Allstate Petition for Interlocutory Appeal

7/27/2019 Allstate Petition for Interlocutory Appeal

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CASE NO.

UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

ALLSTATE INSURANCE COMPANY,

Petitioner- Defendant,

v.

RICHARD CHEN, AND FLORENCIO PACLEB, ON BEHALF OFTHEMSELVES AND ALL OTHERS SIMILARLY SITUATED

Respondents- Plaintiffs. __________________________________________________________________

On Appeal from the United States District Court for the Northern District of California

Civil Case No. 4:13-cv-00685-PJH __________________________________________________________________

DEFENDANT ALLSTATE INSURANCE COMPANY’S PETITION FOR PERMISSION TO APPEAL PURSUANT TO 28 U.S.C. § 1292(b)

__________________________________________________________________

Daniel M. BenjaminBallard Spahr LLP655 West Broadway, Suite 1600San Diego, California 92101-8494Telephone: (619) 696-9200Facsimile: (619) 696-9269Email: [email protected]

Case: 13-80177 08/08/2013 ID: 8736509 DktEntry: 1-2 Page: 1 of 48



CORPORATE DISCLOSURE

Pursuant to Rule 26.1(a) of the Federal Rules of Appellate Procedure,

Defendant Allstate Insurance Company states that it is a wholly-owned subsidiary

of Allstate Insurance Holdings, LLC, which is a Delaware limited liability

company. Allstate Insurance Holdings, LLC is a wholly-owned subsidiary of The

Allstate Corporation, which is a Delaware corporation. The stock of The Allstate

Corporation is publicly traded. No publicly-held entity owns 10% or more of the

stock of The Allstate Corporation.

Respectfully submitted,

Dated: August 8, 2013 By: /s/ Daniel M. BenjaminDANIEL M. BENJAMINAttorneys for Petitioner-Defendant




TABLE OF CONTENTS

CORPORATE DISCLOSURE .................................................................................. i

TABLE OF AUTHORITIES ................................................................................... iii

INTRODUCTION ..................................................................................................... 1

FACTS NECESSARY TO UNDERSTAND THE QUESTION PRESENTED ...... 5

A. The Original and Amended Complaints ..................................... 5

B. The Fed. R. Civ. Proc. 68 Offer .................................................. 6

C. The June 10 and July 31, 2013 Orders ........................................ 6

QUESTION ON APPEAL ......................................................................................... 7

RELIEF SOUGHT ..................................................................................................... 7

REASONS WHY THE APPEAL SHOULD BE ALLOWED ................................. 7

I. The Certified Question Is a Controlling Question of Law ..................... 8

II. There Are Substantial Grounds for Difference of Opinion .................. 10

III. An Immediate Appeal May Materially Advance the Litigation .......... 16

CONCLUSION ........................................................................................................ 17






v

Masters v. Wells Fargo Bank South Central , No. A-12-CA-376-SS, 2013 U.S. Dist. LEXIS 101171 (W.D. Tex. July11, 2013) ............................................................................................................. 11

Miller v. Gammie ,335 F.3d 889 (9th Cir. 2003) (en banc) .............................................................. 12

Ministry of Defense of the Islamic Republic of Iran v. Gould, Inc. ,969 F.2d 764 (9th Cir. 1992) ................................................................................ 8

Owner-Operators Indep. Drivers Assoc. of Am., Inc. v. Skinner ,931 F.2d 582 (9th Cir. 1991) ................................................................................ 9

Pitts v. Terrible Herbst, Inc. ,653 F.3d 1081 (9th Cir. 2011) .....................................................................passim

Reese v. BP Exploration (Alaska) Inc. ,643 F.3d 681 (9th Cir. 2011) ........................................................................ 15, 16

Scott v. Westlake Services, LLC , __ F. Supp. 2d __, 2013 WL 2468253 (N.D. Ill. June 6, 2013) ......................... 11

Sosna v. Iowa ,419 U.S. 393 (1975) .......................................................................... 11, 12, 13, 15

U.S. Parole Comm'n v. Geraghty ,445 U.S. 388 (1980) ................................................................................ 11, 12, 13

United States v. Woodbury ,263 F.2d 784 (9th Cir. 1959) ................................................................................ 7

Valenzuela v. Kraft, Inc. ,801 F.2d 1170 (9th Cir. 1986) .............................................................................. 9

Weiss v. Regal ,385 F.3d 337 (3d Cir. 2004) ............................................................................... 15

F EDERAL STATUTES

28 U.S.C. § 1292(b) ..........................................................................................passim

F EDERAL R ULES

Fed. R. Civ. P. 23(e) ................................................................................................. 15




v

Rule 30(b)(6) ............................................................................................................ 17

O THER AUTHORITIES

16 C.A. Wright, A.R. Miller & E.H. Cooper, Federal Practice & Procedure

§ 3931, at 522 (2012) ............................................................................................ 9

19 J. Moore, Federal Practice 3d § 203.31[2], at 203-87 (2013) ............................. 9




1

Pursuant to 28 U.S.C. § 1292(b), Petitioner-Defendant Allstate Insurance

Company (“Allstate”) respectfully seeks leave to file an interlocutory appeal from

the Order of the District Court dated June 10, 2013. That Order denied Allstate’s

motion to dismiss the only remaining claim of the only remaining named plaintiff

in this putative nationwide class action, Florencio Pacleb (“Pacleb”), for lack of

subject matter jurisdiction. On July 31, 2013, the District Court granted Allstate’s

motion to certify the June 10, 2013 Order for interlocutory appeal and to stay the

action pending appeal. 1

This petition is timely filed within ten days of the District Court’s Order

granting certification. See 28 U.S.C. § 1292(b).

INTRODUCTION

The issue raised in this petition is whether this Court should continue to

follow the reasoning of Pitts v. Terrible Herbst, Inc. , 653 F.3d 1081 (9th Cir.

2011), in light of the Supreme Court’s recent decision in Genesis HealthCare

Corp. v. Symczyk , __ U.S. __, 133 S. Ct. 1523 (2013). This novel and important

jurisdictional question is potentially dispositive of the instant case and numerous

other pending putative class actions.

1 Copies of the June 10, 2013 and July 31, 2013 Orders are attached to this petition as Exhibits 1 and 2, respectively.




2

Under Ninth Circuit law, a defendant’s offer of complete relief to a plaintiff

in an individual action moots the case and requires its dismissal for lack of subject

matter jurisdiction since there is no longer a live case or controversy. 2 However,

Pitts declined to extend that principle to Rule 23 class actions. See Pitts, 653 F.3d

at 1092-93 (“we hold that an unaccepted Rule 68 offer of judgment -- for the full

amount of the named plaintiff’s individual claim and made before the named

plaintiff files a motion for class certification -- does not moot a class action”).

In Genesis HealthCare , the Supreme Court held that a Rule 68 offer made

before the plaintiff filed a conditional certification motion mooted the plaintiff’s

Fair Labor Standards Act (“FLSA”) collective action and deprived the court of

subject matter jurisdiction. As a result of the offer, the plaintiff had “no personal

interest in representing putative, unnamed claimants, nor any other continuing

interest that would preserve her suit from mootness.” 133 S. Ct. at 1532; see also

id. at 1529 (“the mere presence of collective-action allegations in the complaint

cannot save the suit from mootness once the individual claim is satisfied”).

In so ruling, the Supreme Court expressly rejected much of the reasoning on

which Pitts relied in holding that a Rule 68 offer of judgment does not moot a Rule

2 E.g. , Marschall v. Recovery Solution Specialists, Inc. , 399 Fed. Appx. 186,2010 U.S. App. LEXIS 20541, at *2 (9th Cir. Oct. 5, 2010) (“[t]he district court

properly dismissed Marschall’s individual claims against [the defendant] for lack of subject matter jurisdiction because [the defendant’s] offer of judgment was for more than Marschall was legally entitled to recover”).




3

23 class action. However, the Supreme Court also stated that FLSA collective

actions are “fundamentally different” than Rule 23 class actions. 133 S. Ct. at

1529. Consequently, there is a significant unsettled question concerning the

impact of Genesis HealthCare on Pitts .

In this Rule 23 putative class action, Allstate served Pacleb with a Rule 68

offer of judgment that fully satisfied his claim under the Telephone Consumer

Protection Act (“TCPA”), and Pacleb has not filed a class certification motion.

Allstate moved to dismiss this case for lack of subject matter jurisdiction, arguing

that Genesis HealthCare abrogated or overruled the Pitts case sub silentio . The

District Court denied the motion, concluding that Pitts was the applicable law

because the Supreme Court in Genesis HealthCare “emphasized that class actions

are different than collective actions.” (Ex. 1 at 14:1-2).

Nevertheless, the District Court acknowledged that Genesis HealthCare “did

reject the reasoning that the Ninth Circuit in Pitts used … in the class action

context” (Ex. 1 at 13:28-14:1) and that other courts disagreed with Pitts . ( Id. at

8:10-20 (noting split between Seventh and Ninth Circuits, among others)). The

District Court further acknowledged that Genesis HealthCare may presage a

change in the governing law. (Ex. 1 at 14:2-5 (“[W]hile the Supreme Court might

at some future date actually overrule Pitts and decisions from other Circuits

holding that the rule articulated in Genesis also applies in class actions, as of now




4

that has not happened and Pitts remains good law as far as the court can

ascertain.”)).

In granting Allstate’s motion to certify, the District Court explained that

“[w]hile the Supreme Court did not clearly overrule Pitts, it did take issue with the

precedent on which Pitts relies. Thus, resolution of the issue raised by Allstate on

appeal could materially affect the outcome of the litigation in this court – even to

the point of materially speeding the outcome of the litigation.” (Ex. 2 at 5:5-9).

The Court stated that it “would welcome the Ninth Circuit’s view as to whether its

Pitts decision remains good law in light of Genesis Healthcare.” ( Id. at 5:13-14).

As the District Court concluded, the requirements for certification under

§ 1292(b) are satisfied in this case. First, the June 10, 2013 Order involves a

controlling question of law because, if this Court holds that Pacleb’s case was

rendered moot by Allstate’s Rule 68 offer, this action will be dismissed for lack of

subject matter jurisdiction.

Second, there is substantial ground for difference of opinion. Before

Genesis HealthCare , circuit courts were divided on whether a Rule 68 offer

providing complete relief to a named plaintiff and made prior to the filing of a

class certification motion moots a Rule 23 putative class action. After Genesis

HealthCare , district courts have reached different conclusions concerning the

applicability of the Supreme Court’s decision to Rule 23 putative class actions. No






6

B. The Fed. R. Civ. Proc. 68 Offer

On April 10, 2013, without admitting liability, Allstate made a Rule 68

offer of judgment to Plaintiffs on their individual claims. On May 8, 2013, Chen

accepted Allstate’s Rule 68 offer and is no longer a party. Pacleb has yet to accept

the offer, which remains open. 3 It is undisputed that Allstate’s offer afforded

Pacleb complete relief on his individual claim. 4

C. The June 10 and July 31, 2013 Orders

When Pacleb did not accept the Rule 68 offer, Allstate filed its motion to

dismiss for lack of subject matter jurisdiction. On June 10, 2013, the District Court

denied the motion, concluding that Pitts continued to be the applicable law in the

Ninth Circuit notwithstanding Genesis HealthCare , but acknowledging that the

jurisdictional issue “remains somewhat unsettled.” ( See Ex. 1 at 6:7-8).

On July 2, 2013, Allstate filed its motion to certify the June 10, 2013 Order

for interlocutory appeal and stay the action pending appeal. The District Court

granted that motion and amended the June 10, 2013 Order by Order dated July 31,

2013. This petition followed.

3 On April 24, 2013, Allstate extended its offer of judgment until such timeas it is accepted by Plaintiffs or Allstate withdraws the offer in writing. (Ex. 1 at2:21-23).

4 Allstate’s Rule 68 offer was based on Plaintiffs’ original request for trebledamages ( i.e. , $1,500 per call). Plaintiffs’ subsequent withdrawal of that claimand its dismissal by the District Court (Ex. 1 at 15:24-26) made Allstate’s offer all-the-more generous.




7

QUESTION ON APPEAL

In light of Genesis HealthCare Corp. v. Symczyk , __ U.S. __, 133 S.Ct. 1523 (2013), did Allstate’s Rule 68 offer of judgment, whichafforded the named plaintiff in this Rule 23 putative class actioncomplete relief on his individual claims and was made before thefiling of a class certification motion, moot the entire action and thusdeprive the court of federal subject matter jurisdiction?

RELIEF SOUGHT

Allstate asks that the Court grant this petition and permit an interlocutory

appeal under § 1292(b). If this petition is granted, Allstate will ask the Court to re-

evaluate Pitts in light of Genesis HealthCare and hold that Allstate’s Rule 68 offer

of judgment, which fully satisfied Pacleb’s individual claim, mooted this lawsuit

and thus deprived the District Court of subject matter jurisdiction. Allstate will

further ask to have the case remanded with instructions that it be dismissed for lack

of subject matter jurisdiction, terminating the litigation.

REASONS WHY THE APPEAL SHOULD BE ALLOWED

Certification of an interlocutory appeal under 28 U.S.C. § 1292(b) is “a

means of expediting litigation by permitting appellate consideration during the

early stages of legal questions, which, if decided in favor of the appellant, would

end the lawsuit.” United States v. Woodbury , 263 F.2d 784, 787 (9th Cir. 1959).

“Examples of such questions are those relating to jurisdiction ... which the district

court has decided in a manner which keeps the litigation alive but which, if

answered differently on appeal, would terminate the case.” Id .




8

A court may certify an order for interlocutory review pursuant to 28 U.S.C.

§ 1292(b) “in exceptional situations in which allowing an interlocutory appeal

would avoid protracted and expensive litigation.” In re Cement Antitrust Litig. ,

673 F.2d 1020, 1026 (9th Cir. 1982). Certification is warranted if the Court

determines that: (1) the issue to be appealed involves a controlling question of law;

(2) there are substantial grounds for difference of opinion; and (3) an immediate

appeal of the issue may materially advance the ultimate termination of the

litigation. See 28 U.S.C. § 1292(b); In re Cement Antitrust Litig. , 673 F.2d at

1026. Each of these requirements is satisfied in this case.

I. The Certified Question Is a Controlling Question of Law

An issue is controlling if “resolution of the issue on appeal could materially

affect the outcome of litigation in the district court.” In re Cement Antitrust Litig. ,

673 F.2d at 1026. Although resolution of the issue need not necessarily terminate

an action in order to be controlling, it is clear that a question of law is controlling if

reversal of the district court’s order would terminate the action. Klinghoffer v.

S.N.C. Achille Lauro , 921 F.2d 21, 24 (2d Cir. 1990).

Here, the question of law is whether the Court has subject matter

jurisdiction. This Court has repeatedly recognized that cases involving questions

of subject matter jurisdiction can be appropriate for interlocutory appeal. See, e.g. ,

Ministry of Defense of the Islamic Republic of Iran v. Gould, Inc. , 969 F.2d 764,




9

768 (9th Cir. 1992) (“[t]he district court certified the question of jurisdiction for

interlocutory appeal, and we agreed to hear such appeal pursuant to 28 U.S.C. §

1292(b)”); International Brotherhood of Teamsters v. Department of Transp. , 932

F.2d 1292, 1297 (9th Cir. 1991) (“The court did, however, certify its jurisdictional

ruling for interlocutory appeal. On October 17, 1989, we granted the petition for

interlocutory appeal.”); Owner-Operators Indep. Drivers Assoc. of Am., Inc. v.

Skinner, 931 F.2d 582, 584 (9th Cir. 1991) (exercising § 1292(b) appellate

jurisdiction over order denying motion for judgment on the pleadings contending

that the court of appeals had exclusive subject matter jurisdiction); Valenzuela v.

Kraft, Inc ., 801 F.2d 1170, 1171-72 (9th Cir. 1986), amended by 815 F.2d 570 (9th

Cir. 1987) (exercising § 1292(b) appellate jurisdiction over order denying motion

for judgment on the pleadings contending that district court lacked jurisdiction);

Goldberg v. CPC Int’l, Inc. , 678 F.2d 1365, 1366 (9th Cir. 1982) (exercising

§ 1292(b) appellate jurisdiction over order denying motion to remand for lack of

subject matter jurisdiction); see also 19 J. Moore, Federal Practice 3d § 203.31[2],

at 203-87 (2013) (“[c]ontrolling questions of law … include … questions as to

subject matter jurisdiction”); 16 C.A. Wright, A.R. Miller & E.H. Cooper, Federal

Practice & Procedure § 3931, at 522 (2012) (challenges to subject matter

jurisdiction are “obviously suited for interlocutory appeal” under § 1292(b)).

Therefore, the issue of law presented for review in this case is controlling.




10

II. There Are Substantial Grounds for Difference of Opinion

“To determine if a ‘substantial ground for difference of opinion’ exists under

§ 1292(b), courts must examine to what extent the controlling law is unclear.”

Couch v. Telescope Inc. , 611 F.3d 629, 633 (9th Cir. 2010). Here, whether this

case should be dismissed for lack of subject matter jurisdiction given the Supreme

Court’s recently issued ruling in Genesis HealthCare is a difficult and pivotal

question not settled by controlling authority.

As the District Court recognized in its June 10, 2013 Order, even before

Genesis HealthCare , there was a split in the circuit courts as to whether a Rule 68

offer that completely satisfied the named plaintiff's individual claims could moot a

Rule 23 putative class action. ( See Ex. 1 at 6-8 (collecting cases)).

That split has widened after Genesis HealthCare , with conflicting opinions

issuing from several district courts in the last few months alone. Compare Keim v.

ADF Midatlantic, LLC , No. 12-80577, 2013 U.S. Dist. LEXIS 98373 (S.D. Fla.

July 15, 2013) (in a TCPA action, rejecting the argument that Genesis HealthCare

is limited to FLSA cases, 5 and ruling that “filing a ‘class action’ complaint does

5 The Keim court stated: “That Genesis dealt with an FLSA collective actionand its corollary ‘conditional’ class certification … does not support an attempt todistinguish it materially from the facts of this case, which deals with traditionalRule 23 class certification in a TCPA case: both cases present a situation where alone plaintiff was offered full relief before a class acquired independent legalstatus.” 2013 U.S. Dist. LEXIS 98373, at *19-20.




11

not prevent a claim from being rendered moot where the sole plaintiff is offered

full relief before he moves for class certification”); Masters v. Wells Fargo Bank

South Central , No. A-12-CA-376-SS, 2013 U.S. Dist. LEXIS 101171 (W.D. Tex.

July 11, 2013) (dismissing a TCPA class action after concluding that the

defendant’s Rule 68 offer of judgment mooted the plaintiff’s individual and class

action claims based on the reasoning of Genesis HealthCare 6 ); Scott v. Westlake

Services, LLC , __ F. Supp. 2d __, 2013 WL 2468253 (N.D. Ill. June 6, 2013)

(holding after Genesis HealthCare that a putative TCPA class action was mooted

by a Rule 68 offer of judgment) with Canada v. Meracord , LLC , No. C12-5657,

2013 WL 2450631 (W.D. Wash. June 6, 2013) (holding that Genesis Healthcare

does not apply to a Rule 23 class action); Craftwood II, Inc. v. Tomy Int’l, Inc. , No.

SA CV 12-1710, 2013 U.S. Dist. LEXIS 99350 (C.D. Cal. July 8, 2013) (same).

These decisions demonstrate a substantial difference of opinion and

underscore that Allstate’s position concerning the application of Genesis

HealthCare to Rule 23 class actions has considerable judicial support. This is not

6

The Masters

court observed: “Although the [Genesis HealthCare

] Courtrecognized Rule 23 class actions ‘are fundamentally different from collectiveactions under the FLSA,’ it went on to review (and distinguish) the precise Rule 23cases [plaintiff] relies on in support of his argument. See id. at 1529-32 (discussing U.S. Parole Comm'n v. Geraghty , 445 U.S. 388 (1980); Deposit Guaranty Nat'l Bank v. Roper , 445 U.S. 326 (1980); and Sosna v. Iowa , 419 U.S.393 (1975)).” 2013 U.S. Dist. LEXIS 101171, at *14-15.




12

a case of Allstate merely “disagreeing” with the District Court’s June 10, 2013

Order.

If this appeal proceeds, the Ninth Circuit panel assigned to the matter will

have considerable latitude in determining the effect of Genesis HealthCare on

Pitts . The Ninth Circuit has held that its panels can re-examine existing precedent

if the Supreme Court has “undercut the theory or reasoning underlying the prior

circuit precedent in such a way that the cases are clearly irreconcilable.” Miller v.

Gammie , 335 F.3d 889, 900 (9th Cir. 2003) (en banc).

There are substantial grounds for the Ninth Circuit to undertake a re-

examination of Pitts pursuant to this standard. As support for its conclusion that a

Rule 68 offer that completely satisfies a named plaintiff's individual claims does

not moot a Rule 23 putative class action, Pitts relied heavily on three earlier

Supreme Court cases. Those cases were United States Parole Comm’n v.

Geraghty , 445 U.S. 388 (1980); Deposit Guaranty Nat. Bank v. Roper , 445 U.S.

326 (1980); and Sosna v. Iowa , 419 U.S. 393 (1975). See Pitts , 653 F.3d at 1090.

Specifically, Pitts , relying on Geraghty , Roper and Sosna , formulated a

“relation back” theory premised on the assumption that small monetary claims of

putative class members are “transitory” in the sense that they would evade judicial

review unless they were pooled in a class action. According to Pitts , keeping a

putative class action alive after the named plaintiff had received a Rule 68 offer of




13

judgment by permitting a later-filed class certification motion to relate back to the

filing of the complaint was justified because “[a] rule allowing a class action to

become moot ‘simply because the defendant has sought to ‘buy off’ the individual

private claims of the named plaintiffs’ before the named plaintiffs have a chance to

file a motion for class certification would contravene Rule 23’s core concern: the

aggregation of similar, small, but otherwise doomed claims.” 653 F.3d at 1091

(citation omitted).

The plaintiff in Genesis HealthCare also relied heavily upon Geraghty ,

Roper and Sosna in opposing dismissal. But the Supreme Court expressly

distinguished those cases because they dealt with situations in which class

certification had been granted or improperly denied. Because those cases were

ones in which class certification proceedings had already occurred, the Court found

that they were, “by their own terms, inapplicable to these facts.” 133 S. Ct. at

1529. The Court noted that, in the case before it, the “respondent had not yet

moved for ‘conditional certification’ when her claim became moot, nor had the

District Court anticipatorily ruled on any such request. Her claim instead became

moot prior to these events.” Id. at 1530.

The Supreme Court specifically rejected the plaintiff’s core argument (the

same argument that Pitts found persuasive) that the “purposes served by the

FLSA’s collective-action provisions -- for example, efficient resolution of common




14

claims and lower individual costs associated with litigation -- would be frustrated

by defendants’ use of Rule 68 to ‘pick off’ named plaintiffs before the collective-

action process has run its course.” Id. at 1531. The Court rejected that argument

because the Rule 68 offer mooted the plaintiff’s individual claim before a

conditional certification motion was even filed, as it afforded her complete relief.

Id. Moreover, the Court characterized the language in Roper that was the basis for

the “pick-off” argument as mere “ dicta ” and even questioned Roper ’s “continuing

validity.” 133 S. Ct. at 1532 & n. 5.

Accordingly, a substantial argument can be made that even though Genesis

HealthCare stated that FLSA collective actions are “fundamentally different” than

Rule 23 class actions, those differences primarily affect the certification process

itself and thus are irrelevant where (as in Pitts and the instant action) the named

plaintiff’s individual claims are mooted by a Rule 68 offer before a certification

motion is filed. Therefore, one can reasonably argue that in the pre-certification

context, the logic of Genesis HealthCare does apply to Rule 23 class actions.

Because Genesis HealthCare took issue with the precedent on which Pitts

relied, there is a compelling reason for this Court to re-evaluate Pitts . Indeed, in

her Supreme Court brief in Genesis HealthCare , the plaintiff urged the Court to

follow Pitts , but the Court did not do so. Instead, it dismissed the case as moot for






16

that adverse authority develop around an issue before we review it on interlocutory

appeal could lead to unnecessary, protracted litigation and a considerable waste of

judicial resources.” Id. at 688 n. 5.

Here, as the District Court observed in its certification Order, the absence of

conflicting opinions within the Ninth Circuit “is no doubt attributable to the fact

that the decision in Genesis HealthCare was issued only three and a half months

ago.” (Ex. 2 at 5:11-12). Indeed, a determination on the novel issue of subject

matter jurisdiction presented here, in addition to potentially resolving the instant

litigation, could greatly aid the many district courts within and outside this Circuit

that are examining the impact of Genesis HealthCare on Rule 23 class actions.

Thus, substantial grounds for difference of opinion exist.

III. An Immediate Appeal May Materially Advance the Litigation

An order is reviewable under § 1292(b) if its immediate review may

materially advance the litigation. See 28 U.S.C. § 1292(b); see also Englert v.

MacDonnell , 551 F.3d 1099, 1103 (9th Cir. 2009). This criterion is satisfied when

“allowing an interlocutory appeal would avoid protracted and expensive

litigation.” In re Cement Antitrust Litig ., 673 F.2d at 1026.

In the present case, immediate review of the Court’s June 10, 2013 Order

could resolve this case entirely. Alternatively, without such review, the parties will

spend years litigating a costly putative nationwide class action. Prior to the stay of






1

PROOF OF SERVICE

I hereby certify that on August 8, 2013, I served the foregoing on the

interested parties in this action by sending true and correct copies via U.S. Mail

and Electronic Mail pursuant to Fed. R. App. P. 25(c)(1) as follows:

Joshua B. SwigartHYDE & SWIGART411 Camino Del Rio SouthSuite 301San Diego, CA 92108Tel: (619) 233-7770

Fax: (619) 297-1022 [email protected]

Seyed Abbas KazerounianMatthew Loker KAZEROURI LAW GROUP2700 N. Main StreetSuite 1000Santa Ana, CA 92705Tel: (800) 400-6808Fax: (800) [email protected] [email protected]

Todd M. Friedman Nicholas J. Bontrager LAW OFFICES OF TODD M.FRIEDMAN369 S. Doheny Drive, #415

Beverly Hills, CA 90211Tel: (877) 206-4741Fax: (866) [email protected] [email protected]

Counsel for Plaintiff Richard Chen,and Florencio Pacleb, individuallyand on behalf of all others similarlysituated






2

Dated: August 8, 2013 By: /s/ Daniel M. BenjaminDANIEL M. BENJAMINAttorneys for Petitioner-Defendant




EXHIBIT 1




Exhibit 1Page 1

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Case4:13-cv-00685-PJH Document25 Filed06/10/13 Pagel of 16

1

2

3

4

5

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA ..

6 RICHARD CHEN, et al.,

7 Plaintiffs,

8 v.

9 ALLSTATE INSURANCE COMPANY,

10

11

Defendant.

____________________________

No. C 13-0685 PJH

ORDER GRANTING MOTION TODISMISS IN PART AND DENYINGIT IN PART

12 The motion of defendant Allstate Insurance Company ("Allstate") for an order

13 dismissing the above-entitled action for lack of subject matter jurisdiction and failure to

14 state a claim came on for hearing before this court on June 5, 2013. Plaintiff appeared by

15 his counsel Matthew Loker, and Allstate appeared by its counsel Mark Levin. Having read

16 the parties'. papers and carefully considered their arguments and the relevant legal

17 authority, t h ~court hereby GRANTS the motion in part and DENIES it in part as follows .

18 BACKGROUND

19 This is a case filed as a proposed class action, asserting violations of the Telephone

20 Consumer Protection Act, 47 U.S.C. § 227, et seq. ("TCPA"). The complaint alleges that

!

;,

21 defendant Allstate engaged in unlawful activities by contacting plaintiff and the members of '

22 the proposed class on their cell phones without their consent.

23 Plaintiff Richard Chen ("Chen") filed the original complaint on February 14, 2013, as24 a proposed class action seeking statutory damages ($500 per unlawful call, or up to $1,500

25 per unlawful call for knowing/willful viol;:ltions) and injunctive relief against Allstate. Chen

26 alleged that in January 2013, Allstate called him on his cell phone in an attempt to solicit his

27 purchase of an insurance policy. He asserted that Allstate placed "no less than eight (8)

28 calls" to his cell phone through the use of an "automatic telephone dialing system;" that he




Exhibit 1Page 2

Case4:13-cv-00685-PJH Document25 Filed06/10/13 Page2 of 16

1 had never been a customer of Allstate; and that he had never given Allstate his prior

. 2 consent to call his cell phone using an automatic telephone dialing system.

3 On March 3, 2013, Chen filed a first amended complaint ("FAG"), adding an

4 additional plaintiff- Florencio Pacleb ("Pacleb"). The FAG alleges that Allstate called

5 Pacleb "no less than five (5)" times on his cell phone in February and March 2013, using an ·•

6 automatic telephone dialing system; that he had never been a customer pf Allstate, and

7 had not given Allstate prior consent to make the calls; and that the calls were not for

8 emergency purposes. The FAG also alleges that Pacleb was never able to talk to a "live

9 human representative" from Allstate, and that each time he answered the call he was

10 greeted with "dead air" followed by a recorded message asking for an individual named

11 "Frank Arnold."

12 The FAG asserts two causes of action- (1) negligent violations of the TCPA ($500

13 per unlawful call); and (2) knowing and/or willful violations of the TCPA ($1 ,500 per

14 unlawful call).

15 On April 10, 2013, Allstate made an offer of judgment to Chen and Pacleb pursuant

16 to Federal Rule of Civil Procedure 68. Allstate offered Chen $15,000, and Pacleb $10,000,

17 plus "reasonable attorney's fees and costs that have been accrued to date." Allstate also· ,

§ 18 offered to stop sending plaintiffs non-emergency telephone calls and short message

19 service messages, and to have a reasonable amount of attorney's fees and costs

20 determined by the court if the parties could not agree on the amount.

_l .. .

·. /.;:

~ · : · ·'

21 On April 24, 2013, c o u n ~ e lfor Allstate sent plaintiffs' counsel a letter stating,

22 "Allstate hereby extends its April 1 0, 2013 offer of judgment until such time as it is accepted

23 by plaintiffs or Allstate withdraws the offer in writing." On April 25, 2013, Allstate filed the24 present motion to dismiss.

25 On May 8, 2013, Chen filed a notice of acceptance of Allstate's offer of judgment,

26 and was effectively dismissed from the case (though no request for judgment has yet been

27 filed by Allstate). To date, Pacleb has not accepted Allstate's offer. Allstate asserts that

28 the offer to Pacleb is still "open."

2

' '




Exhibit 1Page 3

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1 Allstate now seeks an order dismissing the FAC pursuant to Federal Rule of Civil

2 Procedure 12(b)(1) for lack of subject matter jurisdiction; and also argues that the court

3 should "dismiss or strike" plaintiffs demand for treble damages (available under the TCPA

4 for willing or knowing violation of the statute).

5

6 A.

7

DISCUSSION

Telephone Consumer Protection Act

In relevant part, the TCPA provides as follows with regard to "[r]estrictions on the

8 use of automated telephone equipment" -

9

10

11

12

13

14

15

16

17

18

19

20

21

22

2324

25

26

27

28

(1) Prohibitions

It shall be unlawful for any person within the United States, orany person outside the United States if the recipient is within theUnited States -

(A) to make any call (other than a call made for emergencypurposes or made with the prior express consent of the calledparty) using any automatic telephone dialing system or anartificial or prerecorded voice -

(iii) to any telephone number assigned to a paging service,cellular telephone service, specialized mobile radio service, or

other radio common carrier service, or any service for which thecalled party is charged for the call;

(B) to initiate any telephone call to any residential telephone lineusing an artificial or prerecorded voice to deliver a messagewithout the prior express consent of the called party, unless thecall is initiated for emergency purposes or is exempted by ruleor order by the Commission under paragraph (2)(B);

(D) to use an automatic telephone dialing system in such a waythat two or more telephone lines of a multi-line business are

engaged simultaneously.

(3) Private right of action

A person or entity may, if otherwise permitted by the laws or rules of court ofa State, bring in an appropriate court of that State -

(A) an action based on a violation of this subsection or theregulations prescribed under this subsection to enjoin suchviolation,

3




Exhibit 1Page 4

1

2

3

4

5

6


(B) an action to recover for actual monetary loss from such aviolation, or to receive $500 in damages for each such violation,whichever is greater, or

(C) both such actions.

If the court finds that the defendant willfully or knowingly violatedthis subsection or the regulations prescribed under thissubsection, the court may, in its discretion, increase the amountof the award to an amount equal to not more than 3 times theamount available under subparagraph (B) of this paragraph.

7 47 U.S.C. § 227(b)(1 ), (3).

8 B. Legal Standards

9 1. Motions to Dismiss for Lack of Subject Matter Jurisdiction

10 Federal courts are courts of limited jurisdiction, possessing only that power

11 authorized by Article Ill of the United States Constitution and statutes enacted by Congress

12 pursuant thereto. See Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986).

13 Thus, federal courts have no power to consider claims for which they lack subject-matter

14 jurisdiction. See Chen-Cheng Wang ex rei. United States v. FMC Corp., 975 F.2d 1412,

15 1415(9thCir.1992).I

16 Under Federal Rule of Civil Procedure 12(b)(1), a defendant may seek dismissal of a

17 claim or action fo r lack of subject matter jurisdiction. Although the defendant is the moving

18 party in a motion to dismiss brought under Rule 12(b)(1), the plaintiff is the party invoking

19 the court's jurisdiction. As a result, the plaintiff bears the burden of proving that the case is

20 properly in federal court. McCauley v. Ford Motor Co., 264 F.3d 952, 957 (9th Cir. 2001)

21 (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936)).

22 Nevertheless, the plaintiff must do more than merely allege that a violation of federal

23 law has occurred; the plaintiff must have standing to invoke the power of the federal court.24 Valley Forge Christian Coli. v. Americans United fo r Separation of Church and State. Inc.,

25 454 U.S. 464, 471-72 (1982). Standing is a jurisdictional limitation. It is "an essential and

26 unchanging part of the case-or-controversy requirement of Article Ill." Lujan v. Defenders

27 ofWildlife, 504 U.S. 555,560 (1992).

28 To establish a "case or controversy" within the meaning of Article Ill, a plaintiff must, : :

4




Exhibit 1Page 5

;

, ·. '

'


1 at an "irreducible minimum," show an "injury in fact" which is concrete and not conjectural,

2 a causal causation between the injury and defendant's conduct or omissions, and a

3 likelihood that the injury will be redressed by a favorable decision. kL. at 560-61; see also

4 Allen v. Wright, 468 U.S. 737, 751 (1984). Standing is not subject to waiver, and must be

5 considered by the court even if the parties fail to raise it. See United States v. Hays, 515

6 U.S. 737, 742 (1995). The burden is on the party who seeks the exercise of jurisdiction in

7 his or her favor to "clearly . . . allege facts demonstrating that he is a proper party to invoke

8 judicial resolution of the dispute." kL. at 7 43.

9 Also embedded in Article Ill's case-or-controversy requirement is the doctrine of

: !l

l::·:

10 mootness, which requires that an actual, ongoing controversy exist at all stages of federal !!;.;

11 court proceedings. See Burke v. Barnes, 479 U.S. 361, 363 (1987). A case becomes

12 moot when the issues presented are no longer "live" or the parties lack a legally cognizable

13 interest in the outcome of the litigation. Powell v. McCormack, 395 U.S. 486, 496 (1969).

14 That is, if events subsequent to the filing of the case can solve the parties' dispute, the

15 court must dismiss the case as moot, because the court does not have constitutional .

16 authority to decide moot cases. Pitts v. Terrible Herbst. Inc., 653 F.3d 1081, 1 086-8T(9th '·

17 Cir. 2011).

18 2. Offers of Judgment under Federal Rule of Civil Procedure 68

19

20

21

22

2324

25

26

27

28

At any time up to 14 days before the date set for trial, a defendant may serve a

plaintiff with an offer to allow judgment to be taken against the defendant for a specified

amount of money or property with costs then accrued. If the plaintiff accepts, and the offer

and acceptance are filed with the court, the clerk must enter judgment accordingly. Fed. R.

Civ. P. 68(a). If the offer is not accepted within 14 days after service, it is deemedwithdrawn, "but it does not preclude a later offer." Fed. R. Civ. P. 68(b). If the judgment

recovered by the plaintiff at trial is "not more favorable" than the defendant's offer, the

plaintiff must pay the defendant's costs incurred after the offer was made. Fed. R. Civ. P.

68(d); see also Marek v. Chesney, 473 U.S. 1, 5 (1985).

If a defendant offers judgment in complete satisfaction of a plaintiff's claims, the

5




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19

20

Case4:13-cv-00685-PJH Document25 Filed06/10/13 Page6 of 16.

plaintiff's claims generally are rendered moot because the plaintiff lacks any remaining

interest in the outcome of the case. See Schwarzer, Tashima and Wagstaffe, Federal Civil ;;

"Procedure Before Trial (2013 ed.) § 15:156.5. In cases filed as class actions, however, the ~ ~

rule has long been that once a class is certified, the claims of the unnamed class members

are not mooted by the named plaintiff's acceptance of an offer of judgment. See Wright &

Miller, 13C Federal Practice and Procedure. Jurisdiction (3d ed. 2013) § 3533.9.1. The

question whether that same rule applies where a class has not yet been certified remains

somewhat unsettled. See id.; see also Schwarzer, et al., § 15:156.5.

In Pitts, the plaintiff filed suit in the District of Nevada in April 2009, alleging failure to .

pay overtime and minimum wages, and asserting a collective action under the federal Fair

Labor Standards Act, a class action for violation of Nevada labor laws, and a class action

for breach of contract. The defendant served the plaintiff with a Rule 68 offer of judgment,

for an amount well over the amount the plaintiff was seeking on his own behalf. The

plaintiff refused the offer, and the defendant filed a motion to dismiss for lack of subject: ~

matter jurisdiction, arguing that the offer of judgment had rendered the entire action moot. L·

The district court ruled that a Rule 68 offer of judgment does not moot a putative

class action so long as the class representative can file a timely mot,ion for class

certification; but nevertheless found that the defendant's offer did moot the action because

the plaintiff had failed to seek class certification before the initial deadline for completion ofI ,

discovery (which had subsequently been extended)- and had thus failed to act in a "timely" ·

21 manner. The court dismissed both the FLSA cause of action and the state law labor code

22 cause of action on that basis.

23 The court also ruled that a Rule 23 class action alleging violations of state law is24 incompatible with an FLSA collective action, and that where both are brought together, only

25 the FLSA action may proceed - notwithstanding that in the case before the court, the

26 plaintiff had sought to dismiss the FLSA claim and proceed under only the state law class

27 action.

28 On appeal, the Ninth Circuit considered a number of issues, including whether a

6




Exhibit 1Page 7

Case4:13-cv-00685-PJH Document25 Filed06/10/13 Page? of 16

1 rejected offer of judgment for the full amount of a putative class representative's individual

2 claim moots a class action complaint where the offer precedes the filing of a motion for

3 class certification. The court held that it does not in all cases. Pitts, 653 F.3d at 1090.

4 Relying on United States Parole Comm'n v. Geraghty, 445 U.S. 388 (1980); Deposit :\

5 Guaranty Nat. Bank v. Roper, 445 U.S. 326 (1980); and Sosna v. Iowa, 419 U.S. 393 ,j

6 (1975), the court as an initial matter noted that if the district court has certified a class,

7 mooting the putative class representative's claim will not moot the class action, because

8 upon certification the class acquires a legal status apart from the interest asserted by the

9 class representative. Pitts, 653 at 1090. Further, if the district court has denied class

10 certification, mooting the class representative's claim will not necessarily moot the class

11 action, because the putative class representative retains an interest in obtaining a final

12 decision on the class certification. kl.

13 Finally, the court held that "even if the district court has not yet addressed the Class

14 certification issue, mooting the putative class representative's claims will not necessarily

15 moot the class action." kl. The court advised that the mootness doctrine be applied

16 "flexibly"- "particularly where the issues remain alive" even if the named plaintiff's stake in;-

17 the outcome has become moot. kl. at 1087. The court noted that some claims are so

'I

II

l 18 "inherently transitory" that the court would not have enough time to rule on a motion for

;

'-

19 class certification before the proposed representative's individual interest will expire. kl. at

20 1090.

21 An "inherently transitory" claim is one that will certainly repeat as to the class, either

22

2324

25

because the individual could suffer repeated harm, or because it is certain that others

similarly situated will have the same complaint. kl. In such cases, the court opined, thenamed plaintiff's claim is "capable of repetition, yet evading review," and the "relation back"

doctrine would apply to preserve the merits of the case for judicial resolution. kl. (citations

26 and quotations omitted).

27 The court conceded that the plaintiff's claim in the case before it was not inherently

28 transitory, but asserted that where a defendant is seeking to "buy off' the individual claims

7




Exhibit 1Page 8

, .

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·'

Case4:13-cv-00685-PJH Document25 Filed06/10/13 PageS of 16

1 of the named plaintiffs, the analogous claims of the class "become no less transitory than

2 inherently transitory claims." kL. at 1091. The court concluded that application of the

3 "relation back" doctrine in the case before it would "avoid the spectre of plaintiffs filing

4 lawsuit after lawsuit, only to see their claims mooted before they can be resolved." 1Q,_at

5 1090.

6 Thus, the court determined that the defendant's unaccepted offer of judgment did

7 not moot the named plaintiff's case because his class action claim was "transitory" in nature:

8 because it was subject to the potential "buy-off," and might otherwise evade review- and

9 that if the district court were to certify a class, the certification would relate back to the filing

10 of the complaint. kL.at 1091-92. This decision was in accord with decisions reached by

11i '

the Tenth, Fifth, and Third Circuits. See Damasco v. Clearwire Corp., 662 F.3d 891, 895-

12 96 (7th Cir. 2011 ).

13 In the Seventh Circuit, by contrast, the court in Damasco held that the action (also

14 brought under the TCPA) was mooted by the defendant's offer of the named plaintiff's full

15 request for relief that preceded a motion for class certification. k!_,_, 662 F 3d at 895-96. 1

16 (The offer was an offer of settlement, not a Rule 68 offer of judgment, but the court

17 concluded that the difference between the two was not significant.) The Damasco court .

18 was critical of the approach taken by the Ninth, Tenth, Fifth, and Third Circuits, which was

19 that absent undue delay, a plaintiff may move to certify a class and avoid mootness even ..

20 after being offered complete relief. See id. ( c i t i n g , ~ .Pitts, 653 F.3d at 1091-92). :·

21 Here, Allstate argues that Pitts is no longer good law in light of the Supreme Court's·ii

22 recent decision in Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523 (2013), but the

23 court does not agree. Genesis was an FLSA case, in which the district court dismissed the24

25

26

27

28

1 The Seventh Circuit also held, however, that class action plaintiffs can move to certifythe class at the same time they file their complaint, and that the pendency of that class certmotion will protect a putative class from attempts to "buy off' the named plaintiffs. The courtalso asserted that even if the plaintiffs do not have sufficient facts to move for classcertification, they can "ask the district court to delay its ruling to provide time for additionaldiscovery or investigation." kL., 662 F.3d at 896-97. The court characterized this as a "simple J

solution to the buy-off problem."

8




Exhibit 1Page 9

,_·


1 complaint for lack of subject matter jurisdiction after the employer extended an offer of

2 judgment in full satisfaction of the plaintiff-employee's claimed damages, fees, and costs.

3 The Third Circuit reversed, finding that while the individual claim was moot, the collective

4 action was not, and that allowing defendants to "pick off' named plaintiffs before

5 certification with calculated Rule 68 offers would frustrate the goals of collective actions.

6 The court remanded the case to the district court to allow the plaintiff to seek "conditional

7 certification" which, if successful, would relate back to the date the complaint was filed... ; ~

!

8 See Genesis, 133 S.Ct. at 1524-25.

9 The Supreme Court granted cert, and reversed the order remanding the case so that

10 plaintiff could move for a conditional certification. The court found that the question

11 whether the plaintiffs failure to respond to the offer of judgment had the effect of mooting

12 her claims was not before it, because both the district court and the Third Circuit had ruled

13 that the plaintiffs individual claim was moot because of the unaccepted offer of judgment,;;

14 and because plaintiff herself had "conceded" (while the case was pending before the district:

15 court) that an offer of complete relief will generally moot the plaintiffs claim.

16 Instead, the Court turned to the question whether the action remained justiciable

17 based on the collective-action allegations in the complaint. The Court held that the

18 individual plaintiffs suit became moot when her FLSA claim became moot, because from

19 that point on she lacked any personal interest in representing others in the FLSA collective : :

20 action . .19..:.at 1529. The Court also found that the cases on which the plaintiff rel ied-

21 which all had arisen in the context of Rule 23 class actions- were inapposite, both

' '

·: i

22 because Rule 23 actions are fundamentally different from FLSA collective actions, and

23 because the cases on their own terms were inapplicable to the facts of the case. These24 cases include the three cases cited by the Ninth Circuit in Pi t t s - Geraghty, Roper, and

25 Sosna. See Genesis, 133 S.Ct. at 1530-32.

.:.:

26 The Court cited these cases for the proposition that while a live controversy might

, - 27 continue to exist after class certification has been denied, because a corrected ruling on

28 appeal would relate back to the time of the erroneous denial of the class cert motion, the

9

-,

1




Exhibit 1Page 10

Case4:13-cv-00685-PJH Document25 Filed06/10/13 PagelO of 16

1 situation in the Genesis case was that the claim became moot before the plaintiff had

2 moved for certification, arid also because under the FLSA, a "conditional certification" does

3 not confer independent legal status (as a Rule 23 certification does). See Genesis, 133

4 S.Ct. at 1530.

5 The court also addressed the argument that an "inherently transitory" class action

6 claim is not necessarily moot upon the termination of the named plaintiffs claim. The court'

7 indicated that this might be true if the plaintiff was challenging the constitutionality of

8 temporary pretrial detentions, but noted that unlike claims for injunctive relief challenging

9 ongoing conduct, claims for damages cannot evade review, and remain live until settled,

10 judicially resolved, or barred by a statute of limitations. Moreover, the Court noted, while

11 settlement of the named plaintiffs claim prior to certification may have the effect of

12 foreclosing unjoined plaintiffs from having their rights vindicated in the original plaintiffs

13 suit, nothing precludes them from filing their own suits. 1.9.:.at 1530-31.

14 Finally, the Court addressed the argument that the purposes served by the FLSA's.

15 collective action provisions would be frustrated by defendants' use of Rule 68 to "pick off'

16 named plaintiffs before the collective action process has run its course. The Court noted

17 that in Roper, the district court had denied the motion for class cert, and had found that the

5 18 named plaintiffs retained an ongoing personal economic interest in the case - to shift the

19 attorney's fees and expenses to successful class litigants. The Court characterized the

20 language about "pick[ing] off' named plaintiffs as "dicta," and noted that the essence of the

21 ruling was that the plaintiffs retained a continuing personal economic stake in the litigation

22 even after the defendants' offer of judgment (but also noted that later cases have held that

23 an interest in attorney's fees is not sufficient to create an Article Ill case or controversy24 where none exists on the merits of the underlying claim). kL. .at 1531-32.

25 In short, the Court assumed (without deciding) that the individual named plaintiffs

26 claim had become moot as a result of the offer of judgment in an amount sufficient to make

.I

'

27 her whole, and then, based on that, determined that the collective action brought by that t~

28 single employee on behalf of herself and all others similarly situated for alleged violations of tr='

k.

10




Exhibit 1Page 11

Case4:13-cv-00685-PJH Document25 Filed06/10/13 Pagel l of 16

11 C. Defendant's Motion

12 Allstate makes three main arguments in support of its motion - that Pacleb's claims

13 are moot and must be dismissed; that Pacleb lacks standing to assert a. violation of the

14 TCPA because he was not the intended recipient of the calls; and that Pacleb fails to allege

15 facts sufficient to support the demand for treble damages.

16 1. Whether Pacleb's claims are moot

17 First, Allstate argues that the unaccepted Rule 68 offer of judgment renders Pacleb's .

18 claims moot, and that the court therefore lacks subject matter jurisdiction. Allstate

19 contends that the $10,000 offer of judgment was in an amount that was more than!J·

20 sufficient to satisfy all of Pacleb's alleged damages on his claims, plus costs and attorney's. j

21 fees, and that it also included provisions that satisfy the claim for injunctive relief. Allstate

22 argues that because Pacleb can obtain complete relief without further litigation, his claims

23 are moot, and because the offer of judgment was made prior to any motion for class24 certification, there is no longer any controversy between the parties and the FAC must be

25 dismissed for lack of subject matter jurisdiction.

26 Allstate asserts further that prior to the Supreme Court's April 16, 2013 decision in

27 Genesis, the courts were divided on whether a Rule 68 offer of judgment made prior to the

~ · 28 filing of a class certification motion also mooted the claims of the putative class members

11

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Exhibit 1Page 12

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1 (citing Damasco, on the one hand, and Pitts and cases from the Third, Fifth, and Tenth

2 Circuits on the other). Allstate claims, however, that Genesis resolved that Circuit split, in

3 holding that a collective action filed under the FLSA is rendered moot if the defendant

4 makes a Rule 68 offer of judgment in the full amount of the named plaintiff's individual

5 claim before a class certification motion is filed.

6 Allstate also contends that the Genesis Court rejected the reasoning that led the

7 Ninth Circuit in Pitts to conclude that putative class allegations were enough to keep the

8 case alive after the named plaintiff had received a Rule 68 offer of judgment. AllstateJ

9 argues that Genesis expressly distinguished all the cases on which Pitts relied, on the

10 basis that all those cases involved situations where class cert had been granted or11 improperly denied. Here, Allstate argues, Pacleb is in the same procedural posture as the '.

: :;

12 plaintiff in Genesis because no class cert motion has been filed, and thus, his claims should i

13 be dismissed as moot.

14 As for the Genesis Court's emphasis on the fact that Rule 23 actions are

15 fundamentally different from collective actions under the FLSA, Allstate contends that the

16 Court made that observation when it was distinguishing Sosna, Geraghty, and Roper on

17 the basis that in those cases, class certification proceedings had already taken place,

18 whereas in Genesis, the plaintiff's claims became moot before a class cert motion was

19 filed. Allstate concedes that there are "procedural differences" between Rule 23 class

20 actions and FLSA collective actions, but argues that those differences "primarily affect the

21 certification process." Allstate claims that since in both Genesis and this case, the named

22 plaintiff's claims became moot before a class certification motion had been filed, the logic of

23 Genesis "applies equally to Rule 23 putative class actions as the mootness principles are

24 the same."

25 In opposition, plaintiff argues that Allstate has misconstrued the holding of Genesis

26 to support the proposition that since the unaccepted offer of judgment was in an amount

27 sufficient to satisfy all of Pacleb's claims, and was made prior to the filing of any motion for

28 class certification, Pacleb's claims are moot. Plaintiff asserts that this argument is flawed

12




Exhibit 1Page 13


1 for two reasons.

2 First, plaintiff contends that Genesis explicitly refused to address whether an

3 unaccepted offer that fully satisfies a plaintiffs claim is sufficient to render the claim m o o t -

4 because that issue was not before the court, and the plaintiff had conceded that she . i

5 retained no personal interest in the outcome of the litigation. Here, plaintiff asserts, he has

6 made no concessions or waivers of any kind. He did not accept the offer of judgment and

7 does not anticipate accepting it in the future. Thus, he contends, Genesis is inapplicable. ·

8 Second, plaintiff argues that the Ninth Circuit in Pitts explicitly held that where a

9 defendant makes an unaccepted Rule 68 offer of judgment that fully satisfies a named

10 plaintiffs individual claims before the named plaintiff files a motion for class certification, the

11 offer does not moot the case. Plaintiff repeats the Pitts court's argument regarding

12 "inherently transitory" claims, and the application of the relation-back doctrine. Plaintiff

13 contends that the Pitts court extensively considered the exact situation at issue in the

14 present case, while the same scenario was not presented in Genesis.

15 Finally, plaintiff asserts that he retains a concrete interest in the outcome of this

16 litigation, on the basis that the Rules of Civil Procedure give the proposed class

17 representative the right to have a class certified if the requirements of the Rules are met,::l. 18 and that the procedural right to represent a class suffices to satisfy Article Ill concerns

19 because the class cert question "remains as a concrete, sharply presented ·issue" even

20 after the named plaintiffs individual claim has expired. See Pitts, 653 F.3d at 1089 (citing

21 Geraghty, 445 U.S. at 403).

22 As indicated above, the court finds that Genesis does not control this case. The

23 Supreme Court in Genesis specifically did not decide that an unaccepted Rule 68 offer in

24 an FLSA collective action will moot the named plaintiffs claims, but rather simply assumed

25 it would based on what had transpired in the lower courts. The Court's ruling was that once

26 it had been determined that the named plaintiffs claims were moot, the case could not be

27 kept on for a conditional certification.

28 It is true that the Court did reject the reasoning that the Ninth Circuit in Pitts used

13




Exhibit 1Page 14


1 (based on Sosna, Geraghty, and Roper) in the class action context, but it also emphasized. . ~

2 that class actions are different than collective actions. So while the Supreme Court might

3 at some future date actually overrule Pitts and decisions from other Circuits holding that the

4 rule articulated in Genesis also applies in class actions, as of now that has not happened,

5 and Pitts remains good law as far as the court can ascertain.

6 2. Whether Pacleb has standing to allege violation of TCPA

7 In its second main argument, Allstate contends that Pacleb lacks standing to assert ; :

8 a violation of the TCPA because he was not the inte"'ded recipient of the calls. Allstate

9 cites the portion of the TCPA that makes it unlawful to any person within the United States

10 to "initiate any telephone call to any residential telephone line using an artificial of

11 prerecorded voice to deliver a message without the prior express consent of the called

12 party" unless the call is for emergency purposes. 47 U.S.C. § 227(b)(1)(B). Allstate

13 contends that the phrase "called party" has been interpreted as meaning "the party to

14 whom the call is directed," or "the intended recipient of the call," and that here, the

15 allegations in FAC show that Pacleb was not the intended recipient of the calls and was not

16 the "called party."

17 In opposition, plaintiff asserts that this part of the motion is incomprehensible, as the

18 FAC alleges violations of 47 U.S.C. § 227(b)(1 )(A)(iii)- the provision regarding unsolicited

19 calls to cell phone numbers- not 47 U.S.C. § 227(b)(1)(B)- the provision regarding

20 unsolicited calls to residential land ines. Plaintiff also argues that Allstate has failed to.dte

21 relevant authority holding that a call to ,a cell phone number that belongs to a particular

22 person is a call that is intended for that person - the regular user and carrier of the phone.

23 Plaintiff contends that he does not know Frank Arnold, had no relationship with Allstate,24 and never consented to the calls that were made to his cell phone. He asserts that this is

25 sufficient to confer standing.

26 In its reply, Allstate asserts that Pacleb does not dispute that the phone calls he

27 claims to have received were placed to a man named Frank Arnold. Allstate then cites to .

28 the correct portion of the statute- 47 U.S.C. § 227(b)(1 )(A)(iii)- which makes it unlawful.

14

. ~ ·




Exhibit 1Page 15

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'l,

fifj,

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1 for anyone to "make any call (other than a call made for emergency purposes or made with <

2 the prior express consent of the called party) using any automatic telephone dialing system

3 . . . to any telephone number assigned to . . . a cellular telephone service . . . or any service

4 for which the called party is charged for the call."

5 Allstate notes that whether the issue involves a residential phone or a cell phone, the •

6 TCPA expressly refers to calls made to the "called party" in both contexts. Allstate argues

7 that courts interpreting this language have concluded that in order to have standing, the

8 plaintiff must have been the intended recipient of the cal l - the reasoning being that the

9 TCPA provides an exception for calls made with the prior express consent of the "called

10 party," and there is no way that an unintended recipient could provide express consent.

11 Thus, Allstate argues, the only logical interpretation of§ 227(b (1 )(A)((iii) is one that ,

12 requires the party asserting the TCPA claim to be the party to whom the calls were

13 directed. Here, since the FAC alleges that the calls were intended for "Frank Arnold," ·;

14 Pacleb cannot claim to have been the intended recipient of the calls and therefore lacks

15 standing to maintain an action under the TCPA.

16 The court finds that the question whether the calls were intended for Frank Arnold,

17 or for plaintiff as the account-holder of the cell phone appears to involve a factual dispute,

18 and is thus not appropriate for decision here.

19

20

21

22

2324

25

26

27

28

3. Whether demand for treble damages should be dismissed/stricken

In its third main argument, Allstate asserts that the court should "dismiss or strike"

the "conclusory demand for treble damages," because the F AC does not plead sufficient

facts to "state a claim" for treble damages. Although Allstate refers to "striking" the

"demand': for treble damages, as well as "dismissing" it, it appears that Allstate's purpose isto seek dismissal of the second cause of action. Pacleb does not oppose this part of the

motion. At the hearing, plaintiff's counsel stated that Pacleb did not oppose the motion,

and he was amenable to having the second cause of action dismissed.

4. Analysis

The court finds that the motion must be GRANTED in part and DENIED in part. The

15




Exhibit 1Page 16

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motion to dismiss the second cause of action (alleging knowing and/or willful violations of

the TCPA), and the demand for treble damages is GRANTED, based on plaintiff's lack of

opposition and plaintiff's counsel's concession at the hearing.

With regard to whether Pacleb's .claims are moot- even if they are, under Pitts, the

entire case cannot be dismissed for lack of subject matter jurisdiction, and Pacleb will still.

be able to move for class certification. Thus, that part of the motion is DENIED. The

decision in Genesis does not compel a different conclusion, because it did not involve Rule

23 class certification. As the Genesis Court noted, class certification under Rule 23 is

"fundamentally different from collective actions under the FLSA" because "a putative class

acquires an independent legal status once it is certified under Rule 23" whereas under the

FLSA, '"conditional certification' does not produce a class with an independent legal status,

or join additional parties to the action" (since the unnamed parties must still "opt in" before

they actually become parties). See Genesis, 133 S.Ct. at 1529.

With regard to whether Pacleb has standing, given that the calls appeared to be

addressed to someone other than him - this appears to be a factual dispute. It is unknown

at this point, for example, how long he had been assigned that cell phone number, or

whether someone named Frank Arnold had previously had the number or had at some

point used a cell phone with that number. Certainly Allstate has not provided a sufficient

basis for the court to determine that Pacleb lacks standing.

CONCLUSION

In accordance with the foregoing, the motion to dismiss the case for lack of subject

matter jurisdiction is DENIED. The motion to dismiss the second cause of action is

GRANTED, based on plaintiff's counsel's concession at the hearing.

IT IS SO ORDERED.

Dated: June 10, 2013

16

PHYLLIS J. HAMILTONUnited States District Judge




EXHIBIT 2




Exhibit 2Page 1

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,-·: ..+ -

,- . ~ ·

Case4:13-cv-00685-PJH Document31 Filed07/31/13 Pagel of 5

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

1

2

3

4

5

''l

6 RICHARD CHEN, et al.,

7

8 v.

Plaintiffs,

9 ALLSTATE INSURANCE COMPANY,

10

11

Defendant.- - - - - - - - - - - - - - - - - - - - - - - - - - ~ '

No. C 13-0685 PJH

ORDER AMENDING JUNE 10, 2013ORDER; ORDER STAYING ACTION'

12 Before the court is the motion of defendant Allstate Insurance Company ("Allstate"):.

I

'

13 for an order amending the June 10, 2013 order to certify it for interlocutory appeal under 28 -

14 U.S.C. § 1292(b), and for an order staying this action pending the Ninth Circuit's decision : ~ .

15 on interlocutory appeal. Plaintiffs oppose the motion. Having read the parties' papers and

16 carefully considered their arguments, and the relevant legal authority, the court hereby

17 GRANTS the motion.

18 BACKGROUND

19 This is a case filed as a proposed class action, alleging violations of the Telephone· .

20 Consumer Protection Act, 47 U.S.C. § 227, et seq. ("TCPA"). The complaint asserts that - ~

21 defendant Allstate Insurance Company engaged in unlawful activities by contacting the two--

22 named plaintiffs and the members of the proposed class on their cell phones without their ·

23 consent.24 Allstate made a Rule 68 offer of judgment to the two named plaintiffs, Richard Chen --•·

25 ("Chen") and Florencio Pacleb ("Pacleb"). Chen accepted the offer, but Pacleb did not.

26 Allstate then filed a motion to dismiss Pacleb's claims (and the entire case) for lack of

'. :!_'..

27 subject matter jurisdiction, arguing that because the offer made to Pacleb was in complete\

. 28 satisfaction of his claims, his claims had become moot as there was no longer a case or

· ~ - -

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·,•




Exhibit 2Page 2

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1 controversy

. 2 On June 10, 2013, the court issued an order denying the motion to dismiss for lack :

3 of subject matter jurisdiction. Relying on Pitts v. Terrible Herbst. Inc., 653 F.3d 1081 (9th , ..,,i ,('!·

4 Cir. 2011 ), the court held that even if Pacleb's claims were moot, the entire case could not

5 be dismissed because it was filed as a proposed class action, and Pacleb could still move :.

6 for class certification on behalf of the members of the proposed class.

7 In its motion, Allstate argued that Pitts had been qverruled "sub silentio" by the

8 Supreme Court's recent decision in Genesis Healthcare Corp. v. Symczyk, _ U . S . _ , 133

9 S.Ct. 1523 (2013). In that case, the Court held that in a collective action under the Fair

10 Labor Standards Act ("FLSA"), where the employer extends a Rule 68 offer of judgment in

11 full satisfaction of the named plaintiff-employee's claimed damages and fees, the named

12 plaintiff's FLSA claim becomes moot and the collective action is no longer justiciable

13 because the named plaintiff no longer has any personal interest in representing others in ·•••. :

14 the collective action.

15 On July 2, 2013, Allstate filed the present motion to amend the June 1 0, 2013 order ···

16 to certify it for interlocutory appeal under 28 U.S.C. § 1292(b), and to stay this litigation

17 pending the interlocutory appeal.

18 DISCUSSION

19 A. Legal Standard

20

21

22

2324

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26

The rule allowing a party to seek certification to appeal an interlocutory order, 28 ·

U.S.C. § 1292(b), is a departure from the normal rule that only final judgments are

appealable, and therefore it must be construed narrowly. James v. Price Stern Sloan, Int., '

283 F.3d 1064, 1067-68 n.6 (9th Cir. 2002). A district court may certify an order forinterlocutory review pursuant to§ 1292(b), but "only in exceptional situations in which

allowing an interlocutory appeal would avoid protracted and expensive litigation." In re

Cement Antitrust Litigation, 673 F.2d 1020, 1026 (9th Cir. 1982) (emphasis added).

27 To obtain interlocutory review under§ 1292(b), the party seeking relief must satisfy·

28 certain requirements. Couch v. Telescope, 611 F.3d 629, 633 (9th Cir. 201 0). The district

2




Exhibit 2Page 3


1 court must find that the party has established the existence of a controlling question of law, :·!

2 and substantial grounds for difference of opinion, and that the party has shown that an

3 immediate appeal may materially advance the ultimate termination of the litigation. In re

4 Cement, 673 F.2d at 1026 (citing 28 U.S.C. § 1292(b)).

5 An issue is "controlling" if "resolution of the issue on appeal could materially affect:: ·.··. 1

6 the outcome of litigation in the district court." llL. (citation and quotation omitted). " A l t h o u g h

1" '

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7 resolution of the issue need not necessarily terminate an action in order to be 'controlling,' . ;

8 . . it is clear that a question of law is 'controlling' if reversal of the district court's order would i

9 terminate the action." Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21, 24 (1990).

10 A substantial ground for difference of opinion is not established by a party's strong

11 disagreement with the court's ruling; the party seeking an appeal must make some greater

12 showing. Mateo v. MIS Kiso, 805 F.Supp. 792,800 (N.D. Cal. 1992), abrogated on other

13 grounds by Brockmeyer v. May, 361 F.3d 1222, 1226-27 (9th Cir. 2004). Substantial·

14 grounds for a difference of opinion required to certify an order for interlocutory review arise

15 when an issue involves one or more difficult and pivotal questions of law not settled by

16 controlling authority. See 28 U.S.C. § 1292(b).

17 The third requirement- that the appeal be likely to materially speed the termination

." !

18 of the litigation- is linked to the question whether an issue of law is "controlling," in that the ·

19 . district court should consider the effect of a reversal on the management of the case.

20 Mateo, 805 F.Supp. at 800 (citing In re Cement, 673 F.2d at 1 026). If, on the other hand,

21 an interlocutory appeal would delay resolution of the litigation, it should not be certified.

22 See Shurance v. Planning Controllnt'l. Inc., 839 F.2d 1347, 1348 (9th Cir. 1988).

23 B.24

Defendant's MotionAllstate argues that the requirements for certification under§ 1292(b) are met. First,

25 Allstate contends that the June 10 order involves a controlling issue of law because if the

26 Ninth Circuit holds that this putative class action is rendered moot by Allstate's Rule 68

27 offer, this case will be dismissed for lack of subject matter of jurisdiction.

28 Second, Allstate asserts that there are substantial grounds for a difference of

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Exhibit 2Page 4

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1 opinion. Allstate contends that before Genesis Healthcare, the Circuits were divided on this

2 i s s u e - ~ .the Seventh Circuit differed from the Ninth Circuit. In addition, district court

3 opinions issued after Genesis Healthcare have reached different conclusions as to the

4 Genesis decision's applicability to Rule 23 putative class actions. Allstate notes that even

5 this court acknowledged that the question whether a Rule 68 offer moots a Rule 23 putative

6 class action where a class has not yet been certified "remains unsettled." Allstate argues

7 that certification will enable the Ninth Circuit to determine whether Pitts is good law in light

8 of Genesis Healthcare- an issue on which there is substantial difference of opinion, and

9 which is also an important jurisdictional issue that will affect other cases.

10 Third, Allstate contends that an immediate appeal may materially advance the

11 ultimate termination of this litigation because, if the Ninth Circuit determines that Pacleb's

12 claim is moot, there will be no subject matter jurisdiction over the case and it will be

13 dismissed. . . :.

; ,l :

14 In opposition, plaintiffs assert that the Ninth Circuit has already determined (in Pitts) -fi:;•

15 that a Rule 68 offer of judgment that fully satisfies a named plaintffs individual claim before .

16 a class is certified does not moot the entire case." Plaintiff contends that because Genesis

17 did not address whether an unaccepted offer that fully satisfies a plaintiffs claim is

18 sufficient to render the claim m o o t - finding that that specific issue was not before i t - it is

19 impossible for Genesis to have overruled Pitts.

20 Second, plaintiffs contend that there are no grounds for a difference of opinion ' - that :'

21 neither the fact that Allstate disagrees with the court's June 10, 2013 order, nor the fact that;:,,;:

22 some other Circuits (such as the Seventh) have taken a different approach than the Ninth '·

23 Circuit is sufficient to establish a substantial ground for difference of opinion, as the24 standard requires. Plaintiffs also cite two district court decisions from within the Ninth

25 Circuit, in which the courts held that Genesis did not overrule Pitts, and that the Supreme

26 Court's ruling regarding FLSA collective actions is not clearly applicable in Rule 23 class

27 actions.

28 In reply, Allstate argues that the Ninth Circuit has not decided the exact issue posed

4




.·'

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1 by Allstate- whether Genesis overruled Pitts. Allstate also reiterates that there are

2 substantial grounds for a difference of opinion, primarily based on this court's comment that'1

3 the controlling law is unclear, but also based on the split in the Circuits. Allstate also notes

4 that plaintiffs have not opposed Allstate's request for a stay pending appeal.

5 The court finds that the motion must be GRANTED. While the Supreme Court did

6 not clearly overrule Pitts, it did take issue with the precedent on which Pitts relies. Thus,

7 resolution of the issue raised by Allstate on appeal could materially affect the outcome of

8 the litigation in this cour t - even to the point of materially speeding the outcome of the

9 litigation. Moreover, while it is not entirely clear that there is a substantial ground for

...

10 difference of opinion within the Ninth Circuit, the lack of decisions by other courts on this ,,

11 issue is no doubt attributable to the fact that the decision in Genesis Health care was issued 'i

12 only three and a half months ago.

13 The court would welcome the Ninth Circuit's view as to whether its Pitts decision

14 remains good law in light of Genesis Healthcare.

15 CONCLUSION

16 In accordance with the foregoing, the motion is GRANTED. Further, the case is

17 STAYEO pending a decision by the Ninth Circuit. Defendant shall advise the court

18 immediately regarding the Ninth Circuit's decision whether to permit the appeal.

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IT IS SO ORDERED.

Dated: July 31, 2013

PHYLLIS J. HAMILTONUnited States District Judge

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Documents

Allstate Petition for Interlocutory Appeal