The Eastern District of New York recently denied a motion to dismiss and found that the plaintiff’s claims were not precluded by a different court’s ruling that the same claims against the same defendants had been mooted by an offer of judgment. See Bank v. Spark Energy Holdings, No. 13-6130, 2014 U.S. Dist. LEXIS 84493 (E.D.N.Y. June 20, 2014); Bank v. Spark Energy Holdings, No. 11-4082, 2013 U.S. Dist. LEXIS 150733 (S.D. Tex. Oct. 18, 2013).
The plaintiff alleges that he received telemarketing calls “using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party.” 47 U.S.C. § 227(b)(1)(B). He first filed suit in the Southern District of Texas, where the defendants eventually made a Rule 68 offer of judgment. Although the plaintiff rejected that offer, the Texas court found that he no longer had a personal stake in the outcome of the litigation because he had been offered complete relief and had yet to move for class certification. As such, the Texas court found that it lacked subject matter jurisdiction and dismissed his claims. See Bank, 2013 U.S. Dist. LEXIS 150733, at *37-39.
The plaintiff promptly filed suit in the Eastern District of New York and asserted the same claims against the same defendants. As their offer of judgment had already been rejected, the defendants did not make another. Instead, they moved to dismiss based on the preclusive effect of the prior dismissal.
The New York court denied the motion to dismiss. It explained that claim preclusion only applies if there was a final judgment on the merits in the prior action, and that a dismissal for lack of subject matter jurisdiction is generally not considered a final judgment on the merits. The fact that the Texas court purported to dismiss the claims “with prejudice” did not alter its analysis. Bank, 2014 U.S. Dist. LEXIS 84493, at *10.
The court then explained that issue preclusion only applies if an identical issue was adjudicated in the prior action. It concluded that it was being asked to decide a different issue because it was being confronted with a different set of facts:
I find that the identical jurisdictional issue is not presented here because the prior court’s determination of mootness relied on particular factual circumstances that are not the same as the facts presented in this suit. In the Texas case, the court decided that plaintiff’s individual TCPA claim was moot because plaintiff had rejected a Rule 68 offer that would have provided complete relief on his claim. In this suit, defendants have not made any Rule 68 offer, so the court is not presented with the same factual scenario. Since the first requirement to establish issue preclusion is not satisfied, the Texas court’s prior finding of mootness does not require the dismissal of plaintiff’s claim as moot in this action.
Id. at *14.
Although the defendants argued that their offer had “forever mooted” the plaintiff’s claims, the court disagreed because Rule 68 says that unaccepted offers are deemed withdrawn.Id. at *19; see also Fed. R. Civ. P. 68(b) (“An unaccepted offer is considered withdrawn, but it does not preclude a later offer.”). But by that logic the unaccepted offer should not have mooted the claims in the first action either. Indeed, the only relevant fact—whether the plaintiff had been offered complete relief—was identical in both actions. Focusing on whether that offer was made under the caption of the first or second action elevates form over function and undermines the goals that the mootness and preclusion doctrines were both meant to serve.
Judge Ross expressed sympathy for the plight of the defendants, who had defended the case in Texas for two years only to have it rematerialize in New York. But she concluded that her hands were tied: “A finding that a claim is moot in one case simply does not mean that claim is moot in all subsequent cases,” she explained. Id. at *21.
If this tactic gains traction, defendants should consider making a second offer of judgment rather than relying on the first one. Given that the Second Circuit and Fifth Circuit have both found that unaccepted offers of judgment moot a named plaintiff’s claims, doing that may have changed the outcome here. See, e.g., Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 921 n.5 (5th Cir. 2008); Cabana v. Crowley, 736 F.3d 226, 228 (2d Cir. 2013). And if the second action is filed in a different district as it was here, defendants should also consider trying to transfer venue to the first court rather than relitigating the mootness issue in the second court.