First Circuit Rejects Defendant’s Offer of Settlement as Mooting Plaintiff’s Claims

In many class action cases, the defendant will attempt to render the action moot by offering a settlement to the lead plaintiff. Last month, the First Circuit Court of Appeals rejected one such attempt to moot in Bais Yaakov of Spring Valle v. ACT, Inc. In this case, the plaintiffs alleged that the defendants sent unsolicited faxes informing the plaintiffs and the proposed class of testing deadlines and test locations in violation of the Telephone Consumer Protection Act (“TCPA”) and analogous New York state laws.

After the suit was filed, the defendant made an offer for judgment pursuant to Federal Rule of Civil Procedure 68. The defendant then moved to dismiss the lawsuit, claiming that the Rule 68 offer that it sent, which the plaintiffs did not accept and the defendant later withdrew, fully resolved the parties’ case or controversy, rendering the plaintiffs’ claims moot.

The lower court denied the defendants’ motion, concluding that the unaccepted offer did not serve to moot the plaintiffs’ claims. The court noted, however, that had the offer been accepted prior to its withdrawal, it would have provided the lead plaintiff with the exact relief that he demanded in his individual claim if he ultimately prevailed.

On appeal, the First Circuit framed the issue as whether an unaccepted offer for relief pursuant to FRCP 68 in a proposed class action moots the plaintiff’s claims. The court first noted that plaintiffs bringing claims pursuant to Federal Rule of Procedure 23, which governs class actions, must demonstrate that they are members of the class and that their claim also adequately represents the class. If a plaintiff has accepted a settlement offer, the plaintiff’s claim is no longer representative of the general class claims, which prevents the plaintiff from adequately representing the proposed class.

According to the First Circuit, this strategy is contradictory to the Supreme Court’s holding in Deposit Guaranty National Bank v. Roper. The plaintiff relied on this case to argue that his continuing economic interest in the case, i.e., the interest in receiving attorneys’ fees and the incentive award for serving as the plaintiff, rendered him an adequate representative.

In deciding whether the Rule 68 offer rendered the plaintiff’s claims moot, the court first concluded that a plaintiff receiving such an offer has effectively received complete relief and that no individual case or controversy pursuant to Article III remains. Ultimately, however, the First Circuit agreed with five other circuit courts that have considered the same issue, concluding that an unaccepted Rule 68 offer by itself cannot moot a plaintiff’s claim. The court categorized an unaccepted Rule 68 offer as a red herring, stating that it does not provide any relief and noting that Rule 68’s language specifically states that unaccepted offers are deemed withdrawn.

The issue may soon be before the United States Supreme Court. See Campbell-Ewald Co. v. Gomez, 135 S. Ct. 2311, 2311 (2015) (No. 14-857) (granting petition for certiorari seeking review of the questions of whether a case becomes moot when a plaintiff receives an offer of complete relief on his claim, and whether the answer to that question differs in a putative class action).

If you or someone you know has suffered injuries from a toxic substance, dangerous product, or harmful drug, you may be entitled to compensation. The skilled and experienced product liability lawyers at Moll Law Group have proudly served accident victims in states such as Texas, California, and New York. We understand just how devastating this is for you and your family, and we can fight aggressively for your rights throughout the litigation. Call us now at 312-462-1700 or contact us online to set up your free consultation.

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