On August 6, the Seventh Circuit Court of Appeals ruled that a defendant’s offer of full relief does not render a plaintiff’s claims moot. The case, Chapman v. First Index, Inc. (No. 14-2773, 2015 U.S. App. LEXIS 13767 (7th Cir. 2015)), was a junk fax case brought pursuant to the Telephone Consumer Protection Act (47 U.S.C. § 227). The Seventh Circuit explicitly overruled Damasco, Thorogood, Rand and “similar decisions to the extent they hold that a defendant’s offer of full compensation moots the litigation or otherwise ends the Article III case or controversy.”
In the underlying case, Chapman sought to represent a class of all persons who received faxes from First Index without their consent. The district court declined to certify this class and further declined to certify another class based on the fax’s failure to contain an opt-out notice. While Chapman’s motion to certify the class of non-consenting recipients was pending, First Index made an offer of judgment under Rule 68 for $3,002, an injunction, and costs, but no attorneys’ fees. The offer of judgment expired after 14 days without Chapman’s acceptance, and First Index moved to dismiss Chapman’s personal claim as moot. The district court granted that motion.
The Seventh Circuit Court of Appeals reversed the dismissal on the mootness grounds noting that “[i]f an offer to satisfy all of the plaintiff’s demands really moots a case, then it self-destructs.” The Court reasoned that if an action is moot, the Court cannot enter judgment, and all it can do is dismiss the case for lack of a case or controversy. Moreover, the Court reasoned that “[s]ettlement proposals designed to decapitate the class upset the incentive structure of the litigation by separating the representative’s interests from those of other class members.”
With respect to the impact an offer of judgment can have on an individual suit, the Court referenced different considerations but did not rule on that issue because the defendant had not raised the argument. While avoiding ruling on that particular issue but perhaps indicating a different result could be considered in the individual plaintiff context, the Court asked why a judge should conduct legal research and write an opinion on “what may be a complex issue when the plaintiff can have relief for the asking[.]” Taking defendant’s specific offer into account, the Court noted that the fleeting nature of defendant’s offer (which was open for 14 days) could not “reasonably be equated to full compensation.”
A similar issue addressed by the Ninth Circuit is currently on appeal to the Supreme Court in the case Campbell-Ewald v. Gomez.