March v. Medicredit, Inc.

Filing 36

MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that Defendants Motion to Dismiss (ECF No. 22 ) is DENIED. IT IS FURTHER ORDERED that Plaintiffs Motion to Strike Offer of Judgment (ECF No. 27 ) is GRANTED. IT IS FURTHER ORDERED that Defendant shall f ile an Answer to Plaintiffs First Amended Class Action Complaint no later than two weeks from the date of this Memorandum and Order. An appropriate Rule 16 Order shall also be filed forthwith. Signed by Magistrate Judge Terry I. Adelman on 12/4/13. (KJS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI\
EASTERN DIVISION
JOHN MARCH,
Plaintiff,
v.
MEDICREDIT, INC.,
Defendant.

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No. 4:13CV1210 TIA

MEMORANDUM AND ORDER
This matter is before the Court on Defendant’s Motion to Dismiss (ECF No. 22) and
Plaintiff’s Motion to Strike Offer of Judgment (ECF No. 27). The parties consented to the
jurisdiction of the undersigned pursuant to 28 U.S.C. § 636(c).
Background
On May 14, 2013, Plaintiff filed a Class Action Petition in state court, alleging violations
of the Fair Debt Collections Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq. (Pet. ¶ 1, ECF
No. 4) Defendant removed the action to federal court on June 26, 2013 and filed a Motion to
Dismiss under Fed. R. Civ. P. 12(b)(6) as its Answer on July 17, 2013. (Notice of Removal, ECF
No. 1; Mot. to Dismiss, ECF No. 9) On July 31, 2013, Plaintiff filed an Amended Complaint,
alleging that Defendant violated § 1692e(11) of the FDCPA because Defendant failed to disclose
in its initial communication with Plaintiff that Defendant was “attempting to collect a debt and that
any information obtained will be used for that purpose.” (First Am. Compl. ¶¶ 13-14, 35-36, ECF
No. 14) In the Amended Complaint, Plaintiff requests that the Court certify the action as a class
action, as well as award statutory damages, plus attorney’s fees and costs.

On September 3, 2013, Defendant filed a Motion to Dismiss under Fed. R. Civ. P.
12(b)(1), asserting that Defendant’s offer of judgment in the amount of $2,000 plus attorney’s
fees and costs moots Plaintiff’s claims. (Memorandum in Support of Mot. to Dismiss Ex. A, ECF
No. 23-1) Specifically, Defendant argues that the offer is greater than the maximum recovery of
$1,000 plus attorney’s fees and costs allowed under the FDCPA. Thus, Plaintiff no longer has a
personal stake in the action under Article III of the United States Constitution. In response to the
motion to dismiss, Plaintiff filed a Motion to Strike Offer of Judgment, contending that Defendant
is trying to “pick off” the named Plaintiff or induce him to abandon his class action suit.
Defendant, however, asserts that the offer of judgment provides Plaintiff with full relief for his
individual claim, and he never filed a motion for class certification despite months to do so.
Plaintiff does not contest that the offer of judgment satisfies his claim individually.
Legal Standards
Federal Rule of Civil Procedure 12(b)(1) requires dismissal of claims over which the
federal court lacks subject-matter jurisdiction. In addition, Article III, § 2, of the United States
Constitution limits federal court jurisdiction to actual cases or controversies. See Genesis
Healthcare Corp. v. Symczyk,

U.S.

, 133 S. Ct. 1523, 1528 (2013); Damasco v. Clearwire

Corp., 662 F.3d 891, 894 (7th Cir. 2011). To invoke personal jurisdiction, a plaintiff must show
that he has a personal stake in the outcome at all stages of the action. Genesis, 133 S. Ct. at
1528; Damasco, 662 F.3d at 894-95. “If an intervening circumstance deprives the plaintiff of a
‘personal stake in the outcome of the lawsuit,’ an any point during litigation, the action can no
longer proceed and must be dismissed as moot.” Genesis, 133 S. Ct. at 1528 (quoting Lewis v.
Continental Bank Corp., 494 U.S. 472, 477-48 (1990) (internal quotation marks omitted)).
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Under Federal Rule of Civil Procedure 68(a), a defendant “may serve . . . an offer to allow
judgment on specified terms, with the costs then accrued.” Thus, a Rule 68 offer providing
complete relief renders the plaintiff’s claims moot, even where the plaintiff refuses the offer. As a
result, “‘[o]nce the defendant offers to satisfy the plaintiff’s entire demand, there is no dispute
over which to litigate, and a plaintiff who refuses to acknowledge this loses outright, under Fed.
R. Civ. P. 12(b)(1), because he has no remaining stake.’” Damasco, 662 F.3d at 895 (quoting
Rand v. Monsanto Co., 926 F.2d 596, 596 (7th Cir. 1991)).
Discussion
Defendant asserts that its offer of judgment, which exceeds the statutory limit, moots
Plaintiff’s claim and makes him ineligible to represent the putative class because he no longer has
a stake in the litigation. Plaintiff, in response, requests that the Court strike the offer of judgment
and deny Defendant’s motion to dismiss as an attempt to “pick off” the class representative
Plaintiff. The undersigned finds that dismissal is inappropriate in this case.
Defendant offered Plaintiff $2,000 plus attorney’s fees and costs and offered for judgment
to entered against Defendant on an individual and non-class basis. (Memorandum in Support of
Mot. to Dismiss Ex. A, ECF No. 23-1) Under the relevant FDCPA provision, 15 U.S.C. §
1692k(a), an individual is statutorily entitled to an amount not exceeding $1,000 plus the costs of
the action and a reasonable attorney’s fee. Plaintiff, however, did not accept the offer. The
Eighth Circuit has not ruled squarely on the issue of whether the tender and rejection of an offer
of judgment prior to a request for class certification moots a class action suit. Indeed, the Circuits
are divided on this issue. See, e.g., Warren v. Sessoms & Rogers, P.A., 676 F.3d 365, 372 (4th
Cir. 2012) (stating that if plaintiff would have made a specific demand for actual damages and the
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defendants offered that amount or more, the offer of judgment would have mooted plaintiff’s
claim); Damasco v. Clearwire Corp., 662 F.3d 891, 896 (7th Cir. 2011) (“To allow a case, not
certified as a class action and with no motion for class certification even pending, to continue in
federal court when the sole plaintiff no longer maintains a personal stake defies the limits on
federal jurisdiction expressed in Article III.”); Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1084
(9th Cir. 2011) (holding that a rejected offer of judgment for full amount of a putative class
representative’s individual claim under the FLSA made prior to the filing of a motion for class
certification does not moot the class action complaint); Lucero v. Bureau of Collection Recovery,
Inc., 639 F.3d 1239, 1249 (10th Cir. 2011) (“[A] named plaintiff in a proposed class action for
monetary relief may proceed to seek timely class certification where an unaccepted offer of
judgment is tendered in satisfaction of the plaintiff’s individual claim before the court can
reasonably be expected to rule on the class certification motion.”); Weiss v. Regal Collections,
385 F.3d 337, 348 (3d Cir. 2004) (“Absent undue delay in filing a motion for class certification, . .
. , where a defendant makes a Rule 68 offer to an individual claim that has the effect of mooting
possible class relief asserted in the complaint, the appropriate course is to relate the certification
motion back to the filing of the class complaint.”).
In its Memorandum in Support of the Motion to Dismiss, Defendant relies heavily on a
recent Supreme Court case, Genesis Healthcare Corp. v. Symczyk ,

U.S.

, 133 S. Ct. 1523

(2013). Genesis, however, involved whether a plaintiff’s action under the FLSA remained
justiciable based on the collective-action allegations in the complaint where an unaccepted Rule
68 offer fully satisfied the plaintiff’s claim, rendering the individual claim moot, and no other
claimants opted in. Id. at 1528-29. The Genesis court held that “[i]n the absence of any
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claimant’s opting in, respondent’s suit became moot when her individucal claim became moot,
because she lacked any personal interest in representing others in this action.” Id. at 1529.
However, in response to the plaintiff’s reliance on cases that arose in the context of Rule 23 class
actions, the Supreme Court found that the cases did not apply “both because Rule 23 actions are
fundamentally different from collective actions under the FLSA . . . and because these cases are,
by their own terms, inapplicable to these facts.” Id. Thus, the Genesis case is inapposite to the
present Rule 23 class action complaint. See Sandusky Wellness Center, LLC v. Medtox
Scientific, Inc., No. 12-2066(DSD/SER), 2013 WL 3771397, at *2 (D. Minn. July 18, 2013)
(finding Genesis inapplicable to a Rule 23 class action complaint under the Telephone Consumer
Protection Act).
Defendant also asks this Court to adopt the reasoning in Damasco v. Clearwire Corp., 662
F.3d 891 (7th Cir. 2011). While the reasoning in Damasco is somewhat persuasive, the Court
finds that concerns of “picking off” putative class representative plaintiffs, as well as defendants
racing to offer judgment to avoid a class action suit, weigh against dismissal. In Damasco, the
Seventh Circuit held that an offer of full relief to a putative class plaintiff mooted an action where
no motion for class certification was pending. 662 F.3d at 896. In response to the argument that
this holding would allow defendants to buy off individual plaintiffs, the Damasco court reasoned
that class-action plaintiffs could simply move to certify a class when filing the complaint to protect
the putative class. Id.
Although one district court recently followed Seventh Circuit’s rationale in Damasco and
dismissed an action as moot following an unaccepted offer of judgment, the majority of district
courts in this Circuit addressing this issue have rejected the mootness argument in the class action
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context. See, e.g., Sandusky, 2013 WL 3771397, at *2 (finding that the offer of judgment failed
to provide class-wide relief and thus did not moot the putative class action); Mertz v. Lindell
Bank & Trust Co., No. 4:10CV2098 HEA, 2012 WL 1080824, at *1 (E.D. Mo. March 30, 2012)
(“Because the offer of judgment here did not extend to the putative class representatives, and
because the offer was made before plaintiff could reasonably have been expected to file a motion
for class certification, the offer, in this instance failed to render plaintiff’s case moot.”); Jenkins v.
General Collection Co., 246 F.R.D. 600, 602-03 (D. Neb. 2007) (affirming Magistrate Judge’s
order striking Rule 68 offer of judgment because the offer did not moot possible class relief unless
there was undue delay in filing the motion for class certification); Liles v. Am. Corrective
Counseling Servs., Inc., 201 F.R.D. 452, 455 (S.D. Iowa 2001) (stating that the Eighth Circuit
would likely not allow a defendant to pay off the named plaintiff to preemptively force dismissal
of the putative class action); but see, Goans Acquisition, Inc. v. Merchant Solutions, LLC, No.
12-00539-CV-S-JTM, 2013 WL 5408460, at *6 (W.D. Mo. Sept. 26, 2013) (adopting the
reasoning in Damasco to find that plaintiff’s alleged TCPA claim became moot before plaintiff
moved for class certification).
The sound rationale behind these cases is that Defendant should not be able to use offers
of judgment to thwart class actions. Lamberson v. Fin. Crimes Servs., LLC, No. 11-98
(RHK/JJG), 2011 WL 1990450, at *2 (D. Minn. April 13, 2011). Further, this is not a case
where the Plaintiff has unduly delayed filing a motion for class certification. Although the Plaintiff
filed the class action petition in state court on May 14, 2013, and Defendant removed the case to
federal court on June 26, 2013, Plaintiff filed an Amended Complaint on July 31, 2013.
Defendant tendered its offer of judgment two days later, on August 2, 2013, and, after filing
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several motions for additional time to answer, Defendant filed its Motion to Dismiss in lieu of an
answer on September 3, 2013. While Plaintiff could have filed a motion for class certification
during the 3 ½ months between filing the case in state court and filing the present Motion to
Dismiss, failure to do so did not cause undue delay, especially where, as here, the Defendant has
not filed an answer; the Court has not held a Rule 16 conference; and a Case Management Order
is not yet in place. However, in future cases, putative class action plaintiffs would be wise to
immediately file such motions to protect the class from similar motions to dismiss based on offers
of judgment.
Based on the above analysis, the Court will deny Defendant’s Motion to Dismiss. With
regard to Plaintiff’s Motion to Strike Offer of Judgment, the Court finds that the motion shall be
granted. In a class-action complaint, the named plaintiff, as the putative class representative, has
a special role of assuming responsibility for the entire class of persons. Johnson v. U.S. Bank Nat.
Ass’n, 276 F.R.D. 330, 332 (D. Minn. 2011). Where a defendant presents a Rule 68 offer of
judgment to the named plaintiff only, the plaintiff faces a conflict between accepting the amount
offered to satisfy his individual claim or continuing to represent the putative class to obtain relief
for the entire class. Id. at 334. Therefore, “to prevent an improper conflict of interest between a
putative class representative and the putative class, a precertification offer of judgment must be
deemed ineffective.” Lamberson, 2011 WL 1990450, at *4 (citation omitted). As a result, the
Court will strike Defendant’s offer of judgment.
Accordingly,
IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss (ECF No. 22) is
DENIED.
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IT IS FURTHER ORDERED that Plaintiff’s Motion to Strike Offer of Judgment (ECF
No. 27) is GRANTED.
IT IS FURTHER ORDERED that Defendant shall file an Answer to Plaintiff’s First
Amended Class Action Complaint no later than two weeks from the date of this Memorandum
and Order. An appropriate Rule 16 Order shall also be filed forthwith.

/s/ Terry I. Adelman
UNITED STATES MAGISTRATE JUDGE

Dated this

4th

day of December , 2013.

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