On July 15, 2013, Judge David O. Carter of the U.S. District Court for the Central District of California entered an opinion in Craftwood II, Inc. v. Tomy International, Inc., No. SA CV 12-1710 (C.D. Cal.), denying defendant’s motion for summary judgment and rejecting defendant’s argument that its offer of judgment mooted plaintiff’s claims.

The Court acknowledged a circuit split regarding the issue, but ruled that the Ninth Circuit’s decision in Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011), governed the effect of defendant’s offer of judgment and refused to apply the Supreme Court’s recent decision in Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523 (2013).

As we noted in previous posts (read more here), courts’ continued reluctance to find claims “moot” demonstrates that, notwithstanding Genesis, a Circuit split over the impact of offers of judgment in the class context remains intact, and the future viability of this common defense tactic for eliminating low-value class claims remains uncertain.

Factual Background

Plaintiff Craftwood brought a putative class action contending that Tomy International (“Tomy”) violated the Telephone Consumer Protection Act (“TCPA”) when it sent unsolicited “junk” fax advertisements to Plaintiff and others. Plaintiff sought statutory damages of $500 per violation, treble damages, and injunctive relief against future violations. Id. at 2.

On August 28, 2012, Tomy sent Plaintiff a settlement proposal wherein it offered $1,500 for each fax advertisement that Tomy sent to Plaintiff in violation of the TCPA, agreed to pay costs and prejudgment interest, and agreed to accept entry of an injunction prohibiting it from sending unsolicited faxes in violation of the TCPA. Id. at 2-3.

Thereafter, Tomy filed a motion for summary judgment arguing that the Court lacked subject matter jurisdiction and, therefore, should dismiss the case as moot. Id. at 3.

The Court’s Opinion

Relying on the Seventh Circuit opinion in Damasco v. Clearwire, 662 F.3d 891 (7th Cir. 2011), Tomy argued that its offer mooted Plaintiff’s claims because Tomy offered to provide all of the individual relief to which Plaintiff could be entitled. Id. at 4.

The Court acknowledged that, under Seventh Circuit law, a plaintiff may not avoid mootness where he does not move for class certification prior to the expiration of his personal stake in the case. Id. The Court noted, however, that four circuits disagree with the Seventh Circuit’s approach, including the Ninth Circuit. Id. at 5.

In Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011), the Ninth Circuit held that a rejected offer of judgment for the full amount of a putative class representative’s individual claim does not moot a class action where it precedes the filing of a motion for class certification. Id. at 5. The Court noted that such a holding “furthers the unique purposes and context of [Rule 23], where class claims often are so small in terms of damages that no plaintiff can afford to maintain a lawsuit on her own.” Id. at 5-6.

The Court rejected Tomy’s argument that the Supreme Court’s recent decision in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), overrules or severely undermines the Ninth Circuit’s decision in Pitts. Id. at 6. It reasoned that a ruling in the context of a collective action “does not directly apply to a class action” and, in Genesis, the Supreme Court merely assumed without explaining how an unaccepted offer of judgment could moot an individual claim. Id. at 6-7.

Relying on Justice Kagan’s dissent in Genesis, the Court held that the “better view” is that, as long as parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot. Id. Here, Plaintiff did not receive an offer of relief for its class claims, and it only received an offer of relief for the not-yet-determined number of faxes that actually violated the TCPA. Id. at 7.

Implications

The Court acknowledged, and its opinion demonstrates, that the Circuit split over the effect of unaccepted offers of judgment remains intact. As Craftwood demonstrates, notwithstanding Genesis, courts at least in the Ninth Circuit will continue to find that offers of judgment do not moot plaintiffs’ class claims, even if plaintiffs fail to move for class certification while the offers remain pending. In the class action arena, where defendants have few devices for quickly eliminating costly claims, their ability to rely upon offers of judgment remains uncertain and likely will continue to remain uncertain until the Supreme Court resolves the issue.