Chief Justice Roberts filed a dissenting opinion, in which Justices Scalia and Alito joined.  Notably, the ruling is limited in scope, with Justice Ginsburg  pointing out that the Court was not deciding how a case would be resolved if the settlement funds had been deposited into an account payable to the plaintiff and the trial court then entered judgment in that amount.  In reaching its determination that a rejected settlement offer does not moot a complaint, the majority pointed to Rule 68’s sanction – that the offeree must pay the offeror’s costs after the offer was made.  This may turn out to be a silver lining for defendants in certain types of class actions, such as consumer cases, where it is unlikely that the class representative will obtain the full amount of his claim if the case were to proceed to trial.  Costs in class action litigation are no small matter.

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All Eyes on the Supreme Court for Consumer Class Action Lawyers

supreme-court

**The Supreme Court’s 2015 Term Opens With a Series of Cases Important for Consumer Class Action Defendants: Campbell-Ewald v Gomez, Spokeo v Robins and Tyson Foods v Bouaphakeo** . . .                                                                                                                                                                                                                                                          

In recent years, the Supreme Court has handed down victories to the class action defense bar.  In Wal-Mart v. Dukes, 564 U.S. ___ (2011), the Court reversed a California district court certification of a gender discrimination class – raising the bar on commonality questions for plaintiffs.  In Comcast v. Behrend, 569 U.S. __ (2013), the Court again reversed a district court certification – heightening scrutiny on plaintiffs’ methods for alleging class wide damages.  As the 2015 term opens this week, defense counsel around the country eye further potential victories in three key cases.

The first case up is Campbell-Ewald Co. v. Gomez (No. 14-857) on appeal from the Ninth Circuit where the Court will deal with two frequently litigated questions as yet unresolved by the circuits.  Namely, does a Rule 68 offer of complete relief to a plaintiff moot his or her claim and, if so, does it also moot the resulting class claim under Rule 23?  The underlying case concerns unsolicited text messages prohibited by the Telephone Consumer Protection Act (TCPA) 47 U.S.C. § 227.  The TCPA contains a statutory remedy and defendants argued that, to the extent they had offered Plaintiff  the full amount of the statutory remedy (per Rule 68) as relief,  the plaintiff suffered no cognizable Article III damages.  Thus, defendants argue that because the plaintiff suffered no injury,  he has no right to represent a class of people who may have been damaged.  From a practical perspective, the case addresses the question:  Can a defendant “pick off” would be class representatives through Rule 68 offers of judgment thereby destroying the foundation of the class action claim?  As anyone who has defended corporations receiving required pre-litigation notices under consumer protection statutes has observed, plaintiff law firms have become increasingly reticent to disclose the identity of their clients at the notice stage in order to forestall Rule 68 offers of judgment until the putative class action lawsuit has been filed.

The second case is Spokeo Inc. v. Robins, (No. 13-1339) also on appeal from the Ninth Circuit.  This case involves a related question of Article III standing for class representatives.  Spokeo concerns the  Fair Credit Reporting Act, 15 U.S.C. § 1681 (FCRA), which requires consumer credit agencies to take reasonable steps to ensure the accuracy of their published reports.  Plaintiff in a putative class action argued in the Central District of California that results for his name on the Spokeo website contained inaccurate information about plaintiff’s education and professional experience – and that this inaccuracy harmed his employment prospects.   The District Court dismissed, finding that the alleged damages – based on hypothetical impact on his employment – were too speculative to satisfy Article III standing.  The Ninth Circuit reversed, holding that the statutory violation implicitly creates a private cause of action to enforce and that this violation of a statutory right was an “injury” sufficient to confer standing.  The Ninth Circuit Spokeo decision was the latest in a circuit split – on one side the Second and Fourth circuits, which have rejected standing arguments from plaintiffs who alleged bare statutory violations that did not result in any actual harm (Kendall v. Emps. Ret. Plan of Avon Prods., 561 F.3d 112 (2d Cir. 2009); David v. Alphin, 704 F.3d 327 (4th Cir. 2013)); and the Ninth Circuit joining the Sixth and Seventh Circuits, which have come out on the side of recognizing “damages” for private plaintiffs with respect to minor statutory violations.  Beaudry v. TeleCheck Servs, 579 F.3d 702 (6th Cir. 2009); Murray v. GMAC Mortg. Corp., 434 F.3d 948 (7th Cir, 2006).  If the Supreme Court recognizes damages irrespective of actual harm, the impact could be felt more broadly than FCRA – there are numerous similar statutory schemes, including truth-in-lending legislation (15 U.S.C. § 1640(a)); debt collection statutes, (15 U.S.C. § 1692k(a)); as well as various privacy laws (18 U.S.C. § 2710(c)(1); 47 U.S.C. § 551(f)(1)-(2)).

The third case is Tyson Foods v. Bouaphakeo (No. 14-1146) – a challenge to a $5.8 million wage-and-hour judgment in favor of a class of employees at Tyson’s meat packing plant in Iowa.  Tyson’s petition seeks a reversal of the district court and Eight Circuit’s decision to permit liability and damages verdicts to be based – not on an individual analysis of each purported class member – but by extrapolating a statistical average across the board based on the discrepancies observed in a sample class of workers’ hours and pay.  Tyson further appeals on the lack of ascertainability of the class itself – that is, that the certified group (even according to the Plaintiffs’ own expert) included a significant number of people who weren’t underpaid at all.  If successful, the Tyson case will build upon the Court’s disapproval in Wal-Mart of “trial by formula” and provide a significant bulwark against plaintiffs in putative class actions glossing over differences amongst their claimed class in order to achieve certification.

Not surprisingly, this trifecta of cases has generated a significant amount of interest, amicus briefing, and optimistic thinking from the defense bar that momentum is on its side.  The implications are not insubstantial if defendants prevail:  the type of de facto strict liability for statutory compliance created by such class actions will diminish, there will be new avenues to derail cases pre-certification, and the barrier of ascertainable and reliable class wide damages that plaintiff s must hurdle will be reinforced.

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