There has been a lot of activity in the federal courts of appeals recently regarding the use of offers of judgment to named plaintiffs in class actions. The Fifth and Seventh Circuits recently held that an unaccepted Rule 68 offer to the named plaintiff for full relief will not render a putative class action moot (see my August 20 post for more on those decisions). The First Circuit has agreed on that point, but suggested an alternative strategy that defendants might be able to use, depending on how the Supreme Court decides Campbell-Ewald Co. v. Gomez (see my June 16 post for more on that). The First Circuit’s suggestion was to simply send the named plaintiff a bank check for an amount that constitutes full relief, where damages will fully satisfy the plaintiff’s claim. While defendants will need to evaluate carefully whether that’s the right approach, it is certainly worth considering.
In Bais Yaakov of Spring Valley v. ACT, Inc., 2015 U.S. App. LEXIS 14718 (1st Cir. Aug. 21, 2015), a private school filed a putative class action under the Telephone Consumer Protection Act (“TCPA”), alleging that ACT, Inc., the company that makes the ACT college-entrance examination, sent the school three unsolicited faxes in violation of the TCPA. In an attempt to end the case quickly, ACT made an offer of judgment under Rule 68 for the full amount of statutory damages available. ACT also offered to be enjoined from sending further unsolicited faxes to the plaintiff, and offered to pay attorneys’ fees and costs awarded by the court. The plaintiff ignored the offer. ACT moved to dismiss the suit as moot. The district court denied the motion to dismiss, but certified its ruling to the First Circuit under 28 U.S.C. § 1292(b).
The First Circuit’s opinion, by Judge Kayatta, reviewed the existing Supreme Court precedent, which lacks clarity on the issue (hence the recent grant of certiorari). The First Circuit agreed with recent decisions from other circuits that “an unaccepted Rule 68 offer cannot, by itself, moot a plaintiff’s claim.” Id. at *16. “To the contrary, Rule 68 expressly specifies what happens to a rejected offer: it is deemed to be ‘withdrawn,’ and it is ‘not admissible except in a proceeding to determine costs.’” Id. at *17.
Judge Kayatta suggested, however, another approach that defendants might take: “In many cases involving damages in a certain amount as the only remedy, delivery of a bank check might get around the infirmities in using a Rule 68 offer.” Id. at *21-22. He noted that “if substance is to prevail over form, and consumer class actions are not to be largely eviscerated, the Supreme Court will need to decide that a plaintiff’s request to proceed as a class representative pressing the real claims of those to be represented is a claim for relief that precludes a finding of mootness.” Id. Based on Justice Kagan’s dissent in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), there are probably four justices who would agree with that proposition. But we don’t know yet if there will be a fifth.
In the meantime, some defendants might want to take Judge Kayatta’s suggested strategy to the bank. They will need to think about the fact that the amount of the check and its delivery will not be protected from admissibility the way a settlement offer could be. So if the gambit fails (based on how the Supreme Court ultimately decides the issue), and the case continues, the defendant’s maneuver might come out at trial (if there ever is a trial). But that may not be a big deal, and a letter accompanying the check might help with the explanation for it at trial. Sending a check to the plaintiff may not be enough where the complaint also seeks injunctive and declaratory relief. As to those forms of relief, the defendant may need to not only provide the check but make an offer, or file something with the court formally offering to accept the relief as to the named plaintiff. There are risks to consider there, however, depending on the nature of the relief sought.
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