Let's Make A Deal (Class Action)

Can you get your client out of a putative class action lawsuit by offering the individual plaintiff a full recovery? The courts of appeals have split on this question, and it is undecided in the First Circuit. (See the cases listed at the end of this post). The Supreme Court granted certiorari to weigh in on this issue next term in Genesis Health Care Corp. v. Symczyk, No. 11-1059. The issue can profoundly affect the economics of class litigation. With an individual settlement, a defendant may avoid protracted class discovery and litigation that is expensive even when it is successful. For plaintiffs, an individual settlement means there will be no common fund for paying attorney fees.

Generally speaking, a plaintiff can sue on only a claim that affects her personally. And the plaintiff ordinarily has to maintain that personal stake throughout the case. If at any point the plaintiff loses such a stake in the outcome, the suit is dismissed as moot. Defendants have said the same requirements apply not only when a person sues in her own name but also when she purports to sue on behalf of a class. Some courts have agreed. Others have not.

So far, the courts agree on one point: after a motion for class certification has been filed, an offer of full relief on an individual basis does not moot the lawsuit. Once a motion for class certification is filed, an offer that does not include relief for the class does not offer the full relief sought in the lawsuit and therefore does not moot the case. Where courts disagree is over the effects of offers made before a motion for certification has been filed.

As much as anything, differing emphasis on practical considerations seems to lead the courts to their differing outcomes. The Seventh Circuit especially has been willing to dismiss a putative class case based on an individual offer of full relief because there is no practical need to depart from the principles that apply to ordinary individual cases. Courts on the other side of this issue have been especially moved by their distaste for what they perceive as defendants' efforts to "pick off" class representatives, and by the prospect of giving defendants the de facto ability to turn any class litigation into a...