11th Circuit Issues Opinion Affecting Class Action Defendants

On December 1, the Eleventh Circuit issued its opinion in Stein v. Buccaneers Limited Partnership, No. 13-15417, 2014 U.S. App. LEXIS 22603 (11th Cir. Dec. 1, 2014), an important case regarding whether a named plaintiff’s rejection of a defendant’s offer of judgment for full relief renders the case moot. The Court concluded that if a named plaintiff in a putative class action does not accept a defendant’s offer of judgment, the case is not moot.

The Court’s Decision

Six named plaintiffs filed suit against Buccaneers Limited Partnership (“BLP”) alleging that BLP had sent unsolicited faxes to the named plaintiffs and more than 100,000 others, advertising tickets to Tampa Bay Buccaneers games, in violation of the Telephone Consumer Protection Act. The plaintiffs sought statutory damages of $500 per violation, trebled to $1500 based on BLP’s willfulness.

Shortly after the start of the lawsuit, BLP served upon each named plaintiff an offer of judgment under Federal Rule of Civil Procedure 68. Rule 68 allows a defendant to offer to allow the entry of judgment on specified terms, which offer the plaintiffs may accept within 14 days. If the plaintiffs do not accept the offer, it is considered withdrawn; evidence of the unaccepted offer is not admissible later in the litigation (except in a proceeding to determine costs) and the defendant is not precluded from making a later offer. If the plaintiffs reject an offer and later obtain a judgment that is not more favorable than the one offered, the plaintiffs must pay the costs incurred by the defendant after the offer was made.

The named plaintiffs did not accept BLPs offers of judgment. BLP then moved to dismiss the case as moot, because the named plaintiffs had rejected BLPs offers for full satisfaction of their claims. The district court granted the motion and dismissed the putative class action as moot.

The plaintiffs appealed to the Eleventh Circuit, arguing that their rejection of the offers of judgment did not render the case moot. The Eleventh Circuit agreed.

The Eleventh Circuit relied heavily on the four-justice dissent, authored by Justice Elena Kagan, in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013). In Genesis, a collective action under the Fair Labor Standards Act out of the Third Circuit, the parties agreed by stipulation that an unaccepted Rule 68 offer of judgment mooted the individual plaintiff’s claim. The majority of the Supreme Court accepted the stipulation without addressing the issue. But Justice Kagan, writing for four dissenters, said this:

That thrice-asserted view [that the defendant’s offer mooted the plaintiff’s individual claims] is wrong, wrong, and wrong again. We made clear earlier this Term that “[a]s long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot.” Chafin v. Chafin, 568 U.S. ___, ___, 133 S.Ct. 1017, 1023 (2012) (internal quotation marks omitted). “[A] case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Ibid. (internal quotation marks omitted). By those measures, an unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer — however good the terms — her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer — like any unaccepted contract offer — is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer “leaves the matter as if no offer had ever been made.” Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U.S. 149, 151 (1886). Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that “[a]n unaccepted offer is considered withdrawn.” Fed. Rule Civ. Proc. 68(b). So assuming the case was live before — because the plaintiff had a stake and the court could grant relief — the litigation carries on, unmooted.

Among the circuit courts, there has been some disagreement as to the effect of an unaccepted offer of judgment for full relief. One circuit (the Third) has determined that an unaccepted offer moots the individual’s claims. Some circuits (the Second and Sixth) have determined that an unaccepted offer moots the individual’s claim, but that the proper approach is to enter judgment for the plaintiff in the amount of the unaccepted offer. Following a recent Supreme Court dissent, one circuit (the Ninth) has determined that an unaccepted offer does not moot the individual’s claims.

The Eleventh Circuit took Justice Kagan’s dissent as “a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don’t try this at home.” The Eleventh Circuit, therefore, decided not to try the Third Circuit’s approach at home and instead determined that if a named plaintiff in a putative class action does not accept a defendant’s offer of judgment, the case is not thereby moot.

Implications Going Forward

Use of Rule 68 offers of judgment for full relief to the named plaintiffs was becoming an effective tool in some jurisdictions for defendants to circumvent protracted class litigation. The Eleventh Circuit’s decision removes this arrow from the class action defendant’s quiver, and it appears that the other circuits likely will soon follow suit. However, using offers of judgment early in the litigation may still be an effective tool for managing the costs of class litigation, because a plaintiff who does not accept an offer of judgment and later obtains a less favorable judgment must pay the defendant’s costs after the time of the offer of judgment.

Abbott-JonesPrepared by Abbott Marie Jones