District Court Shuts the “Back Door” on Offers of Judgment

A district court in Minnesota has shut the “back door” on a collection agency who attempted to moot a putative class action by tendering the maximum amount of damages sought to the plaintiff.  In Ung v. Universal Acceptance Corp., C.A. No. 15-127, 2016 U.S. Dist. LEXIS 72861 (D. Minn. June 3, 2016), prior to the plaintiff’s motion to certify class, the defendant tendered to the named plaintiff a check for the maximum amount of statutory TCPA damages sought on plaintiff’s individual claim, along with a letter offering to stipulate to an awards of costs and an injunction prohibiting further calls to the plaintiff’s cell phone.  When the check was returned and the offer rejected, the collection agency moved for judgment asserting that the action was mooted, relying upon the Supreme Court’s decision earlier this year in Campbell-Ewald v. Gomez.

 When the Supreme Court issued its decision in Campbell-Ewald v. Gomez earlier this year regarding offers of judgment, a glimmer of hope arose for defendants in the dissenting opinions of Chief Justice Roberts and Justice Alito.  In Campbell-Ewald, the Supreme Court held that a Rule 68 offer of full statutory relief does not moot a class action.  See Campbell-Ewald v. Gomez, __ U.S. __, 136 S. Ct. 663 (2016).  In Campbell, the majority held that a case becomes moot only “when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Id., 136 S. Ct. at 670.  The court continued its rationale by noting that since the defendant’s offer lapsed without acceptance, they retained the same stake in the litigation they had at the outset. In other words, “[a]n unaccepted settlement offer-like any unaccepted contract offer – is a legal nullity, with no operative effect.” Genesis Healthcare Corp. v. Symczyk, __ U.S. __, 133 S. Ct. 1523, 1534 (2013) (Kagan, J., dissenting). 

In the dissenting opinions of Justice Roberts and Justice Alito, however, hope was not lost.  Both noted that the majority in Campbell-Ewald did not say that payment of complete relief would lead to the same conclusion.  In fact, Justice Alito’s dissent went so far as to suggest that a defendant could moot a case by paying over the money sought by plaintiff either by handing them a certified check or by depositing the funds in an account in plaintiff’s name or with the court. Campbell-Ewald, 136 S.Ct. 663, 684.  

In what was termed by the Minnesota district court as defendant’s attempt “to shoehorn its case through Campbell-Ewald’s back door, the defendant moved to dismiss the action arguing that by tendering complete relief rather than merely offering it, the case was moot.  The court disagreed and denied the motion.  “[I]n this court’s view, there is no principled difference between a plaintiff rejecting a tender of payment and on offer of payment…Indeed, other than their labels, the two do not differ in any appreciable way once rejected: in either case, the plaintiff ends up in the exact same place he occupied before his rejection.”  Ung at *13-14.  Moreover, the court was also persuaded by the fact that the defendant’s offer required further action by the court- the entry of the stipulated injunction and the court remained troubled by the fact that mooting the case would preclude the court from entering the injunction.  The court also was disturbed by the fundamental fact that mooting the entire action based upon the individual claim being mooted would cause a fundamental failure of the class action device, noting that for the class action device to work, the court must have a reasonable opportunity to consider and decide the motion for certification.  As stated by the court, “[a]ccepting Universal’s argument would place control of a putative class action in the defendant’s hands…The law does not countenance the use of individual offers to thwart class litigation.” Ung at *21.