April 12, 2016

Yet another pro-class action decision in the Ninth Circuit

By Deborah J. La Fetra Senior Attorney

Three years ago, Richard Chen and Florencio Pacleb sued Allstate Insurance Company for alleged violations of the Telephone Consumer Protection Act. They purported to represent a class of people who received unwanted Allstate robocalls and sought the statutory remedy of $500 per unwanted call. Allstate responded to the lawsuit with a settlement offer that would have fully compensated the plaintiffs. Chen accepted; Pacleb refused. When Allstate moved to dismiss the case, the district court refused, holding that Pacleb’s case was not mooted by the unaccepted settlement offer. Allstate appealed and PLF filed an amicus brief arguing that an individual cannot pursue a class action without a personal stake in the case and that Pacleb lost that stake when Allstate offered him more than enough money to cover any potential damages. Meanwhile, the United State Supreme Court ruled earlier this year in Campbell-Ewald Co. v. Gomez that an unaccepted settlement offer does not moot a purported class action. The Gomez case posed a hypothetical, however, suggesting that if the defendant actually pays the full amount of damages to the plaintiff, that might moot the case.

Taking the hint, Allstate immediately deposited $20,000 in an escrow account for Pacleb’s benefit. Today, the Ninth Circuit said: Not good enough. When Pacleb refused to accept the money, Allstate could have taken it back. Only an “unconditional reliquishment” of the funds could possibly suffice. Of wider import, the court held that under no circumstances would it order dismissal of Pacleb’s lawsuit before he had the opportunity to move for class certification. This ruling is based on an earlier Ninth Circuit case, Pitts v. Terrible Herbst, Inc. (2011), which expressly allows even plaintiffs with mooted individual claims to remain in the lawsuit long enough to move for class certification. The Supreme Court did not reach this issue in Gomez so the Ninth Circuit declared that Pitts remains the law of the Circuit and applies here. Pitts raises significant questions as to whether a purported class representative, whose mooted claims means he personally lacks Article III standing to litigate, may nonetheless pursue the litigation through class certification. Perhaps another Supreme Court case—Spokeo v. Robins—will provide the answer by the end of this Term. Either way, we would not be surprised to see Allstate petition for Supreme Court review of the Ninth Circuit’s latest volley in favor of class actions.

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