Ruling in a Bay Area robocall case, a federal appeals court said Tuesday that a company can’t scuttle a proposed class-action suit it is facing by trying to buy off the lead plaintiff.
The Ninth U.S. Circuit Court of Appeals in San Francisco addressed an issue that the U.S. Supreme Court left unresolved in a ruling in January: whether a company or person accused of violating the rights of large numbers of people can avoid large-scale liability by setting aside enough money to meet the demands of the plaintiff, or plaintiffs, who seek to represent the entire group.
No, the appeals court said, because defendants facing class-wide lawsuits can’t elude them by “picking off lead plaintiffs.” Instead, the court said, a plaintiff is entitled to reject the offer and ask the trial judge to approve the suit as a class action.
The suit accuses Allstate Insurance Co. of violating a federal law that prohibits unsolicited, automated nonemergency calls to someone’s cell phone. The 1991 law provides for damages of $500 per violation, or $1,500 for “willful” violations.
The suit was filed by Richard Chen of San Mateo County and joined later by Florencio Pacleb of Los Angeles County. Both said they were not Allstate customers but received a series of unsolicited calls from the insurer on their cell phones in early 2013 and heard only automated voices when they picked up the receiver. They sought to represent all recipients of unwanted cell phone calls nationwide and estimated their number in the tens of thousands.
Allstate immediately proposed to settle their cases by offering $15,000 to Chen and $10,000 to Pacleb, along with their legal costs and a promise not to call them in the future. The company then asked a federal judge to dismiss the case, saying the dispute had been resolved. Chen accepted the offer, but Pacleb declined it, arguing through his lawyers that he wanted to pursue the class action.
In a separate case in January, the Supreme Court ruled that a plaintiff with an ongoing claim was entitled to a “fair opportunity” to seek class-action status, but stopped short of saying what would happen if the company that was being sued put the money the plaintiff was seeking into an escrow account.
Allstate promptly placed $20,000 in an escrow account payable to Pacleb — doubling its previous offer — and argued again that the case was over, since it had relinquished control of the funds and agreed to all of the plaintiff’s demands. Business groups, including the U.S. Chamber of Commerce, filed supporting arguments.
But the appeals court said Pacleb hadn’t settled his case and is entitled to an opportunity to expand it into a class action. That will be up to Chief U.S. District Judge Phyllis Hamilton of Oakland, who had denied Allstate’s previous attempt to dismiss the suit.
“As the Supreme Court has recognized, the class action device is often the only effective means of pursuing relief on behalf of injured persons,” Judge Raymond Fisher said in the 3-0 ruling.
Attorney F. Paul Bland of the nonprofit group Public Justice, which represents Pacleb, said the court rejected “this idea that you can pick off a couple of people and keep the money from everyone else you cheated.”
Allstate’s lawyer could not be immediately reached for comment.
Source: www.sfgate.com
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