On April 7, 2014, the United States District Court in the Eastern District of Virginia declined to dismiss a class action under the Fair Credit Reporting Act as moot because it could not conclude with certainty that an offer of judgment under Rule 68 afforded complete relief.

In Milbourne v. JRK Residential America, LLC, the defendant made two offers of judgment to the plaintiff under Rule 68 of the Federal Rules of Civil Procedure.  The second offer of judgment, which was larger than the first, offered the plaintiff $22,000 plus any prejudgment interest, attorneys’ fees, and costs to which the plaintiff may be entitled.  This offer included $2,000 in statutory damages – arguably more than the plaintiff could recover for his two claims – and $20,000 in punitive damages.  The defendant argued plaintiff’s possible punitive damages are limited to no more than ten times the statutory damages, thus full relief was offered.  When the plaintiff declined the offer, the defendant claimed the plaintiff’s decision to decline the offer rendered the action moot.

Although the Court recognized that a plaintiff’s failure to accept an offer of judgment that includes complete relief could render an action moot, it was unable to conclude that the relief the defendant offered was complete.  Because there is no cap on punitive damages under the FCRA, the Court held that it was not possible to determine whether the punitive damage offer constituted full relief.  According to the Court, although a plaintiff may be unlikely to recover punitive damages greater than ten times the statutory damages, no clear cut mathematical limit on punitive damages exists.  Because the Court could not determine the punitive damages to which the plaintiff might be entitled with certainty, it could not conclude that the offer of judgment constituted complete relief.

Defendants in FCRA class action cases face the possibility of significant exposure given the potential for large class sizes and the availability of both statutory damages up to $1,000 and punitive damages that are uncapped.  The Court’s decision casts doubt on the effectiveness of offers of judgment as a tool to bring FCRA cases to an early resolution, given the open-ended nature of punitive damage claims.