The latest court to weigh in on an offer of judgment in a Telephone Consumer Protection Act Suit: the Seventh Circuit Court of Appeals, which reversed itself to hold that an offer for the full amount requested does not moot the case.
Previously, Seventh Circuit precedent held that when a defendant made an offer of judgment for the full relief requested, the claim became moot.
In the new decision, Arnold Chapman filed suit against First Index for allegedly sending fax advertisements without consent. A federal court judge denied multiple attempts by Chapman to certify a class of plaintiffs in the suit, and First Index made an offer of judgment for $3,002, an injunction, and costs. The plaintiff failed to accept within 14 days and the defendant moved to dismiss the case. A federal court judge granted the motion, finding the action moot.
But the Seventh Circuit reversed. A case “becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party,” the court explained. “By that standard, Chapman’s case is not moot. The district court could award damages and enter an injunction. Chapman began this suit seeking those remedies; he does not have them yet; the court could provide them.”
Many courts, including the Seventh Circuit, have applied the label “moot” to a situation where a plaintiff declines an offer that would satisfy his or her entire demand, the panel said. However, Justice Elena Kagan’s dissent in Genesis Healthcare Corp. v. Symczyk, a 2013 U.S. Supreme Court decision addressing the impact of a full offer of judgment made to a plaintiff in a Fair Labor Standards Act case, “shows that an expired (and unaccepted) offer of a judgment does not satisfy the Court’s definition of mootness, because relief remains possible.”
The Second and Ninth Circuits have considered the issue since theGenesis decision and “uniformly agree” with Justice Kagan, the court said. And although the issue is currently pending before the Supreme Court, “we think it best to clean up the law of this circuit promptly, rather than require Chapman and others in his position to wait another year for the Supreme Court’s decision,” the panel declared.
“If an offer to satisfy all of the plaintiff’s demands really moots a case, then it self-destructs,” the court wrote. “Rule 68 is captioned ‘Offer of Judgment.’ But a district court cannot enter judgment in a moot case. All it can do is dismiss for lack of a case or controversy. So if the $3,002 offer made this case moot, then even if Chapman had accepted it the district court could not have ordered First Index to pay. It could have done nothing but dismiss the suit. Likewise with First Index’s offer to have the district court enter an injunction. As soon as the offer was made, the case would have gone up in smoke, and the court would have lost the power to enter the decree. Yet no one thinks (or should think) that a defendant’s offer to have the court enter a consent decree renders the litigation moot and thus prevents the injunction’s entry.”
Reversing the dismissal based on mootness, the court reinstated Chapman’s individual TCPA claim. It also overruled its prior decisions “to the extent they hold that a defendant’s offer of full compensation moots the litigation or otherwise ends the Article III case or controversy,” noting that the panel circulated its decision to all the judges in the circuit and none favored an en banc hearing.
To read the decision in Chapman v. First Index, Inc., click here.
Why it matters: Joining the other federal circuits that have found a complete offer of judgment does not moot a case (including the Eleventh Circuit), the Seventh Circuit decision did recognize that rejecting a fully compensatory offer may have consequences other than mootness. For example, the court raised the question of whether a spurned offer of complete compensation should be deemed an affirmative defense, perhaps based on a waiver or estoppel. And the panel seemingly frowned upon the use of judicial resources for such situations, particularly in single-plaintiff cases when the defendant has offered more than the plaintiff requested. “Ordering a defendant to do what it is willing to do has no legitimate claim on judicial time,” the court wrote. “Why should a judge do legal research and write an opinion on what may be a complex issue when the plaintiff can have relief for the asking?” For now, all eyes are on the U.S. Supreme Court, with the justices set to consider these issues next term.