Consumer Finance Insights
April 17, 2014

District Court Rejects Theory that Offer of Judgment Moots Class Action Complaint

On January 22, 2014, a federal judge in California denied J.C. Penney Corporation’s motion to dismiss for lack of subject matter jurisdiction following the plaintiff’s rejection of an offer of judgment. Maier v. J.C. Penney Corp., Inc., No. 3:13-cv-00163, slip op. (S.D. Cal. Jan. 22, 2014). The plaintiff has filed a putative class action against J.C. Penney, claiming it violated the Telephone Consumer Protection Act (TCPA) by sending automated text messages to her cell phone.

The company moved to dismiss the case on grounds that the plaintiff’s rejection of its earlier offer of judgment—which included the maximum statutory damages requested, a stipulated injunction, and all of the plaintiff’s costs—rendered the action moot and deprived the court of subject matter jurisdiction. The company argued that the U.S. Supreme Court’s recent ruling in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), called into question the Ninth Circuit’s existing precedent, which generally holds that an unaccepted offer of judgment for a class representative’s claims does not moot the class action complaint if the offer is made before a motion for class certification has been filed.

In denying the motion to dismiss, the California court stated that it was bound by the Ninth Circuit’s opinion in Diaz v. First American Home Buyers Protection Corp., which the court said “squarely holds that ‘an unaccepted Rule 68 offer that would have fully satisfied a plaintiff’s claim does not render that claim moot.’”

The denial of the motion in Maier further solidifies the idea that, at least within the Ninth Circuit, a defendant in a putative class action may be unable to use an offer of judgment—no matter how fully the offer would compensate the plaintiff—as a tool to terminate a lawsuit before a motion for class certification is filed. The court’s narrow interpretation of Genesis Healthcare may also constrain litigants in other jurisdictions who would argue for a broader application of that case in their own class action suits.

J.C. Penney’s briefs indicated that if its motion was denied, the company would seek to appeal to the Ninth Circuit, and to the Supreme Court if necessary, to try to “establish the application of Genesis to Rule 23 class actions in the Ninth Circuit,” so companies and their counsel should watch for future developments in this area.