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Is Cheating Moot if You’re Offered Chump Change?

Is Cheating Moot if You’re Offered Chump Change?

By Claire Prestel, Staff Attorney

It would be a pretty funny argument if companies weren’t using it to avoid being held accountable. Basically companies are saying, we’ll offer you $1 to stop complaining that we made $1 million by breaking the law. And just offering you the $1, without even giving it to you, means your beef with us is moot—or so they say. 

Let’s talk “moot.”  “Moot” is one of those legal words that sounds complicated but actually refers to a simple and important concept. The idea is that courts should only decide cases that involve real, ongoing disputes. Courts shouldn’t decide cases that the parties have already resolved because that would be a waste of everyone’s time and money.  And a case that has already been resolved is called moot.    

Here’s an example: If your friend borrows $100 from you and then pays you back on time and in full, you can’t sue her for the $100. If you tried to sue, your case would be dismissed as moot because you’ve already won and there’s nothing more a court can give you. 

Now imagine a very different set of facts—

You believe a huge insurance company violates the law in a way that harms you and thousands of others, and you file a class action to force the company to pay everyone damages and to get a court order prohibiting the company’s illegal conduct. The company wants to avoid paying all that money, and wants to continue operating as usual, so it offers to pay you a comparatively small amount, and to stop harming you personally, if only you’ll give up on the whole class-action case.  You say “no.” 

Do you think your case is moot? Is your dispute with the company over even though (unlike in the $100 loan example) the company hasn’t actually paid anything or stopped its illegal conduct, and even though the company never even offered to pay everything it owes or stop violating the law? Can you be forced out of court just because the company made you a bad settlement offer that you refused, as you had every right to do? 

Seems pretty clear that the answer to all those questions is no. And that’s what we’re arguing now in a case called Chen v. Allstate Insurance Co., which is pending in the Ninth Circuit Court of Appeals. Fortunately, the Ninth Circuit has already agreed with us in another case called Diaz v. First American Home Buyers Protection Corp., 732 F.3d 948 (9th Cir. 2013), and the only U.S. Supreme Court Justices to have addressed the issue agree with us as well.

Not that any of that has stopped companies (and the Chamber of Commerce, on their behalf) from arguing mootness in this kind of case. And you can probably guess why. 

If the mootness-by-unaccepted-offer theory pevails, a company will be able to cheat millions of consumers in a way that’s hard to figure out, and then avoid any real scrutiny by paying the few consumers who figure it out a couple hundred dollars. Even worse—the company may be able to avoid scrutiny merely by offering the couple hundred dollars without actually paying it, on the theory that once the offer is made, the case is moot even if the consumer turns the offer down. 

That’s not a joke; that’s really what many companies argue. And that’s a mootness theory worth a lot of money.

So, long story short, cases like Chen v. Allstate are another example of legal arguments that sound complicated and opaque but lead to a result that’s pretty easy to understand—shielding illegal corporate conduct and preventing consumers from getting the money they’re owed.