Hooks v. Landmark Industries: 5th Cir. Holds Unaccepted Rule 68 Offer Cannot Moot Class Rep’s Claims

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Last month, in an opinion authored by Chief Judge Carl Stewart, the Fifth Circuit Court of Appeals ruled that an unaccepted Rule 68 offer, or “pick off” settlement, does not moot a named plaintiff’s individual or class claims. Hooks v. Landmark Industries, Inc., No. 14-20496 (5th Cir. Aug. 12, 2015) (slip opinion available here). The Third, Fourth, Sixth, Seventh, and Tenth Circuits have held that a complete Rule 68 offer moots an individual’s claim, while the Second, Ninth, and Eleventh Circuits have held than an unaccepted offer cannot moot an individual’s claim. Slip op. at 8 (internal citations omitted). Since Justice Elena Kagan’s dissent in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), nearly every circuit has considered this issue. In Genesis, Justice Kagan argued that an unaccepted offer of judgment cannot moot a case.

In January of 2012, the plaintiff in Hooks filed a class action against Landmark, alleging that the defendant operated automated teller machines (“ATMs”) that charged withdrawal fees of $2.95, but failed to post notice of the fee on or at the ATM, as required by the Electronic Fund Transfer Act, 15 U.S.C. § 1693, which provides for statutory damages of $1,000 for each violation. Under the Federal Rules of Civil Procedure 68, the defendant made an offer of judgment to settle the plaintiff’s statutory damages claim for $1,000, plus costs and reasonable attorney fees through the date of acceptance of the offer. Hooks rejected the offer. Landmark then moved to dismiss, and the federal district court granted the motion, finding that the unaccepted offer mooted the plaintiff’s individual and class claims. However, the Court of Appeal reversed the dismissal, cautioning the lower court’s ruling “would serve to allow defendants to unilaterally moot named-plaintiffs’ claims in the class action context—even though the plaintiff, having turned the offer down, would receive no actual relief.” Slip op. at 9. Citing Genesis, the panel stated that they found the reasoning of the Ninth and Eleventh Circuits (both post-Genesis rulings) more persuasive and held that an unaccepted Rule 68 offer to a representative in a class action is a “legal nullity, with no operative effect.” Id. at 8 (internal citations omitted).

Though the Fifth Circuit acknowledged that the United States Supreme Court will be considering the exact issue in Gomez v. Campbell-Ewald Co., 768 F.3d 971 (9th Cir. 2014), cert. granted, 135 S. Ct. 2311 (2015), the panel stated that “[t]he parties have not requested a stay pending the outcome of that case, and due to uncertainty of timing and nature of resolution, we ordinarily do not wait in such situations.” Slip op. at 7, n6. Gomez, a class action case involving unsolicited text messages in violation of the Telephone Consumer Protection Act, is set for oral argument before the Supreme Court on October 14, 2015.

Authored by: 
Mao Shiokura, Associate