An unaccepted settlement offer did not moot a Telephone Consumer Protection Act class action, the U.S. Court of Appeals for the Second Circuit ruled, reversing dismissal of the suit based on the U.S. Supreme Court’s decision in Campbell-Ewald v. Gomez.
Radha Geismann, M.D. sued ZocDoc, Inc., accusing the doctor-finding service of violating the statute by sending two unsolicited fax advertisements. After Geismann filed the complaint as well as a motion for class certification, the defendant made a settlement offer as to Geismann’s individual claims pursuant to Federal Rule of Civil Procedure 68.
Geismann rejected the offer of $6,000, attorney’s fees, and an injunction not to violate the TCPA in the future. ZocDoc then moved to dismiss the action for lack of subject matter jurisdiction, arguing that its offer afforded Geismann complete relief, mooting the action.
A U.S. District Court Judge granted the motion, entered judgment in Geismann’s favor under the terms offered by the defendant, and dismissed the action. Geismann appealed and while the case was pending, the U.S. Supreme Court issued its opinion in Campbell-Ewald.
In Campbell-Ewald, the five-justice majority ruled that an unaccepted Rule 68 offer is a nullity and that “[w]ith the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists,” and the district court retained jurisdiction. The Court also recognized that a class representative with a live claim “must be accorded a fair opportunity to show that certification is warranted,” and that so long as the named plaintiff’s individual claim remains alive, so do the alleged claims of the purported class.
Considering the Supreme Court’s opinion, the Second Circuit reversed, finding that the instant case mirrored the situation presented in Campbell-Ewald. “The district court’s conclusion in the case now before us is, of course, understandable, it having been reached before Campbell-Ewald was decided,” the panel wrote. “And, as we have noted, ‘our prior case law has not always been entirely clear on this subject.’ But the basis upon which the district court entered judgment did not exist: An unaccepted Rule 68 offer of judgment does not render an action moot.”
ZocDoc made two attempts to distinguish Campbell-Ewald. First, the defendant argued that the district court had entered judgment in the Geismann case, giving effect to the unaccepted offer. But the Second Circuit panel was not persuaded. “We do not find this distinction meaningful because the judgment should not have been entered in the first place,” the panel wrote. “The result in Campbell-Ewald cannot be avoided simply by entering a judgment effectuating an otherwise precluded dismissal.”
Further, Geismann contested whether the offer in fact exceeded any recovery possible under the TCPA, in part because the parties had divergent legal theories regarding the amount of damages available under the TCPA (the plaintiff argued the statute allows a person to recover $500 in damages for each violation, not just limiting recovery to $500 per call or fax). The court agreed, noting that this issue “constitutes a live controversy precluding dismissal on the basis of mootness.”
ZocDoc’s second argument, that Geismann was not left “emptyhanded” by the offer, also failed to pass muster with the Second Circuit. “Geismann has not been compensated in satisfaction of its claim, which would require, at a minimum, its acceptance of a valid offer,” the panel wrote. “Geismann thus remains emptyhanded.”
The defendant’s post-judgment actions moved it no closer to its goal, the court added, as the check was deposited in furtherance of a judgment that should not have been entered in the first place and did nothing to satisfy the demand for injunctive relief.
Finally, the court noted that the facts of the case did not match the hypothetical posed by Campbell-Ewald, where the Supreme Court declined to consider whether the outcome would be different had the “defendant deposit[ed] the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enter[ed] judgment for the plaintiff in that amount.”
“Here, the district court entered a judgment that should not have been entered in the first place, and ZocDoc then more than one year later deposited an amount in satisfaction of that errant judgment in an account payable to Geismann,” the panel said.
The court reversed dismissal of the plaintiff’s suit and remanded the case back to the district court.
To read the decision in Geismann v. ZocDoc, Inc., click here.
Why it matters: The Second Circuit left no room for doubt in its holding. “An unaccepted Rule 68 offer of judgment is, regardless of its terms, a legal nullity,” the panel wrote, rejecting all of the defendant’s attempts to distinguish the Supreme Court’s decision in Campbell-Ewald. As the case law on Rule 68 offers of settlement following Campbell-Ewald continues to develop throughout the country, defendants in the Second Circuit are effectively foreclosed from using this strategy to dispose of TCPA suits.