Post-Class Action Complaint Tender of Amount Sought by Class Action Plaintiff does not Render Claim Moot or Deprive Federal Court of Subject Matter Jurisdiction Georgia Court Holds
Plaintiff filed a putative class action against his credit insurance coverage carrier, Protective Life, alleging that it refused to refund unearned premiums for early termination of insurance coverage. Bishop’s Prop. & Investments, LLC v. Protective Life Ins. Co., 463 F.Supp.2d 1375, 1376 (M.D. Ga. 2006). The credit insurance in question involved vehicle loans: in return for a single premium, Protective Life promised to make the loan payments in the event of the insured’s death or disability. In plaintiff’s case, he purchased a vehicle with a 72-month loan term, but he paid off the loan in only 11 months. Id. Because the loan had been paid in full, the insurance policy terminated. The class action alleged that insureds who paid off their loans early were entitled to refunds of the “unearned premiums.” Id., at 1376-77. After the filing of the class action complaint, defendant tendered a refund to plaintiff, which he refused to accept. Id., at 1376. Defense attorneys then moved for summary judgment arguing that, despite his refusal to accept the check, the tender mooted plaintiff’s claim thereby depriving the court of subject matter jurisdiction over the class action. Id. Under the defense theory, Protective Life “issued a check for the total amount of unearned premiums owed to Plaintiff under its credit insurance policy,” and that tender divested the federal court of jurisdiction because “Plaintiff’s personal claims became moot the moment [Protective Life] ‘refunded in full the unearned premiums that [Plaintiff] claims are due.'” Id., at 1377. The district court denied the motion.
The district court phrased the issue at page 1377 as follows: “Under what circumstances does a legal controversy for Article III purposes continue to exist in a class action after the named plaintiff’s individual claims become moot?” The court recognized that generally the claims of the class representative must be “live” not only at the time the class action is filed but at the time of class certification as well; if it is not, then “the court lacks a justiciable controversy” and the class action must be dismissed. Id. (citation omitted). The district court provided a concise explanation behind the purpose of the rule at pages 1377 and 1378:
The rationale for this general rule is that until a class is certified it is the plaintiff’s individual claim that provides the controversy, and if it is eliminated before a class is certified, no controversy remains for adjudication. After a class is certified, the action evolves from a controversy involving solely active individual claims of the class representative and putative claims of a potential class to a controversy including active claims of the certified class. The class claims provide the controversy upon certification. Thus, if the representative plaintiff’s claims remain live throughout the certification process, but become moot after certification, the court retains jurisdiction so long as there is at least one member of the certified class whose claim remains viable. (Citation omitted.)
Here, defense attorneys argued that the individual claims were not justiciable because Protective Life “tendered to plaintiff all that it is owed on its individual claim prior to class certification.” Bishop’s, at 1378. In opposition, plaintiff’s lawyer argued that standing is determined at the time the class action complaint was filed. The district court agreed, relying on Fifth Circuit authority that “a plaintiff in a putative class action whose individual claims become moot prior to class certification may nevertheless have standing to pursue the class action if he has filed a motion for class certification and vigorously pursued it.” Id., (citing Zeidman v. J. Ray McDermott & Co., Inc., 651 F.2d 1030 (5th Cir. 1981)). As the district court explained at page 1378:
Zeidman . . . provides certain guideposts for evaluating whether an action remains a live controversy in the class action context when the named plaintiff receives full compensation for his individual claims prior to class certification. The general rule is that the controversy no longer remains a live one. Zeidman is an exception to that general rule. Under the circumstances existing in Zeidman, the controversy remains live notwithstanding the pre-certification satisfaction of plaintiff’s individual claims.
The court discussed Zeidman at length, and concluded that it compelled a finding that plaintiff’s claim was not rendered moot by the pre-certification tender of amounts allegedly owed because plaintiff had vigorously prosecuted the class action. Bishop’s, at 1378-82. Moreover, under the facts of the case, the court found it would unfairly penalize plaintiff to accept defense arguments that Zeidman did not apply because plaintiff had not filed a motion for class certification: the district court attributed that delay to the conduct of the defense, not the plaintiff. Id., at 1382. In sum, the district court rejected what it deemed defense efforts to “pick off” the class representative before the court could rule on a class certification motion, id.; accordingly, it denied the defense motion to dismiss.