United States District Court, E.D. Arkansas, Western Division
LESLIE EPPS and WILLIAM EPPS individually and on behalf of all others similarly situated, Plaintiffs,
WAL-MART STORES, INC., Defendant.
OPINION AND ORDER
J. LEON HOLMES, District Judge.
On February 5, 2015, Leslie Epps and William Epps commenced this putative class action against Wal-Mart Stores, Inc., in the Circuit Court of Pulaski County, Arkansas, alleging that Wal-Mart failed to credit the plaintiffs for the full amount of insurance proceeds that it received for services provided to the plaintiffs at the Wal-Mart Vision Center. The plaintiffs seek relief on theories of conversion, unjust enrichment, and violations of the Arkansas Deceptive Trade Practices Act. Leslie and William Epps claim damages of $55.00 and $35.00, respectively. The complaint also seeks damages for a class of similarly-situated plaintiffs. On March 10, 2015, Wal-Mart removed the action to this Court.
On March 30, 2015, Wal-Mart sent an offer of judgment to the plaintiffs under Federal Rule of Civil Procedure 68. Wal-Mart offered judgment to Leslie Epps in the amount of $90.00 and to William Epps in the amount of $107.00. Wal-Mart also offered pre- and post-judgment interest as well as a reasonable amount of attorneys' fees and costs accrued through the date of the offer in amounts to be determined by agreement or by the Court. On the same day, Wal-Mart filed a motion to dismiss, arguing that the offer of judgment provides the complete relief that the named plaintiffs seek, that the named plaintiffs' claims are moot, and that the entire action must be dismissed for lack of an Article III case or controversy. The plaintiffs have filed a response, moved to strike Wal-Mart's offer of judgment, and moved to certify the class. For the reasons explained below, Wal-Mart's motion to dismiss is denied, the plaintiffs' motion to strike is granted, and the plaintiff's motion to certify the class is held in abeyance.
Federal Rule of Civil Procedure 12(b)(1) requires dismissal of claims over which the federal court lacks subject-matter jurisdiction. In addition, Article III, § 2, of the United States Constitution limits federal court jurisdiction to actual cases or controversies. See Genesis Healthcare Corp. v. Symczyk, ___ U.S. ___, 133 S.Ct. 1523, 1528 (2013); Damasco v. Clearwire Corp., 662 F.3d 891, 894 (7th Cir. 2011). To invoke personal jurisdiction, a plaintiff must show that he has a personal stake in the outcome at all stages of the action. Genesis, 133 S.Ct. at 1528; Damasco, 662 F.3d at 894-95. "If an intervening circumstance deprives the plaintiff of a personal stake in the outcome of the lawsuit, ' a[t] any point during litigation, the action can no longer proceed and must be dismissed as moot." Genesis, 133 S.Ct. at 1528 (quoting Lewis v. Continental Bank Corp., 494 U.S. 472, 477-48 (1990) (internal quotation marks omitted)).
March v. Medicredit, Inc., Case No. 4:13CV1210 TIA, 2013 WL 6265070, at *1 (E.D. Mo. Dec. 4, 2013).
Wal-Mart argues that the action is moot because it has offered the named plaintiffs a Rule 68 judgment in full satisfaction of their individual claims and because no motion for class certification had been filed when Wal-Mart extended the offers. The plaintiffs have responded by filing a motion for class certification and arguing that an unaccepted Rule 68 offer in full satisfaction of their individual claims cannot moot a putative class action, and in any case, they argue, Wal-Mart's offer fails to satisfy the entire demands of their individual claims because Wal-Mart has not offered punitive damages, injunctive relief, attorneys' fees, or an incentive award for acting as a class representative.
Under Federal Rule of Civil Procedure 68, "a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service." Fed.R.Civ.P. 68(a). "An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs." Fed.R.Civ.P. 68(b).
Here, the plaintiffs did not accept Wal-Mart's offer within the 14-day period specified in Rule 68(a), so under Rule 68(b), Wal-Mart's "unaccepted offer is considered withdrawn" and is "not admissible." Fed.R.Civ.P. 68(b). However, contrary to Stein v. Buccaneers Ltd. P'ship, 772 F.3d 698, 702 (11th Cir. 2014), and Diaz v. First Am. Home Buyers Prot. Corp., 732 F.3d 948, 954 (9th Cir. 2013), both following Genesis Healthcare, 133 S.Ct. at 1533-34 (Kagan, J., dissenting), applying this basic contract principle to the Rule 68 offer does not dispose of the Article III question regarding whether the action is moot. Hendricks v. Inergy, L.P., Case No. 4:12CV00069 JLH, 2013 WL 6984634, at *3-4 (E.D. Ark. July 18, 2013). Rather, what creates the mootness issue is the offer itself, which seeks "to provide every form of individual relief the claimant seeks in the complaint." Id. at *4 (quoting Hrivnak v. NCO Portfolio Mgmt., Inc., 719 F.3d 564, 568 (6th Cir. 2013)).
Judge Schiltz has concisely summarized the current state of the law:
Courts agree that, if the class has been certified, the fact that the named plaintiff's individual claim becomes moot does not necessarily moot the entire case. See Sosna v. Iowa, 419 U.S. 393, 401-02 (1975). Courts also agree that, if the named plaintiff's claim becomes moot after class certification has been denied, he may pursue an appeal of the denial of his class-certification motion-necessarily implying that the entire case is not rendered moot. See Deposit Guar. Nat'l Bank v. Roper, 445 U.S. 326, 339-40 (1980); see also Geraghty, 445 U.S. at 404 ("an action brought on behalf of a class does not become moot upon expiration of the named plaintiff's substantive claim, even though class certification has been denied"). Finally, courts agree that if the individual claim of the named plaintiff becomes moot for some reason other than a Rule 68 offer before the named plaintiff moves to certify the class, the entire case is rendered moot. See Shipman v. Mo. Dep't of Family Servs., 877 F.2d 678, 682 (8th Cir.1989). What courts do not agree upon is the question presented in this case: When a Rule 68 offer is made to a putative class representative before he moves to certify the putative class, and that Rule 68 offer includes all of the relief to which the putative class representative is personally entitled but no relief for the other members of the putative class, does the Rule 68 offer moot the entire case?
Harris v. Messerli & Kramer, P.A., Case No. CIV 06CV4961 PJS/JJG, 2008 WL 508923, at *2 (D. Minn. Jan. 2, 2008). Because Wal-Mart's offers apparently satisfy the named plaintiffs' entire demands,  the question presented in Harris is identical in all relevant respects to that presented here. As discussed infra, subsequent to Harris the greater weight of authority has found that a Rule 68 offer of judgment made before a motion for class certification that would provide full satisfaction of the named plaintiff's individual claims does not moot a class action.
Wal-Mart relies principally, although not exclusively, on the Seventh Circuit's opinion in Damasco. 662 F.3d 891. There, the plaintiff filed a putative class action against Clearwire Corporation in an Illinois state court, alleging that Clearwire violated the law by sending unsolicited text messages to cell phone users. Id. at 893. Within a month, Clearwire offered to settle the case by paying the plaintiff and up to 10 other people $1, 500 for each text message received, to pay court costs, and to stop sending unsolicited test messages to mobile subscribers. The plaintiff did not respond to the offer, and four days later, Clearwire removed the suit to federal court. The plaintiff moved for class certification within a few hours of removal, and on the following day, Clearwire moved to dismiss the case, arguing that its settlement offer stripped the plaintiff of his personal stake in the case's outcome and mooted the action. Id. The plaintiff replied, among other things, that the defendants should be prohibited from mooting a potential class action by "buying off" named plaintiffs through involuntary settlements. Id. The district court held that "a complete offer of settlement made prior to the filing for class certification moots the plaintiff's claim, " id. at 894, and it dismissed the case. On appeal, following Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th Cir. 1994), the Seventh Circuit declined to adopt what it characterized as a potential class-action exception to the mootness doctrine, which would allow a plaintiff to prevent a claim from being mooted by moving to certify a class after receiving an offer in full satisfaction of his individual claim. Damasco, 662 F.3d at 895-96. The court held that where complete relief has been offered to the individual plaintiff, a complaint's identification of the suit as a class action does not create an Article III case or controversy. Id. at 896. The court went on to address the concern that a plaintiff could be "bought off" by explaining that a plaintiff could move to certify the class at the same time that he files his complaint and that the motion would protect a putative class from such a "pick off" attempt. Id. In response to the argument that this solution would provoke plaintiffs to move for certification prematurely, the court stated that plaintiffs could also ask the district court to delay its ruling to provide time for additional discovery or investigation. Id. The court further explained that this procedure is consistent with Federal Rule of Civil Procedure 23(c)(1)(A), which directs courts to determine whether to certify a class "at an early practicable time." Id.
The Third, Fifth, Ninth, Tenth, and Eleventh Circuits have disagreed with the Seventh Circuit on the question of whether a defendant's offer of complete relief to the named plaintiff prior to a motion for class certification moots the action. See Stein, 772 F.3d at 702-07 (holding that an unaccepted pre-motion-to-certify Rule 68 offer does not moot a named plaintiff's claim because the unaccepted offer was "considered withdrawn" under Rule 68(b) and alternatively holding that even if the named plaintiff's claim was mooted, the class claims would remain alive so long as the plaintiff acts diligently to pursue those class claims because subsequent certification of the class relates back to the filing of the complaint); Mabary v. Home Town Bank, N.A., 771 F.3d 820, 824 (5th Cir. 2014) (holding that where the plaintiff timely and diligently pursues class certification, an unaccepted pre-motion-to-certify Rule 68 judgment in full satisfaction of the named plaintiff's individual claims does not moot the action because the "relation back" exception applies and prevents a defendant from "picking off" a named plaintiff before the court has the opportunity to rule on class certification), opinion withdrawn (Jan. 8, 2015); Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1091-92 (9th Cir. 2011) (holding that an unaccepted pre-motion-to-certify Rule 68 offer of judgment in full satisfaction of the named plaintiff's individual claims does not moot the claims of the class because subsequent certification relates back to the filing of the complaint); Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239, 1250 (10th Cir. 2011) (holding "that a named plaintiff in a proposed class action for monetary relief may proceed to seek timely class certification where an unaccepted offer of judgment is tendered in full satisfaction of the named plaintiff's individual claim before the court can reasonably be expected to rule on the class certification motion."); Weiss v. Regal Collections, 385 F.3d 337, 346-48 (3d Cir. 2004), as amended (Oct. 22, 2004) (applying the "relation back" doctrine due to the potential for "picking off" named plaintiffs and holding that where the named plaintiff has not unduly delayed seeking class certification, an unaccepted pre-motion-to-certify Rule 68 offer of full relief does not moot the action for class relief).
Wal-Mart also argues that two Supreme Court cases, Genesis Healthcare, 133 S.Ct. 1523, and Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345, 185 L.Ed.2d 439 (2013), lead to the conclusion that an offer of full satisfaction of a named plaintiff's claim before a class certification motion is filed moots the action and requires that it be dismissed. The question presented in Genesis Healthcare was whether a collective action brought under the Fair Labor Standards Act remained justiciable when the lone individual plaintiff's claim became moot. 133 S.Ct. at 1526. The Court declined to reach the question of whether an offer of full satisfaction of the named plaintiff's individual claim would moot the action in that context, stating, "While the Courts of Appeals disagree whether an unaccepted offer that fully satisfies a plaintiff's claim is sufficient to render the claim moot, we do not reach this question, or resolve this split, because the issue is not properly before us." Id. at ...