Update on ending class actions by “picking off” the lead plaintiff

In Chapman v. First Index, Inc. (decided on August 6, 2015 by the Seventh Circuit Court of Appeals), a plaintiff was allowed to continue his class-action lawsuit even though the defendant had offered him all the individual relief he was seeking. This decision reversed Seventh Circuit precedent, which previously allowed defendants to moot a class action by “picking off” the lead plaintiff.   The lawsuit alleged unwanted facsimiles were sent in violation of the Telephone Consumer Protection Act.

The Seventh Circuit now joins the majority of jurisdictions, which do not allow a class action to be avoided simply by satisfying the demands of the individual claimant. The Seventh Circuit’s ruling stated, “We acknowledge that many courts, this one included, have applied the label ‘moot’ when a plaintiff declines an offer that would satisfy his entire demand... [But we now] overrule Damasco, Thorogood, Rand, and similar decisions to the extent they hold that a defendant’s offer of full compensation moots the litigation or otherwise ends the Article III case or controversy.”

Judge Easterbrook, writing for the Seventh Circuit, explained the court’s reasoning as follows: “If there is only one plaintiff, […], why should a court supply a subsidized dispute-resolution service when the defendant’s offer means that there’s no need for judicial assistance, and when other litigants, who do need the court’s aid, are waiting in a queue?

We have covered this issue in the past, discussing cases that reached the opposite result and allowed a defendant to pick off a plaintiff.

Currently, there is no nationwide unanimity on how courts should deal with such situations, but the split in authority is not expected to last much longer.  The Supreme Court is scheduled to take up this very issue sometime during the session that begins in October, but the Seventh Circuit wrote, “we think it best to clean up the law of this circuit promptly, rather than require Chapman and others in his position to wait another year for the Supreme Court’s decision.”

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