Maryland Court of Appeals Denies Attempt to Pick-Off Plaintiff in Class Action

In Frazier v. Castel Ford, Ltd., 2013 WL 265072 (January 24, 2013), the Maryland Court of Appeals put the brakes on a tactic that has gained favor among defendants in class actions—and that has caught the attention of the Supreme Court, for better or for worse—where a defendant attempts to moot the claims of a potential class representative by paying his damages in full at the outset of the case.  This tactic is referred to as “picking off” the class representative.  The court in Frazier held that an attempt to pick off the class representative cannot moot a class action, at least where the plaintiff has not had a “reasonable opportunity” to move for class certification.

Picking off the class representative benefits defendants because they can get out of a class action for the small amount they owe to the class representative (usually a single person), whose claims are typically very small on an individual basis.  This tactic, however, is particularly dangerous because it allows a defendant to thwart the claims of the proposed class, who may never bring their own actions.  Recognizing these principles, the Maryland Court of Appeals held that a defendant cannot defeat a class action by tendering all of the plaintiff’s damages—he must at least be given a “reasonable opportunity” to move for class certification, “including any necessary discovery.”

In Frazier, the plaintiff alleged that the defendant, a Ford dealer, misrepresented the expiration date of his extended warranty by two years.  The plaintiff’s complaint asserted two causes of action—one for violation of Maryland’s Consumer Protection Act, and one for common law fraud.  The plaintiff alleged that he incurred unexpected repair costs that he would not have paid if the warranty lasted as long as the dealer represented.

After plaintiff commenced his action and began to take discovery, the defendant sent him a check for all the damages it claimed he was owed.  Thereafter, the defendant moved for summary judgment and made a motion to deny class certification.  The trial court granted the defendant’s motion for summary judgment on the grounds that the plaintiff’s complaint was mooted by the tender of his damages, and granted the motion to deny class certification because the plaintiff, who had now purportedly been made whole, was not a member of the class he sought to represent.

The Maryland Court of Appeals reversed.  The court noted that the concept of mootness is more flexible in a class action than in an individual case.  The reason for this relaxed mootness standard, the court elaborated, was illustrated by the defendant’s actions: before filing his class action complaint, the plaintiff contacted the dealership and was ignored; the court stated that the defendant made “no effort to rectify the situation until the class action complaint was filed.”  Then, once the complaint was filed, the defendant “immediately took action to moot it by tendering individual damages to the plaintiff . . . before the plaintiff had any reasonable opportunity to seek class certification or to conduct discovery addressed to the merits of class certification.”

The court noted that, if this type of behavior were permitted:

“[M]any meritorious class actions will never get off the ground. It will be particularly tempting to ‘pick off’ a putative class representative in cases where the underlying conduct affected many people but each claim, including the class representative’s, is small or moderate in size—a type of case for which the class action procedure was devised.”

The court noted that other jurisdictions—including the Ninth Circuit and the Third Circuit—had come to the same conclusions, based on substantially similar reasoning.

One practice pointer from this case: the court did not hold that a tender of damages fails to moot a class action in any and all circumstances.  Rather, the court made clear that a class representative cannot be picked off “if the individual plaintiff has not had a reasonable opportunity to seek class certification, including any necessary discovery.”  The court held that the lower court, on remand, could determine whether the plaintiff had an “adequate opportunity to file a timely motion for class certification” and, if so, could permit him to move for class certification.