Commercial Litigation and Arbitration

Does an Unaccepted Settlement Offer That Satisfies Plaintiff’s Entire Demand (Not Just What Defendant Feels Case Is Worth) Render Case Moot? — Circuit Split — Importance of Justice Kagan’s Dissent in Genesis Healthcare

Scott v. Westlake Servs. LLC, 2014 U.S. App. LEXIS 1335 (7th Cir. Jan. 23, 2014):

Under this circuit's case law, an unaccepted settlement offer can render the plaintiff's case moot if it gives the plaintiff everything she requested. Damasco v. Clearwire Corp., 662 F.3d 891, 895 (7th Cir. 2011); Gates v. City of Chicago, 623 F.3d 389, 413 (2010). These cases reason that once "the defendant offers to satisfy the plaintiff's entire demand, there is no dispute over which to litigate" and thus no controversy to resolve. Rand v. Monsanto Co., 926 F.2d 596, 597-98 (7th Cir. 1991). In other words, "You cannot persist in suing after you've won." Greisz v. Household Bank (Ill.), N.A., 176 F.3d 1012, 1015 (7th Cir. 1999).1

1   Since most plaintiffs are happy to have defendants surrender, this tactic is most controversial as a means to short-circuit a looming class action or as a means to avoid paying attorney fees and costs in light of Buckhannon Bd. and Care Home, Inc. v. West Virginia Dept. of Health and Human Resources, 532 U.S. 598, 121 S. Ct. 1835, 149 L. Ed. 2d 855 (2001). The circuits are split on whether an unaccepted settlement offer can render a case moot. Compare, e.g., Diaz v. First Am. Home Buyers Protection Corp., 732 F.3d 948, 950 (9th Cir. 2013) (no), with Warren v. Sessoms & Rogers, P.A., 676 F.3d 365, 370 (4th Cir. 2012) (yes). The Supreme Court granted certiorari in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 185 L. Ed. 2d 636 (2013), to resolve this split but ultimately decided that case on narrower grounds. The circuit split remains, but there are reasons to question our approach to the problem. See id. at 1533-34 (Kagan, J., dissenting). Scott does not challenge our circuit's view, so we will continue to await a resolution of the split.

On the other hand, if the defendant offers to pay only what it thinks might be due, the offer does not render the plaintiff's case moot. Gates v. Towery, 430 F.3d 429, 431-32 (7th Cir. 2005). In that situation, the plaintiff still has a stake in the action because she may obtain additional relief if she prevails. The plaintiff's stake is negated only if no additional relief is possible. Id. To hold otherwise would imply that any reasonable settlement offer moots the plaintiff's case or that long-shot claims are moot rather than unlikely to succeed. Id. at 432. "That's not the way things work: A bad theory (whether of liability or of damages) does not undermine federal jurisdiction." Id.

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