Rhea Drugstore, Inc. v. Smith & Nephew, Inc.

Filing 49

ORDER denying 27 Motion to Dismiss. Signed by Judge Jon Phipps McCalla on 6/10/2015. (McCalla, Jon)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
RHEA DRUGSTORE, INC.,
individually and on behalf of
all others similarly situated,
Plaintiff,
v.
SMITH & NEPHEW, INC.,
Defendant.
SMITH & NEPHEW, INC.,
Third-Party Plaintiff,
v.
MODERN MARKETING CONCEPTS,
INC.,
Third-Party Defendant.

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No. 2:15-cv-02060-JPM-tmp
JURY DEMAND

ORDER DENYING MOTION TO DISMISS
Before the court is Defendant Smith & Nephew, Inc.’s Motion
to Dismiss for Mootness and Lack of Subject Matter Jurisdiction,
filed April 9, 2015.

(ECF No. 27.)

For the reasons stated

below, the Motion is DENIED.
I.

BACKGROUND
This case concerns allegations that Defendant Smith &

Nephew, Inc. (“S&N”) violated the Telephone Consumer Protection
Act, 47 U.S.C. § 227, by faxing unsolicited advertisements to

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Plaintiff Rhea Drugstore, Inc. (“Rhea”) and others similarly
situated without providing the opt-out notice required by
statute.

(See Compl., ECF No. 1.)

During the Telephonic

Scheduling Conference, S&N represented that Modern Marketing
Concepts, Inc. (“MMC”) was the party that actually sent the
faxes at issue in this case.
Plaintiff filed its Complaint on January 23, 2015.
No. 1.)
1, 1-2.)

Attached to the Complaint were two faxes.

(ECF

(ECF Nos. 1-

Plaintiff states that these faxes were sent to Rhea on

November 27, 2014, and December 3, 2014, respectively.
¶¶ 10, 11.)

(Compl.

According to Plaintiff, those faxes are “exemplary

of the junk faxes Defendant sends.”

(Id. ¶ 12.)

As individual

and class relief, Plaintiff requests the following: (1)
“determine that this action may be maintained as a class action
under Rule 23”; (2) “award damages for each violation in the
amount of actual monetary loss or $500, whichever is greater,
and treble those damages;” (3) “enjoin Defendant from additional
violations”; and (4) “other legal and equitable relief as the
Court may deem appropriate, including costs and attorney’s
fees.”

(Compl. at 9–10.)

On February 4, 2015, Rhea filed a Motion for Class
Certification and to Stay Briefing.

(ECF No. 12.)

Rhea stated

that it had filed the motion “out of an abundance of caution in
light of a potential mootness problem . . . .”
2

(Id.)

Counsel

for Rhea represented that he had spoken to counsel for S&N, and
that S&N did not oppose Rhea’s motion to stay briefing in this
matter.

(ECF No. 14.)

Accordingly, the Court granted Rhea’s

motion, stayed briefing on the motion for class certification,
and directed the parties to include a proposed briefing schedule
in their Joint Proposed Scheduling Order.

(ECF No. 15.)

S&N filed a Motion to Dismiss on April 9, 2015.
27.)

(ECF No.

In its Motion to Dismiss, S&N stated that it provided Rhea

with an offer of judgment pursuant to Rule 68 of the Federal
Rules of Civil Procedure on March 19, 2015.
3.)

(ECF No. 27-1 at

According to S&N, it offered: “(1) to pay damages to Rhea

Drug for its individual claims under the TCPA in the amount of
Five Thousand Dollars ($5,000.00); (2) to be enjoined from
sending facsimiles in violation of the TCPA; and (3) to pay Rhea
Drug all of its costs accrued as well as its reasonable
attorneys’ fees to be determined by the Court.”

(Id. (citing

Faughnan Decl., ECF No. 27-2 (attaching the “offer of
judgment”).)
2015.

Rhea filed a Response in Opposition on May 7,

(ECF No. 41.)

S&N filed a Reply on May 21, 2015.

(ECF

No. 46.)
II.

Legal Standard
Pursuant to Rule 12(b)(1), a defendant may move to dismiss

a plaintiff’s complaint for “lack of subject-matter
jurisdiction.”

Fed. R. Civ. P. 12(b)(1).
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“A Rule 12(b)(1)

motion can either attack the claim of jurisdiction on its face,
. . . or it can attack the factual basis for jurisdiction
. . . .”

DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6th Cir.

2004).
A facial attack is a challenge to the sufficiency of
the pleading itself. On such a motion, the court must
take the material allegations of the petition as true
and construed in the light most favorable to the
nonmoving party. A factual attack, on the other hand,
is not a challenge to the sufficiency of the
pleading’s allegations, but a challenge to the factual
existence of subject matter jurisdiction.
On such a
motion, no presumptive truthfulness applies to the
factual allegations, and the court is free to weigh
the evidence and satisfy itself as to the existence of
its power to hear the case.
But the fact that the
court takes evidence for the purpose of deciding the
jurisdictional issue does not mean that factual
findings are therefore binding in future proceedings.
United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994)
(citations omitted).

Where a Rule 12(b)(1) motion challenges

the factual basis for jurisdiction, “a trial court has wide
discretion to allow affidavits, documents and even a limited
evidentiary hearing to resolve disputed jurisdictional facts.”
Williams v. Hooah Sec. Servs., LLC, 729 F.Supp.2d 1011, 1012
(W.D. Tenn. 2010) (quoting Ohio Nat. Life Ins. Co. v. United
States, 922 F.2d 320, 325 (6th Cir.1990)) (internal quotation
marks omitted).
III. Analysis
S&N argues that the Rhea no longer has standing to proceed
in this case, and that the Court therefore does not have
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jurisdiction to grant any relief to the putative class.
No. 27-1.)

(ECF

According to S&N, its offer constituted a Rule 68

offer of judgment.

(Id. at 4.)

S&N asserts that under Sixth

Circuit precedent, a Rule 68 offer of judgment made before
certification -- whether accepted or not -- moots the action.
(Id. (citing Brunet v. City of Columbus, 1 F.3d 390, 399 (6th
Cir. 1993) and Mey v. N. Am. Bancard, LLC, No. 14-cv-11331, 2014
WL 668773, at *2 (E.D. Mich. Nov. 26, 2014), appeal docketed,
No. 14-2574 (6th Cir. December 11, 2104)).)

S&N states that the

appropriate relief in a circumstance such as this, in which a
Rule 68 offer of judgment is not accepted, is to enter judgment
in favor of the named plaintiff.

(ECF No. 27-1 at 4–5 (citing

Mey at *2).)
Rhea argues that its cause of action is not moot for two
reasons.

First, Rhea argues that the offer made by S&N did not

provide everything that Rhea requested as an individual.
No. 41 at 4–9.)

(ECF

According to Rhea, the two faxes referenced in

the Complaint are “simply examples of S&N’s noncompliant faxes.”
(Id. at 5.)

Rhea asserts that “[n]either S&N nor Rhea Drug

knows how many violations occurred during the class period,” and
that further discovery will be needed to determine whether S&N
offered complete relief.

(Id. at 6.)

Rhea also argues that

because it requested actual monetary damages if greater than the
statutory damages, the $5000 offered is insufficient.
5

(Id. at

6-8.)

Additionally, Rhea states that it individually requested

class relief, and so the offer of judgment has failed to provide
that relief.

(Id. at 8.)

Second, Rhea argues that even if S&N’s offer was a Rule 68
offer of judgment, it does not moot the class action.
9–17.)

(Id. at

According to Rhea, such an offer of judgment does not

moot a class action if the offer is made after the motion for
class action is filed.

(Id. at 8–9 (citing Brunet, 1 F.3d at

399).)
The Court agrees that even if S&N’s offer was a Rule 68
offer of judgment, it does not moot the class action.

According

to the Sixth Circuit, whether an offer of judgment moots an
action depends on when the offer is made.

“Once a class is

certified, the mooting of the named plaintiff’s claim does not
moot the action[;] the court continues to have jurisdiction to
hear the merits of the action if a controversy between any class
member and the defendant exists.”
F.3d 390, 399 (6th Cir. 1993).

Brunet v. City of Columbus, 1

“Where, on the other hand, the

named plaintiff’s claim becomes moot before certification,
dismissal of the action is required.”

Id.

The Brunet court

held that because the representatives had not even filed their
motion for class certification at the time that they settled,
their class claims were moot.

See id.

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The Sixth Circuit has yet to determine the effect of an
offer of judgment that is made after a motion for class
certification has been filed.

S&N’s citations to Mey, which is

currently pending before the Sixth Circuit, are inapposite, as
the district court in Mey denied an early motion for class
certification as premature.

In contrast, in this case, S&N did

not oppose Rhea’s early filing of the motion for class
certification and staying briefing until a later date.
Accordingly, the procedural posture in this case requires the
Court to consider whether an offer of judgment made after a
motion for class certification has been filed moots the action.
For the following reasons, the Court finds that it does not.
According to the Supreme Court, class certification relates
back to the filing of the complaint when a representative’s
claims “are so inherently transitory that the trial court will
not have even enough time to rule on a motion for class
certification before the proposed representative's individual
interest expires.”
388, 399 (1980).

U.S. Parole Comm’n v. Geraghty, 445 U.S.
Several circuits have held that an offer of

judgment renders a potential representative’s claim sufficiently
transitory due to the defendant’s strategy of attempting to
“pick off” potential class representatives -- regardless of
whether a motion for class certification has yet been filed.
Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1090–92 (9th Cir.
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2011); Weiss v. Regal Collections, 385 F.3d 337, 346–47 (3d Cir.
2004), as amended (Oct. 22, 2004); see also Lucero v. Bureau of
Collection Recovery, Inc., 639 F.3d 1239, 1250 (10th Cir. 2011)
(holding that an offer of judgment does not moot a class action
when a plaintiff timely files a motion for class certification
pursuant to an agreed upon schedule -- even when filed after the
offer of judgment is made).

Other Circuits have held that once

the motion for class certification has been filed, the relation
back doctrine applies.

Zeidman v. J. Ray McDermott & Co., 651

F.2d 1030, 1048–49 (5th Cir. 1981); Susman v. Lincoln Am. Corp.,
587 F.2d 866, 869–71 (7th Cir. 1978).
The Court follows the guidance of Geraghty, and of the
Third, Fifth, Seventh, Ninth, and Tenth Circuits, and holds that
once a motion for class certification has been filed, class
certification relates back to the date of the filing of the
complaint.

Accordingly, Plaintiff’s claims are not moot so long

as the motion for class certification is pending -- and class
certification is not denied.

Plaintiff thus has standing to

pursue its claims, and the Court has subject matter jurisdiction
over this action.
IV.

CONCLUSION
For the reasons stated above, S&N’s Motion to Dismiss (ECF

No. 27) is DENIED.

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IT IS SO ORDERED, this 10th day of June, 2015.

/s/ Jon P. McCalla
JON P. McCALLA
UNITED STATES DISTRICT JUDGE

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