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Bais Yaakov of Spring Valley v. Act, Inc.

United States District Court, D. Massachusetts

October 26, 2016

BAIS YAAKOV OF SPRING VALLEY, Plaintiff,
v.
ACT, INC., Defendant.

          MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS (Docket No. 128)

          TIMOTHY S. HILLMAN DISTRICT JUDGE

         This decision concerns the third attempt by ACT, Inc. (Defendant) to satisfy the individual claims of Bais Yaakov of Spring Valley (Plaintiff), in order to make the case moot and prevent the instigation of a class action. In its most recent iteration, Defendant has tendered $45, 600 to Plaintiff and moves to dismiss the case for lack of subject matter jurisdiction. For the reasons detailed below, Defendant's motion to dismiss (Docket No. 128) is denied.

         Background

         Plaintiff is a religious corporation located in New York. In March, April, and May of 2012, Plaintiff alleges that it received unsolicited faxes from Defendant, which did not contain opt-out notices, in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 (TCPA) and a similar New York law, N.Y. General Business Law § 396-aa (section 396-aa). Plaintiff further alleges that from July 30, 2008 through July 30, 2012 Defendant, either negligently or knowingly, sent thousands of unsolicited or solicited faxes without opt-out notices to fax machines belonging to people throughout the United States, and from July 30, 2009 through July 30, 2012, either negligently or knowingly sent thousands of unsolicited or solicited faxes without opt-out notices to fax machines belonging to people throughout New York. Plaintiff claims that each of these faxes violated the TCPA, or both the TCPA and section 396-aa. As a result, on July 30, 2012, Plaintiff brought suit against Defendant on its own behalf and seeking to represent three classes of people.[1]

         Defendant's Rule 68 Offer of Judgment and First Motion to Dismiss

         On August 2, 2013, Defendant made an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure. Plaintiff did not accept this offer within fourteen days after it was made, and it expired. On August 6, 2013, Plaintiff moved for class certification. On September 4, 2013, approximately one month after making its offer of judgment, Defendant moved to dismiss for lack of subject matter jurisdiction, arguing that its unaccepted offer of judgment rendered the case moot by negating the existence of a case or controversy. In response, Plaintiff argued that its claims had not been satisfied because it had not accepted the offer. In the face of a circuit split and no applicable First Circuit precedent, I denied Defendant's motion to dismiss on December 16, 2013, finding that the offer of judgment did not moot Plaintiff's claims. I assumed, for the purposes of my discussion of the issue of whether the offer of judgment mooted the case, that the offer would have fully satisfied Plaintiff's individual claims.

         On December 23, 2013, Defendant moved this Court to certify an interlocutory appeal of my decision denying the motion to dismiss. On December 24, 2013, Plaintiff filed an amended motion for class certification. On January 22, 2014, I certified the following question for interlocutory review: “Whether an unaccepted offer of judgment under Rule 68 in a putative class action, when the offer is made before the Plaintiff files a motion to certify class, moots the Plaintiff's entire action and thereby deprives a court of federal subject matter jurisdiction.” (Docket No. 63 at 7.) In my certification order, I noted that Defendant's offer of judgment had offered all of the relief to which Plaintiff was entitled, because statutory damages under the TCPA should be calculated per offending fax, rather than per violation-with each fax potentially containing multiple violations. I also stayed the case pending appeal, and denied Plaintiff's motion for class certification, without prejudice to refile after the appeal.

         The First Circuit's Decision on Appeal

         On August 21, 2015, the First Circuit issued a decision affirming my order denying Defendant's motion to dismiss. Bais Yaakov of Spring Valley v. ACT, Inc., 798 F.3d 46, 55 (1st Cir. 2015), cert. denied, 136 S.Ct. 982 (2016). The court held that “a rejected and withdrawn offer of settlement of the named plaintiff's individual claims in a putative class action made before the named plaintiff moved to certify a class did not divest the court of subject matter jurisdiction by mooting the named plaintiff's claims.” Id. at 46. While ultimately affirming my decision, the First Circuit did not approve of the fact that I had made a determination regarding the proper measure of damages. In furtherance of its Rule 68 argument, Defendant asserted that I could have entered judgment for Plaintiff, just as I would have if Plaintiff had accepted the Rule 68 offer, even though it did not accept the offer. The First Circuit rejected this proposed construction of Rule 68, noting that it would require the district court to “make what in effect are qualitative assessments of the legal and factual merits of the claims, defenses, and evidence, ” because the amount of Plaintiff's potential damages remained in dispute. Id. at 52-53. The court explained that, if it were “to bless this approach, courts would find themselves ruling on the merits of claims under the guise of determining whether cases are moot.” Id. at 53.

         I retained the stay of the case pending the outcome of Defendant's petition for certiorari in the Supreme Court, which was denied on January 25, 2016. At the same time, the Supreme Court was considering a different case that addressed this very same issue.

         Campbell-Ewald Co. v. Gomez

         On January 20, 2016, the Supreme Court issued its decision in Campbell-Ewald Co. v. Gomez, holding-consistent with the First Circuit's decision in this case-that an unaccepted offer to satisfy the named plaintiff's individual claim was not sufficient to render a case moot, when the complaint sought relief on behalf of the plaintiff and a class of persons similarly situated. 136 S.Ct. 663, 666 (2016). The Court held that, “in accord with Rule 68 of the Federal Rules of Civil Procedure, an unaccepted settlement offer has no force.” Id. “Under basic principles of contract law, [the defendant's] settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy.” Id. at 670. “In short, with no settlement offer still operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset.” Id. at 670-71. Because the unaccepted settlement offer did not moot the named plaintiff's individual claims, it also did not preclude class certification: “[A] would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” Id. at 672.

         The Campbell-Ewald Court did not decide “whether the result would be different if a defendant deposits the full amount of the plaintiff's individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.” Id. The Court also did not reach the question of whether the purported class representative's claim for class relief would prevent the case from becoming moot even if the plaintiff's individual claim was mooted. Id. at 679 n.1 (Roberts, C.J., dissenting). However, in concurring and dissenting opinions, Chief Justice Roberts and Justices Thomas, Scalia, and Alito stated expressly that tendering a check or depositing one with the district court would moot a plaintiff's individual claims. Id. at 675 (Thomas, J., concurring); id. at 680 (Roberts, C.J., dissenting)[2]; id. at 684 (Alito, J., dissenting).

         Defendant's Rule 67 Attempt and ...


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