The U.S. Court of Appeals for the 11th Circuit recently held that a class action was not mooted by the unaccepted offers of judgment made by the defendant to each putative class representative in the full amount of his or her individual claims.

In Stein v. Buccaneers Limited Partnership, the named plaintiffs asserted putative class claims under the Telephone Consumer Protection Act (TCPA) against the Buccaneers Limited Partnership (the Buccaneers), arising out of alleged unsolicited faxes. Shortly after the action was filed, the Buccaneers sent offers of judgment pursuant to Federal Rule of Civil Procedure 68 to each of the named plaintiffs, offering the full amount of statutory damages and other relief sought by each. Two days later, the Buccaneers moved to dismiss for lack of jurisdiction, asserting that the Rule 68 offers rendered the case moot. While the motion was pending, the period under Rule 68 for acceptance of the offers expired without any of the named plaintiffs having accepted them. The district court subsequently granted the Buccaneers’ motion to dismiss, and the named plaintiffs appealed.

The 11th Circuit reversed. The 11th Circuit explained that the appeal raised two questions. The first was whether an individual plaintiff’s claim becomes moot when the plaintiff does not accept a Rule 68 offer of judgment that offers all relief the plaintiff seeks. The second was, even if the answer to the first question is yes, and such offers are made to all named plaintiffs in a putative class action before any motion for class certification is filed, whether the named plaintiffs may nonetheless go forward as class representatives.

Addressing the first issue, the court initially observed that Rule 68 expressly states that an unaccepted offer of judgment is “considered withdrawn” and “not admissible,” and that such language indicates that an unaccepted Rule 68 offer has no impact on a plaintiff’s claims. The Stein court found support in the dissenting opinion in Genesis HealthCare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), wherein four justices (after the majority left the issue unresolved because the plaintiff had waived the issue on appeal) opined that a Rule 68 offer of judgment in the full amount of a plaintiff’s claims is a legal nullity when it is not accepted, and it thus does not moot the plaintiff’s claims. Still further supporting its decision, the Stein court explained, was the fact that several pieces of language in the Buccaneers’ offers of judgment themselves indicated that the offers were to have no effect unless they were accepted.

The court acknowledged, however, that courts are divided on whether an unaccepted offer of judgment can moot a named plaintiff’s individual claims. It was also influenced by the fact that the district court had dismissed the action without entering judgment in the plaintiffs’ favor. It acknowledged that some courts, including the Second Circuit, hold that an unaccepted offer of judgment can moot a plaintiff’s individual claims if judgment is entered in accordance with the offer.

Turning to the second issue, the Stein court held in the alternative, albeit in possible dicta, that even if the Rule 68 offers somehow mooted the named plaintiffs’ claims, the class claims would remain live and the named plaintiffs would retain the ability to pursue them. The court relied on Zeidman v. J. Ray McDermott & Co., 651 F.2d 1030 (5th Cir. 1981), in which the Fifth Circuit held that a class action was not moot even though the defendant tendered (in a non-Rule 68 context) the full amount of the putative class representatives’ claims.

The Buccaneers tried to distinguish Zeidman on the ground that there, the plaintiffs’ claims did not become moot until after the motion for class certification was filed, whereas in Stein, the Buccaneers posited that the named plaintiffs’ claims had become moot before any class certification motion was filed. In response, the Stein court reviewed several U.S. Supreme Court cases decided prior to Genesis HealthCare wherein class actions were permitted to proceed even after the named plaintiff’s claims became moot. The rationale to permit the class actions in those cases to proceed, the Stein court observed, had nothing to do with the particular timing of the filing of the motion for class certification. What matters instead, the Stein court held, is that the named plaintiffs continue to diligently pursue the class claims by taking any necessary discovery, complying with rules and scheduling orders, and acting without undue delay. Moreover, the court reasoned, giving controlling effect to the timing of the certification motion would cause class action plaintiffs to prematurely file class certification motions at the same they filed their complaints. The Stein court noted that its holding was consistent with those of the majority of other federal appellate courts that have addressed this issue. However, several other circuit courts are in the process of re-examining earlier decisions in light of Genesis HealthCare, so the 11th Circuit’s opinion will likely not be the last word on this important jurisdictional issue.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). In addition to having vast experience in defending TCPA lawsuits, the Group has counseled a number of clients on establishing autodialing and monitoring protocols.

If you have questions, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, Mark J. Levin at 215.864.8235 or levinmj@ballardspahr.com, or Joel E. Tasca at 215.864.8188 or tasca@ballardspahr.com.


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