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One of the hottest cases on the docket at the 3rd U.S. Circuit Court of Appeals has suddenly chilled off as the judges voted last week simply to dismiss the appeal just a few weeks after sitting through more than an hour of oral arguments before a 13-judge en banc court. The case, Colbert v. Dymacol Inc., sent a shockwave through the plaintiffs’ bar when a three-judge panel decided in August that 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 the case. But plaintiffs breathed a sigh of relief in October when the full court vacated the opinion and granted rehearing before the full court. (Since the decision to grant en banc rehearing requires a majority vote, it is often read as a sign that the court is poised to reject the views of the original three-judge panel.) At the oral argument on Feb. 19, court watchers said that it seemed the court was leaning in favor of plaintiffs’ attorney David A. Searles of Philadelphia’s Donovan Searles, while only a few judges seemed to be favoring defense attorney Robert W. Hayes of Philadelphia-based Cozen O’Connor. Ordinarily, lawyers expect to wait a few months for an appellate court’s opinion, especially from an en banc court. But the decision in Colbert was especially swift in coming since the court opted not to write any opinion. Instead, the judges decided that the appeal should never have been heard in the first place. With a one-page order, the court announced that “this appeal is dismissed as improvidently granted.” Although the court issued only a single paragraph of explanation, it includes significant hints at the judges’ thinking. The appeal was filed by Dymacol under Rule 23(f) of the Federal Rules of Civil Procedure, a relatively new rule that allows for permissive appeals from orders that grant or deny a motion to certify a class action. 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. 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. Senior U.S. District Judge Clarence C. Newcomer of the Eastern District of Pennsylvania 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.” But in the first round of litigation before the 3rd Circuit, Dymacol had emerged as the winner. 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. In a brief urging the court to grant en banc rehearing, the plaintiffs’ attorneys 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,” the plaintiffs’ team 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. Now the 3rd Circuit has ruled that the appeal never should have been granted. In a one-paragraph order, the court explained that Dymacol’s original petition had inaccurately stated the “question presented.” Dymacol stated in its brief that its Rule 68 offer had mooted the case by providing the lone plaintiff with the maximum relief available under the law. The 3rd Circuit disagreed, saying Dymacol’s presentation of the question was “inaccurate” because the plaintiff “had not received all relief requested in his complaint.” In doing so, the court seemed to adopt one of the key themes in the plaintiffs’ argument — that a lead plaintiff in a proposed class action is seeking to vindicate not only his own rights, but the rights of the entire class. Although a one-page order dismissing an appeal would not ordinarily be viewed as law-making, the Colbert order is likely to be cited by plaintiffs’ lawyers as a strong indication that the 3rd Circuit takes a dim view of using Rule 68 offers of judgment to moot a lead plaintiff’s claim before a case becomes a class action.

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