2d Circuit reinstates case after defendant tries to moot it with make-whole settlement offer

This case re-acquaints us with an issue the Supreme Court took up two years ago, when it held that a defendant cannot moot out a case by making a Rule 68 offer that gives the plaintiff everything it asks for. The Second Circuit broadly interprets that holding to mean that even non-Rule 68 maneuvers that give the plaintiff everything it wants cannot moot the case.

The case is Geismann v. ZocDoc, decided on November 27. Plaintiff is a doctor who sues this "patient matching service" who sent unsolicited faxes in violation of the the Telephone Consumer Protection Act, which authorizes damages for these annoying intrusions into our everyday lives.

This is the second time this case reaches the Second Circuit. During the first go-round, the Court of Appeals said that defendant could not make the case go away by making a Rule 68 Offer of Judgment that would have made the plaintiff whole. In making the Rule 68 offer, the defendant was trying to kill off a class action suit by knocking off the plaintiff such that the class action necessarily would go away. That holding in the first Geisman appeal invoked the Supreme Court's decision in Campbell-Ewald Co. v. Gomez, 136 S.Ct. 665 (2016), which said that an unaccepted Rule 68 offer does not render the action moot because "an unaccepted settlement offer -- like any unaccepted contract offer -- is a legal nullity, with no operative effect" on the individual plaintiff's claim.

In the first Geisman appeal, the Second Circuit reversed the district court, which had dismissed the case as moot, consistent with the Supreme Court's ruling in Campbell-Ewald. On remand, the defendant tried another tactic. This time, it asked the district court for permission to deposit $13,900.00 with the court under Rule 67 and that it would make an open-ended offer to plaintiff with no expiration date of a total of $20,000.00 and all available injunctive relief sought by plaintiff. The district court was OK with this, and once defendant made the deposit with the court, the trial judge granted defendant summary judgment on the case, reasoning that this settlement offer mooted out the case because it was not a Rule 68 Offer of Judgment which carries a short deadline for the plaintiff to accept or reject the offer.

The Second Circuit rejects that reasoning and the case is again reinstated. Judge Sack reasons that the Supreme Court's rationale in Campbell-Ewald applies in cases that do not involve Rule 68 offers. This follows the Seventh Circuit's reasoning in Fulton Dental, LLC v. Bisco, Inc., 860 F.3d 541 (7th Cir. 2017). The Second Circuit states:

Like the Seventh Circuit, we see no material difference between a plaintiff rejecting a tender of payment (pursuant to Rule 67) and an offer of payment (pursuant to Rule 68). Indeed, other than their labels, once rejected, the two do not differ in any meaningful way: In each case, ʺall that exists is an unaccepted contract offer, and as the Supreme Court recognized, an unaccepted offer is not binding on the offeree.ʺ

Moreover, a key factor underlying the Supreme Courtʹs holding in Campbell‐Ewald was that the plaintiff ʺremained emptyhandedʺ once the defendantʹs Rule 68 settlement offer expired. 136 S. Ct. at 672. An unaccepted offer provides a plaintiff ʺno entitlement . . . to relief,ʺ so ʺthe parties remained adverse; both retained the same stake in the litigation they had at the outset.ʺ Id. at 670–71. In other words, ʺa lawsuit—or an individual claim—becomes moot when a plaintiff actually receives all of the relief he or she could receive on the claim through further litigation.ʺ

The deposit of funds in the district court registry, without more, leaves a plaintiff “emptyhanded” because the deposit alone does not provide relief to him or her. “The Rule 67 procedure provides a place of safekeeping for disputed funds pending the resolution of a legal dispute, but it cannot be used as a means of altering the contractual relationships and legal duties of the parties.” Indeed, on its face, Rule 67 “is just a procedural mechanism that allows a party to use the court as an escrow agent.” It does not itself determine who is entitled to the money.

The Court of Appeals adds that even if the district court first entered judgment against defendant by enjoining it from sending additional faxes and providing plaintiff with the $20,000, that would not have offered plaintiff complete relief, because plaintiff was looking for more than just injunctive relief and damages; it wanted "the additional reward that it hopes to earn by serving as the lead plaintiff for a class action." This means the trial court must resolve the pending motion for class certification before entering judgment and declaring the action moot based solely on relief provided to plaintiff on an individual basis. If the class certification motion is granted, the case may proceed. Otherwise, the Second Circuit says, the defendant has control over control of a putative class action at will.