In Hooks v. Landmark Indus., Inc., No. 14-20496 (8/12/2015), the Court of Appeals for the Fifth Circuit joined a minority of the federal appellate courts in holding that "an unaccepted offer of judgment cannot moot a named-plaintiff’s claim in a putative class action[.]" Slip Op., at 2.
Plaintiff Hooks had made a withdrawal from his checking account through an automated teller machine ("ATM") operated by Defendant Landmark. Slip Op., at 2. About two months later, Hooks sued for statutory damages based upon alleged violations of the Electronic Funds Transfer Act ("EFTA"), 15 U.S.C. § 1693, et seq. The alleged EFTA violation was based upon Landmark charging Hooks $2.95 for the ATM withdrawal, but failing to post a notice of that fee on the ATM or at its location. Id. About a month after the first status conference in the case, Landmark tendered a Fed. R. Civ P. 68 Offer of Judgment to Hooks. The Offer "proposed to settle the statutory damage claim for $1,000, the maximum allowable statutory damages for his individual claim. Landmark also offered to 'pay costs accrued and reasonable and necessary attorney fees, through the date of acceptance of the offer, as agreed by the parties, or to be determined by the court if agreement cannot be reached.'" Id. (citation omitted).
Instead of accepting the Offer, Hooks allowed it to lapse and then filed a motion to strike the Offer. Slip Op., at 2-3. The district court denied the motion to strike, but also denied Landmark's motion to dismiss and certified a class of consumers who had used the ATM to make withdrawals during a period before Landmark posted a notice of charges in compliance with the EFTA. Id., at 3. Landmark then filed a second motion to dismiss, "arguing that Hooks’s individual claim and the class action suit were mooted by the unaccepted Rule 68 offer. The district court granted the motion to dismiss and vacated its prior order." Id.
On appeal, Hooks argued first that the Rule 68 Offer "was not a complete offer of judgment because it only included reasonable attorney fees accrued through the date of the offer." Slip Op, at 4. Hooks argued that instead, a valid Rule 68 Offer "should include post-offer fees -- for example, those incurred litigating the 'reasonableness' of already-accrued fees if the parties should fail to reach an agreement." Id. The appeals panel noted that the Fifth Circuit has not ruled whether a Rule 68 Offer would be considered complete if it failed to include post-Offer costs, and noted a split of authority on the issue. Id., at 4-5 (citations omitted). However, the panel declined to consider the question and held instead that a Rule 68 Offer, if not accepted, does not moot an individual's claims or putative class action. Id., at 5.
The panel observed that both the U.S. Supreme Court and Fifth Circuit have assumed in prior decisions, without deciding, that a Rule 68 Offer of Judgment may moot a Plaintiff's individual and putative class action claims even if the Offer is not accepted. Slip Op., at 6-7, citing Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013); Krim v. pcOrder.com, Inc., 402 F.3d 489, 502 (5th Cir. 2005). The panel also noted that a majority of the federal courts of appeals have adopted the principle that the Offer may moot a Plaintiff's claims, even if not accepted. Id., at 8 (citations omitted). Previous posts to this blog have discussed other cases which considered whether a Defendant may use a Fed. R. Civ. P. Rule 68 Offer of Judgment to obtain dismissal of a Plaintiff's claims as moot. See, 11th Circuit Rejects Use of Rule 68 Offer of Judgment To Moot Class Actions: "Don't Try This At Home" (in at least some circuits) (1/5/2015); Eastern District of Michigan holds that Rule 68 Offer of Judgment moots proposed class representative's claims(12/7/2014); "Picking Off Class Representatives" - Using a Rule 68 Offer of Judgment to "Moot" Potential Class Claims (4/2/2014).
After considering the split of authority in the federal appellate courts, and quoting specifically Justice Kagan's dissent in Genesis Healthcare ("Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don’t try this at home.") (Slip Op. at 7, quoting 133 S. Ct., at 1534), the Fifth Circuit panel squarely rejected the argument that an unaccepted Rule 68 Offer of Judgment could moot a Plaintiff's claims. Id., at 8: "It is hornbook law that the rejection of an offer nullifies the offer. We agree that '[n]othing in Rule 68 alters that basic principle,' and, in fact, Rule 68 considers an unaccepted offer to be withdrawn. 'Giving controlling effect to an unaccepted Rule 68 offer ... is flatly inconsistent with the rule.'" Id., at 8-9 (citations omitted). "We agree that '[a] plaintiff seeking to represent a class should be permitted to accept an offer of judgment on her individual claims under Rule 68, receive her requested individual relief, and have the case dismissed, or reject the offer and proceed with the class action.'" Id., at 9.
The Fifth Circuit panel issued its ruling while recognizing that the U.S. Supreme Court has granted certiorari to consider specifically whether a Rule 68 Offer of Judgment may moot a Plaintiff's claims. Slip Op. at 6-7. n.6, citing Gomez v. Campbell-Ewald, 768 F.3d 871 (9th Cir. 2014), cert. granted, 135 S. Ct. 2311 (2015). The Supreme Court granted Campbell-Ewald's Petition as to three issues. The first two are: "1. Whether a case becomes moot, and thus beyond the judicial power of Article III, when the plaintiff receives an offer of complete relief on his claim. 2. Whether the answer to the first question is any different when the plaintiff has asserted a class claim under Federal Rule of Civil Procedure 23, but receives an offer of complete relief before any class is certified." Campbell--Ewald Co. v. Gomez, No. 14-857. The Court’s docket indicates that oral argument has been set for October 14, 2015.