Second Circuit Nixes Attempt to “Pick Off” Lead Plaintiff

Earlier this month in the TCPA litigation matter of Lary v. Rexall Sundown, Inc., the Second Circuit Court of Appeals rejected attempts to “pick off” the lead plaintiff, intended to effectively moot class action litigation.

The matter involves a nutritional supplement maker and the marketing company that allegedly sent an unauthorized fax on its behalf.

In 2015, a New York federal judge dismissed the TCPA claim following an offer to pay the maximum amount of statutory damages possible under the TCPA, which U.S. District Judge Sandra F. Feuerstein concluded was sufficient to end the dispute before class certification.

In reversing the lower court ruling, the Second Circuit held that “the District Court’s dismissal was based on an error of law since Lary’s claim was not mooted by [the] offer of judgment. Accordingly, judgment should not have been entered in his favor.”

The Second Circuit pointed out that in the time since the appeal had been filed, the U.S. Supreme Court had issued its Campbell-Ewald Co. v. Gomez ruling that held that companies cannot avoid class action claims by tendering an offer of full relief to individual plaintiffs that they decline to accept.

The case has been revived and sent back to the district court.

Key takeaway: The body of legal precedent holding that class-action litigation cannot be mooted by making an offer of full relief to the lead plaintiff continues to grow. In reviving the matter, the Second Circuit rejected the defense argument that a proposed class action can be mooted by directly depositing the full claim amount into an account payable to the plaintiff.

Contact an FTC Defense Lawyer to discuss the design and implementation of preventative marketing strategies, or if your company is the subject of a regulatory investigation.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.


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