Can a Class Action Proceed when the Named Plaintiff’s Claim Becomes Moot? A Recent View from the North Carolina Business Court
In this post we talk about two of our favorite things (relatively speaking): class actions and mootness. We last looked at these issues when covering the U.S. Supreme Court’s decision in Campbell-Ewald Company v. Gomez, 136 S. Ct. 663 (2016). There, the Court rejected the defendant’s attempt to “pick off” the named plaintiff in a class action case. The defendant had made a Rule 68 offer to settle the case for the full value of the plaintiff’s claim. The plaintiff declined, but the defendant argued that its offer nonetheless mooted the claim. The Supreme Court rejected that argument, holding that an unaccepted Rule 68 offer does not moot a claim—at least if the defendant does not deposit the Rule 68 money with the court.
But what if the named plaintiff’s claim does become moot? Can the case stay alive based on the claims of the class? The Supreme Court has been wrestling with that question for decades, and the answer turns in large part on timing—when did the named plaintiff’s claim become moot? If it became moot after the class was certified, then the class action is not rendered moot because, at that point, the class has acquired a legal status independent of the plaintiff’s. See Sosna v. Iowa, 419 U.S. 393 (1975). The same rule applies if the named plaintiff’s claim became moot after the trial court denied class certification. If the denial is later reversed, the reversal will relate back to the time of the trial court’s erroneous certification decision. See U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 (1980). In both of these situations, the named plaintiff had a live claim at the time the trial court ruled on certification.
That leaves open a third scenario: a named plaintiff whose claim becomes moot before the trial court makes any certification ruling. What then? Chief Judge Gale of the North Carolina Business Court faced this question in the recent case of Chambers v. Moses H. Cone Memorial Hospital. To simplify the facts and procedural history, the plaintiff received emergency treatment at a hospital and then objected to the amount of the bill he received. The plaintiff claimed that the hospital charged uninsured patients, like himself, more for emergency services than the hospital charged its insured patients. He brought a class action complaint on behalf of himself and other uninsured patients who received emergency services at the hospital. His initial complaint alleged common law claims and sought damages. But he later amended the complaint to seek only a declaratory judgment that the hospital may collect only “reasonable payments” for its emergency services, rather than the “regular rates” the hospital charged in its form contract.
Judge Gale first held that the plaintiff’s declaratory judgment claim was moot because the hospital was not seeking to recover the unpaid amount of the plaintiff’s bill. (The hospital had been seeking to do so earlier in the case, but the hospital dismissed its counterclaims with prejudice after the plaintiff dropped his damages claims.)
That left the more difficult question: Even though the plaintiff no longer had a live claim, could the case continue based on the claim of the putative class? Judge Gale began by noting that the case did not come within the holdings of Sosna or Geraghty because the court had not ruled on certification at the time the plaintiff’s claim became moot. (It appears the plaintiff had not yet filed a certification motion.)
Judge Gale then addressed whether the putative class claim could proceed based on an exception to the mootness doctrine for claims that are “so inherently transitory that the trial court will not have even enough time to rule on a motion for class certification before the proposed representative’s individual interest expires.” Judge Gale explained that the classic example of an “inherently transitory” claim was one that inevitably becomes moot with the passage of time, such as a challenge to pretrial detention. In those cases, dismissing a case as moot would mean that no plaintiff could challenge the defendant’s conduct, because any plaintiff’s individual claim would become moot before the case could be fully litigated. Judge Gale said that the plaintiff’s claim—challenging the hospital’s emergency-services rates for uninsured patients—doesn’t fit into that passage-of-time category for “inherently transitory” claims.
But that left another possibility—one that circles us back to Campbell-Ewald: Can a claim be “inherently transitory” when the claim becomes moot, not because it is time-sensitive, but because the defendant has “picked off” the claim by offering to pay its full amount before the trial court makes a decision on certification? Judge Gale noted that the Ninth Circuit has applied the “inherently transitory” exception in this scenario (as have several other federal circuit courts). But ultimately, Judge Gale did not have to decide whether to follow this interpretation of the “inherently transitory” exception, because he concluded that there was no evidence showing that the hospital tried to pick off the plaintiff’s claim. To the contrary, Judge Gale stated, the plaintiff’s claim became moot only when the plaintiff decided to dismiss his claims seeking damages. Judge Gale agreed with the hospital that, had the plaintiff maintained those claims, then the hospital’s dismissal of its counterclaims “would not have mooted [plaintiff’s] declaratory claim.”
So, what to take away from all this?
First, class action law is complicated, especially when mootness is thrown into the mix.
Second, the law is pretty clear that a class action is not rendered moot when the named plaintiff has a live claim at the time the trial court decides whether to certify the class.
Third, the law is less clear whether the class action is rendered moot when the named plaintiff’s claim becomes moot before the trial court makes a certification decision. In that scenario, the issues will likely focus on whether the case fits into exceptions to the mootness doctrine, such as the “inherently transitory” exception discussed above.
Fourth, there will likely be continued developments in the law as to whether a defendant’s effort to pick off a named plaintiff succeeds in mooting the plaintiff’s claim, and if so, whether that effort satisfies the “inherently transitory” exception such that a live case or controversy still exists.
We’ll keep you updated as the law develops.