Offer of Judgment Coupled with Deposit of Funds Does not Moot Claims

A district court in Illinois has slammed the door on an attempt to moot a class action by coupling an offer of judgment with a motion under Rule 67 to deposit funds with the court.  In Wendell H. Stone Co. v. Metal Partners Rebar, LLC, the plaintiff filed a putative class action seeking damages for violations of the Junk Fax Prevention Act.  Wendell H. Stone Co. v. Metal Partners Rebar, LLC, 2016 U.S. Dist. LEXIS 167574 (N.D. Ill. Dec. 5, 2016). Before the plaintiff could file its motion to certify the class, the defendant moved to deposit funds with the court which defendant claimed would fully satisfy the named plaintiff’s individual claims and requested the court enter judgment in favor of the plaintiff.  On the same day, the defendant made an offer of judgment in the same amount plus accrued costs.  The issue before the court was whether the defendant’s deposit of funds could render moot both the individual claims and the plaintiff’s attempt to pursue a class action. 

The case comes on the heels of the Supreme Court’s ruling this year in Campbell-Ewald v. Gomez, __ U.S. __, 136 S.Ct. 663 (2016).  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). 

A glimmer of hope, however, arose for defendants in the dissenting opinions of Chief Justice Roberts and Justice Alito. 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.

The defendant in Stone attempted to do as Justice Alito suggested; however, the district court gave little credence to Alito's dissent.  Instead, the court held that the defendant cannot render moot either the plaintiff’s individual or class claims by its motion to deposit funds. In doing so, the court relied upon Supreme Court's majority opinion in in Campbell-Ewald as well as existing Seventh Circuit authority. "If submitting an offer immediately rendered a case moot, the court would have no authority to enter a decree, enforce the offer or ensure that the plaintiff receives the relief provided for in the offer.  Therefore a plaintiff's claim cannot be rendered moot- based on the premise that he has received full relief- before the Court actually exercises its authority to grant the relief." Stone at * 8-9. "The court concluded, therefore that the only time plaintiff's claims could become moot would be after the defendant has made the deposit and the court has entered judgment in plaintiff's favor. 

The court continued by noting that it would not render judgment in favor of the plaintiff because doing so would undermine the purposes of the class action device.  Additionally, the court noted that doing so would circumvent the purpose of Rule 68 which authorizes offers not deposits. 

Finally, the court noted that even if the deposit of funds could render a plaintiff’s claim moot, the offer in this case would not have that effect because the parties disputed whether or not the offer would make the plaintiff whole.  Because the court could not determine whether the offer would provide complete relief on the individual claim, the deposit would not render either the individual of class claims moot.

Defendants contemplating using Rule 67 as a vehicle to moot class actions should take note that, in this case, while the court denied the request that judgment be entered, it  did grant the defendant's motion to deposit funds.  Defendants therefore should be aware therefore of the risk that the court may grant the Rule 67 motion to deposit funds while denying the remainder of the relief sought.

 

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.