Sixth Circuit to Consider Whether Pre-Certification Offer of Complete Relief to Plaintiff Requires Dismissal of Case


Later this week, the Sixth Circuit Court of Appeals will hear argument in Hrivnak v. NCO Portfolio Management, Inc. At issue in the June 8th oral argument is a question of first impression in the Sixth Circuit: whether a defendant’s pre-certification offer of complete relief to a plaintiff who purports to bring a class action operates to moot the plaintiff’s complaint and strip the plaintiff of Article III standing.

In response to a class action complaint, Christopher Hrivnak sued NCO Portfolio Management and other defendants (including NCO’s counsel) in Cuyahoga County Common Pleas Court, alleging claims for violation of the Fair Debt Collection Practices Act (FDCPA) and state law. The defendants removed the case to federal court. Two days after removing the case, the defendants made an offer of judgment to Hrivnak, offering him the entirety of the relief he could individually obtain in the case — $7,000 plus his full attorneys’ fees, expenses and costs.

Relying on Stewart v. Cheek & Zeehandelar, LLC, 252 F.R.D. 384 (S.D. Ohio 2008), the district court concluded that the offer of judgment did not have any effect on the class representative’s ability to continue pursuit of his class action complaint. See Hrivnak, 723 F. Supp. 1020, 1029-30 (N.D. Ohio 2010). The issue has thus been certified to the Sixth Circuit as part of an interlocutory appeal. See Hrivnak v. NCO Portfolio Mgmt., 2010 U.S. Dist. LEXIS 135426 (N.D. Ohio Dec. 26, 2010).

The subject of when and under what circumstances a pre-certification offer of full settlement or offer of judgment can moot a class representative’s personal claim — and thus the representative’s class claim — has been the subject of much recent litigation. Two circuits have held that a class representative lacks Article III standing where his claims were satisfied before a ruling on class certification. See Rhodes v. E.I. du Pont deNemours, 636 F.3d 88 (4th Cir. 2011) (“when a putative class plaintiff voluntarily dismisses the individual claims underlying a request for class certification, . . . we hold that we lack jurisdiction to decide the issue [of class certification]”); Anderson v. CNH U.S. Pension Plan, 515 F.3d 823 (8th Cir. 2008) (“because the claims of all named plaintiffs against Pactiv were satisfied before the district court's ruling on class certification, and there is no showing that any future claims by retirees would evade review, it appears that the case against Pactiv should have been dismissed by the district court.”)

Four circuits have taken the opposite view: that an offer of full satisfaction to a class representative does not moot the class aspect of the case because any subsequent certification would “relate back” to the filing of the complaint. See Pitts v. Terrible Herbst, Inc., 653 F.3d 1081. 1091-92 (9th Cir. 2011); Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239, 1247-50 (10th Cir. 2011); Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 920-21 (5th Cir. 2008); Weiss v. Regal Collections, 385 F.3d 337, 344-45 (3rd Cir. 2004).

Thus, a plaintiff may move to certify a class and avoid mootness even after he has received an offer of complete relief. The rationale underlying the holding in this line of cases is the need to prevent defendants from “picking off” plaintiffs ad seriatim. Weiss, 385 F.3d at 344-45.

The Seventh Circuit has taken a middle approach: that a full offer of satisfaction to the named plaintiff before the filing of a motion for class certification strips that plaintiff of Article III standing to continue to pursue his case, but not after a motion for class certification has been filed. See Damasco v. Clearwire Corp., 662 F.3d 891 (7th Cir. 2011) (“we believe the [relation-back] exception created by [the Third, Fifth, Tenth and Ninth] circuits is unnecessary. To allow a class, not certified as a class action and with no motion for class certification even pending, to continue in federal court when the sole plaintiff no longer maintains a personal stake defies the limits of federal jurisdiction express in Article III. That the complaint identifies the suit as a class action is not enough by itself to keep the case in federal court”) (citations omitted); see also Gates v. City of Chicago, 623 F.3d 389, 413 (7th Cir. 2010) (confirming a plaintiff cannot avoid mootness by moving for class certification after receiving an offer of full relief).

A panel consisting of Judges Jeffrey Sutton, David McKeague and Kenneth Ripple (a senior judge of the Seventh Circuit) will therefore decide in Hrivnak which approach the Sixth Circuit will adopt. The rationale for following the Fourth, Seventh and Eighth Circuits is that under Fed. R. Civ. P. 23(e) as amended in 2003, Rule 23 is only applicable to certified classes. It does not require court approval of a settlement unless it is of a “certified class.” See Fed. R. Civ. P. 23(e) (“The claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court's approval.”). Classes are not established via class action complaint, and prior to certification, there is no class to protect. Putative class members are therefore not prejudiced because an offer of satisfaction to the named plaintiff has no preclusive effect on absent putative class members.

Another argument is that the Rules Enabling Act provides Rule 23 is nothing more than a procedural device, and does not abridge, enlarge or modify substantive rights. See also Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997). And artificially created doctrines, like “relation back,” certainly cannot trump constitutional standing. Moreover, efforts to make Rule 68 offers of judgment inapplicable to class actions was considered and rejected in 1983 and 1984.

Finally, the United States Supreme Court is considering whether to accept certiorari in Genesis HealthCare Corp. v. Symczyk, Case No. 11-1059, a case with a similar issue. In that case, Laura Symczyk sued Genesis HealthCare for violation of the Fair Labor Standards Act (FLSA) for charging her for automatic meal break deductions when she claimed she had not taken meal breaks. The FLSA prohibits class actions, but permits collective actions. But no other employee chose to join Symczyk in the litigation, so Genesis served a Rule 68 offer of judgment on Symczyk when it answered the complaint, offering her $7,500 for her unpaid wages, plus attorneys’ fees, costs and expenses of litigation. The district court found plaintiff’s claim moot and dismissed the action. Relying on class action principles from Weiss, the Third Circuit reversed.

If the Supreme Court accepts certiorari and decides Genesis HealthCare on broad class action grounds (as opposed to the more narrow FLSA collective action grounds), a definitive ruling on this issue may come as early 2013 — right on the heels of the Sixth Circuit’s ruling in Hrivnak.

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