When a class action is filed, defendants often wonder whether tendering a payment to a class representative can defeat the claims.  In a recent decision, the Third Circuit held that a mid-litigation payment to a class representative plaintiff does not moot her claim if the check is not cashed.  Duncan v. Governor of the Virgin Islands, — F.4th —-, 2022 WL 3906213 (3d Cir. Aug. 31, 2022).  But tendering the payment, even if the check is uncashed and even if the plaintiff claims the payment does not cover the full value of her claim, did make the plaintiff an atypical class representative and provided a basis to defeat certification of a damages class.

            The lead plaintiff alleged that she was owed a $7,104 tax refund from the U.S. Virgin Islands government for her 2016 tax return.  She sought to represent a putative class consisting of all the Territory’s residents who qualified for but had not yet received a tax refund from the Territory’s government.  During litigation but before class certification, the government sent the plaintiff a check for $2,474, which it contended was the proper amount of her refund.  She declined to cash the check.  Then, following close of discovery, the district court denied class certification on grounds that by virtue of receiving the refund check the plaintiff’s claim was no longer typical of the class she sought to represent.

            On appeal, the Third Circuit held that the post-litigation refund did not moot the plaintiff’s claims.  The court began with the doctrine of mootness, holding that just as settlement offers “cannot moot a case when they are not accepted,” the government’s sending of a check to the plaintiff cannot moot the case unless she accepts—cashes—it.  Because she did not, her claims could not be moot.  But even if they were, the court would apply the “picking-off exception,” which “allows a plaintiff to continue representing a class, notwithstanding otherwise mooted claims” where it appears that the defendant had picked off the named plaintiff with the intention of mooting her claims.  That, the Third Circuit held, is exactly what happened in Duncan.

            Then the court addressed the district court’s class certification ruling, ultimately agreeing that the post-litigation refund offer made the plaintiff’s damages claims no longer typical of those in her class.  The Third Circuit’s decision turned on the fact that the plaintiff’s check was for less than the amount the plaintiff believed she was owed, meaning the plaintiff would need to “‘devote time and effort’ to facts unique to her claim”—whether the government had sent her the correct amount of money.  This finding defeated typicality for the plaintiff’s damages claim.

            The post-litigation refund check, however, did not prevent class certification on the plaintiff’s claims for injunctive, mandamus, and declaratory relief.  Instead, “the central point with respect to the claims for mandamus, declaratory relief, and injunctive relief is the question of systemic, arbitrary, and indefinite withholding of refunds, which is ‘essentially the same’ for every class member, regardless of whether he or she is the lucky recipient of a long-delayed refund check.”

            Notably, a single dissenting judge would have gone farther.  Judge Matey would have found all her claims atypical, including those for injunctive, mandamus, and declaratory relief because the plaintiff’s receipt of a refund check “is reason enough to ‘motivate [her] to litigate against or settle with the defendants in a way that prejudices the absentees.’”  The majority of the panel disagreed, and permitted the plaintiff to seek class certification on her non-monetary claims.