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Class Action “Pick Off” Strategy Largely Eliminated by U.S. Supreme Court

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By Tyler Tarney

February 15, 2016

In class actions under Rule 23 of the Federal Rules of Civil Procedure, as well as collective actions under the Fair Labor Standards Act (FLSA), individual plaintiffs seek relief on behalf of themselves and similarly-situated parties. When a class action is certified, prospective members are automatically presumed part of the suit unless they opt-out. But with collective actions under the FLSA prospective members must affirmatively opt-in to participate. In both contexts, Article III of the Constitution requires an ongoing “case or controversy” with the named plaintiff for courts to continue to exercise jurisdiction. A common strategy in defending class and collective actions is “picking off” named plaintiffs through offers for complete relief of their individual claim, thereby eliminating the case or controversy and rending the case “moot” before prospective members join the suit. In Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) a nurse’s collective action was declared moot by the United States Supreme Court after she conceded that she refused an offer for full relief of her individual claim. But in Genesis the Court declined to extend its holding to Rule 23 class actions. And it emphasized the fundamental difference between class actions, where members are presumed part of the suit unless they opt-out, and collective actions, where members must opt-in to participate.

In a recent decision, Campbell-Ewald Co. v. Gomez, No. 14-857, slip op. (S. Ct. Jan. 20, 2016), a case closely watched by class action plaintiffs and defendants, the United States Supreme Court ruled that an unaccepted offer for full relief of a class representative’s individual claim in a class action does not moot the case. This decision fills the gap left open by the Court’s 2013 decision in Genesis, which addressed a similar issue in the context of collective actions under the FLSA. Ultimately, Campbell-Ewald largely eliminates a defendant’s ability to pick off class actions before they get off the ground.

In Campbell-Ewald, the Court addressed whether an unaccepted offer for full relief of a named plaintiff’s claim in a class action—before a request for class certification was made—rendered the case moot. The named plaintiff was one of 100,000 recipients of marketing solicitations to join the Navy, which were issued by a government contractor tasked with the initiative aimed at young adults who agreed to receive marketing solicitations on the topic. The plaintiff alleged that he received the message without consent and brought a class action under the Telephone Consumer Protection Act (TCPA). The defendant made an offer of judgment before a request for class certification was made that would have given the plaintiff full relief on his TCPA claim, which was not accepted. Relying on basic contract principles, the majority opinion held that where there is no offer and acceptance, the offer has “no force” because—with the offer off the table and the defendant’s continuing denial of liability—the parties remain adverse.

Practically, this decision is a win for class action plaintiffs and it clarifies the gap left open after Genesis. But it did not close off the pick off strategy entirely: it expressly left open whether the outcome would change under the “escrow plaintiff” scenario where the full amount of the plaintiff’s individual claim is deposited in an account payable to the plaintiff and judgment is entered for the plaintiff in that amount. And the concurring and dissenting opinions discussed other situations that might affect the result, such as when a defendant admits liability in its settlement offer.

Every class or collective action is different. The main takeaway of Campbell-Ewald is that it largely eliminates the ability of defendants to pick off class actions before they get off the ground. However, the use of this strategy in collective actions under Genesis remains viable in certain jurisdictions and under certain circumstances.

If you have questions about the decision, would like a copy of it, or have a general question about class or collective actions, do not hesitate to contact a member of our Environmental/Mass Tort/Class Action or Employment Liability Practice Groups. 

This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel. 

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