Seventh Circuit Rules that Rule 67 Does Not Provide an Avenue to Mootness
After the Supreme Court held in Campbell-Ewald v. Gomez that merely offering to make a payment will not moot a claim, we predicted that defendants would explore various procedural mechanisms for arguing that actually making a payment will moot a plaintiff’s claim. Indeed, although the Supreme Court did not reach the issue, its decision strongly suggested that plaintiffs who have received complete relief—as opposed a mere offer of complete relief—no longer have live cases or controversies as required by Article III. SeeCampbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 672 (Feb. 9, 2016) (“We need not, and do not, now decide whether 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.”). This week, however, a panel of the United States Court of Appeals for the Seventh Circuit held that not even tendering funds into a court-monitored interest-bearing account is enough to moot a claim. See Fulton Dental, LLC v. Bisco, Inc., No. 16-3574 (June 20, 2017). What, if anything, would be enough it did not say.
The plaintiff in Fulton Dental alleges that the defendant committed two separate TCPA violations by sending a fax that was unsolicited and lacked an opt-out notice. The defendant began by making an offer of judgment under Rule 68. Two days later, however, the Supreme Court issued the Campbell-Ewald decision that held that a mere offer of complete relief will not moot a plaintiff’s claim. At that point the defendant pivoted and made a motion under Rule 67 that asked the court to (1) grant it leave to make a deposit into court in the amount of $3,600, which represented the maximum allowable statutory damages for two separate violations, plus an additional amount for good measure; (2) enter judgment against it; and (3) enjoin it from further TCPA violations. As the defendant had for all intents and purposes surrendered, the trial court granted its motion and entered judgment against it on plaintiff’s individual claim.
The Seventh Circuit reversed, concluding that there is “no principled distinction” between Rules 68 and 67 because, “[i]n either case, all that exists is an unaccepted contract offer.” But that does not withstand scrutiny; although Rule 68 does involve an “offer” that is deemed “withdrawn” if it is not “accepted,” nothing in Rule 67 speaks in terms of an “offer.” Rather, Rule 67 speaks in terms of a deposit into an interest-bearing account, and actually anticipates that a defendant can seek leave to make such a deposit even if, as was the case here, the defendant no longer “claims any of it” as its own. If a defendant makes such a deposit, disclaims any interest in it, and invites the plaintiff to withdraw it, how is that functionally any different from making a deposit into the plaintiff’s bank account? Or for that matter handing the plaintiff a briefcase full of money? And if doing those things would not be enough to moot a plaintiff’s claim, what would be? The panel reasoned that funds deposited into court are “nothing like a bank account in the plaintiff’s name” because a withdrawing litigant must have permission from the court and show an entitlement to make the withdrawal. But that ignores that the defendant in this case disclaimed its entitlement to the funds, and that banks similarly require that accountholders show—by using an ATM card and PIN, for example—an entitlement to make a withdrawal.
The panel also echoed dicta in Campbell-Ewald that suggested that would-be class representatives “must be accorded a fair opportunity to show that certification is warranted.” Campbell-Ewald, 136 S. Ct. at 672; see also Chen v. Allstate Ins. Co., 819 F.3d 1136, 1147 (9th Cir. 2016). But the suggestion that Rule 23 imbues plaintiffs with an absolute right to keep fighting even after a defendant has surrendered cannot be reconciled with the Rules Enabling Act, which states that the rules “shall not abridge, enlarge or modify any substantive right,” and Rule 82, which states that the rules “do not extend … the jurisdiction of the district courts.” 28 U.S.C. § 2072(b); Fed. R. Civ. P. 82. Indeed, several of the Supreme Court’s recent class action decisions have hinged on the fact that Rule 23 cannot be interpreted or applied in a way that affects substantive rights. See Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2561 (2011) (“The Court of Appeals believed that it was possible to replace such proceedings with Trial by Formula…. We disapprove that novel project. Because the Rules Enabling Act forbids interpreting Rule 23 to ‘abridge, enlarge or modify any substantive right,’ a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.”); see also Am. Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304, 2319 & n.5 (2013) (explaining that the Federal Arbitration Act’s statutory “command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims.”). Using Rule 23 to allow a plaintiff to pursue a moot claim would run headlong into that well-reasoned, well-settled precedent.
The panel suggested in passing that the plaintiff may not have been made whole because the defendant’s deposit did not account for the possibility that the plaintiff might one day receive a service award in recognition of its work on behalf of the putative class. SeeOpinion at 8-9 (“Fulton is … is saying that its suit is about more than the statutory damages to which it believes it is entitled; it is also about the additional reward that it hopes to earn by serving as the lead plaintiff for a class action.”); id. at 11-12 (“[W]e cannot say as a matter of law that that the unaccepted offer was sufficient to compensate plaintiff Fulton for its loss of the opportunity to represent the putative class.”). But that dicta ignores that the Supreme Court long ago made clear that “an interest that is merely a ‘byproduct’ of the suit itself”—such as a service award for a class representative—does not satisfy Article III. Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765, 772 (2000) (holding that the “bounty [that the qui tam relator] will receive if the suit is successful” does not in and of itself satisfy Article III); see also Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 108 (1998) (“reimbursement of the costs of litigation cannot alone” satisfy Article III); Lewis v. Continental Bank Corp., 494 U.S. 472, 480 (1990) (an “interest in attorney’s fees is, of course, insufficient to create an Article III case or controversy where none exists on the merits of the underlying claim”). Moreover, when the defendant deposited the maximum allowable statutory damages under the TCPA, the plaintiff had not even sought—let alone obtained—class certification. In any event, incentive awards are a creature not of Rule 23, but of settlement agreements and judicial discretion.
Although it found that the plaintiff still has standing to pursue its claim, the panel did note that, “if it turns out that the named plaintiff really has no personal stake in the litigation, the district judge might well question whether it is the appropriate champion for the class.” But a court has no jurisdiction over the claims of a plaintiff who “really has no personal stake in the litigation.” A plaintiff’s lack of standing should be resolved in the context of a motion to dismiss under Rule 12(b)(1), not a motion for class certification under Rule 23 after protracted litigation by a plaintiff with “no personal stake.”