Reinforcing its interpretation of the U.S. Supreme Court’s decision in Campbell-Ewald v. Gomez, the U.S. Court of Appeals for the Second Circuit affirmed that an unaccepted offer of judgment made pursuant to Federal Rule of Civil Procedure 68 is a legal nullity and does not require dismissal of a Telephone Consumer Protection Act suit.
John H. Lary filed suit against Rexall Sundown, alleging the company—along with related corporate entities and a marketing company that provided its services to them—violated the TCPA. The defendants responded with an offer of judgment pursuant to Rule 68 and Lary countered by moving for class certification to prevent the defendants from mooting his class claims.
Even though Lary did not accept the offer, the defendants moved to dismiss the complaint, arguing that all of the plaintiff’s claims had been mooted by the offer of judgment, leaving the district court without subject matter jurisdiction. The court granted the motion to dismiss, denied the motion for class certification, and entered judgment in the plaintiff’s favor based on the Rule 68 offer.
Lary appealed to the Second Circuit. While the appeal was pending, the Supreme Court decided the Campbell-Ewald case, where the justices held that “[a]n unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect,” and therefore, a case or controversy remained between the parties.
Recently, a panel of the Second Circuit applied the Campbell-Ewald decision in Geismann v. ZocDoc. The case involved a similar fact pattern, where a TCPA defendant made a Rule 68 offer of judgment to the plaintiff and the district court granted the motion to dismiss on mootness grounds (see discussion of case in the article above). Unlike Campbell-Ewald, however, the Geismann district court entered a judgment in the plaintiff’s favor.
Although the Geismann defendant argued the judgment distinguished the case from Campbell-Ewald, the panel was not persuaded, reversing the motion to dismiss as “the judgment should not have been entered in the first place.”
In a summary order, the court found the facts in the instant case “largely indistinguishable” from Geismann. “The District Court’s order dismissing Lary’s putative TCPA class action was premised on [the defendant’s] Rule 68 offer mooting his claim,” the panel wrote. “Pursuant to the holdings of Campbell-Ewald and Geismann, the District Court’s dismissal was based on an error of law since Lary’s claim was not mooted by [the defendant’s] offer of judgment. Accordingly, judgment should not have been entered in his favor.”
The defendants argued their situation was analogous to the hypothetical posed by Campbell-Ewald, where the Supreme Court declined to consider whether the outcome would have been different had the defendant deposited the full amount of the plaintiff’s individual claim in an account payable to the plaintiff and the court then entered judgment for a the plaintiff in that amount. But the panel disagreed.
“Here, ‘the district court entered a judgment that should not have been entered in the first place, and [the defendants] then,’ after Campbell-Ewald was issued, sent Lary a certified check ‘in satisfaction of that errant judgment,’” the court said. “Lary did not accept the check, nor did [the defendants] seek leave to deposit the amount of its offer with the District Court. The hypothetical posed by Campbell-Ewald is thus not present here. As such, we need not, and do not, decide whether a different outcome would result if the facts here matched this hypothetical.”
To read the summary order in Lary v. Rexall Sundown, Inc., click here.
Why it matters: The Second Circuit doubled down on its interpretation of the Supreme Court’s Campbell-Ewald decision, emphasizing that an unaccepted Rule 68 offer is a legal nullity that does not moot a case. The panel also declined to apply the hypothetical posed by the justices, finding that the facts of the case did not fit.