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Class Action Countermeasures Discussions of the Strategic Considerations Involved In Class Action Defense

Mootness Maneuvering – Physicians Healthsource Inc. v. Allscripts-Misy’s Healthcare Solutions, Inc.

Posted in Motions Practice, Strategy

This term, the Supreme Court will review several class action cases. In one of those, Genesis HealthCare Corp. v. Symczyk (technically, an FLSA collective action, but a ruling either way will likely have wider significance) it will decide whether a defendant can moot a class action by offering full relief to a class representative. The case has received a lot of attention, in no small part because plaintiffs are worried about the practice of "picking off" named plaintiffs. On the other side, defendants would like to preserve one of the best tools they have for avoiding nuisance suits.

Last week, in Physicians Healthsource, Inc. v. Allscripts-Misy’s Healthcare Solutions, Inc., 2012 U.S. Dist. LEXIS 169381 (N.D. Ill. Nov. 29, 2012), a magistrate judge for the Northern District of Illinois decided a motion to dismiss/deny certification in a TCPA "junk fax" case.  Physicians Healthsource addresses the same mootness issue at the heart of Symczyk, but the procedural posture shows just how far we have allowed the mootness debate to move from the real issues that motivate each side.

The opinion is complicated reading, because the posture is unusual. But here it is in a nutshell. The plaintiff filed a TCPA complaint and with it, a "bare-bones, boiler plate Motion for Class Certification." (We’ll get to why in a moment.) But the plaintiff did not notice the motion for presentment (a local requirement). That same day, the defendant offered the plaintiff $1,500, a consent to an injunction, and costs–the maximum it could receive for the TCPA claims in its complaint. Then the defendant moved to dismiss the complaint as moot (and to deny the motion for certification), because in the Seventh Circuit, a defendant’s offer of complete relief can moot a class action.

The plaintiff responded that it had filed a Motion for Certification, which the Seventh Circuit had said can prevent the mooting of a class action complaint. The defendant then pointed out that the plaintiff had not noticed the motion for presentment within 14 days of filing it as required by Local Rule 5.3(b), which meant that the motion for certification wasn’t valid.

For those following along, at this point the fate of the class action hinges entirely on whether the plaintiff had filed a notice of presentment in accordance with the local rules.

The magistrate judge found that the plaintiff had not noticed the motion, and then pointed out that "deadlines count" and that

the Seventh Circuit has repeatedly warned that ignoring deadlines is the surest way to lose a case.

But it then decided that, since it had the discretion to not dismiss under Local Rule 78.2, it would decline to do so in this case. Why?

Excusing the plaintiff’s noncompliance with the Local Rule’s presentment schedule in this case is consistent with Damasco’s requirement that to avoid the "buy-off" problem, a plaintiff must file with his complaint a motion for class certification and its directive that a court should "wait until ‘an early practicable time’ before ruling on a motion to certify a class."

There are a few easy lessons from this little motions drama:

  1. Plaintiffs adapt to changing circumstances. Faced with clear guidance about the possibility of mootness, plaintiffs don’t file better-researched complaints, they file pro forma class certification motions and ask the court to decide them later.
  2. Courts adapt to changing circumstances. Faced with that same clear guidance, courts are willing to let plaintiffs file placeholder motions and grant requests to defer decision. And they’re willing to waive local deadlines to keep class actions alive when they think it necessary.

But the very existence of this opinion speaks to some of the larger strategic dilemmas that face class action lawyers on both sides, and one of the largest unresolved debates in class action jurisprudence. The strategic dilemmas on each side stem from two questions:

(1) Why don’t plaintiffs just have named plaintiffs waiting in the wings? After all, we know class actions are really brought by the lawyers, so why not just recruit 10 plaintiffs instead of one, and refile the case as soon as the first plaintiff gets picked off? If there really is a widespread problem, this would seem to be a simple answer rather than filing a motion and then asking the court not to decide it until you can support it with facts.

and

(2) Why don’t defendants just settle the entire case? If there’s a real problem, then they must know they will be facing more litigants. Why not settle early before incurring lots of litigation costs?

The answer to (1) is that, since the real benefit of class action litigation tends to flow to the class lawyers, finding adequate named plaintiffs is really hard.  That’s one reason incentive awards are so popular.  And this is particularly true for statutory violations like the TCPA, where many class members may not know (or care) that the violation occurred.

So plaintiffs’ counsel will fight hard to hold on to their plaintiffs, because if they lose one, they may not be able to find another. But, if there really are classwide problems–especially ones that require an injunction the defendant will readily agree to–why isn’t the defendant just giving in?

The answer to (2) is that frequently, it is not clear that there really is a large problem. Many plaintiffs lawyers file class actions when there is little (or no) evidence that their client’s individual complaint is really a classwide one, either because there aren’t enough people who "suffered" or because the named plaintiff is unique in her complaint. (In Rule 23 terms, it lacks numerosity or typicality.)

So the mere act of filing a class action does not mean that there is really a classwide problem; instead one could be facing an overambitious plaintiff’s lawyer or an unusually hacked-off customer. Under those circumstances, a defendant may be willing to make someone who actually cares enough to complain whole, but not want to pay millions of dollars in attorney fees for a plaintiffs’ lawyer to act as a surrogate (and often redundant) customer service department.

The specific twists and turns that led to this outcome are unlikely to come up before the Court in Symczyk. (Indeed, neither the petitioner nor the respondent relied on Damasco, the Seventh Circuit case which created the need to concurrently file a complaint and a class certification motion.) But the underlying dilemma–what to do about cases where the plaintiffs’ lawyer has an incentive to file a case even when he can’t find a class member who cares about the supposed "harm"–will remain. Until courts can figure out better ways to fit the class action device to true collective harms (and the Supreme Court’s 2011 term–in both its pro-plaintiff and pro-defendant rulings–was a great start toward that), they are likely to see many more cases Physicians Healthsource.