Offers of Compromise Do Not Moot Ability To Bring Class Claims

Written by Offers of Compromise Do Not Moot Ability To Bring Class Claims

A tactic that has been used by defense counsel in recent years to combat the influx of class and collective action claims has been to offer the representative all relief possible in an effort to moot the claims. Essentially, the tactic is to cut off the head and hope that the body will die. This has been a powerful tool because employers and defense counsel believe that there will not be another person to stand up for the class and effectively insulate them from liability if they are able to stop the case before it really gets started and before notices go out to other class members who may not even know there is a legal issue affecting them.

The 2013 U.S. Supreme Court decision in Genesis HealthCare Corp v. Symczyk appeared to leave an opening for this tactic to gain traction in general. In Genesis, an employer made an offer to resolve the case under federal procedural rules that covered all the plaintiff's damages claims, but none of the non-representative employees. The offer also included all damages that could be obtained for the plaintiff. Although the plaintiff in that case conceded the offer to resolve rendered her case moot, an important concession, the language of the majority opinion seemed to leave open the possibility of mootness even in the absence of a concession by a plaintiff.

However, this tactic has been put to rest by the later, recently decided U.S. Supreme Court case of Campbell-Ewald Co. v. Gomez. In this case, the defense attempted to moot the class and collective action claims by offering the representative all the relief they would be entitled to on an individual basis. This time, the plaintiff did not concede that the offer mooted her claims. The high Court used basic contract principles to come to the conclusion that an unaccepted offer to resolve the claims will not prevent a putative representative from proceeding on behalf of the class. This makes sense as there would be no legally binding contract between the representative and the employer if it were unaccepted, so there could be nothing to moot the claims.

Although the Campbell-Ewald Co. case was decided under federal law, the language and reasoning has important implications that may well be adopted and reaffirmed by California courts, which often look to federal law to interpret California class action procedural rules. California has a similar procedure for offers of settlement at issue in Genesis and Campbell-Ewald, a statutory offer of compromise under Civil Procedure Code section 998. The California Supreme Court has affirmed that since section 998 involves the process of settlement and compromise and since this process is a contractual one, it is appropriate for contract law principles to govern the offer and acceptance process under section 998. With this contractual view of section 998, it is highly likely that a California Court would follow the same contractual analysis at issue in the federal cases: where there is no acceptance, there is nothing to moot a representative claims or standing.

This is consistent, and arguably more plaintiff friendly, with a line of California cases addressing similar settlement attempts outside the section 998 context, so called "picking off" cases. So long as the benefits were involuntary received, i.e. the plaintiff did not enter into a settlement agreement regarding her claims precipitating the relief, a plaintiff will not necessarily be deemed to no longer have an interest in the case. Instead the Court will evaluate the matter to determine whether, notwithstanding the benefit, the representative will still adequately represent the class. In class actions, the representative is the fiduciary for the putative class and should not seek to gain individually at the expense of the class. Even if a Court found that the "picked off" representative could no longer suitably represent the class, an employer would not be let off the hook. An alternative representative may be substituted in, so the class action may continue.

Hopefully, following Campbell-Ewald Co., California courts will find that rejection of an offer, without more, is enough to prevent any argument that a class presentative lacks standing or claims are moot.

If you believe you have unpaid wage claims that affect you and a number of other employees at your job, contact our office to have your claims evaluated and determine whether they may be appropriate claims for class action treatment.

 

The Shimoda Law Corp. legal articles should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents of these articles are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have.

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