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June 23, 2015

Are You Pulling Out All The Stops to Protect Your Company From a TCPA or FDCPA Class Action?  You Should Consider A Rule 68 Offer Of Judgment.

The scenario:  Your company is sued by a class action plaintiffs’ firm that trolls for named plaintiffs in putative class action lawsuits pursuant to, among other statutes, the Telephone Consumer Protection Act or the Fair Debt Collection Practices Act.  If your company engages in telemarketing, fax advertising, or debt collection, it could be the target of such a lawsuit. 

The problem:  Even a single fax or phone call in the hands of a party willing to act as a named plaintiff could result in a huge headache for your company.  It only takes one plaintiff for a putative class action to be commenced, at which point your company could be compelled to respond to extensive discovery in an effort by plaintiffs’ counsel to uncover hundreds, or thousands, of other members of the “class.”  Although statutes such as the TCPA and FDCPA provide for small penalties for each individual plaintiff, a large class can mean your company risks liability in the millions, especially since statutory damages are calculated on a per violation basis.

The procedural move:  The best move is to make all efforts to avoid the commencement of a lawsuit altogether by ensuring that your company takes all necessary precautions to comply with the law – both the statute itself and, if applicable, the FCC regulations.  If a lawsuit is commenced, the best course of action is often to attempt to get out of it right away.  In the context of a class action, one litigation tool that may be overlooked is a Rule 68 Offer of Judgment.  This is an offer to settle the claim of the single named plaintiff alone even before you answer the complaint.

The potential benefit:  If the Offer of Judgment offers the named plaintiff all of the relief that it could hope to achieve in the litigation (i.e., the maximum statutory penalty for the individual plaintiff), a court may hold that the named plaintiff no longer has standing to pursue the action, in which case it is rendered moot and is dismissed.

Sounds crazy, right?  Think again.  There is a circuit split in this country, with some federal courts finding that a Rule 68 Offer can render the case moot, so long as it offers complete relief to the named plaintiff.  If the named plaintiff rejects the offer or ignores it, some courts have concluded that there is no Article III standing because the plaintiff has succeeded in obtaining the most it could ever hope to individually gain from the lawsuit.  In other words, why should the plaintiff be permitted to continue to litigate when the defendant is willing to give the plaintiff everything it could possibly hope to recover? 

Other courts, however, have concluded that merely offering to settle a named plaintiff’s claims does not in and of itself divest the court of jurisdiction.  Still other courts have held that although jurisdiction over an individual plaintiff may be divested with an Offer of Judgment, a putative class action presents a different scenario because, some courts have held, the named plaintiff has an independent interest in pursuing judgment for the “class.” 

The Second Circuit Court of Appeals recently addressed this issue in an attempt to bring some guidance to the district courts in the Second Circuit.  Tanasi v. New Alliance Bank, No. 14-1389 slip op. (2d Cir. May 21, 2015).  In Tanasi, the Court acknowledged the confusion on this issue and ultimately held that an “unaccepted Rule 68 offer alone does not render a plaintiff’s individual claims moot before entry of judgment against the defendants.”  Id. at *3 (emphasis added).  The Court went on to hold that absent agreement among the parties, judgment following an offer of judgment should not be entered against a defendant “if it does not provide complete relief.”  Id. at 12 (emphasis added).  What exactly does this mean?  Does it mean that if the offer does provide “complete relief,” then the court should enter judgment in favor of the plaintiff and dismiss the remainder of the case?  That question was not answered.

The Tanasi Court also specifically declined to take on the question of whether a plaintiff can still have an interest in a case by claiming that it has an interest in prosecuting or helping to prosecute the claims of a purported class.  That question, however, is likely to soon be considered by the United States Supreme Court.  Within days of the Tanasi decision, the Supreme Court granted certiori in a case appealed from the Ninth Circuit that addresses this very question.  Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014) cert granted sub nom. Campbell-Ewald Co. v. Gomez, 2015 246885 (U.S. May 18, 2015) (No. 14-857).  The Supreme Court’s decision on this issue will likely prove dispositive in the many cases across the country that are currently in a holding pattern given the uncertain state of the law.                 

In the meantime, be sure to consider a Rule 68 Offer of Judgment when your company is faced with a putative class action lawsuit.  In some jurisdictions, at least for the time being, it may prove to be an effective early exit tool.

 

This article is for educational and informational purposes only and should not be considered legal advice.  The article may be considered attorney advertising under applicable state laws.




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