April 9, 2017
Originally appeared in the newsletter of the Commercial & Business Litigation Section of the American Bar Association
The Supreme Court last year held in Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663 (2016) that an unaccepted offer of judgment under Fed. R. Civ. P. 68 was a nullity. That meant, among other things, that a class action defendant could not "pick off" a named individual plaintiff and would-be class representative by offering him under Rule 68 the full relief he was seeking individually, in the expectation that it would moot the action. So long as the individual plaintiff refused the offer, no matter how good it was, the case would proceed.
But what if the lower court entered a judgment based on the Rule 68 offer? And what if the defendant deposited with the court the full amount of the monetary relief the individual plaintiff was seeking?
The Second Circuit held in February in Geissmann v. ZocDoc, Inc., No. 14-3708 (2d Cir. Feb. 1, 2017) that neither of these can work. In Geismann, the plaintiff alleged that ZocDoc had sent to its office two unauthorized faxes in violation of the Telephone Consumers Protection Act. It sought, for itself and for a purported class of victims, statutory damages for each violation, attorney fees, and an injunction prohibiting further violations. This happened before the Supreme Court decided Campbell-Ewald.
ZocDoc countered by making a Rule 68 offer of judgment: more than the maximum statutory damages for each fax Geismann claimed to have received, plus attorney fees, plus a stipulated judgment prohibiting further violations. Geismann turned the offer down. One of Geismann's arguments was that it was entitled to statutory damages per violation, not per fax, and that because each fax was a multiple violation, the offer of judgment was not in full satisfaction of the claim. The district court disagreed, and based on the district court's conclusion that the plaintiff had been offered complete relief, entered judgment for the damages plus injunction ZocDoc had offered.
Geismann appealed. While the appeal was pending, ZocDoc asked for and received permission to deposit with the district court the amount of damages it had offered. Also while the appeal was pending, the Supreme Court decided Campbell-Ewald. That decision changed the posture of the case before the Second Circuit.
The Second Circuit, unsurprisingly, held that under Campbell-Ewald, ZocDoc's offer was a nullity: once Geismann turned it down it had no further effect and could not have been a valid basis for a judgment. The more interesting aspect of the case is the Second Circuit's skepticism that after Campbell-Ewald there is any way for a defendant in a pre-certification class action to "pick off" the named class plaintiff by offering full relief.
The Supreme Court in Campbell-Ewald had declined to consider whether its decision would have been different if, after the plaintiff declined the defendant's Rule 68 offer of complete judgment, the defendant then deposited the full amount with the district court, and the district court then entered judgment based on the deposit. In the case of Geismann, of course, that is not what happened: the deposit came after the judgment, not before. Additionally, the Second Circuit noted that there remained a legal issue in that case as to whether a single fax could generate multiple claims for statutory damages—so it may be that ZocDoc had not in fact offered complete relief. But the Second Circuit went further and observed in a long footnote (footnote 8) that, even if the facts in Geismannreally had tracked the Supreme Court's hypothetical, the defendant's tactic still might not work. While disclaiming any view on what might happen if such a case were actually presented, the footnote took note of the Supreme Court's criticism of efforts to deter class actions by tactics that would result in multiple plaintiffs resorting to multiple lawsuits rather than a single class action. The Second Circuit suggested that perhaps "Rule 68 should be harmonized with Rule 23." Geismann, slip op at 17 n. 8.
These ruminations by the Second Circuit imply that the door may be closing on defendants' ability to moot as-yet-uncertified class actions by satisfying the claims of individual defendants. Indeed, it may already be closed and may just be waiting for a court to say so. Perhaps one less litigation tool for defendants to use.
|Stuart Riback is a business litigator with nearly 30 years of experience, and a frequent author of topics germane to the world of litigation. If you have any questions about Rule 68 offers, feel free to contact Stuart by email at firstname.lastname@example.org or by telephone at (212) 981-2326.|