Last week the Ninth Circuit Court of Appeals held that a named plaintiff’s rejection of a settlement offer for the full amount of the named plaintiff’s individual claim does not moot a class action complaint where the offer precedes the filing of a motion for class certification. Pitts v. Terrible Herbst, No. 10-15965 (9th Cir. August 9, 2011).
Plaintiff Gareth Pitts filed a class action complaint in Nevada state court against his employer, Terrible Herbst, Inc., a Las Vegas-based convenience store chain, seeking damages for alleged minimum wage and overtime violations. Pitts’ complaint contained causes of action under both Nevada state law and the federal Fair Labor Standards Act (FLSA). Terrible removed the case to federal court.
During pre-certification discovery, Terrible made an offer of judgment to Pitts under Federal Rule of Civil Procedure 68. Although Pitts claimed individual damages of only $88.00, in its Rule 68 offer Terrible agreed to allow judgment to be taken against it in the total amount of $900.00. Pitts declined the offer. Terrible then filed a motion to dismiss the action for lack of subject matter jurisdiction, arguing that its offer of judgment to Pitts for more than the value of his individual claim rendered the entire case moot. In its ruling on the motion, the district court held that a Rule 68 offer of judgment in an amount that satisfies the named plaintiff’s individual claim does not moot a putative class action so long as the class representative can still file a timely motion for class certification.
The Ninth Circuit agreed, citing a line of cases addressing whether a class action becomes moot, and therefore not a live case or controversy required for federal court jurisdiction under Article III of the Constitution, when the named plaintiff loses his personal stake in the litigation. Those cases, which include Sosna v. Iowa, 419 U.S. 393 (1975), Gerstein v. Pugh, 420 U.S. 103 (1975), Deposit Guaranty Nat’l Bank v. Roper, 445 U.S. 326 (1980), U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 (1980), and County of Riverside v. McLaughlin, 500 U.S. 44 (1991), together establish the principle that the termination of a named plaintiff’s individual claim does not moot a certified class action.
The Ninth Circuit acknowledged that those cases did not address the specific question of whether an uncertified class action becomes moot when the named plaintiff loses his personal stake in the litigation. The court nevertheless found that those cases provide “several principles” to support its decision. First, if the district court has certified a class, mooting the named plaintiff’s individual claim does not moot the class action, because upon certification a class acquires a legal status separate from the class representative. After certification, a defendant can moot a class action only by settling with the entire class. Second, if the district court denies certification, mooting the putative class representative’s claim will not necessarily moot the class action because the putative class representative may appeal the denial of class certification, and therefore retains an interest in obtaining a final decision on class certification. Third, even if the district court has not yet addressed class certification, mooting the putative class representative’s claim will not necessarily moot the class action because some claims are so “inherently transitory” that the court will not have an opportunity to rule on class certification before the proposed representative’s individual interest expires. In such cases, the named plaintiff’s claim is “capable of repetition, yet evading review” and the “relation back” doctrine is properly invoked to preserve the merits of the case for judicial resolution.
Applying these principles, the Ninth Circuit concluded that “Terrible’s unaccepted offer of judgment did not moot Pitts’s case because his claim is transitory in nature and may otherwise evade review.” The court further explained that there is “no reason to restrict application of the relation-back doctrine to cases involving inherently transitory claims. Where, as here, a defendant seeks to “buy off” the small individual claims of the named plaintiffs, the analogous claims of the class—though not inherently transitory—become no less transitory than inherently transitory claims.” Although a named plaintiff’s claims are not inherently transitory as a result of being time sensitive, they are nevertheless “acutely susceptible to mootness” in light of a defendant’s tactic of “picking off” the named plaintiff with a Rule 68 offer to avoid a class action. To allow defendants to employ this tactic to moot class actions before the district court can rule on class certification “would thus contravene Rule 23’s core concern: the aggregation of similar, small, but otherwise doomed claims.”
With this decision, the Ninth Circuit joins the Third, Fifth, and Tenth Circuits which previously have held that a pre-certification Rule 68 offer in an amount sufficient to satisfy the named plaintiff’s individual claim does not moot a putative class action.
Aaron Buckley and Fred Plevin – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA