It's the Pitts for the Military: Interest Charges Get a Second Look

By Dyanna Quizon, Esq. on December 07, 2011 | Last updated on March 21, 2019

When dealing with the appeals process, you never know when new case law may throw a wrench, or a life preserver, into your case.

In Taylor Russell's class action complaint against the United States for interest charges on military credit accounts, a new decision turned into a life preserver.

Russell had opened a credit account with the Army and Air Force Exchange Service (the "Exchange") for the purchase of personal goods, but became delinquent on the balance in 2000. Accruing interest over the next nine years, Russell finally realized the government was charging him a higher interest rate than agreed upon in 2009 and sued.

The Exchange then conducted an audit and adjusted the accounts for approximately 46,000 individuals, including Russell, and refunds were issued. A second audit resulted in further adjustments for 103,000 more individuals. Issue settled, right? The government thought so and moved to dismiss his claim as moot. In the meantime, Russell moved to have his action certified as a class action lawsuit.

The district court sided with the government, finding the amount credited back to him sufficient to satisfy his individual claim. It dismissed his complaint and denied his motion for class certification without prejudice.

Russell appealed both court rulings.

Although the Federal Circuit Court of Appeals upheld the district court's ruling concerning his individual claim, the more difficult issue of his continuation as class representative posed an interesting dilemma. Since he, as the named plaintiff, no longer had a claim against the military, could the class action still continue?

Applying Ninth Circuit case law because of the procedural nature of the issue, the Court of Appeals discovered a precedential case that had arisen after the district court's dismissal order. Luckily for Russell, the Ninth Circuit held in Pitts vs. Terrible Herbst, Inc. that an unaccepted offer of judgment for the named plaintiff's individual claim does not moot the class action. This also applies if the offer is made before the named plaintiff files a motion for class certification and may even possibly apply if a "partial payment" is made.

As long as the offer fails to "satisfy the demands of the class," the named plaintiff may still continue to represent the class members. Further, since there was a subsequent audit and adjustments made to additional customers, it was unclear who constituted the class and if all of the appropriate members' claims were satisfied.

Due to the new decision and subsequent government adjustments, the dismissal order was vacated and the case remanded to the district court for reconsideration. A lucky break for Russell, but a wrench for the government.

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