The Ninth Circuit recently clarified the circumstances in which a plaintiff who settles his or her individual claims can appeal the denial of class certification of related claims. In Campion v Old Republic Protection Company the Ninth Circuit dismissed a class certification appeal as moot because the plaintiff had settled his individual claims. The court explained that a settling plaintiff must retain a personal financial stake in litigation in order to appeal the denial of class certification – "the theoretical interest akin to a private attorney general" will not suffice.
The leading Ninth Circuit case on post-settlement class-certification appeals is Narouz v Charter Communications, LLC. The plaintiff in Narouz settled his individual claims and attempted to settle on behalf of a class as well. If the settlement class had been certified and the class settlement had received final approval, Narouz would have obtained an additional $20,000 incentive payment on top of the amount he had been given to settle his individual claims. However, the district court refused to certify the class for settlement purposes and Narouz appealed. The Ninth Circuit found that the individual settlement did not moot the appeal because Narouz retained a "personal stake" in the class litigation (ie, the $20,000 enhancement award).
In November 2014 the Ninth Circuit rejected as moot a plaintiff's attempts to appeal class claims after accepting a Rule 68 offer of judgment covering "any liability" asserted in the action. In an unpublished decision, Sultan v Medtronic, Inc, the court held that Narouz foreclosed the appeal because the plaintiff did not retain a personal stake in the class claims. Campion, a published decision, follows on the heels of Sultan and clarifies the standard established in Narouz and applied in Sultan.
In Campion a customer sued a home warranty provider, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and violations of the California Consumers Legal Remedies Act and the California Unfair Competition Law. Campion complained that Old Republic arbitrarily denied class members' claims and cheated them out of benefits owed under their policies. After extensive motions practice, the district court:
- denied Campion's motion for class certification;
- granted Old Republic partial summary judgment on the Consumers Legal Remedies Act claims; and
- denied Campion leave to amend the complaint.
After these rulings, the parties reached a settlement agreement. Campion dismissed his individual claims with prejudice in exchange for the "full amount of those claims", but "expressly reserve[d] the right to appeal the… order denying class certification" and "any other order in the case". Campion then purported to appeal (on behalf of the putative class) the orders denying class certification and granting the defendant partial summary judgment.
A divided panel of the Ninth Circuit dismissed the appeal as moot. Campion argued that he retained an interest in the matter as a private attorney general sufficient to satisfy Narouz. However, the panel majority disagreed, explaining that "a more concrete interest" is necessary. Specifically, the panel majority explained that courts of appeals have jurisdiction over appeals of class certification denials brought by settling named plaintiffs "only where the putative class representative maintain[s] a financial interest in class certification". Because Campion had settled his individual claims for their full value, he lacked the personal financial stake necessary to pursue the class appeal.
Judge Owens dissented. He explained that he would have reached the merits of Campion's appeal and affirmed the denial of class certification and grant of partial summary judgment. Owens predicted that "the Supreme Court someday will hold that a plaintiff who voluntarily settles his claim must retain a financial stake in the litigation to serve as a class representative". But he stated that in his view, existing law allowed settling plaintiffs to appeal on a private attorney general theory; he did not read the Narouz decision as imposing a 'financial-in-nature' limitation on the type of personal stake needed to have standing to appeal the denial of class certification.
However, the majority noted that Narouz had retained a $20,000 interest in his class appeal (the potential incentive payment). Although the Narouz court had not used the term 'financial' in its formulation of the personal stake standard, the court had permitted Narouz to proceed with his appeal only because of his $20,000 financial interest in the class claims. Similarly, in another case discussed by the Campion majority (Evon v Law Offices of Sidney Mickell), the settling plaintiff continued to have a personal stake in the class appeal because he had retained the right to seek up to $100,000 in attorneys' fees if that appeal succeeded. Campion, by contrast, stood to gain no compensation if the putative class recovered, thereby mooting his appeal.
Campion thus confirms that, at least in the Ninth Circuit, a plaintiff voluntarily settling individual claims must retain a personal financial stake in continuing litigation in order to purport to file appeals on behalf of a putative class. Individual cases will "turn... on the language of [the] settlement agreement", but merely retaining the right to appeal as a private attorney general will not suffice. The court left open the possibility that a private attorney general interest might suffice when the plaintiff's individual claims expire "involuntarily", rather than by voluntary settlement. But where the plaintiff voluntarily extinguishes his or her entire financial interest, he or she cannot later appeal on behalf of the class.
For further information on this topic please contact John Nadolenco, Evan Wooten or Elizabeth Crepps at Mayer Brown LLP by telephone (+1 213 229 9500) or email (email@example.com, firstname.lastname@example.org or email@example.com). The Mayer Brown International LLP website can be accessed at www.mayerbrown.com.
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