On June 3, the Ninth Circuit dismissed a putative class action after the named plaintiff voluntarily settled his individual claims. In so doing, the court held that a class representative must retain a financial stake in the outcome of class claims or his voluntary settlement will render those claims moot. As the court’s nuanced analysis of circuit precedent reveals, individual settlements in putative class actions can prove to be traps for the unwary—for both plaintiffs and defendants alike.
- Plaintiff Michael Brady sued AutoZone Stores, Inc. and Autozoners LLC (“AutoZone”), asserting various violations of Washington’s meal break laws on behalf of himself and a putative class. After several years of litigation, the district court denied Plaintiff’s motion for class certification and later declined to modify its ruling. Plaintiff then settled his individual claims with AutoZone.
- Significantly, the parties’ settlement agreement resolved Plaintiff’s individual claims, including his claims for costs and attorneys’ fees. While the settlement agreement provided that it was “not intended to settle or resolve Brady’s Class Claims,” it failed to expressly leave open the possibility that Plaintiff would be entitled to any financial reward (e.g., an enhancement fee or incentive award) if those class claims were ultimately successful.
- Plaintiff appealed the class certification rulings after entry of final judgment. On appeal, the Ninth Circuit analyzed whether the individual settlement rendered Plaintiff’s attempt to pursue putative class claims moot. The court noted that “[t]he test for whether an appeal is moot after the putative class representative voluntarily settles his individual claims is whether the class representative retains a personal stake in the case.” Campion v. Old Republic Prot. Co., 775 F.3d 1144, 1146 (9th Cir. 2014). Moreover, that “personal stake” must be “concrete” and “financial”—a question that “turns on the language of [the] settlement agreement.” Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015, 1021 (9th Cir. 2012).
- Applying these principles, the court held that Plaintiff’s attempt to pursue claims on a classwide basis had been mooted by his individual settlement. Unlike prior Ninth Circuit cases where a live controversy remained because the plaintiff properly preserved a financial interest in the outcome of class adjudication, Plaintiff’s settlement agreement failed to provide that he would receive any additional compensation for the class claims. The court also noted that Plaintiff could not point to the possibility of a higher award of attorney’s fees because the agreement settled that claim as well.
- Furthermore, the Ninth Circuit declined to assume, absent an express agreement, that Plaintiff could potentially receive a class representative enhancement award. Lastly, the court rejected Plaintiff’s argument that his obligation to pay litigation costs preserved his ability to pursue class claims: “Absent proof that [Plaintiff] is obligated to pay the advanced legal costs unless the class is certified, those costs do not provide [Plaintiff] a financial stake in the outcome of the class claims.”
- This case serves as a reminder that a plaintiff must have a concrete, financial stake in class claims to pursue them. Yet, class action defendants should also take heed of the Ninth Circuit’s careful efforts to distinguish the case from precedents in which an individual settlement did not moot a named plaintiff’s class claims. Namely, defendants must be wary of inadvertently preserving a plaintiff’s class claims by failing to extinguish—in the settlement agreement itself—the plaintiff’s future financial stake in those class claims.
- The case is Brady v. AutoZone Stores, Inc., No. 19-35122 (9th Cir.). Read the Ninth Circuit’s opinion here.