In two recent cases—Damasco v. Clearwire Corp. and Pitts v. Terrible Herbst, Inc—the 7th and 9th Circuits, respectively, reached conflicting results on the issue of whether an offer of judgment for the full amount of a putative lead plaintiff’s own claim moots a class action complaint if the offer predates the plaintiff’s filing of a motion to certify the action as a class. While the 7th Circuit opinion provides a road map for plaintiffs’ counsel to avoid the practical results of the ruling, it may provide certain opportunities for defendants to neutralize the putative lead plaintiff.
In Pitts, the putative lead plaintiff in a wage and hour case claimed $88in damages for himself. Prior to Pitts moving for class certification, defendant Terrible Herbst made an offer of judgment under Federal Rule of Civil Procedure 68, for $900 plus costs and a reasonable attorney’s fee. Pitts rejected the offer.
The defendant then moved to dismiss the complaint for lack of subject matter jurisdiction, arguing that the offer of judgment rendered the entire complaint moot. The district court adopted Sandoz, a case in which the 5th Circuit held that an offer of judgment does not moot a putative class action where the class representative is still able to move for certification on a timely basis. However, the district court dismissed the entire case, holding that because Pitts had failed to move for class certification in a timely manner, the Rule 68 offer of judgment mooted the entire action. The district court then ordered Terrible Herbst to pay $900 to Pitts and $3,500 to Pitts’ attorney.
The 9th Circuit, relying on precedent in the Supreme Court and its own circuit, agreed with the district court that the offer of judgment did not moot the class action. However, the court rejected the district court’s finding that Pitts had not moved to certify the class in a timely fashion.
Notably, the 9th Circuit limited its holding to the unique factual circumstances of the case—“where the court had extended the initial discovery deadline at the time of its ruling, where a motion to compel the production of documents allegedly crucial to the class certification decision had been filed well in advance of the initial discovery deadline and was still pending, where neither the local rules nor the court’s own scheduling order imposed a deadline for seeking class certification, and where the scheduling order actually suggested that a motion for class certification could be filed even after the end of discovery.”
In Damasco, the putative lead plaintiff filed a class action complaint against defendant Clearwire, alleging a violation of the Telephone Consumer Protection Act, and seeking treble damages of $1500 for each alleged unsolicited text message to mobile subscribers. Prior to Damasco moving for class certification, Clearwire made an offer to pay him his entire $1500 claim for damages, as well court costs. Damasco never responded to the offer. Clearwire then removed the case, and moved to dismiss on mootness grounds.
The district court granted the motion to dismiss, relying on Holstein, a prior 7th Circuit decision that held an offer of judgment moots a putative class action unless the lead plaintiff moved for class certification prior to the offer being made.
The 7th Circuit affirmed, rejecting the holding of Pitts, as well as of the 10th, 5th and 3rd Circuits as “def[ying] the limits on federal jurisdiction express in Article III”. As to the concern expressed by those circuits of “buy-offs,” the court provided a potential avenue for plaintiff’s counsel to avoid mootness—simultaneously filing the complaint, the class certification motion and, if necessary, a motion seeking for the district court to delay ruling on the class certification pending discovery.
What do these cases mean for defendants? In the 7th Circuit, a failure by a lead plaintiff to move for class certification immediately upon filing the putative class complaint almost certainly risks dismissal on the grounds of mootness. In the other circuits, the risk of dismissal is minimized, but is still there if plaintiffs fail to keep in mind their obligation to move for class certification and/or seek relief from the district court. Accordingly, defendants should always be on the lookout for possibilities to moot the putative lead plaintiff’s claims through Rule 68.