In a case that began as a putative class action, the Seventh Circuit held that a Rule 68 offer of complete relief does not render litigation moot. Plaintiff in Chapman v. First Index filed a “junk-fax” suit pursuant to the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227 et seq., after allegedly receiving two unsolicited and unauthorized faxes from First Index. He demanded $3,000 plus an injunction under § 227(b)(3)(A).

Plaintiff proposed to represent a class of persons who received faxes from First Index despite having not given consent. First Index argued it always had consent, though sometimes verbal. The district court declined to certify the class, ruling that the difficulty of deciding who had provided oral consent made it infeasible to determine who is in the class. Plaintiff then proposed a class of persons whose faxes from First Index either lacked an opt-out notice or contained a notice plaintiff believed violated the FCC’s regulations. The district court declined to certify that class as well, but because the plaintiff proposed it too late in the litigation, more than 18 months after discovery had closed.

While class certification was pending, however, First Index made a Rule 68 offer of judgment for $3,002, an injunction, and costs. Realizing plaintiff could not accept the offer while class certification was pending, as that would amount to abandonment of the class he sought to represent, but not wanting to leave the offer open indefinitely, First Index stated in the offer that it would expire 14 days after the class certification decision. The offer lapsed, and the district court then granted First Index’s motion to dismiss the claim as moot.

The Seventh Circuit did not disturb the district court’s class certification decision, but took the opportunity “to clean up the law” in the circuit on whether a Rule 68 offer of complete relief renders litigation moot, and held it does not. In doing so, it “overrule[d] Damasco v. Clearwire Corp., 662 F.3d 891, 895 (7th Cir. 2011); Thorogood v. Sears Roebuck & Co., 595 F.3d 750, 752 (7th Cir. 2010), and Rand v. Monsanto Co., 926 F.2d 596, 598 (7th Cir. 1991), and similar decisions to the extent they hold that a defendant’s offer of full compensation moots the litigation or otherwise ends the Article III case or controversy.”

Citing Knox v. Service Employees Int’l Union, 123 S. Ct. 2277, 2287 (2012), the Seventh Circuit explained “[a] case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party,” and because the district court could have awarded damages and entered an injunction, the offer did not render the litigation moot. The court further explained:

If an offer to satisfy all of a plaintiff’s demands really moots a case, then it self-destructs.  Rule 68 is captioned “Offer of Judgment.”  But a district court cannot enter a judgment in a moot case.  All it can do is dismiss for lack of a case or controversy.  So if the $3,002 offer made this case moot, then even if [the Plaintiff] had accepted it the district court could not have ordered First Index to pay.  It could have done nothing but dismiss the suit.  Likewise with First Index’s offer to have the district court enter an injunction. As soon as the offer was made, the case would have gone up in smoke, and the court would have lost the power to enter the decree.  Yet no one thinks (or should think) that a defendant’s offer to have the court enter a consent decree renders the litigation moot and thus prevents the injunction’s entry.

The Seventh Circuit acknowledged it had previously applied the label “moot” when a plaintiff declines an offer that would satisfy his entire demand, but agreed with Justice Kagan’s dissent in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 1532-37 (2013), which the court explained shows that an expired (and unaccepted) offer of a judgment does not satisfy the court’s definition of mootness, because relief remains possible. It noted the Second and Ninth Circuits have agreed, and that the issue is presently before the Supreme Court in Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), cert. granted, 135 S. Ct. 2311 (2015).

Chapman v. First Index, Inc., No. 14-2773 & 14-2775 (7th Cir. Aug. 6, 2015).