Courts Continue to Grapple with Article III Jurisdictional Questions in the Wake of Campbell-Ewald v. Gomez

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Article III of the U.S. Constitution limits the jurisdiction of federal courts to “cases” and “controversies.” U.S. Const., Art. III, § 2. Accordingly, as the Supreme Court recently clarified, “[i]f an intervening circumstance deprives the plaintiff of a personal stake in the outcome of the lawsuit, at any point during litigation, the action can no longer proceed and must be dismissed as moot.” Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 669 (2016). In the long-awaited decision, the Campbell-Ewald majority held that an unaccepted offer of complete relief under Rule 68, alone, does not moot a claim and thus does not deprive a court of Article III jurisdiction over the action. However, in so ruling, the majority emphasized that the fact that the offer was unaccepted was critical to its decision, thus leaving unanswered a host of scenarios in which a defendant makes an actual full payment or an unconditional tender to the plaintiff, and the court enters judgment for the plaintiff in that amount.

Earlier this month, a district court grappled with one of those scenarios in Wendell H. Stone Company, Inc. v. Metal Partners Rebar LLC, No. 16-8285, 2016 U.S. Dist. LEXIS 167574 (N.D. Ill. Dec. 5, 2016). The court was faced with the question of whether a defendant’s actual deposit of funds under Rule 67 could moot the plaintiff’s claims. Under Federal Rule of Civil Procedure 67, a defendant may, by leave of court, deposit with the court all or part of a monetary judgment sought as relief. Fed. R. Civ. P. 67(a). Accordingly, the court accepted the Defendant’s deposit of the entire amount of the statutory damages that the defendant claimed would fully satisfy the relief sought by the plaintiff (according to Defendant’s calculation)—a whopping $30,500. As for whether that deposit mooted the plaintiff’s claims, the Court held that it did not. By so holding, the court concluded that even an actual deposit of the full amount owed to the plaintiff could not render its claims moot—a question the Seventh Circuit itself has not yet addressed.

The court based its ruling on Chapman v. First Index, Inc. 796 F.3d 783 (7th Cir. 2015), which held that an unaccepted Rule 68 offer of judgment could not moot a claim, but which left open the question of whether a motion to deposit funds would be treated differently. The court’s holding addresses that question and more—stating not only that an unconditional motion to deposit funds fail to moot the plaintiff’s claims, but also that the court’s acceptance of the deposited funds fails to do so where the court declines to enter judgment in favor of the plaintiff. As an alternative basis for its ruling, the court noted that even if a defendant’s deposit of funds could render a plaintiff’s claim moot, here the plaintiff disputed the number of faxes it had received, and thus the court could not “determine definitively” whether the deposit of $30,500 provided complete relief. But the opinion suggests that this alternative holding was something of an afterthought, given the court’s earlier holding that even a deposit of full compensation would not moot the individual or class claims.

The court reasoned that giving defendants the ability to moot individual claims under Rule 67 would essentially give them the ability to “perpetually evade a class action by satisfying only [the plaintiff’s] individual claim.” That, it concluded, “would undermine the purposes of the class action device” by separating the interests of the proposed class representative from those of the putative class. It does not appear that the parties briefed whether that rationale is consistent with the Rules Enabling Act’s command that the Rules of Civil Procedure not be applied in a way that would “enlarge or modify” substantive rights; as we discussed in a prior post, the Supreme Court’s recent commentary on the Rules Enabling Act disapproves of doing so.

Whatever the court’s reasoning, it is clear that defendants are facing disparate outcomes in the wake of Campbell-Ewald.  For example, as we previously discussed, the Ninth Circuit in Chen v. Allstate, No. 13-16816 (9th Cir. April 12, 2016) held that a conditional offer tendering complete relief does not moot TCPA claims (failing to address the scenario of an unconditional tender of relief). On the other hand, as we reported last month, the Second Circuit recently held that an entry of judgment pursuant to an offer of relief satisfying an individual plaintiff’s claims does moot TCPA claims. Apparently, the scenarios identified in the majority and dissenting opinions in Campbell-Ewald will continue to play out in the endless foray of TCPA cases, resulting in disparate outcomes absent clearer guidance on the subject—which may, once again, have to come from our highest Court.