In Chen v. Allstate Insurance Co., --- F.3d ----, 2016 WL 1425869 (April 12, 2016), the Ninth Circuit held that the offer and deposit of funds into an escrow account in an amount sufficient to satisfy the named plaintiff’s individual claim, combined with an offer of injunctive relief, does not "moot" the claim under Article III. This decision blocks one avenue not already closed by the Supreme Court’s ruling in Campbell-Ewald v. Gomez, 136 S. Ct. 663 (January 20, 2016), which held that an unaccepted offer of judgment in full satisfaction of a claim does not moot the claim, but left open whether or not a defendant could take other unilateral steps to moot a plaintiff’s claim. The Ninth Circuit also declined to follow the defendant’s suggestion that it direct the district court to judgment in plaintiff’s favor on the terms offered, thereby mooting the named plaintiff’s claim, stating that “even if Allstate could moot the entire action by mooting [plaintiff’s] individual claims for damages and injunctive relief, those individual claims are not now moot, and we will not direct the district court to moot them by entering judgment on them before [plaintiff] has had a fair opportunity to move for class certification.”

In Chen, two named plaintiffs alleged that Allstate made multiple unauthorized telephone calls to their cell phones in violation of the Telephone Consumer Protection Act (TCPA). The TCPA provides that “an aggrieved person may bring an action to enjoin a violation of this provision or to seek actual or statutory damages.” 28 USC § 227(b)(3). Statutory damages are $500 per violation, or $1500 for willful violations. 28 USC § 227(b)(3)(B). Before plaintiffs filed a motion for class certification, Allstate extended Rule 68 offers of judgment to plaintiffs for the maximum statutory penalties recoverable, together with reasonable attorneys’ fees and costs. Allstate also agreed “to stop sending non-emergency telephone calls and short service messages to [them] in the future.” Allstate indicated that the offer would remain open “until such time as it was accepted by plaintiffs or Allstate withdrew the offer in writing." One plaintiff accepted the offer; the other did not. Allstate moved to dismiss the claims of the remaining plaintiff as moot under Article III, arguing that its offer and tender of funds extinguished any "case or controversy" between the parties.  In denying Allstate’s motion, the district court relied on the Ninth Circuit’s decision in Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011), which held that although an unaccepted offer of judgment mooted an individual named plaintiff’s claim, it did not “moot” putative class claims. Recognizing that there were questions as to the continuing validity of Pitts, the district court certified its ruling for interlocutory appeal under 28 U.S.C. § 1292(b).

Campbell-Ewald v. Gomez

While the Chen appeal was pending, the Supreme Court decided Campbell-Ewald, which held that an unaccepted Rule 68 offer of judgment for full relief does not moot an individual plaintiff’s claim because “[l]ike other unaccepted contract offers, it creates no lasting right or obligation.” The majority concluded that an unaccepted offer of judgment is a “legal nullity,” that has no legal effect on the parties’ claims in the case. Responding to criticism of the dissenting Chief Justice, Justice Alito, and Justice Scalia, the majority declined to address “whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount,” explaining that this “question is appropriately reserved for a case in which it is not hypothetical.”

Chen v. Allstate Insurance

Chen addresses that hypothetical.  After Campbell-Ewald was decided, Allstate deposited the monetary portion of its offer of judgment into a bank account for the benefit of the named plaintiff who had not accepted its offer and reaffirmed that it would cease the alleged conduct. Allstate supplemented its record on appeal with this new information and submitted additional briefing. The Ninth Circuit rejected Allstate's argument that its post-Campbell-Ewald deposit of funds into a bank account for plaintiff’s benefit mooted the plaintiff's individual claim because the plaintiff still had not received actual payment. “As we read Campbell-Ewald, a lawsuit – or an individual claim – becomes moot when a plaintiff actually receives all of the relief he or she could receive on the claim through further litigation.” On this point, the Court relied heavily on Justice Thomas’s concurrence, which draws upon principles of common law tender and concludes that a defendant wishing to terminate a lawsuit must tender actual, complete payment of the plaintiff’s claim.  

The Court declined to follow Allstate's suggestion that it direct the district court to enter judgment in plaintiff’s favor as a means of ensuring actual performance.  The Court drew support for this conclusion from its prior decision in Pitts v. Terrible Herbstsupra, in which it had held that an unaccepted offer of judgment—which it assumed mooted the individual claim—does not moot putative class claims if a plaintiff has not yet moved for class certification. Pittshad relied on an exception to the mootness doctrine for cases that are “inherently transitory,” reasoning that a defendant’s “pick-off” strategy could render the underlying issue in a class action “capable of repetition yet evading review.” While Pitts dealt specifically with an unaccepted offer of judgment, the Ninth Circuit apparently views Pitts as standing for the broader principle that the unilateral acts of a defendant cannot end a case against a plaintiff’s will. 

The Court further explained, “even if Pitts were not binding, and Allstate could moot the entire action by mooting [plaintiff’s] individual claims for damages and injunctive relief, those individual claims are not now moot, and we will not direct the district court to moot them by entering judgment on them before [plaintiff] has had a fair opportunity to move for class certification.”  As support, the Ninth Circuit cited the following sentence in Campbell-Ewald: “[w]hile a class lacks independent status until certified, a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” Because the Supreme Court had already concluded that the plaintiff’s claim wasnot moot by the time this language appears in Campbell-Ewald, it seems to stand for the basic point that a named plaintiff in a class action with a live claim (i.e., not moot) may seek certification. The Ninth Circuit, however, apparently interprets this language to mean that every named plaintiff—not just one with a live claim—has a right to move for class certification.  The Ninth Circuit thus reaffirmed its view that the right to seek to represent a class is separate from a named plaintiff’s individual claim for money or other relief, at least in response to a defendant’s attempts to terminate that right through a "pick-off" strategy.