Eighth Circuit Halts Defendant’s Attempt To Avoid Class Action Via Offer Of Judgment Made To The Class Representative

On December 4, 2013, the United States District Court for the Eastern District of Missouri denied defendant Medicredit, Inc.’s motion to dismiss the plaintiff’s claim in the case March v. Medicredit, Inc. The plaintiff – John March – originally filed a class action lawsuit against Medicredit alleging violations of the federal Fair Debt Collections Practices Act (FDCPA).

The FDCPA provides a number of protections to consumers against abusive debt collection practices. In this case, Medicredit offered plaintiff March an offer of judgment of $2,000 plus costs and attorney’s fees. The $2,000 offer was double the maximum amount of recovery allowed under the FDCPA. Conveniently, plaintiff March was the lead plaintiff in a pending class action lawsuit against Medicredit stemming from alleged violations of the FDCPA. Plaintiff March rejected the $2,000 offer, contending Medicredit’s offer was an attempt to “pick off” the lead plaintiff or induce him to abandon the class action lawsuit. Accordingly, plaintiff March moved the court to strike Medicredit’s offer of judgment. Medicredit contended its offer of judgment rendered moot plaintiff March’s pending class action because he no longer had a personal stake in the action. As such, Medicredit moved the court to dismiss plaintiff March’s claim.

Similar situations have arisen in the context of collective actions under the federal Fair Labor Standards Act. But the precise issue in this case was a novel one in the Eighth Circuit. In considering the issue and applicable law, the court properly denied Medicredit’s motion to dismiss. Presumably, the court’s rationale lies in the fact that defendants should not be able to use offers of judgment abusively to thwart class action lawsuits. To be sure, offers of judgment are not categorically invalid. In fact, the practice is generally permitted by federal rules of civil procedure. But the court noted that such an offer (made before the class is certified) creates a substantial conflict of interest for the lead plaintiff. That is, the lead plaintiff faced with an offer of judgment must decide whether to accept the offer in satisfaction of their personal loss, or reject to the offer and continue to represent class members as a whole.

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