Class Action “Buy-Off” Settlement Offer Ends Florida Federal Case Because Plaintiff Had Not Yet Filed for Class Certification

Plaintiff received multiple unwanted texts generated by the automatic telephone dialing system of Defendants.  Plaintiff filed a class action complaint alleging violations of the Telephone Consumer Protection Act (“TCPA”), which Defendants removed to Florida federal District Court.  Before Plaintiff filed for class certification, Defendants made a Rule 68 settlement offer containing all relief requested in Plaintiff’s Complaint.  Plaintiff rejected this offer.  Defendants moved to dismiss the suit, arguing that its first offer provided full relief, and thus mooted the case because Plaintiff no longer had a personal stake in the litigation.  Although Plaintiff did not file an Opposition, Plaintiff did file a Notice of Supplemental Authority, with a recent case that held that a settlement offer that did not include an offer of judgment did not moot the case.  During the pendency of Defendants’ Motion to Dismiss, Defendants made a second nearly identical offer, this one pursuant to Rule 68, which included an offer to have judgment entered against Defendants.  The federal District Court ultimately granted Defendants’ Motion to Dismiss, stating that dismissal of the case was supported by the U.S. Supreme Court’s recent decision, Genesis Healthcare Corp. v. Symczyk, 133 S.Ct 1523, 1528 (2013), and policies underlying Article III of the Constitution.  (Keim v ADF Midatlantic, LLC (Slip Copy, S.D.Fla., July 15, 2013).

Facts

Brian Keim (“Keim”) received unsolicited commercial text messages generated by an automatic telephone dialing system on behalf of several related companies: ADF Midatlantic, LLC; American Huts, Inc.; ADF Pizza I, LLC; and ADF PA, LLC (collectively “Defendants”).  Keim filed a class action complaint which Defendants removed to Florida federal district court.  Keim alleged that he was one of a number of individuals who had received unwanted texts from the Defendants in violation of the TCPA.  Keim asked the Court to award damages under the TCPA statute and issue an injunction to stop the Defendants from sending further texts.  The Defendants made an informal settlement offer to Keim, offering to accept injunctive relief, pay Keim’s court costs, and pay $1,500 for each text message he received, and also pay $1,500 per unsolicited text for up to 10 other people represented by the firm Keim retained. 

After Keim rejected the offer, the Defendants filed a motion to dismiss Keim’s Complaint on the grounds that Keim had failed to state a claim and that the court lacked subject matter jurisdiction over the case.  The Defendants argued that they already offered Keim full relief through their informal settlement offer, and so his claim was moot.  Keim did not file an Opposition to Defendants’ Motion to Dismiss, but filed a Notice of Supplemental Authority referencing a recent Eleventh Circuit case that held that a settlement offer that did not include an offer of judgment against a defendant did not moot a claim because such an offer does not provide full relief to a plaintiff.  (Zinni v. ER Solutions, Inc. (11th Cir. 2012) 692 F.3d 1162).)  Defendants then repeated their earlier offer to Keim, this time adding an offer of judgment pursuant to Federal Rule of Civil Procedure 68 (“Rule 68”).  Keim had not yet filed a motion for class certification.

Keim finally filed an Opposition Brief after the Court issued an order setting a date for an Opposition Brief to be filed because Keim had not filed an Opposition Brief.  Keim asked the Court to either strike the Defendants’ offer of judgment or to certify his lawsuit as a class action.  Keim argued that by making a full settlement offer before his lawsuit was certified as a class action, the Defendants were attempting to “pick-off” Plaintiff and avoid liability to others who had received the Defendants’ unsolicited texts.

Keim’s response failed to directly address the significance of the Defendants’ second settlement offer that included an offer of judgment.  After the Court ordered further briefing to address this issue, Keim argued that the second settlement offer did not provide him with full relief because part of the relief he sought was to be able to pursue the case as a class action.  The Defendants countered that their offer was a good-faith effort to avoid litigation, not an attempt to “pick-off” an individual plaintiff before it mushroomed into a class action. 

Decision

The United States District Court for the Southern District of Florida agreed with the Defendants and dismissed Keim’s claim.  The Court stated that the claim became moot as soon as the Defendants made their Rule 68 offer.  The Court noted that to comply with Article III of the Constitution, an “actual controversy” must exist at all stages of litigation, not only when the lawsuit is first filed.  The Court concluded that once the Defendants made their second offer holding out full relief to Keim, he no longer had a “personal stake” in the litigation.  The Court referred to the U.S. Supreme Court’s recent opinion in Genesis Healthcare Corp. v. Symczyk (2013) 133 S.Ct. 1523, which held that a collective action claim under the Fair Labor Standards Act was moot when the plaintiff was offered full relief for herself before she had filed for certification as a class action.

The Court observed that had Keim wanted to preserve the opportunity to pursue a class action lawsuit, he should have filed a motion for class certification before the Defendants made the second offer.  The Court also noted that the Seventh Circuit had ruled under similar facts that a settlement offer of a TCPA class action complaint mooted the case when the plaintiff had not yet filed for class action certification. (Damasco v. Clearwire Corp. (7th Cir. 2011) 662 F.3d 891).  Additionally, another federal district court in Florida’s Southern District adopted the reasoning of the Seventh Circuit in a factually similar case.

The Court noted that there was a split among federal circuit courts of appeals on this issue, and that courts disagreeing with the Seventh Circuit approach expressed concerns about “buy-offs” short circuiting the class action process and allowing an ongoing pattern of violations to continue relatively unchecked.  The District Court stated that the solution was for plaintiffs to file for class action certification at the time they file a class action complaint, and if they have not yet been able to fully discover facts to support certification, they could request a delay in the court’s ruling to allow time for discovery.  Moreover, to decide otherwise would have the negative effect of encouraging plaintiffs to plead vaguely in their complaints, which would run counter to the public policy underlying the Federal Rules of Civil Procedure and Article III of the Constitution.

In dismissing the lawsuit, the Court retained jurisdiction to enter a judgment for Keim’s individual claim according to the Defendants’ second offer.