Decapitating Class Actions

by Proskauer - Class & Collective Actions
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[author: Mark W. Batten]

One potential early approach to a class action is to "decapitate" it -- to knock out the claims of the class representative(s), often by finding some deficiency in their individual claim that supports a motion to dismiss or for summary judgment.  Another approach, though, is to settle with the named plaintiffs.  That buys no peace with other class members, of course, and so isn't necessarily the end of the story, but in some cases plaintiffs' counsel may find recruitment of class reps to be challenging and a decapitation strategy may have more lasting effect.

There have been a flurry of opinions recently on the topic of settling with class representatives.  The Tenth Circuit began the parade in Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239 (10th Cir. 2011), holding that a defendant can't moot a class action by making an offer of judgment to the named plaintiff -- even if the offer is indisputably enough to satisfy the individual claim -- if the plaintiff refuses to accept it. 

The Ninth Circuit came to the same result last month in Pitts v. Terrible Herbst, Inc., holding that such a strategy by the defendant undermines the goals of Rule 23, potentially ensuring that claims ideally suited for class treatment (by their similarity and small size individually) will not be heard. 

The Third Circuit now joins these courts, holding yesterday in Symczyk v. Genesis Health Care Corp. that a rejected offer of judgment does not moot the claim, thereby extending the holding from Rule 23 class actions to claims arising under the Fair Labor Standards Act.

None of this means, however, that decapition-by-settlement is a bad idea.  The Seventh Circuit held August 5 in Premium Plus Partners v. Goldman Sachs (pdf) that if the plaintiff accepts the offer of judgment, that plaintiff cannot continue; and if that occurs before class certification, that's the end of the case.  That's not a novel holding, but the rash of opinions on offers of judgment in class matters suggests that the decapitation strategy is seeing wider use. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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