Neither a potential enhancement award nor the prospect that he would have to pay legal costs absent class certification meant he retained the requisite financial stake in the case.
A putative class representative in a class action wage suit against AutoZone mooted the unresolved class claims when he voluntarily settled his individual claims, a Ninth Circuit panel held. The appeals court rejected his contention that he retained a financial stake in the outcome of the class suit because he stood to get an enhancement award out of a successful litigation. He also argued that he would have to shoulder the advanced legal costs if the case, brought under Washington state’s meal break laws, did not get certified as a class action. But absent proof, his contention was not enough to show he continued to have a vested stake in the outcome. The appeals court therefore dismissed the plaintiff’s appeal of a federal court’s dismissal of his class action claims (Brady v. AutoZone Stores, Inc., June 3, 2020, Nelson, R.).
The plaintiff settled his individual meal break, wage, and derivative claims against AutoZone for $5,000 after a federal district court, following several years of litigation, denied his motion for class certification (and his subsequent motion to modify the ruling). The operative settlement agreement also resolved his “claims to costs or attorneys’ fees.” The agreement stated that it was “not intended to settle or resolve” his class claims, but did not provide that he would stand to gain any financial reward if the unresolved class claims proved to be successful.
Circuit precedent. In Narouz v. Charter Communications, LLC, the Ninth Circuit tackled, for the first time, the mootness question after a class representative in a putative class action voluntarily settles his or her individual claims but not those claims related to the class allegation. In that 2010 case, the appeals court concluded that the class claims were not moot because the class representative retained a financial stake in the class case because he stood to receive an “award enhancement” fee if the court certified the class, and he had not released his claims for attorneys’ fees and costs. The class representative in Evon v. Law Offices of Sidney Mickell, a 2012 decision, accepted a Rule 68 offer of judgment that settled her individual claims, but the settlement agreement did not expressly disclaim her class claims. Consequently, those claims were not moot, the appeals court held, leaving aside the question whether she maintained a “continued financial interest” in the class claims.
These cases left unclear, though, what settlement language would be necessary to show that a class representative maintains an ongoing personal stake in a class action after resolving individual claims. Circuit law continued to evolve in Campion v. Old Republic Prot. Co. In this 2014 opinion, the class representative, again, had settled individual claims but the operative settlement agreement “explicitly did not resolve” the class claims. The Ninth Circuit held that “a more concrete interest”—that is, a “financial interest”—would be required to avoid mootness in this scenario. Here, the class claims were moot because the agreement provided no additional compensation to the class representative for the resolution of class claims beyond the individual settlement. (Also, looking back at Evon, the court noted it did not have to address the “financial stake” requirement because there was no dispute the class representative had a financial interest—namely, the prospect of a higher attorneys’ fee award.
No financial stake; class claims moot. Applying this trio of precedents to the facts at hand, the appeals court explained that unlike the settlement agreement in Narouz, the agreement here did not indicate that the class representative would receive additional compensation for the class claims. And, in contrast to both Narouz and Evon, the agreement settled any claim he may have had to attorneys’ fees, so he couldn’t cite this possible financial stake in the class litigation. Therefore, his case most reflected Campion: he “expressly did not resolve the class claims,” but he did not continue to have a financial stake in those claims—so they are moot.
Potential enhancement award. The plaintiff argued his class case was not in fact moot, though, because he could still receive an enhancement award as class representative—giving him a financial stake. But the language of the settlement controls, and it gave no indication that he could or will get such a payout.
Attorneys’ fees. Unless the class case is certified, the plaintiff will be liable for more than $35,000 in advanced litigation costs, he next argued, in an effort to demonstrate his financial stake in the case. He cited Washington Rule of Professional Conduct 1.8(e)(2), which notes the exception to the general rule that “a lawyer not give financial assistance to a client by allowing for contingency arrangements in ‘matters maintained as class actions.’” This meant that he, and not his attorneys, will be responsible for the costs accrued in this litigation unless the class is certified. The appeals court was not persuaded, as he failed to offer a single statute or procedural rule imposing such an obligation absent an express agreement—or any fact evidence such as an affidavit or engagement letter from counsel.
The black-letter conclusion: “[W]hen a class representative voluntarily settles his individual claims, he must do more than expressly leave class claims unresolved to avoid mootness,” the court said. “A class representative must also retain—as evidenced by an agreement—a financial stake in the outcome of the class claims. Absent such a stake, a class representative’s voluntary settlement of individual claims renders class claims moot.”
Interested in submitting an article?
Submit your information to us today!Learn More
Labor & Employment Law Daily: Breaking legal news at your fingertips
Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on labor and employment legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.