Seventh Circuit decides settlement with class representative moots the class complaint

The Seventh Circuit Court of Appeals recently held a defendant may moot a plaintiff's class action complaint by "offer[ing] him his full request for relief."  

In Damasco v. Clearwire Corp., 2011 U.S. App. LEXIS 23093 (7th Cir. Nov. 18, 2011), plaintiff Damasco filed a class action complaint against defendant Clearwire for violation of the Telephone Consumer Protection Act (TCPA), alleging that Clearwire had sent unsolicited text messages to him and more than 1,000 others.  Damasco's complaint asked for $1,500 in damages as well as an injunction to enjoin Clearwire from sending unsolicited text messages. 

Prior to Damasco moving for class certification, Clearwire offered to pay Damasco $1,500 and to stop sending unsolicited text messages to its mobile subscribers.  Clearwire's offer indicated it believed its offer rendered the case moot.  Damasco never responded to the settlement offer.  So Clearwire moved to dismiss the case, arguing its settlement offer stripped Damasco of his personal stake in the case and mooted in his claim.  The district court agreed, granting Clearwire's motion and dismissing Damasco's case.
 
On appeal, Damasco contended that defendants should be prohibited from mooting a potential class action by "buying off" or "picking off" named plaintiffs through "involuntary" settlement offers.  The Seventh Circuit rejected this argument.  The court noted it is a widely regarded rule that once a defendant offers to satisfy the plaintiff's entire demand, there is no longer any dispute over which to litigate, and thus a plaintiff's claim becomes moot.  Relying on its prior precedent in Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th Cir. 1994), the court refused to create an exception to this general rule in class actions where a defendant offers a named plaintiff full relief before the plaintiff has filed a motion for certification. 
 
The Damasco court acknowledged that other circuit courts have held differently.  For instance, the Third, Fifth, Ninth, and Tenth Circuits have fashioned a rule that, absent undue delay by the plaintiff in seeking certification, a plaintiff may move to certify a class and avoid mootness even after being provided a Rule 68 offer of judgment for complete relief.  See Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1091-92 (9th Cir. 2011); Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239, 1249-50 (10th Cir. 2011); Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 920-21 (5th Cir. 2008); Weiss v. Regal Collection, 385 F.3d 337, 348 (3rd Cir. 2004).  While the Sixth Circuit has not yet ruled on this issue, a case currently pending in the Sixth Circuit will likely soon resolve this issue there as well.  See Hrivnak v. NCO Portfolio Mgmt., Inc., Sixth Circuit Case No. 11-3142. 
 
However the Sixth Circuit decides Hrivnak, these cases represent a circuit split that may be appropriate for Supreme Court resolution in the future.  At least until then, however, defense counsel in class actions may want to determine the advisability of offering a plaintiff full relief prior to the filing of a motion for class certification in order to moot the plaintiff's claim.

Federal Class Action Law, Settlements