Following in the footsteps of the U.S. Court of Appeals, Seventh Circuit, the Second Circuit held that a deposit of the full amount of an individual Telephone Consumer Protection Act (TCPA) claim pursuant to Federal Rule of Civil Procedure 67 does not moot the action.

The case began in 2014, when the professional corporation Radha Geismann, M.D., P.C., filed a putative class action against ZocDoc, based on two allegedly unsolicited faxes advertising a “patient matching service” for doctors. Geismann sought between $500 and $1,500 in statutory damages for each alleged TCPA violation, an injunction prohibiting ZocDoc from sending similar faxes in the future and costs. On the same day that Geismann filed the Missouri state court complaint, it also filed a separate motion for class certification.

ZocDoc removed the action to federal court and made an offer of judgment to Geismann pursuant to Rule 68 for $6,000 plus reasonable attorney’s fees, in satisfaction of Geismann’s individual claims, as well as an injunction prohibiting ZocDoc from engaging in the alleged statutory violations in the future. The defendant also moved to transfer the case to New York federal court, and moved to dismiss on the grounds that its offer of judgment provided full satisfaction so the action was moot.

A district court granted the motion to dismiss, reasoning that no case or controversy remained because ZocDoc’s Rule 68 offer more than satisfied any recovery Geismann could make. The court also denied Geismann’s motion for class certification, as it could not represent the class without a claim of its own.

Geismann appealed to the Second Circuit. In the interim, the U.S. Supreme Court decided Campbell-Ewald Co. v. Gomez, where the justices ruled that because an unaccepted settlement offer is a legal nullity, a defendant’s unaccepted Rule 68 offer did not render the action moot.

ZocDoc filed a motion with the district court seeking to deposit a check in the amount of $6,100 in satisfaction of the judgment. Writing that the Supreme Court’s decision “favor[s] deposit of judgments with the Court,” the district court granted the request.

In light of Campbell-Ewald, the Second Circuit then vacated the district court’s judgment and remanded the case for further proceedings.

A few weeks later, ZocDoc filed a motion seeking leave to deposit an additional $13,900 pursuant to Rule 67, explaining that it was making an “open-ended offer” to Geismann with no expiration date for a total of $20,000 and all injunctive relief sought in the complaint. The defendant also promised to file a subsequent summary judgment motion to enter a judgment in favor of Geismann and against ZocDoc for the full amount of the individual claims and to dismiss the class allegations without prejudice.

The district court granted the defendant leave to deposit and then granted the motion for summary judgment. Geismann appealed.

Finding the situation analogous to that of Campbell-Ewald, the Second Circuit reversed. In Campbell-Ewald, the Supreme Court relied on a fundamental principle of contract law to hold that an unaccepted offer is not binding on the offeree.

“[W]e see no material difference between a plaintiff rejecting a tender of payment (pursuant to Rule 67) and an offer of payment (pursuant to Rule 68),” the panel wrote. “Indeed, other than their labels, once rejected, the two do not differ in any meaningful way: In each case, ‘all that exists is an unaccepted contract offer, and as the Supreme Court recognized, an unaccepted offer is not binding on the offeree.”

A lawsuit, or an individual claim, becomes moot only when a plaintiff actually receives all of the relief he or she could receive on the claim through further litigation, the court added. But Geismann had received nothing from ZocDoc.

“The deposit of funds in the district court registry, without more, leaves a plaintiff ‘emptyhanded’ because the deposit alone does not provide relief to him or her,” the panel wrote. The Rule 67 procedure provides “a place of safekeeping” for disputed funds, but it cannot be used as a means of altering the contractual relationships or legal duties of the parties.

Indeed, Rule 67 is a mere “procedural mechanism” that does not itself determine who is entitled to the money, the Second Circuit said, and permits withdrawal only by order of the court.

“In short, the Rule 67 procedure ‘is nothing like a bank account in the plaintiff’s name—that is, an account in which the plaintiff has a right at any time to withdraw funds,’” the court wrote, quoting from a similar decision issued last year by the Seventh Circuit. “By itself, then, ZocDoc’s deposit of funds cannot be considered to have rendered Geismann’s individual claims moot.”

Further, the panel doubted that mootness was the correct legal concept to employ in analyzing the effect of ZocDoc’s Rule 67 deposit. Geismann began the suit seeking damages and an injunction, but after ZocDoc’s deposit, Geismann had not yet “actually receive[d]” any funds; and although ZocDoc offered to submit to an injunction, it had not committed to stop sending the offending faxes.

Claims may become moot in other ways, the Second Circuit noted, such as where a defendant surrenders to “complete relief” in satisfaction of a plaintiff’s claims and the district court enters default judgment against the defendant, mooting the plaintiff’s individual claims.

“That is not the case here,” the panel clarified. “Even if the district court first entered judgment—enjoining ZocDoc from further faxes and directing the clerk of court to send Geismann a check for $20,000—and thereafterdeemed Geismann’s claims moot, that resolution would not have afforded Geismann complete relief.”

By rejecting the defendant’s offer, Geismann signaled that it was seeking more than statutory damages and had an interest in serving as the lead plaintiff for a class action, with any ensuing additional reward, the court said.

“We therefore conclude that the district court must resolve the pending motion for class certification before entering judgment and declaring an action moot based solely on relief provided to a plaintiff on an individual basis,” the Second Circuit wrote. “If the motion is granted, the class action may proceed. A conclusion otherwise would risk placing the defendant in control of a putative class action, effectively allowing the use of tactical procedural maneuvers to thwart class litigation at will.”

Concluding that ZocDoc’s Rule 67 deposit did not provide Geismann with an entitlement to complete relief and therefore did not render its TCPA claim moot, the panel reversed the district court’s entry of judgment and denial of the motion for class certification. “The fact that Geismann’s claim is not moot means both that its own claim is still viable and that the door remains open for possible class certification,” the court said.

To read the decision in Geismann v. ZocDoc, Inc., click here.

Why it matters: Although the Campbell-Ewald decision purported to leave open alternatives to Rule 68 to moot class actions, TCPA defendants have struggled to find a method that courts will approve. Rule 67 appears to be largely off the board, as both the Second Circuit and Seventh Circuit have now rejected the use of the procedural rule to moot cases.