Civil Procedure - Rule 68 of the Federal Rules of Civil Procedure - Ninth Circuit Holds That Unaccepted Rule 68 Offer Does Not Moot Plaintiff's Individual Claims

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CIVIL PROCEDURE--RULE 68 OF THE FEDERAL RULES OF CIVIL PROCEDURE--NINTH CIRCUIT HOLDS THAT UN ACCEPTED RULE 68 OFFER DOES NOT MOOT PLAINTIFF'S INDIVIDUAL CLAIMS.--DIAZ V. FIRST AMERICAN HOME BUYERS PROTECTION CORP., 732 F.3D 948 (9TH CIR. 2013).

Rule 68 of the Federal Rules of Civil Procedure permits a defendant to make an "offer of judgment" to a plaintiff. (1) if the plaintiff accepts the defendant's proposed relief, the court will enter judgment for the plaintiff on the terms of that offer. (2) A difficult situation arises when a defendant offers a plaintiff all she could individually obtain through litigation, yet she does not accept that offer: Why permit continued, costly litigation if the plaintiff will, at best, get what the defendant is already willing to pay? More fundamentally, is there really a case or controversy, as required by Article III, (3) if all parties "agree entirely on what should happen in [the] lawsuit"? (4) lower federal courts have generally given short shrift to this issue, hastily noting that a full offer would moot a plaintiffs individual claims (5) and instead focusing significant attention on the impact of such an offer in cases where the plaintiff seeks to represent a class. (6) Recently, in Diaz v. First American Home Buyers Protection Corp., (7) the Ninth Circuit bucked that trend, holding that an unaccepted offer for complete relief would not moot a case even when a plaintiff sues only on her own behalf. (8) The Ninth Circuit's analysis, relying almost entirely on Justice Kagan's stinging dissent last term in Genesis Healthcare Corp. v. Symczyk, (9) offered a sharp contrast to the Ninth Circuit's--and other circuits'--prior cursory treatment of the question. Diaz may be the first of many cases responding to Genesis by directly confronting the question of whether a rejected Rule 68 offer can ever moot an individual claim--a question that courts will perhaps come to see as a preliminary, and even dispositive, issue.

Emily Diaz thought she was getting "relief from hassle" when she purchased home warranty plans from First American Home Buyers Protection Corporation (First American), but instead found herself trapped in an alleged "[n]ightmare" of customer service (10): when she called the company to fix her backed-up shower and her leaking water heater, First American purportedly refused to cover the cost of repairs, performed shoddy work, and engaged in unscrupulous business practices. (11) Rather than voice her complaints on the pages of Epinions.com as others had done, (12) Diaz brought suit on behalf of a nationwide class asserting various contract law breaches and state consumer protection law violations. (13) After two years and a series of motions to dismiss, (14) Diaz moved to certify the class. (15) Finding that Diaz had failed to present sufficient evidence of a common scheme by First American to defraud consumers or to delegate claims adjustment in breach of contract, the district court denied the motion. (16)

With class certification denied, First American attempted to satisfy Diaz's individual claims and end the matter by serving Diaz with an offer of judgment under Rule 68. (17) Diaz did not accept the offer, and it expired. (18) Arguing that the nonacceptance--an implicit rejection--rendered Diaz's claims moot, First American filed a motion to dismiss for lack of subject matter jurisdiction. (19) The court determined that First American's offer of $7019.32, plus costs, was in "full satisfaction of the amount [Diaz] could possibly recover at trial." (20) As such, there was "no case or controversy on which federal jurisdiction [could] be based," and the court dismissed Diaz's remaining claims. (21)

The Ninth Circuit vacated the dismissal. (22) Writing for a unanimous panel, Judge Fisher (23) explained that the case required the court to decide "an open question in [the] circuit": "whether an unaccepted Rule 68 offer that would have fully satisfied a plaintiffs claim is sufficient to render the claim moot. …

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