Friday, April 25, 2014

FYI: 9th Cir Holds Unaccepted Offer of Judgment That Would Satisfy Pl's Claims Does Not Render Claims Moot

Thursday, October 17, 2013

The U.S. Court of Appeals for the Ninth Circuit recently held that an unaccepted offer of judgment under Federal Rule of Civil Procedure 68 that would fully satisfy the plaintiff's claims did not render those claims moot. 

A consumer ("consumer") sued the provider of her home warranty plan ("Warranty Provider"), arguing that Warranty Provider refused to make timely repairs, used substandard contractors and wrongfully denied claims. 

The lower court dismissed several of her claims.  Then, Warranty Provider made an offer of judgment to the borrower pursuant to Federal Rule of Civil Procedure 68 ("Rule 68") as to the remainder.  The consumer did not accept the offer, and Warranty Provider moved to dismiss the remaining claims for lack of subject matter jurisdiction. 

The lower court granted Warranty Provider's motion, and the consumer appealed. 

On appeal, the Ninth Circuit began by surveying the current case law regarding whether an unaccepted Rule 68 offer that would fully satisfy a plaintiff's claim renders that claim moot.  It explained that the Supreme Court has yet to squarely address the issue, and that the Circuit Courts to do so are divided on the question. 

However, the Ninth Circuit noted that "[a]lthough the majority of courts and commentators appear to agree...that an unaccepted offer will moot a plaintiff's claim, four justices of the Supreme Court...embraced a contrary position" in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 1528-29 (2013) ("Genesis Healthcare"). 

As you may recall, the majority in Genesis Healthcare did not reach the issue of the effect of an unaccepted Rule 68 offer on a plaintiff's claims.  The dissenting justices, however, indicated that "[a]n unaccepted settlement offer - like any unaccepted contract offer- is a legal nullity, with no operative effect."  Id. at 1533-34 (Kagan, J., dissenting). 

The dissenting justices in Genesis Healthcare also scrutinized the language of Rule 68, finding that "[t]he text of the Rule contemplates that a court will enter judgment only when a plaintiff accepts an offer," but "provides no appropriate mechanism for a court to terminate a lawsuit without the plaintiff's consent."  Id. at 1536. 

The Ninth Circuit followed the reasoning of the dissenting justices in Genesis Healthcare to hold that "an unaccepted Rule 68 offer that would have fully satisfied a plaintiff's claim does not render that claim moot." 

Accordingly, the Ninth Circuit vacated the lower court's judgment, and remanded the matter for further proceedings. 

Eric Tsai
McGinnis Wutscher Beiramee LLP
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