Jessica Karmasek Apr. 19, 2016, 10:22am


SAN FRANCISCO (Legal Newsline) - Last week, a federal appeals court ruled that defendant Allstate Insurance Company cannot put an end to a class action lawsuit by depositing $20,000 in a court-controlled, bank escrow account.

Allstate argued the amount would moot the named plaintiff’s claims.

The U.S. Court of Appeals for the Ninth Circuit affirmed an order by the U.S. District Court for the Northern District of California denying Allstate’s motion to dismiss.

“Under Supreme Court and Ninth Circuit case law, a claim becomes moot when a plaintiff actually receives complete relief on that claim, not merely when that relief is offered or tendered,” Circuit Judge Raymond C. Fisher wrote in the panel’s 27-page ruling. Judges Barry G. Silverman and Richard C. Tallman joined in the April 12 opinion.

“Where, as here, injunctive relief has been offered, and funds have been deposited in an escrow account, relief has been offered, but it has not been received.”

Fisher said plaintiff Florencio Pacleb’s individual claims are not now moot. The appeals court, in its opinion, also declined to direct the district court to moot them.

“Because Pacleb has not yet had a fair opportunity to move for class certification, we will not direct the district court to enter judgment, over Pacleb’s objections, on his individual claims,” Fisher wrote for the panel.

In 2013, Pacleb and Richard Chen filed a class action complaint against Allstate, alleging they received unsolicited automated telephone calls to their cell phones in violation of the Telephone Consumer Protection Act.

The TCPA restricts telephone solicitations, i.e. telemarketing, and the use of automated telephone equipment.

In particular, the law limits the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages and fax machines. It also specifies several technical requirements for fax machines, autodialers and voice messaging systems -- principally with provisions requiring identification and contact information of the entity using the device to be contained in the message.

Generally, the act makes it unlawful “to initiate any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party” except in emergencies or in circumstances exempted by the Federal Communications Commission.

The law permits any “person or entity” to bring an action to enjoin violations of the statute and/or recover actual damages or statutory damages ranging from $500 to $1,500 per violation.

In this case, Chen alleged he received eight calls from Allstate, while Pacleb alleged he received five such calls. In Pacleb’s case, the automated calls asked for an individual named Frank Arnold.

Before any motion for class certification had been made, Allstate, in April 2013, made an offer of judgment to both Chen and Pacleb: the company offered to allow judgment to be taken against it by Chen and Pacleb on their individual claims in the amount of $15,000 and $10,000, respectively, together with reasonable attorneys’ fees and costs.

Chen and Pacleb declined the offer. At that time, Allstate sent plaintiffs’ counsel a letter extending the offer of judgment “until such time as it is accepted by plaintiffs or Allstate withdraws the offer in writing.” The next day, the company moved to dismiss the complaint for lack of subject matter jurisdiction. It argued the plaintiffs’ claims are moot because it made an offer of judgment “more than sufficient” to satisfy the plaintiffs’ damages and requests for relief.

While the motion to dismiss was pending, Chen accepted Allstate’s offer; Pacleb did not.

The district court denied Allstate’s motion to dismiss, and then granted the company’s motion to certify an order for interlocutory appeal. The court said it “would welcome” an opinion from the Ninth Circuit on the matter.

While the appeal was pending, the U.S. Supreme Court decided Campbell-Ewald Co. v. Gomez. The high court, in its January ruling, confirmed that an unaccepted settlement offer has no force.

The court, in a 6-3 ruling, upheld the Ninth Circuit’s 2014 decision in Gomez v. Campbell-Ewald Co. The Ninth Circuit vacated and remanded a summary judgment ruling in favor of the defendant in a case brought under the TCPA.

However, Justice Ruth Bader Ginsburg, in the majority decision, noted that the court would not decide whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount -- as in Pacleb’s case.

“That question is appropriately reserved for a case in which it is not hypothetical,” Ginsburg wrote in the Jan. 20 opinion.

Shortly after the Supreme Court issued its decision in Gomez -- no doubt taking a cue from the Supreme Court case -- Allstate deposited $20,000 in escrow “pending entry of a final district court order or judgment directing the escrow agent to pay the tendered funds to Pacleb, requiring Allstate to stop sending non-emergency telephone calls and short message service messages to Pacleb in the future and dismissing this action as moot.”

The company, pointing to their actions, argued the Ninth Circuit should reverse the denial of its motion to dismiss and remand the case to the district court to order disbursement of the tendered funds to Pacleb, the entry of judgment in favor of Pacleb and the dismissal of the class action as moot.

The Ninth Circuit disagreed.

“In Allstate’s view, if it is able to fully satisfy Pacleb’s individual claims, the action as a whole will also be moot,” Fisher wrote. “We disagree.

“Even if, as Allstate proposes, the district court were to enter judgment providing complete relief on Pacleb’s individual claims for damages and injunctive relief before class certification, fully satisfying those individual claims, Pacleb still would be entitled to seek certification.”

Among those representing the plaintiffs: national public interest law firm Public Justice and the Law Offices of Todd M. Friedman PC. Friedman, a Beverly Hills-based consumer protection attorney, is known for frequently filing lawsuits over unwanted telephone solicitations.

Attorneys with Ballard Spahr LLP represented Allstate. They declined to comment on the Ninth Circuit’s ruling or plans for an appeal.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

Organizations in this Story

Ballard Spahr, LLP
1735 Market St
Philadelphia, PA 19103

Law Offices of Todd M. Friedman
8730 Wilshire Boulevard
Beverly Hills, CA 90211

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