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In a significant victory for class action plaintiffs’ lawyers, the 3rd U.S. Circuit Court of Appeals has granted a rehearing in Colbert v. Dymacol Inc. before a 12-judge en banc court, vacating a decision handed down in August that said defendants have the power to end certain class actions before they are ever certified by making a maximum offer to the lead plaintiff that effectively moots his case. Since the decision to grant en banc rehearing requires a majority vote, the court now appears poised to rule in favor of the plaintiffs. In the August decision, Senior 3rd Circuit Judge Max Rosenn found that a defense offer of judgment under Rule 68 that provides the maximum available relief to the named plaintiff effectively moots his claim and ends the case — so long as the plaintiff has not yet moved for class certification. “It is axiomatic that a litigation becomes moot and federal jurisdiction is lost when a dispute between the parties no longer exists or when a party loses a personal interest in the outcome of the litigation,” Rosenn wrote in an opinion joined by 3rd Circuit Judges Jane R. Roth and Marjorie O. Rendell. Rosenn’s decision reversed a pair of rulings by Senior U.S. District Judge Clarence C. Newcomer of the Eastern District of Pennsylvania that struck the defense offer of judgment and granted the plaintiff’s motion for class certification that was filed after the offer was made. In a brief urging the court to grant en banc rehearing, plaintiffs’ attorneys David A. Searles and Michael D. Donovan of Philadelphia’s Donovan Searles and James A. Francis of Francis & Mailman, also in Philadelphia, argued that Rosenn’s decision conflicted with existing 3rd Circuit law and Supreme Court precedent, and that it created a split among the federal circuits in which the 3rd Circuit would be alone, with four others weighing in against it. “The panel’s decision sets aside decades of Supreme Court class action jurisprudence by reaching out to deprive a class representative of his right to prove the requirements of Rule 23 have been met,” they wrote. “If left to stand, this unprecedented decision will result in the waste of judicial and litigants’ resources. … Worse, it encourages parties to engage in legal ‘gamesmanship’ because it compels a legitimate representative plaintiff to file a barebones, pre-discovery, pro forma motion for class certification along with the complaint, or risk having the class action forestalled by a defendant,” they wrote. The brief said Rosenn’s analysis failed to account for the Supreme Court’s “longstanding rule that commencing a class action suit confers legal status on absent class members.” Rosenn found that since the case had not yet been certified as a class action, and since no motion for class certification was even pending at the time of the Rule 68 offer to the named plaintiff, the other members of the proposed class had no legal standing. But the plaintiffs’ lawyers argued in their en banc brief that the suit was always proposed as a class action. “Because the case was filed as a class action and the complaint sought class certification, the interests of non-party class members, as well as the district court’s responsibilities to protect both the absent class and the integrity of the judicial process were implicated from the inception,” they wrote. In the suit, plaintiff Brent Colbert claimed that two debt collection companies — Dymacol and Intellirisk Management Corp. — had violated the Fair Debt Collection Practices Act by sending him a false and misleading “dunning letter” in July 2000 in an attempt to coerce payment of an alleged debt relating to a consumer purchase. The suit alleged that the letter was “false, deceptive, misleading and unfair” because the least sophisticated consumer would interpret it to mean that the consumer’s alleged delinquency had been reported to a major credit reporting bureau when in fact the “National Consumer Reporting Service” named in the letter is not a credit bureau but instead is merely a marketing company. The suit also alleged that the letter could deceive consumers who might interpret it to mean that the delinquency would be “removed” by a bona fide credit reporting agency and no longer reported when, in fact, bona fide credit reporting agencies may continue to report debt as delinquent for seven years, whether paid or not. Soon after the suit was filed, Dymacol’s lawyers made an offer of judgment to Colbert under Rule 68 for $1,100 — the maximum relief he could obtain by winning on the merits. Colbert’s lawyers responded by filing a motion for class certification and a motion to strike the Rule 68 offer. Newcomer sided with the plaintiff’s lawyers, saying, “Because Rule 68 would bypass court approval of settlement, plaintiff has filed this suit as a class action, and this court has not determined that plaintiff’s class action is improper. Rule 68 is not applicable here, and the court will strike defendants’ offer of judgment.” The defense team responded by asking the 3rd Circuit to hear an immediate appeal. Under Rule 23(f) — a relative new and so-far rarely used Federal Rule of Civil Procedure — the losing party in a class certification ruling can take an interlocutory appeal.

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