Uncertified Class Actions May Be Dismissed Upon Complete Offer of Judgment

Class actions based on alleged Fair Debt Collection Practices Act (FDCPA) violations can become extraordinarily expensive for debt collectors, with costs potentially including statutory damages of up to $500,000, plaintiff’s attorney’s fees, and costs, in addition to the substantial costs required to defend the litigation even if the claim is defeated. Due to the high potential costs, many debt collectors will attempt to quickly settle potential class action claims early in the litigation process.  By using a complete offer of judgment, defendants of potential class actions may be able to prevent class action certification and quickly resolve the litigation.

A class action requires at least one individual plaintiff to pursue the case on behalf of the entire class. All lawsuits also require that the plaintiff have a case or controversy for the court to have jurisdiction. A complete offer of judgment offers the plaintiff everything that they have sought in the case and therefore eliminates their legal interest in pursuing the case. If the class has not yet been certified and all of the plaintiff’s claims have been satisfied, the plaintiff will then be prevented from representing the class and the class action claims must be dismissed.

In Malone v. Portfolio Recovery Associates, LLC, Portfolio Recovery Associates (PRA) used a complete offer of judgment to quickly resolve a putative FDCPA class action and dismiss the class action claims. After Malone’s filing of her initial disclosure detailing her individual demands in the lawsuit, PRA sent her a complete offer of judgment offering to pay her $1,001 in statutory damages plus costs and reasonable attorney’s fees, as demanded in her initial disclosure. PRA then moved to dismiss the class action claims, arguing that as all of Malone’s demands had been met, she could no longer represent the class and the court lacked subject matter jurisdiction over the claims.

The court noted two situations that would prevent the dismissal of the class action claims. First, the offer of judgment must meet every demand of the plaintiff. Any demand that is not met, no matter how small, will allow the plaintiff to continue with the class action claims. Secondly, if the plaintiff has already moved to certify the class, the court may refuse to dismiss the class action claims if the certification is pending and has been pursued with reasonable diligence by the plaintiff. As the court found neither situation applied, judgment was granted to the plaintiff on her individual claims and the class action claims were dismissed.

Malone provides a useful example in how an offer of judgment presented early in a putative class action case can be used to quickly settle the lawsuit. This procedure does, however, effectively grant the plaintiff the maximum she could receive on an individual FDCPA claim and it should be pursued prior to any attempt to certify the class. Dismissal of the class claims also does not permanently prevent a class action as another member of the class is free to attempt a new class action. While such a decision must be carefully weighed, in some circumstances a complete offer of judgment can be a useful tool in resolving class action litigation.

The offer of judgment rule is found in Federal Civil Rule 68.  While most States have adopted this into their own state civil rules, each state’s civil rules must be reviewed closely if the action is presented in state court instead of federal court.  For example, Ohio has not adopted federal civil rule 68 and the offer of judgment procedure is not available in Ohio state courts.

A copy of Malone v. Portfolio Recovery Associates, LLC may be found HERE