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2nd Cir. Rules Successful Offer of Judgment Mooted TCPA Putative Class Action

The U.S. Court of Appeals for the Second Circuit recently held in a non-precedential opinion that a consumer, in the circumstances of this case, did not have standing to bring putative class action claims after entry of judgment in his favor on his individual claims pursuant to the defendants’ offer of judgment under Rule 68 of the Federal Rules of Civil Procedure.

A copy of the opinion in Bank v. Alliance Health Networks, LLC is available at:  Link to Opinion.

A consumer filed an individual and putative class action alleging that several companies violated the federal Telephone Consumer Protection Act , 47 U.S.C. § 227, and New York’s General Business Law, § 399-p.

The district court dismissed the consumer’s putative class action claims for a lack of subject matter jurisdiction after the entry of judgment in his favor pursuant to an offer of judgment under Rule 68.  The consumer appealed.

The Second Circuit began its analysis by addressing its prior ruling in Tanasi v. New Alliance Bank, 786 F.3d 195 (2d Cir. 2015).  There, the Second Circuit, contrary to the opinion of other circuits, held that an unaccepted offer of settlement or judgment, on its own, will not moot a plaintiff’s claims.  However, any individual claims are rendered moot where a judgment has been entered and plaintiff’s claims have been satisfied. Subsequently, the Supreme Court of the United States in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), came to the same conclusion as the Second Circuit.

The Second Circuit noted that it had not addressed the issue of whether, in all cases, the rendering moot of a plaintiff’s individual claims undermines the plaintiff’s standing to pursue claims on behalf of a putative class.  In Tanasi, the Second Circuit explicitly left open the question of whether unresolved class action claims can ever provide an independent basis for justiciability.  Ultimately, the Court decided not to reach this question here because the consumer did not have any connection to a “live claim of his own” or any cognizable interest in pursuing the class claims.

The Second Circuit cited Campbell-Ewald for the rule that Article III limits federal court jurisdiction to cases and controversies at all stages of review, not merely at the time the complaint is filed.  The Court then distinguished the effect of a putative and a certified class.

The Second Circuit determined that although a certified class may obtain independent status for purposes of standing, where the individual claims of the putative class representative are rendered moot prior to certification, in general, the entire action becomes moot.  Consequently, the Court held that because the consumer was the sole individual representative for the putative class, once his claim was no longer live, no plaintiff remained in a position to pursue the class claims.

The Court acknowledged that in certain circumstances the rendering of a named plaintiff’s individual claim as moot will not remove the basis for the associated class action.  However, the Court determined that none of those circumstances applied to the consumer.  For example, the Second Circuit examined the relation back doctrine, which occasionally allows a court to review a class certification decision even after a plaintiff’s individual claims have been rendered moot.  But that line of cases was inapplicable here because there was no class certification decision or any other reason to link the consumer’s once-live claim to the now-independent class claims.

The Second Circuit then rejected the consumer’s argument that his expectation of an incentive reward as representative of the putative class gave him a personal stake in the class litigation.

The Court noted that standing requires that a plaintiff allege a concrete injury that creates a legally protected interest in pursuing the litigation.  The Court determined that the consumer’s interest in a potential incentive award was merely a purely hypothetical possibility of recovery that did not meet the standing requirements, because an incentive reward is not guaranteed but rather solely within the discretion of the district court after a class is certified and recovery occurs.

Moreover, in this matter there was never a determination as to whether there might be a cognizable class in this case, as he never moved for class certification.  Consequently, the Court held that the consumer did not meet the requirements for standing.

Accordingly, the Second Circuit affirmed the judgment of the trial court.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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