## Facts

- A public tender-offer contest occurred in 1977 for control of Babcock & Wilcox Co. (B&W), involving J. Ray McDermott & Co., Inc. and a competing bidder.
- Fred Zeidman and Steven Youngelson, individual investors, sold B&W stock and call options before McDermott ultimately offered a materially higher tender price.
- The investors alleged that McDermott, its investment banker, and certain officers disseminated false and misleading information to depress B&W’s market price, inducing sales at reduced prices, in violation of federal securities laws.
- The investors filed a putative Rule 23 class action for non-professional, non-institutional investors who sold B&W securities during specified periods.
- Plaintiffs moved for class certification and initially relied on aggregate trading statistics that did not separate professional/institutional traders from the proposed class.
- The district court found other Rule 23 prerequisites satisfied but held numerosity inadequately supported on the then-existing record; it kept the certification motion pending and invited further evidence on numerosity.
- Plaintiffs promptly submitted additional numerosity evidence; on the same day, defendants tendered full payment of the named plaintiffs’ individual claims.
- Without addressing the supplemental numerosity evidence, the district court dismissed the entire action as moot because no class had been certified and the named plaintiffs had been offered complete relief.

## Issues

1. Whether the district court abused its discretion by declining to find Rule 23(a)(1) numerosity satisfied on the initial evidentiary record.
2. Whether a putative class action becomes moot when defendants tender full relief to the named plaintiffs while a timely filed and diligently pursued motion for class certification remains pending.

## Decision

- The Fifth Circuit held the district court did not abuse its discretion in declining, on the original record, to find numerosity satisfied, where the court kept the certification motion pending and invited additional proof.
- The Fifth Circuit reversed the mootness dismissal, holding the case was not moot merely because defendants tendered full relief to the named plaintiffs while class certification was pending and being diligently pursued.
- The court remanded for the district court to consider the supplemental numerosity evidence and rule on class certification, and for further proceedings on the merits as appropriate.

## Legal Principles

- When a timely and diligently pursued motion for class certification is pending, defendants cannot moot a putative class action solely by tendering complete relief to the named plaintiffs before the certification question is decided.
- A district court that has left class certification unresolved must address class certification (including additional evidence it invited) rather than dismissing for mootness based only on a tender to the named plaintiffs.
- Aggregate market trading data may be insufficient to prove numerosity for a class defined to exclude professional and institutional traders if the data does not reasonably estimate the number of class members.
- Mootness doctrine in the class-action context permits continuation of the certification dispute where mooting of individual claims occurs before a reasonable opportunity for the court to rule on certification, and the plaintiffs’ pursuit of certification has been diligent.

## Conclusion

The Fifth Circuit permitted the putative class action to proceed despite a tender of full relief to the named plaintiffs because class certification had been timely sought and remained pending; it required the district court to evaluate the additional numerosity evidence and decide certification rather than dismissing the action as moot.


Zeidman v. J. Ray McDermott & Co., 651 F.2d 1030 (5th Cir. 1981)