Hunton Employment & Labor Perspectives

On August 12, 2015, the Fifth Circuit held that an unaccepted Rule 68 offer of judgment to a named plaintiff in a class action does not render the plaintiff’s claim moot. In Hooks v. Landmark Indus., Inc., No. 14-20496 (5th Cir. 2015), the Fifth Circuit joined the minority of Circuit Courts—Second, Ninth, and Eleventh Circuits—and held that an unaccepted Rule 68 offer is a legal nullity, with no operative effect. The majority of the Circuit Courts to decide this issue —Third, Fourth, Sixth, Seventh, Tenth, and Federal Circuits—have all held that a complete Rule 68 offer moots an individual’s claim.

In Hooks, the plaintiff made one withdrawal at an ATM operated by Landmark Industries, Inc. Landmark did not post a notice on the ATM to inform customers, such as Hooks, that a withdrawal fee would be charged. Hooks sued for violation of the Electronic Funds Transfer Act. A few months after he filed suit, Landmark tendered a Rule 68 offer of judgment to Hooks for the maximum allowable statutory damages for his individual claim and for costs. Hooks did not accept the offer. Subsequently, the district court dismissed Hooks’s claim and putative class for lack of subject-matter jurisdiction on mootness grounds.

On appeal, the Fifth Circuit held that Hooks’s claim was not mooted by a complete Rule 68 offer of judgment because it was not accepted. Relying on Justice Kagan’s dissent in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), the Fifth Circuit held that according to Rule 68, an unaccepted offer has been withdrawn, and that nothing in Rule 68 altered the premise that the rejection of an offer nullified the claim. Plaintiffs should be permitted to accept an offer of judgment on his individual claim and have the case dismissed, or reject the offer and proceed with the class action, according to the Fifth Circuit. Expressing concern about defendants attempting to “pick off” individual plaintiffs before class certification, the Court noted that a contrary ruling would allow defendants to unilaterally moot named-plaintiffs’ claims in the class action context, even if the plaintiff rejected the offer.

The Supreme Court noted in Genesis Healthcare that the Circuit Courts disagree about whether an unaccepted offer that fully satisfies a plaintiff’s claim is sufficient to render the claim moot but did not reach the question because the issue was not properly before it. The issue will soon be resolved, however. The United States Supreme Court will hear argument in Campbell-Ewald Company v. Gomez, case no. 14-857 on October 14, 2015, to determine whether a case becomes moot, and thus beyond the judicial power of Article III, when the plaintiff receives an offer of complete relief on his claim. The Supreme Court will also decide whether the answer is any different when the plaintiff has asserted a class claim under Federal Rule of Civil Procedure 23, but receives an offer of complete relief before any class is certified. The outcome of Gomez will have significant implications for how individual claims are resolved, and is also particularly important to those who litigate class and collective actions.

For an assessment of the oral arguments in Gomez, please return to the HELP blog in October 2015.