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When Will a Rule 68 Offer of Judgment Kill a Class Action?

On June 19, 2013 by Schnader in Finance

By Monica Platt

According to the Sixth Circuit, a defendant may only moot a plaintiff’s claim through a Rule 68 offer of judgment if the offer satisfies all of plaintiff’s claims, not only those the defendant believes are viable. In Hrivnak v. NCO Portfolio Management, Inc., defendant NCO claimed that its offer of judgment mooted plaintiff’s individual claims (and therefore the putative class action) because the offer provided all relief the defendant believed would be available. Hrivnak had filed, on behalf of himself and a class of similarly situated individuals, claims under the Fair Debt Collections Practices Act and the Ohio consumer protection law seeking class relief and statutory, compensatory, and punitive damages exceeding $25,000, in addition to injunctive and declaratory relief. Defendant NCO offered $7,000, and argued that the only relief available under the FDCPA and Ohio law is a statutory damages award of $1,000 plus attorneys fees and costs.

NCO argued that because it offered Hrivnak all relief it believed he could possibly obtain, his claim was moot and therefore the uncertified class claim was moot as well. The Sixth Circuit, on the other hand, found that mootness only occurs if an offer of judgment provides all relief sought, explaining that the issue is a defendant’s willingness to meet the plaintiff on his terms, not the legitimacy of a plaintiff’s claims or reasonableness of defendant’s offer.

The court distinguished between the merits of a claim and the existence of a live controversy, and found that a bad theory of liability or damages does not undermine the court’s power to adjudicate a claim. Only when a plaintiff’s claim is so insubstantial that it fails to present a federal controversy would an offer of judgment failing to address the claim moot a case. Ultimately, the court found that while Hrivnak’s claims might be weak, such an argument goes to the merits of the claims, not jurisdiction.

An effective offer of judgment can have far reaching implications in some class and collective actions. Recently, the Supreme Court considered a case brought as a collective action under the Fair Labor Standards Act and found that because the defendants’ Rule 68 offer of judgment (that plaintiff did not accept) mooted plaintiff’s claims and no other claimants had opted in, the district court lacked subject matter jurisdiction over the case, noting that collective allegations in a complaint cannot save a suit from mootness once the individual claim is satisfied. See Genesis Healthcare Corp. v. Symczyk, 133 S Ct. 1523 (2013). Further, at least one district court has found that a pre-complaint offer of relief can moot a named plaintiff’s claims, and therefore a class action. See Datascope Analytics, LLC v. Comcast Cable Communications, Inc., No. 13-608, 2013 U.S. Dist. LEXIS 70215 (E.D. Pa. May 17, 2013). However, defendants must ensure that they do not confuse the relief possible with the relief sought when making such offers.