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New York Federal Court Ruling May Breathe New Life into Employment Class Action Pick-off Strategy; Addresses Supreme Court's Gomez Decision

Is the pick-off strategy to moot class actions still alive in the Southern District of New York?  Possibly.

Last month we reported on Brady v. Basic Research, L.L.C. – the first decision to interpret the Supreme Court’s Campbell-Ewald Co. v. Gomez opinion.  If you remember, the Supreme Court in Gomez ruled that “an unaccepted Rule 68 Offer of Judgment for complete relief does not moot a plaintiff’s individual and class action claims,” but left open the possibility that employers could moot a class action in other ways: by either actually paying the named plaintiff the amounts allegedly owed, or similarly, by depositing the money with the court to be released to the plaintiff upon dismissal of the action.  An Eastern District of New York judge in Brady refused to endorse these alternatives because it would deprive the named plaintiff “a fair opportunity to show that certification is warranted."

Now comes a decision out of the neighboring Southern District of New York.  In Leyse v. Lifetime Entertainment Services, LLC, the plaintiff alleged violations under the Telephone Consumer Protection Act and sought to certify a class of similarly situated individuals.  The Court denied the plaintiff’s motion for certification leaving only Leyse’s individual claims.  After that decision, the defendant promptly offered to pay Leyse his max damages.  Leyse did not accept the offer, but the defendant moved for an entry of judgment in plaintiff’s favor nonetheless.

Despite Leyse’s refusal to accept the offer, Judge Hellerstein granted the defendant’s motion to enter judgment upon payment to the Court clerk of the amount offered.  The Court said that despite the opinion in Gomez – that an unaccepted offer, which provides full relief, does not moot a cause of action – an action can be dismissed if the defendant does actually pay the plaintiff the full amount in controversy.  In other words, Judge Hellerstein was picking up where the Supreme Court left off and saying that actual payment (whether directly to the plaintiff or by deposit with the Court) could moot a claim.  This is good news.

But Judge Hellerstein went further.  First, he also said that in ordering entry of judgment, there is no requirement that the defendant must admit liability – another big victory for defendant-employers wondering whether that would be yet another road block in executing on a named plaintiff pick-off strategy.  And second, Judge Hellerstein made the entry of judgment conditional on payment – another outcome that defendant-employers will welcome, because it relieves them of any obligation to make a cash outlay in advance of the judgment entry decision.

There is one catch here, however.  Some of our readers may have picked up on it earlier.  The court in Leyse had previously denied the plaintiff’s certification motion.  Thus, this case does not explicitly decide whether actual payment to the plaintiff or depositing of such payment with the court would moot a class action.  The Eastern District in Brady said it did not.  We will have to wait for another decision from the Southern District to see if it feels differently; although a fair reading of this case leads to a logical conclusion that it should.

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