Friday, April 25, 2014

FYI: 9th Cir Holds Unaccepted Rule 68 Offer of Judgment Does Not Render Claim Moot, Even If Offer Would Fully Satisfy the Claim

Saturday, December 14, 2013

Acknowledging a circuit split on the issue, the U.S. Court of Appeals for the Ninth Circuit recently held that an unaccepted Fed. R. Civ. P. 68 offer of judgment is insufficient to render the claim moot, even if the offer of judgment would fully satisfy a plaintiff's claim. 

A copy of the Court's opinion is available at:

Plaintiff, the owner of a home warranty plan, filed a class action complaint against the company providing the warranty alleging the company refused to make timely repairs, used substandard contractors and wrongfully denied claims.  Plaintiff asserted state law claims for unfair competition, misrepresentation, concealment, breach of contract and breach of the implied covenant of good faith and fair dealing. 

The district court dismissed Plaintiff's claims for concealment, false promise, unfair competition and violation of California consumer laws under Fed. R. Civ. P. 12(b)(6).  The district court also entered an order denying class certification.  Thereafter, the company made a Rule 68 offer of judgment on Plaintiff's remaining individual claims – misrepresentation, breach of contract and breach of the implied covenant of good faith and fair dealing.  The company offered to allow judgment entered against it and in favor of Plaintiff in the total amount of $7,019.21 plus costs. 

When Plaintiff did not accept the offer, the company moved to dismiss those claims for lack of subject matter jurisdiction.  The company argued that the matter should be dismissed as moot because Plaintiff refused to accept an offer for full satisfaction of the amount she could possibly recover at trial. The company cited to opinions from the Seventh and Fourth Circuits where those courts held that "once a defendant offers to satisfy the plaintiff's entire demand, there is no dispute over which to litigate, and a plaintiff who refuses to acknowledge this loses outright, under Rule 12(b)(1), because he has no remaining stake." 

The district court agreed with the company that the unaccepted Rule 68 offer rendered Plaintiff's remaining claims moot because the offer would have fully satisfied Plaintiff's remaining claims.  The district court acknowledged that Plaintiff also sought declaratory and injunctive relief, which was not covered in the Rule 68 offer, but determined that she was not entitled to such relief.  Having determined that the company's offer would have given Plaintiff "complete relief," and relying on the rulings from the Seventh and Fourth Circuits, the district court dismissed Plaintiff's claims pursuant to Rule 12(b)(1).

On appeal, the Ninth Circuit clarified the issue: whether an unaccepted Rule 68 offer that would have fully satisfied a plaintiff's claim is sufficient to render the claim moot. 

The Ninth Circuit observed that neither it nor the United States Supreme Court had previously addressed the issue. Although the Ninth Circuit had addressed the application of an unaccepted Rule 68 offer in class actions, and an agreement to accept everything the other party has demanded, it deemed the issue in this appeal "an open question in this circuit."  The Ninth Circuit concluded that although a majority of courts and commentators appear to agree with the Seventh Circuit that an unaccepted offer will moot a plaintiff's claim, "four justices of the U.S. Supreme Court, as well as the Solicitor General of the U.S., embraced a contrary position" in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 1528-29 (2013).  Although the majority in Genesis Healthcare did not address the issue, four justices addressed it in the dissent and concluded that "an unaccepted offer of judgment cannot moot a case." 

The Ninth Circuit quoted extensively from, and relied heavily on, the dissent in Genesis Healthcare:

"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.  A case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.  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. Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that an unaccepted offer is considered withdrawn.  So assuming the case was live before – because the plaintiff had a stake and the court could grant relief – the litigation carries on, unmooted."

Relying on the dissent from Genesis Healthcare and the "language, structure and purposes of Rule 68," the Ninth Circuit held that an unaccepted Rule 68 offer that would have fully satisfied a plaintiff's claim does not render that claim moot.  The Ninth Circuit vacated the district court's dismissal of Plaintiff's claims and remanded the matter to the district court. 

Eric Tsai
McGinnis Wutscher Beiramee LLP
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