Russell v. United States

United States Court of Appeals
for the Federal Circuit
__________________________

TAYLOR RUSSELL, ON BEHALF OF HIMSELF AND ALL
OTHERS SIMILARLY SITUATED,
Plaintiff-Appellant,

v.
UNITED STATES,
Defendant-Appellee.
__________________________

2010-1498
__________________________

Appeal from the United States District Court for the
Northern District of California in Case No. 09-CV-3239,
Judge William H. Alsup.
__________________________

TAYLOR RUSSELL, ON BEHALF OF HIMSELF AND ALL
OTHERS SIMILARLY SITUATED,
Plaintiff-Appellant,

v.
UNITED STATES,
Defendant-Appellee.
__________________________

2011-1230
__________________________
RUSSELL v. US 2

Appeal from the United States District Court for the
Northern District of California in Case No. 09-CV-3239,
Judge William H. Alsup.
___________________________

Decided: December 1, 2011
___________________________

S. CHANDLER VISHER, Law Office of S. Chandler
Visher, of San Francisco, California, argued for plaintiff-
appellant. Of counsel on the brief was MARIE NOEL
APPEL, Consumer Law Office of Marie Noel Appel, of San
Francisco, California.

ALICIA M. HUNT, Trial Attorney, Commercial Litiga-
tion Branch, Civil Division, United States Department of
Justice, of Washington, DC, argued for defendant-
appellee. With her on the brief were TONY WEST, Assis-
tant Attorney General, J. CHRISTOPHER KOHN, Director,
RUTH A. HARVEY, Assistant Director, and MICHAEL J.
QUINN, Trial Attorney.
__________________________

Before LOURIE, BRYSON, and REYNA, Circuit Judges.
BRYSON, Circuit Judge.

Taylor Russell filed a class action complaint against
the United States seeking relief for himself and a class of
similarly situated persons regarding interest charges that
the government had assessed against him and the other
putative class members on military credit accounts. Prior
to ruling on Mr. Russell’s motion for class certification,
the district court dismissed his individual action as moot
on the ground that the government, by issuing a payment
to Mr. Russell during the pendency of the lawsuit, had
3 RUSSELL v. US

satisfied his individual claim. Mr. Russell argues on
various grounds that the district court erred by dismiss-
ing his claim. We vacate the district court’s order dis-
missing the case and remand for further consideration
consistent with this opinion.

I

The Army and Air Force Exchange Service (“the Ex-
change”), an instrumentality of the United States, issues
credit cards to military personnel to purchase uniforms
and other merchandise from post-exchange stores on U.S.
military bases. During the period relevant to this case,
the credit-card plan under the Exchange’s credit program
agreement offered two types of purchases: the Uniform
Clothing Deferred Payment Plan (“UCDPP”) for uniforms
and the Deferred Payment Plan (“DPP”) for other goods.
UCDPP balances were not subject to finance charges,
while DPP balances were.

Mr. Russell opened a credit account with the Ex-
change in 1997. His agreement with the Exchange pro-
vided for a variable interest rate of bank prime rate plus
4.75%, with a minimum rate of 12%. In 2000, Mr. Russell
became delinquent on the balance of his DPP account. He
incurred finance charges associated with that delinquent
balance until February 2009.

In July 2009, Mr. Russell filed this action against the
government alleging that the Exchange had breached its
credit agreement with him and others by charging a rate
of interest on delinquent debt that exceeded the rate
specified by the credit agreements. 1 After the action was

1 The complaint alleged that improper interest was
charged on both UCDPP and DPP balances. The UCDPP
RUSSELL v. US 4

filed, the Exchange conducted an audit and subsequently
adjusted the DPP accounts of 46,851 individuals. Mr.
Russell’s account was among those audited and adjusted.
The audit revealed that refunds were due to approxi-
mately 33,902 customers who had DPP accounts, includ-
ing Mr. Russell.

In May 2010, the Exchange conducted a second audit
that was designed to identify the interest overcharges on
a large number of additional accounts. That audit re-
sulted in adjustments to the DPP accounts of an addi-
tional 103,320 individuals, of whom 69,198 received
refunds.

Meanwhile, on February 11, 2010, the Exchange sent
Mr. Russell a refund check in the amount of $149.78
through his litigation counsel. That amount exceeded the
$133.66 that Mr. Russell, in his interrogatory responses,
had asserted was due to him in connection with his DPP
claim. Shortly after sending the check to Mr. Russell, the
government moved to dismiss his pending claim as moot.
While that motion was pending, Mr. Russell moved to
have his action certified as a class action. The district
court subsequently dismissed Mr. Russell’s individual
action as moot. It then denied his motion for class certifi-
cation without prejudice, noting the possibility that a
plaintiff whose account had not been adjusted could
intervene and assume the role of lead plaintiff and poten-
tial class representative. The court also noted that Mr.
Russell’s claim for attorney’s fees “remain[ed] alive.” On
June 22, 2010, because no appropriate plaintiff had
intervened in the action and because no motion for attor-

claim was dismissed as moot in November 2009. Mr.
Russell does not challenge that dismissal on appeal.
5 RUSSELL v. US

ney’s fees had been filed, the district court entered final
judgment of dismissal.

Mr. Russell then filed an appeal to this court (No.
2010-1498), challenging the dismissal of his action.
Subsequently, Mr. Russell filed a motion in the district
court pursuant to Fed. R. Civ. P. 60(b). In his motion, he
sought relief from the judgment based on his asserted
discovery that the Exchange’s refund check of $149.78
was insufficient to fully compensate him for the loss
attributable to the erroneous calculation of the interest
due on his DPP account balance. The district court de-
nied that motion. Mr. Russell then took an appeal to this
court (No. 2011-1230) from that order. We have consoli-
dated the two appeals for decision.

II

With respect to the dismissal order, Mr. Russell ar-
gues that the government’s proffer of $149.78 did not
warrant dismissal of his action for several reasons. First,
he contends that the proffer was not sufficient to provide
full satisfaction of even his own claim, particularly as it
provided no compensation for attorney’s fees and costs.
Second, he contends that it was improper for the court to
hold that his individual action was mooted while his
motion to certify the class was pending.

A

With respect to his individual claim, Mr. Russell con-
tends that the $149.78 refund on his underlying claim
was $30.71 too low. In addition, Mr. Russell argues that
in order to fully compensate him on his individual claim,
the government should have reimbursed him for the $350
filing fee that he paid to file this action, the $228 cost of
RUSSELL v. US 6

the transcript of his deposition, the $88.50 cost of service
of process, an expert fee of $1265, and other costs totaling
approximately $5000. Finally, he argues that the gov-
ernment’s proffer was inadequate to moot his individual
case because it did not compensate him for his attorney’s
fees to which he claims he would have been entitled if he
had prevailed at trial.

We find no error in the district court’s determination,
based on the record before it at the time, that the gov-
ernment’s proffer of $149.78 was sufficient to moot his
individual claim for relief. That amount was more than
Mr. Russell claimed, in his interrogatory responses, that
he was owed. While he later claimed, months after the
case had been dismissed, that the $149.78 payment was
less than he was actually due on his claim, he cannot rely
on that belated assertion to challenge the district court’s
dismissal order unless there is merit to his Rule 60 mo-
tion for relief from the judgment, a point that we address
below.

We also reject Mr. Russell’s argument that his indi-
vidual claim was not moot because the government failed
to compensate him for various expenses, including court
costs, litigation expenses, and attorney’s fees. The law is
clear that when a court seeks to determine whether a
plaintiff’s claim is moot because the claim has been satis-
fied, the proper focus is on whether the plaintiff’s princi-
pal claim has been resolved, not on whether ancillary
expenses, such as court costs, sunk litigation costs, and
attorney’s fees, have been paid or have accrued. As the
Supreme Court explained in Lewis v. Continental Bank
Corp., 494 U.S. 472, 480 (1990):

Th[e] interest in attorney’s fees is, of course, in-
sufficient to create an Article III case or contro-
7 RUSSELL v. US

versy where none exists on the merits of the un-
derlying claim . . . . Where on the face of the re-
cord it appears that the only concrete interest in
the controversy has terminated, reasonable cau-
tion is needed to be sure that mooted litigation is
not pressed forward, and unnecessary judicial pro-
nouncements on even constitutional issues ob-
tained, solely in order to obtain reimbursement of
sunk costs.

See also Diamond v. Charles, 476 U.S. 54, 70-71 (1986)
(“[T]he mere fact that continued adjudication would
provide a remedy for an injury that is only a byproduct of
the suit itself does not mean that the injury is cognizable
under Art. III.”); United States v. Anchor Coal Co., 279
U.S. 812, 813 (1929) (proper disposition of a case that has
become moot is “to dismiss the bill of complaint without
costs, because the controversy involved has become moot
and, therefore, is no longer a subject appropriate for
judicial action”).

Moreover, there is a separate problem with Mr. Rus-
sell’s assertion that he is entitled to attorney’s fees based
on the government’s tender of the full amount of his
claim. The only source that he cites for his claim of
entitlement to attorney’s fees is the Equal Access to
Justice Act (“EAJA”), 28 U.S.C. § 2412(d). Fees may be
awarded under that statute only to a “prevailing party,”
however. As the Supreme Court has made clear, a party
is not a “prevailing party” under a fee statute such as
EAJA if the action at issue is terminated without the
issuance of a judicial order granting the relief sought. See
Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of
Health & Human Res., 532 U.S. 598, 603 (2001); see also
Brickwood Contractors, Inc. v. United States, 288 F.3d
1371, 1377 (Fed. Cir. 2002) (analysis of “prevailing party”
RUSSELL v. US 8

in Buckhannon applies to EAJA cases). Accordingly, we
agree with the district court that Mr. Russell’s individual
claim was fully satisfied after the government made a
payment to him in the amount of $149.78, which was
more than he had claimed was due to him. Mr. Russell
attaches some significance to the fact that although his
counsel had received the government’s check, Mr. Russell
had not cashed it. But it is undisputed that the govern-
ment had tendered a check in that amount to Mr. Russell
through his agent; the fact that Mr. Russell may have
chosen not to “accept” that payment by cashing the check
is not sufficient to prevent his individual claim from
becoming moot. See Holstein v. City of Chicago, 29 F.3d
1145, 1147 (7th Cir. 1994) (a plaintiff “may not spurn [an]
offer of all the damages he is owed and proceed to trial”).

B

The more difficult question is whether, despite the
satisfaction of Mr. Russell’s individual claim, the claim for
classwide relief in his complaint, together with the pend-
ency of his motion for class certification at the time of the
district court’s dismissal order, were sufficient to require
the district court to adjudicate the rights of the putative
class members. The question regarding whether and
under what circumstances Mr. Russell can continue to
represent putative class members even after his personal
claim has become moot is a procedural question that is
not unique to cases arising under the Little Tucker Act,
28 U.S.C. § 1346(a)(2). We therefore apply the law of the
regional circuit—in this case the Ninth Circuit—to that
question. See Chattler v. United States, 632 F.3d 1324,
1327 (Fed. Cir. 2011) (applying the law of the regional
circuit to various procedural issues arising from a claim
brought under 28 U.S.C. § 1346(a)(2)).
9 RUSSELL v. US

Mr. Russell argues that the government should not be
able to “pick off” class representatives in a putative class
action by offering individual relief to the class members
rather than relief to the entire putative class. Accord-
ingly, he contends that an offer of relief to a class repre-
sentative should not result in the dismissal of the
putative class action. In this regard, he submits that it
does not matter whether class certification has been
granted by the time of the offer to the class representa-
tive. If class certification has not been granted at that
time, the act of certification should relate back to the
filing of the class action complaint, and in such a case
mootness with respect to an individual claim for relief
should not result in dismissal of the class complaint.

At the time of the district court’s dismissal order,
there was no clear Ninth Circuit precedent regarding the
proper disposition of a case in which an offer of settlement
is made to a putative class representative that fully
satisfies his individual claim before he files a motion for
class certification. Quoting Zeidman v. McDermott & Co.,
651 F.2d 1030, 1045 (5th Cir. 1981), the district court
noted that other courts have held that when a putative
class representative has filed a motion for class certifica-
tion and has diligently pursued it, “the defendants should
not be allowed to prevent consideration of that motion by
tendering to the named plaintiffs their personal claims
before the district court reasonably can be expected to
rule on the issue.” The district court distinguished that
line of authority, however, on two grounds: first, that Mr.
Russell had not filed his motion for class certification at
the time the defendant tendered the check to Mr. Russell
and filed its motion to dismiss; and second, that the
government was not seeking to pay the individual claim of
Mr. Russell simply in order to “pick off” the class repre-
sentative, but instead had adjusted a total of 46,851
RUSSELL v. US 10

accounts “and intends to issue subsequent refunds for
approximately 33,902 customers.” 2

While the district court’s analysis was not at odds
with Ninth Circuit law at the time, a subsequent Ninth
Circuit decision has called the court’s analysis into ques-
tion, at least in part. In Pitts v. Terrible Herbst, Inc., 653
F.3d 1081 (9th Cir. 2011), the Ninth Circuit held that in a
putative class action, an unaccepted offer of judgment for
the full amount of the named plaintiff’s individual claim
does not moot the class action even if the offer is made
before the named plaintiff files a motion for class certifi-
cation. That case disposes of one of the two grounds on
which the district court relied in its dismissal order to
distinguish prior cases—that the offer to the named
plaintiff was made prior to the filing of the motion for
class certification. The other ground of distinction—that
the government expressed its intention to make refund
payments to 33,901 other customers in addition to Mr.
Russell—is also questionable in light of Pitts and in light
of the facts available to the district court at the time the
case was dismissed.

In particular, it is unclear whether the 46,851 cus-
tomers whose accounts had been adjusted in February
2010 by the time of the government’s motion to dismiss
constituted all of the putative class members, or whether
the May 2010 audit and adjustment of the additional
103,320 accounts covered the entire class. The govern-
ment now contends that the May 2010 audit and adjust-
ments are irrelevant to the question whether full relief

2 It appears that but for an agreement by the gov-
ernment, at Mr. Russell’s behest, to delay payment of the
refunds until the motions to certify and dismiss were
resolved, the rest of the 33,902 refunds likely would have
been paid several weeks before the case was dismissed.
11 RUSSELL v. US

has been granted to the prospective class, because in the
government’s view the previous audit and adjustments in
February 2010 satisfied the demands of the entire class,
as defined by paragraph 48 of Mr. Russell’s complaint.
That paragraph appears to limit the class to only those
individuals who were charged an interest rate “between
12% and prime plus 4.75% per annum.” But it is unclear
that paragraph 48 actually defines the class that Mr.
Russell sought to represent, because paragraph 37 of his
complaint appears to define the class in a way that does
not limit membership based on interest rate. In light of
the ambiguity of the complaint on that point, it is unclear
whether the February 2010 adjustment, alone or in
combination with the May 2010 adjustment, satisfied the
claims of all class members.

Although the Ninth Circuit’s decision in Pitts did not
address the question whether payment to the named
plaintiff as well as some, but not all, of the other putative
class members would be sufficient to moot an action such
as this one prior to class certification, the court’s analysis
in Pitts appears to indicate that such a “partial payment”
would not render the action moot. The court in Pitts ruled
that even after receiving a tender of judgment, the named
plaintiff may continue to represent the class for purposes
of class certification. If the class is then certified, the
court held, the case may continue “despite full satisfaction
of the named plaintiff’s individual claim because an offer
of judgment to the named plaintiff fails to satisfy the
demands of the class.” Pitts, 653 F.3d at 1092. And if the
district court denies class certification, the named plain-
tiff “may still pursue a limited appeal of the class certifi-
cation issue.” Id. The rationale underlying that line of
analysis is that the named plaintiff may continue to
represent the putative class members for class certifica-
tion purposes despite an offer of judgment that would
RUSSELL v. US 12

satisfy the named plaintiff’s individual claims. That
rationale would appear to apply equally whether the
defendant had offered payment of the claims of only a few
of the class members or many of them, as long as the offer
failed “to satisfy the demands of the class.” Id.

In light of the Ninth Circuit’s intervening decision in
Pitts and in light of the post-dismissal adjustment of the
103,320 additional DPP accounts, resulting in an addi-
tional 69,198 refunds, we conclude that the dismissal
order should be remanded to the district court for further
consideration. The further audit and the additional
refunds raise the question whether and to what extent
the entire prospective class that Mr. Russell seeks to
represent has now been granted the relief, through volun-
tary action by the government, that his lawsuit was
designed to obtain. Further development of these facts
will no doubt help determine if the case, even if not moot
at the time of the district court’s original dismissal order,
is now moot.

III

We now turn to appeal No. 2011-1230, the appeal
from the denial of Mr. Russell’s post-judgment motion for
relief from the judgment under Rule 60(b)(2). In his
motion, Mr. Russell claimed that he discovered, months
after the entry of judgment in the case, that the amount
proffered to him by the government, $149.78, was $30.71
less than he should have been given in the refund of the
interest overcharges on his DPP account. He argued that
the information in question was not available to him
earlier, because he had to obtain the assistance of an
expert in order to calculate exactly how much was owed to
him. The district court denied the Rule 60(b) motion on
the ground that Mr. Russell had failed to show that he
13 RUSSELL v. US

could not have discovered the alleged new evidence earlier
through the exercise of due diligence. In particular, the
district court ruled that Mr. Russell did not provide “any
persuasive reason why [the expert’s] new analysis could
not have been performed in a timely manner if [Mr.
Russell] had exercised due diligence on this issue.”

The district court plainly did not abuse its discretion
in determining that Mr. Russell failed to satisfy the
exacting standard for showing that the evidence in ques-
tion was new evidence that could not have been discov-
ered earlier in the exercise of due diligence. See Jones v.
Aero/Chem Corp., 921 F.2d 875, 878 (9th Cir. 1990).
Critically, Mr. Russell waited for months after he was
provided his refund before requesting that his accounting
expert review the calculations relating to the refund.
Under those circumstances, the delay in obtaining the
revised information about the amount of his claim is
fairly attributable to Mr. Russell and does not give rise to
a valid claim of newly discovered evidence that could not
have been discovered earlier with the exercise of due
diligence. See Coastal Transfer Co. v. Toyota Motor Sales,
U.S.A., 833 F.2d 208, 212 (9th Cir. 1987). We therefore
sustain the district court’s denial of the Rule 60(b) motion
for relief from the judgment.

IV

In sum, while we uphold the district court’s rulings in
several respects, we vacate the court’s dismissal order
and remand the case for further factual development and
reconsideration in light of Pitts and in light of the gov-
ernment’s further adjustments of the DPP accounts.

Each party shall bear its own costs for this appeal.
RUSSELL v. US 14

VACATED AND REMANDED