Commercial Litigation and Arbitration

Rule 68 Offer of Judgment Moots Action Only If It Is Unequivocal and Unconditional in Offering Complete Relief to the Plaintiff

Fariasantos v. Rosenberg & Assocs., LLC, 2015 U.S. Dist. LEXIS 24179 (E.D. Va. Feb. 27, 2015):

This case arises from debt-collection letters sent by Defendant Rosenberg & Associates, LLC ("R&A") that include disclosures in alleged violation of the Fair Debt Collections Practices Act (the "FDCPA"). Plaintiff Claudio Fariasantos ("Fariasantos") received one of the letters and brought suit on behalf of himself and a class of other Virginia consumers who received such letters. R&A does not contest liability in this case, (Docket No. 68, SI 8, at 3), and this Court has certified a class of all Virginia residents who received identical letters in an attempt to collect a home loan debt that was incurred primarily for personal, household, or family purposes during the one year period prior to the filing of the Complaint in this matter, (Docket No. 64).

Although the parties stipulate to liability, there is disagreement as to the proper amount of damages and whether the case has been rendered moot by operation of an Offer of Judgment that R&A served on Fariasantos on June 16, 2014. With [*3]  respect to damages, R&A submits a motion for summary judgment regarding its net worth based upon produced documentation, a declaration from R&A's sole member and owner, Ms. Diane S. Rosenberg ("Rosenberg"), and a summary sheet verifying Rosenberg's calculations prepared by Klausner Bendler + Associates, P.C. ("Klausner Bendler"). Fariasantos, on the other hand, moves to strike the net worth information provided by R&A. Fariasantos contends, assuming its motion is successful, that R&A has failed to provide sufficient evidence to carry its burden of establishing a net worth. As a result, Fariasantos believes that the class of consumers he represents is entitled to the maximum statutory damages available: $500,000.


I. Subject Matter Jurisdiction

The Court first addresses R&A's contention that its Rule 68 Offer of Judgment has rendered this action moot and deprived the Court of subject matter jurisdiction. Because "the exercise of judicial power depends upon the existence of a case or controversy," Liner v. Jafco, Inc., 375 U.S. 301, 306 n.3 (1964), "an actual controversy must be extant at all stages of review" to retain the Court's continued oversight, Arizonans for Official English v. Arizona, 520 U.S. 43, 67 (1997) (quoting Preiser v. Newkirk, 422 U.S. 395, 401 (1975)). If the plaintiff "receives the relief he or she sought to obtain through [*4]  the claim," for example, the case can become moot. Simmons v. United Mortg. & Loan Inv., LLC, 634 F.3d 754, 763 (4th Cir. 2011). That is because there remains no case or controversy and the Court no longer has subjection matter jurisdiction. Id.

This Court has previously held that one way in which a plaintiff can receive complete relief is the tender of an offer of judgment under Rule 68. Milbourne v. JRK Residential Am., LLC, 2014 WL 1369378, *3 (E.D. Va. 2014). Federal Rule of Civil Procedure 68 provides that a defendant may make "an offer to allow judgment on specified terms." If the offer is not timely accepted, it may lapse. See Bradford v. HSBC Mortg. Corp., 280 F.R.D. 257, 260 (E.D. Va. 2012). According to current Fourth Circuit precedent, if the Rule 68 offer "unequivocally offers a plaintiff all of the relief [h]e sought to obtain, the offer renders the plaintiff's action moot." Warren v. Sessons & Rogers, P.A., 676 F.3d 365, 371 (4th Cir. 2012) (internal quotations omitted). This theory is not based on the idea that the plaintiff actually obtained the full amount of damages pled, but rather that the plaintiff "could have obtained through acceptance of the offer all that he could have hoped to obtain through litigation." Amrhein v. Regency Mgmt. Servs., LLC, 2014 U.S. Dist. LEXIS 36477, *13 (D. Md. 2014). As the Seventh Circuit put it, "You cannot persist in suing after you've won." Greisz v. Household Bank (Illinois), N.A., 176 F.3d 1012, 1015 (7th Cir. 1999).

Yet, courts have been increasingly reticent to adopt or extend this theory in the wake of Justice Kagan's dissent in Genesis Healthcare Corp. v. Symczyk. 133 S. Ct. 1523 (2013). In Symczyk, the Supreme Court noted a disagreement between the Courts of Appeals as to [*5]  "whether an unaccepted offer that fully satisfies a plaintiff's claim is sufficient to render the claim moot," but the majority did not ultimately reach or resolve the question. Id. at 1528-29. Writing for four dissenters, however, Justice Kagan made their view quite clear:

   [A]n unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer -- however good the terms -- her interest in the lawsuit remains just what it was before. And so too does the court's ability to grant her relief. An unaccepted settlement offer -- like any unaccepted contract offer -- is a legal nullity, with no operative effect. ... So a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don't try this at home.

Symczyk, 133 S. Ct. at 1533-34 (Kagan, J., dissenting). Although it appears that a majority of courts disagree, see Diaz v. First Am. Home Buyers Prot. Corp., 732 F.3d 948, 953 (9th Cir. 2013) (adopting the position set out in the Symczyk dissent, but noting that "the majority of courts and commentators appear to agree with the Seventh Circuit that an unaccepted offer will moot a plaintiff's claim"), even the Seventh Circuit has begun to question its own approach, see Scott v. Westlake Services LLC, 740 F.3d 1124, 1126 n. 1 (7th Cir. 2014), and limit the extent of its rule, see Smith v. Greystone Alliance, LLC, 772 F.3d 448, 450-51 (7th Cir. 2014) ("A court can't [*6]  decide the merits and then dismiss for lack of jurisdiction. ... An offer that the defendant or the judge believes sufficient, but which does not satisfy the plaintiff's demand, does not justify dismissal.'"). That said, it is for the Fourth Circuit, and not this Court, to decide whether the rule set out in Warren remains good law.

In any event, R&A's offer would fail even assuming Warren's continued validity. For the theory's rationale to hold, a Rule 68 offer must be complete, unequivocal, and unconditional. See Melbourne, 2014 WL 1369378, at *3. Although a specific sum is not necessary, id., "the plaintiff must know unequivocally what is being offered in order to be responsible for refusing such offer," Warren, 676 F.3d at 371. Rule 68 is meant to encourage settlement, not to short-circuit the judicial process. R&A's "offer of judgment" attempts the latter.

R&A's offer of judgment employs conditional language that encompasses the controversy rather than resolving it. Because the FDCPA allows statutory damages for class members of 1.00% of R&A's net worth, see 15 U.S.C. § 1692k (A) (2) (B), R&A offers all as-yet-unnamed class members 1.01% of R&A's net worth. (Docket No. 68-5.) Yet, this assertedly "complete" offer of relief to the class-to-be is almost entirely unwound in the adjacent [*7]  sentence which states that: "Said amount is to be agreed by the parties or, if they are unable to agree, as determined by the Court." Id. Far from providing a complete, unequivocal, and unconditional offer of judgment, that sentence merely summarizes the steps remaining in the litigation. In essence, R&A's offer of judgment provides an invitation to settle or, that failing, judicial recourse.1 Because the offer was "predicated on what the district court as fact finder might or might not do" and "provided no guarantee that [Fariasantos] would not challenge the veracity of [R&A's submissions]," the Court cannot find that the offer served to deprive the court of subject matter jurisdiction by mooting the case and eliminating the controversy. Warren, 676 F.3d at 372-73.2

1   If the defendant's net worth were beyond reasonable factual dispute, perhaps such facially "conditional" language could be less problematic than that proposed here. See, e.g., Johnson v. Midwest ATM, Inc., 881 F. Supp. 2d 1071, 1074 (D. Minn. 2012) (finding an offer for "1.01 per centum of [Defendant's] net worth as determined by the Court" sufficiently definite where the Court found that the plaintiff "[could not] claim he is unable to determine the lesser of $500,000 or 1.01% of [the defendant's] net worth" based on [*8]  the evidence in the record).

2   As in Warren, the Court "need not determine whether an offer of attorney's fees *to date' can render such a claim moot" because R&A's offer of statutory damages alone failed to moot the claim. 676 F.3d at 371 n.3.

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