Following the Supreme Court’s decision in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), lawyers have debated whether a defendant can defeat a class action by offering full relief to the named plaintiff(s), either before a class is certified, or before a motion for class certification is filed. Last week, the Eleventh Circuit addressed the issue, holding that the case before it was not moot. This case was decided in a particular context that will vary from other cases. But it is not a positive development for defendants seeking to use this approach in the Eleventh Circuit.

In Jeffrey Stein, D.D.S., M.S.D., P.A. v. Buccaneers Ltd. P’ship, No. 13-15417, 2014 U.S. App. LEXIS 22603 (11th Cir. Dec. 1, 2014) , a putative class action alleging violation of the Telephone Consumer Protection Act, the defendant made an offer of judgment to the named plaintiffs under Fed. R. Civ. P. 68 for what it intended to be full relief. The offer included the maximum statutory penalties, plus reasonable costs, entry of a stipulated injunction, and any other relief determined by the court to be necessary to fully satisfy the plaintiffs’ individual claims. The plaintiffs allowed the offer to expire without responding to it, and the defendant then moved to dismiss the case as moot. The district court granted the motion to dismiss, without entering a judgment in favor of the plaintiffs.

Here is a short summary:

1. The court cited the text of Rule 68, which provides that “[a]n unaccepted offer is considered withdrawn” and “[e]vidence of an unaccepted offer is not admissible except in a proceeding to determine costs.” The court concluded that “dismissing a case based on an unaccepted offer as was done here – is flatly inconsistent with the rule.” Id. at *8. The court agreed with Justice Kagan’s dissent in Symczyk on this point. The court noted, however, that “[a] defendant who wishes to offer complete relief need not invoke Rule 68; the defendant can simply offer complete relief, including the entry of judgment,” but the defendant did not do so in Jeffrey Stein. Id.
2. The court wrote that Zeidman v. J. Ray McDermott & Co., 651 F.2d 1030 (5th Cir. 1981), a Fifth Circuit decision issued prior to the larger Fifth Circuit being split up and the Eleventh Circuit being formed, was the “law of the circuit,” and allowed the named plaintiffs in Jeffrey Stein to continue to pursue a class action even if their individual claims were deemed moot because of a defendant’s offer of full relief. Jeffrey Stein, at *14-20.
3. The court followed opinions by several other circuits, and declined to follow the Seventh Circuit’s decision in Damasco v. Clearwire Corp., 662 F.3d 891 (7th Cir. 2011), under which a named plaintiff cannot pursue a class action if an offer of full relief is made before the plaintiff has moved to certify a class (but not after that point). The Eleventh Circuit wrote that “the Damasco approach would produce unnecessary and premature certification motions in some cases and unnecessary gamesmanship in others.” Id. at 23.

The Eleventh Circuit recognized that there was significant tension between its holding and part of the rationale given by the Supreme Court majority for its decision in Symczyk. But the Eleventh Circuit characterized the Supreme Court’s opinion on that point as “dictum,” and declined to depart from Zeidman based on that.

So where do things go from here? The Supreme Court might take this issue up and resolve it. But I think that is more likely to happen, if it does, in a case where the defendant has not made a Rule 68 offer (as in this case), but rather makes an unrestricted offer of full relief, including the entry of judgment, untethered to Rule 68. If the district court then enters a final judgment for full relief to the named plaintiff and finds the putative class claims moot, that would seem to be a more likely posture for Supreme Court review. The issue would be cleanly presented, and this would sidestep Justice Kagan’s points about the text and purpose of Rule 68, which were a focus of the Eleventh Circuit here. In the meantime, defendants in the Eleventh Circuit might try to distinguish this case — the Eleventh Circuit appeared to suggest that a different outcome might apply in a case where the named plaintiff did not act diligently to pursue the case as a putative class action. Jeffrey Stein, at *21. And a very different issue would appear to be presented if, for example, the named plaintiff’s individual claim were resolved by arbitration, rather than by an offer of full relief.