Saturday, July 8, 2017

FYI: 7th Cir Rules Depositing Named Plaintiff's Full Monetary Relief With Trial Court Did Not Moot Putative Class Action

The U.S. Court of Appeals for the Seventh Circuit recently concluded that a putative class representative's unaccepted deposit of payment with the trial court under Fed. R. Civ. P. 67 by the defendant does not moot the representative's individual claim or disqualify him from serving as a class representative. 


The Seventh Circuit described the issue as a variation of the one presented in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016).  As you may recall, in that case, the Supreme Court concluded that an unaccepted settlement offer or offer of judgment does not moot a plaintiff's case.  The specific issue in Campbell-Ewald addressed an offer of judgment under Rule 68. 


In this case, after the plaintiff rejected the defendant's offer of judgment, the defendant deposited with the district court under Rule 67 an amount it believed to be the plaintiff's maximum possible damages plus fees and costs. 


The Seventh Circuit held that the variation in this case produced the same result as in Campbell-Ewald – an unaccepted offer to a putative representative does not moot representative's individual claim or the claims of the class. 


A copy of the opinion is available at:  Link to Opinion


The plaintiff dental company received an unsolicited fax from defendant advertising defendant's dental products.  As you may recall, the federal Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. ("TCPA") generally prohibits unsolicited faxes, unless one of several exceptions applies, such as a previous business relationship or use of certain approved ways to obtain the fax number.  The TCPA also requires the sender to include opt-out notice in clear and conspicuous language. 


The plaintiff filed a complaint against the defendant, seeking statutory damages under the TCPA for the two alleged violations (lack of consent and omission of the opt-out notice), injunctive relief banning future violations, and certification of a class (to be represented by plaintiff) of all those who had similarly received faxes from defendant.


Shortly after plaintiff filed its lawsuit, the defendant made an offer of judgment under Fed. R. Civ. P. 68.  The offer was for $3,005 plus accrued costs, and it included an agreement to have the requested injunction entered against it.  Two days after the defendant made the offer of judgment, the Supreme Court of the United States issued its ruling in Campbell-Ewald, in which it held that "an unaccepted settlement offer or offer of judgment does not moot a plaintiff's case." 


The plaintiff rejected the offer of judgment because it did not provide relief to the other members of the purported class. 


The defendant then filed a motion for leave to deposit $3,600 with the trial court under Rule 67. This sum, according to the defendant, represented what it regarded as the maximum possible damages the plaintiff could receive under the TCPA, plus $595 for fees and costs.  The defendant argued that depositing the plaintiff's maximum damages with the court and acquiescing to the injunction made the plaintiff's claim moot, and that the trial court should thus enter judgment in the plaintiff's favor on the moot claims for $3,600 plus the injunction. 


Over the plaintiff's objection, the trial court granted the defendant's motion.  The plaintiff appealed.


On appeal, the defendant first argued that the Seventh Circuit did not have jurisdiction over the appeal because there was no longer any case or controversy between the parties.  In essence, according to the defendant, the forced settlement mooted the case.


The Court rejected this argument, and noted that even though the trial court entered the order granting the defendant leave to deposit the money with the court, the trial court also ordered relief on the merits.  By issuing an order on the merits, the Seventh Circuit concluded that the defendant did not moot the case.  Instead, according to the Court, this was more akin to accord and satisfaction or payment, both of which are affirmative defenses that would not moot the case altogether.


The Seventh Circuit then analyzed Campbell-Ewald and certain language from that case that may have caused the defendant to believe it could moot the plaintiff's case.  In particular, even though the Supreme Court in Campbell-Ewald did not distinguish between unaccepted Rule 68 settlement offers and other unaccepted settlement or contract offers, it provided the following ruling:


In sum, an unaccepted settlement offer or offer of judgment does not moot a plaintiff's case, so the District Court retained jurisdiction to adjudicate Gomez's complaint. That ruling suffices to decide this case. 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. That question is appropriately reserved for a case in which it is not hypothetical.


The defendant argued that this language offered a roadmap for mooting the plaintiff's claim and destroying the plaintiff's ability to serve as a class representative, and that depositing the money under Rule 67 was the appropriate vehicle for accomplishing those results.


The Seventh Circuit analyzed the specific language of Rule 67, which provides:


(a) Depositing Property. If any part of the relief sought is a money judgment or the disposition of a sum of money or some other deliverable thing, a party—on notice to every other party and by leave of court—may deposit with the court all or part of the money or thing, whether or not that party claims any of it. The depositing party must deliver to the clerk a copy of the order permitting deposit.


(b) Investment and Withdrawing Funds. Money paid into court under this rule must be deposited and withdrawn in accordance with 28 U.S.C. §§ 2041 and 2042 and any like statute. The money must be deposited in an interest-bearing account or invested in a court-approved, interest-bearing instrument.


The Court observed that sections 2041 and 2042 do not give any party an unrestricted right to remove money from the court's registry. Section 2041 permits "the delivery of [deposited] money to the rightful owners upon security, according to agreement of parties, under the direction of the court," and section 2042 begins with the statement that "[n]o money deposited under section 2041 of this title shall be withdrawn except by order of court."


Based on this language, the Seventh Circuit concluded that "Rule 67 is not is a vehicle for determining ownership; that is what the underlying litigation is for."  Thus, according to the Court, defendant did not effectuate the hypothetical mentioned in Campbell-Ewald of "deposit[ing] the full amount of the plaintiff's individual claim in an account payable to the plaintiff."


Because the Court did not find a distinction between trying to force a settlement under Rule 68 and Rule 67, and because the defendant's action of depositing the money with the trial court under Rule 67 did not address the circumstances the Supreme Court in Campbell-Ewald suggested may have produced a different result, the Court concluded that plaintiff's claim was not moot.  As a result, according to the Court, plaintiff was not barred from seeking class treatment.


Finally, the Seventh Circuit concluded that it could not rule as a matter of law that the $3,600 deposited with the trial court was sufficient to compensate plaintiff for its damages and the lost opportunity to represent the putative class.


Accordingly, the Seventh Circuit reversed the trial court's judgment and remanded the matter.




Ralph T. Wutscher
Maurice Wutscher LLP
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