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Federal Bar Update: Offers of judgment and class actions

March 23, 2016

FedBarMaley-sigThe U.S. Supreme Court recently held that an unaccepted offer of judgment under Rule 68 does not moot a class representative’s claim, even when the offer is made prior to class certification. Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663 (Jan. 20, 2016). The majority wrote, “We hold today, in accord with Rule 68 of the Federal Rules of Civil Procedure, that an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.”

Furthermore, the court explained, “The Federal Rule in point, Rule 68, hardly supports the argument that an unaccepted settlement offer can moot a complaint. An offer of judgment, the Rule provides, ‘is considered withdrawn’ if not accepted within 14 days of its service. Fed. Rule Civ. Proc. 68(a), (b). The sole built-in sanction: ‘If the [ultimate] judgment . . . is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.’ Rule 68(d).”

The Campbell-Ewald decision has been cited repeatedly since within the 7th Circuit on some related issues. For instance, in Walters v. Drive Solutions, LLC, 2016 U.S. Dist. LEXIS 9840 (S.D. Ind. Jan. 28, 2016), prior to the Campbell-Ewald decision, plaintiff in a class action had filed a motion to suspend the automatic briefing schedule on the motion for class certification. Magistrate Judge Tim Baker, noting the impact of Campbell-Ewald, denied the motion.

Judge Baker explained that particularly in consumer law cases, plaintiffs have commonly filed “placeholder” class certification motions concurrently with the complaint. “The need for such placeholder motions may be traced back to Damasco v. Clearwire Corp., 662 F.3d 891 (7th Cir. 2011), in which the Seventh Circuit held that a plaintiff’s action becomes moot once the defendant makes an offer of judgment, unless the plaintiff has moved for class certification, because there is no longer a live controversy.” Walters, *1.

Judge Baker further explained, “The necessity of placeholder motions ebbed last year when the Seventh Circuit overruled Damasco in Chapman v. First Index, Inc., 796 F.3d 783 (7th Cir. 2015). Since Chapman, courts have vacated denials of motions for class certification because an offer of judgment no longer automatically moots the plaintiff’s action. E.g., Webster v. Bayview Loan Servicing, LLC, 618 F. App’x 864, 865 (7th Cir. 2015). Since Chapman, courts have also found that class issues may be properly decided after discovery and briefing. E.g. Leiner v. Johnson & Johnson Consumer Companies, Inc., No. 15-cv-5876, 2016 U.S. Dist. LEXIS 3896, 2016 WL 128098, at *1 (N.D. Ill. Jan. 12, 2016).” Further, Campbell-Ewald fortified Chapman and resolved the issue of mootness among the circuits,” with the Supreme Court holding “that an unaccepted settlement offer has no force. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.” Walters, *1.

Judge Baker then closed, noting that in light of the Supreme Court’s holding on mootness, “suspending briefing on Walters’ motion for class certification is unnecessary. Either Walters should proceed with the automatic briefing schedule or withdraw his motion for class certification, reserving the ability to re-file it at a later time. If Defendants respond to Walters’ complaint with an offer of judgment, Walters may choose not to accept it and retain his action. If Walters wishes to engage in discovery and briefing first, he may withdraw the motion and decide whether to move for class certification at a later time.”

Meanwhile, in Severns v. Eastern Account Sys. of Conn., 2016 U.S. Dist. LEXIS 23164 (E.D. Wis. Feb. 24, 2016), the defendant in a class action sought to moot the case by depositing funds with the court. The court denied the motion for leave to deposit funds.

The court explained: “In Campbell-Ewald, the Court held that an unaccepted offer of judgment does not moot an individual claim, but left open the possibility that ‘the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.’ 136 S. Ct. at 672. The dissenting opinions seized upon this possibility. Id. at 680 (“The settlement offer promises ‘prompt payment,’ and it would be mere pettifoggery to argue that Campbell might not make good on the promise. In any event, to the extent there is a question whether Campbell is willing and able to pay, there is an easy answer: have the firm deposit a certified check with the trial court”) (Roberts, C.J., dissenting) (internal citation omitted); id. at 684 (“Alternatively, a defendant might deposit the money with the district court (or another trusted intermediary) on the condition that the money be released to the plaintiff when the court dismisses the case as moot”) (Alito, J., dissenting).”

The Severns court, however, ruled that depositing funds would not moot the case because the plaintiff moved for class certification. The judge explained, “‘Class-action plaintiffs can move to certify the class at the same time that they file their complaint. The pendency of that motion protects a putative class from attempts to buy off the named plaintiffs.’ In Campbell-Ewald, the plaintiff ‘had not moved for class certification before his claim became moot,’ and the lower court ‘held that an unaccepted Rule 68 offer of judgment — for the full amount of the named [*3] plaintiff’s individual claim and made before the named plaintiff files a motion for class certification — does not moot a class action.’” 136 S. Ct. at 668 (emphasis added). In short, the procedure for depositing funds suggested in Campbell-Ewald cannot be used when a motion for class certification is pending, as in the instant case.”

These two District Court decisions, along with the multiple other District Court decisions citing, explaining, and distinguishing Campbell-Ewald show that there will be a period of further case law developed around the edges of the new holding. Counsel pursuing or defending class actions should stay tuned and keep track of these ongoing developments.•

John Maley – jmaley@btlaw.com – is a partner with Barnes & Thornburg, LLP, practicing federal and state litigation, employment matters, and appeals. The opinions expressed are those of the author.

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