Mabary v. HomeTown Bank, N.A.

Filing 32

MEMORANDUM AND ORDER DENYING 14 Opposed MOTION to Dismiss For Want of Subject Matter Jurisdiction, DENYING 8 MOTION to Dismiss 1 Complaint.(Signed by Judge Keith P Ellison) Parties notified.(sloewe)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
LISA MABARY,
Plaintiff,
VS.
HOMETOWN BANK, N.A.,
Defendant.

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CIVIL ACTION NO. 4:10-cv-3936

MEMORANDUM & ORDER
Pending before the Court are Defendant Hometown Bank, N.A.’s (“Hometown”
or “Defendant”) motions to dismiss Plaintiff Lisa Mabary’s (“Mabary” or “Plaintiff”)
class complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1).
(Doc. Nos. 8 & 14.) After considering the parties’ filings, all responses and replies
thereto, and the applicable law, the Court finds that both of Hometown’s motions to
dismiss must be DENIED.
I.

BACKGROUND

On October 19, 2010, Plaintiff filed the present lawsuit on behalf of herself and
all others similarly situated, alleging that Hometown violated the Electronic Funds
Transfer Act, 15 U.S.C. § 1693 et seq. (“EFTA”), and its implementing Regulation E, 12
C.F.R. § 205.1 et seq. The section of the EFTA under which Plaintiff brings this lawsuit
requires operators of automated teller machines (“ATMs”) who impose a fee in
connection with electronic fund transfers to provide advance notice to the consumer. 15
U.S.C. § 1693b(d)(3). Section 1693b(d)(3)(C) specifically prohibits fees that are not
properly disclosed and explicitly assumed by the consumer:

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No fee may be imposed by any automated teller machine operator in
connection with any electronic fund transfer initiated by a consumer for
which a notice is required under subparagraph (A), unless-(i) the consumer receives such notice in accordance with subparagraph
(B); and
(ii) the consumer elects to continue in the manner necessary to effect the
transaction after receiving such notice.
15 U.S.C. § 1693b(d)(3)(C). In this case, Plaintiff alleges that Hometown violated the
“on the machine” notice requirement set forth in subparagraph (B):
(B) Notice requirements
(i) On the machine
The notice required under clause (i) of subparagraph (A) with respect to
any fee described in such subparagraph shall be posted in a prominent and
conspicuous location on or at the automated teller machine at which the
electronic fund transfer is initiated by the consumer.
15 U.S.C. § 1693b(d)(3)(B)(i).1
Specifically, in her original complaint, Plaintiff alleges that, in May 2010, she was
charged a $2.00 transaction fee in connection with one or more electronic fund transfers
she completed using an ATM or ATMs operated by Hometown. She asserts that there
was no notice posted “on or at” the relevant ATM(s) operated by Hometown that
informed consumers about the imposition of a fee. (Compl. ¶ 16-19.)
In her original complaint, Plaintiff seeks to represent a class of persons to be
defined as follows:
All persons who: 1) were charged a “terminal fee” at ATMs operated by

1

Plaintiff contends and the Court agrees that Hometown’s compliance with the on screen notice
requirements of 15 U.S.C. §1693b(d)(3)(B)(ii) is immaterial to Plaintiff’s claim for statutory damages
because the EFTA requires that a fee notice appear both “on or at” an ATM machine and “on the screen” or
paper receipt and prohibits the imposition of a fee unless both prongs of the notice requirement are
satisfied. See 15 U.S.C. § 1693b(3)(C).

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Defendant when such persons made an electronic fund transfer and/or
balance inquiry where, 2) no notice indicating that such fee was to be
charged was posted on or at the outside of the ATM machine.
(Compl. ¶ 22.)
Shortly after Plaintiff filed her original complaint, the Court set a Pretrial and
Scheduling Conference for June 3, 2011. (Doc. No. 3.) Hometown was served with
Plaintiff’s complaint on November 29, 2010. The parties entered into a stipulation on
December 17, 2010, which allowed Hometown an extension of time to respond to
Plaintiff’s complaint until January 14, 2011. (Doc. No. 7.)
Defendant timely responded to the complaint by filing a motion to dismiss for
failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) or, in the
alternative, for a more definite statement. (Doc. Nos. 8 & 9.) On February 3, 2011,
Hometown made Plaintiff an offer of judgment pursuant to Federal Rule of Civil
Procedure 68, which Hometown contends, tendered the full amount of Plaintiff’s
individual claim.2

Plaintiff did not accept Hometown’s offer and responded to

Hometown’s motion to dismiss by filing her First Amended Complaint on February 7,
2011. (Doc. No. 12.) The same day, Plaintiff filed a motion for class certification. (Doc.
No. 13.)
On February 21, 2011, Hometown filed a motion to dismiss pursuant to Federal
Rule of Civil Procedure 12(b)(1),3 contending that its Rule 68 offer of judgment divested
the Court of subject matter jurisdiction over the case. (Doc. Nos. 14 & 15.) The Court
subsequently stayed Hometown’s deadline to respond to Plaintiff’s class certification
motion until the Court ruled on Hometown’s motions to dismiss.
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Hometown offered to allow entry of judgment in favor of Plaintiff, individually, in the amount of $1,000
in statutory damages, plus reasonable attorneys’ fees and costs.
3
Unless otherwise indicated, references to rules are to the Federal Rules of Civil Procedure.

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Hometown’s motions are both now fully briefed and ripe for decision. The Court
will first address the issue of its subject matter jurisdiction over Plaintiff’s complaint
before analyzing whether Plaintiff has stated a claim for relief under Rule 12(b)(6).
II.

MOTION TO DISMISS PURSUANT TO RULE 12(b)(1)

Hometown argues that its February 3, 2011, offer of judgment mooted Plaintiff’s
individual claims. Because no class had been certified when Plaintiff’s claims were
mooted, Hometown argues, the entire case is moot and must be dismissed pursuant to
Rule 12(b)(1) for want of subject matter jurisdiction. Hometown concedes that the Fifth
Circuit recognizes an exception to this general rule, but contends that the present case
does not fit into the “limited exception” that applies “if, but only if, the action becomes
moot after there has been a timely filed and diligently pursued motion for class
certification that actually results in a class being certified.” (Def.’s Mem. of Law at 2.)
Plaintiff urges that the circumstances presented fit squarely within the class of
cases to which the Fifth Circuit applies the “relation back” doctrine, which prevents the
mootness of the individual plaintiff’s claims from mooting the entire case before the
Court has an opportunity to rule on the propriety of class certification. Plaintiff asserts
that she has met all of the prerequisites for application of the doctrine, which preserves a
live controversy at each stage in the litigation. Indeed, as the Fifth Circuit requires,
Plaintiff contends that she timely filed and diligently pursued a class certification motion
and that her complaint presented a live controversy when it was filed.
As discussed below, the Court is persuaded that the “relation back” doctrine
applies to the facts presented. Thus, the Court retains subject matter jurisdiction over the
case, at least until Plaintiff’s motion for class certification can be resolved. If the Court

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certifies Plaintiff’s proposed class, the certification will relate back to Plaintiff’s original
complaint, which presented a live controversy when it was filed. Accordingly, the case
will not be moot notwithstanding Hometown’s offer of judgment to Plaintiff.
A.

Rule 12(b)(1) Legal Standard

Pursuant to Rule 12(b)(1), a court may dismiss a complaint for “lack of subjectmatter jurisdiction.” Fed. R. Civ. P. 12(b)(1). “‘A case is properly dismissed for lack of
subject matter jurisdiction when the court lacks the statutory or constitutional power to
adjudicate the case.’” Home Builders Ass’n of Miss., Inc. v. City of Madison, 143 F.3d
1006, 1010 (5th Cir. 1998) (quoting Nowak v. Ironworkers Local 6 Pension Fund, 81
F.3d 1182, 1187 (2d Cir. 1996)). “‘[U]nder Rule 12(b)(1), the court may find a plausible
set of facts supporting subject matter jurisdiction by considering any of the following:
‘(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced
in the record; or (3) the complaint supplemented by undisputed facts plus the court’s
resolution of disputed facts.’” Castro v. United States, 560 F.3d 381, 386 (5th Cir. 2009),
rev’d en banc on other grounds, 608 F.3d 266 (5th Cir. 2010) (quoting Lane v.
Halliburton, 529 F.3d 548, 557 (5th Cir. 2008)) (internal quotations omitted).
A factual attack, such as the one Hometown has raised, “challenges the existence
of subject matter jurisdiction in fact, irrespective of the pleadings, and matters outside the
pleadings, such as testimony and affidavits, are considered.” Menchaca v. Chrysler
Credit Corp., 613 F.2d 507, 511 (5th Cir. 1980) (citing Mortensen v. First Fed. Sav. &
Loan Ass’n, 549 F.2d 884, 891 (3d Cir. 1977)). In analyzing a factual attack on subject
matter jurisdiction “the district court must resolve disputed facts without giving a
presumption of truthfulness to the plaintiff’s allegations.” Vantage Trailers, Inc. v. Beall

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Corp., 567 F.3d 745, 748 (5th Cir. 2009).

The plaintiff bears the burden of

demonstrating by a preponderance of the evidence that subject matter jurisdiction exists.
Id.
Hometown argues that the Plaintiff’s claims are, in fact, moot, and, thus, attacks
the existence of the Court’s subject matter jurisdiction over this case. Plaintiff, therefore,
bears the burden of demonstrating that her claims are not moot or that, despite the
mootness of her individual claims, the Court retains jurisdiction to adjudicate the merits
of her motion for class certification. In analyzing whether Plaintiff has met her burden,
the Court will first review general mootness principles and the impact of offers of
complete relief on justiciability. The Court will then discuss mootness rules in the class
action context and the applicability of the Fifth Circuit’s relation back doctrine to the
present case.
B.

General Mootness Principles

“Article III of the Constitution limits federal ‘Judicial Power,’ that is, federalcourt jurisdiction, to ‘Cases’ and ‘Controversies.’” United States Parole Comn’n v.
Geraghty, 445 U.S. 388, 395 (1980). “‘[W]hen the issues presented are no longer live or
the parties lack a legally cognizable interest in the outcome,’” a case is considered moot.
Id. at 396 (quoting Powell v. McCormack, 395 U.S. 486, 496 (1969)) (internal quotations
omitted). “Generally, any set of circumstances that eliminates actual controversy after
the commencement of a lawsuit renders that action moot.” Ctr. for Individual Freedom
v. Carmouche, 449 F.3d 655, 661 (5th Cir. 2006). In turn, “the definitive mootness of a
case or controversy . . . ousts the jurisdiction of the federal courts and requires dismissal
of the case.” Deposit Guaranty Nat’l Bank v. Roper, 445 U.S. 326, 335 (1980).

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1. Offers of Complete Relief and Mootness
An offer of complete relief will generally moot a plaintiff’s claim, as at that point
she no longer retains a personal interest in the outcome of the litigation. See Rand v.
Monsanto Co., 926 F.2d 596, 598 (7th Cir. 1991) (“Once 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.”) (internal citation omitted). Indeed, even an unaccepted offer of full
relief may moot a plaintiff’s claim. See Young v. Asset Acceptance, LLC, Civil Action
No. 3:09-CV-2477-BH, 2011 WL 618274, at *2 (N.D. Tex. Feb. 10, 2011) (“when a
plaintiff rejects an offer by the defendant of everything he could possibly recover from
his lawsuit, his case may be dismissed as moot”); McCauley v. Trans Union, LLC, 304
F.Supp.2d 539, 540 (S.D.N.Y. 2004) (same); 13B Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure § 3533.2 (3d ed. 1998) (“Even when one party
wishes to persist to judgment, an offer to accord all of the relief demanded may moot the
case.”).
2. Sufficiency of Hometown’s Offer of Judgment
A threshold question is, thus, whether Hometown’s offer of judgment was, in fact,
sufficient to moot Plaintiff’s individual claims. Plaintiff appears to concede that an offer
of complete relief, even if rejected, will generally moot a plaintiff’s claims. Plaintiff
contends, however, that Hometown’s offer of $1,000 in statutory damages is inadequate
under the EFTA because Plaintiff conducted one or more transactions for which she is
entitled to relief. She suggests that Hometown owes her $1,000 in statutory damages for
each transaction she conducted in which a Hometown ATM violated EFTA’s notice

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requirements.
The EFTA authorizes statutory damages of no less than $100 and no more than
$1,000, plus reasonable costs and attorney’s fees. 15 U.S.C. §§ 1693m(a)(2)(A) and
1693m(a)(2)(A)(3). Citing Stilz v. Global Cash Network, Inc., Hometown argues that the
EFTA permits each plaintiff to recover a maximum of $1,000, regardless of the number
of transactions for which proper notice under the EFTA was lacking. No. 10 CV 1998,
2010 WL 3975588, at * 4 (N.D. Ill. Oct. 7, 2010) (“The EFTA’s plain language is clear
that a plaintiff may recover a maximum of $1,000 in statutory damages.”).
Although it appears that Hometown’s position is supported by at least one district
court, the Court need not resolve the question at this stage. As discussed below, even if
Plaintiff’s individual claims were fully satisfied by Hometown’s offer of judgment, the
Court retains subject matter jurisdiction to rule on Plaintiff’s pending motion for class
certification. If the Court denies Plaintiff’s class certification motion, leaving only her
individual claims, it will then be necessary for the Court to determine whether
Hometown’s offer of judgment successfully mooted her claims.
C.

Mootness in the Class Action Context

Jusiticiable claims may be presented by either named or unnamed class plaintiffs.
Zeidman v. J. Ray McDermott & Co., Inc., 651 F.2d 1030, 1046 (5th Cir. 1981). A
lawsuit which is originally jusiticiable because of the named plaintiff’s live claims may
be justiciable at a later stage because of the live claims of the unnamed plaintiffs in a
certified class.

Id.

This is because, when a class action is properly certified, it

“acquire[s] a legal status separate from [the named plaintiff’s] asserted interest.” Sosna
v. Iowa, 419 U.S. 393, 399 (1975). Accordingly, satisfaction of the class representative’s

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claim does not moot the entire action, so long as the claims of certified class members are
justiciable. See Zeidman, 651 F.2d at 1046.
The class members, which may take the place of the named plaintiff for Article III
purposes, generally must do so, however, while the named plaintiff(s) have justiciable
claims. Id. Thus, under general principles, “a purported class action becomes moot when
the personal claims of all named plaintiffs are satisfied and no class has properly been
certified.” Zeidman, 651 F.2d at 1041. “In such a case there is no plaintiff (either named
or unnamed) who can assert a justiciable claim against any defendant and consequently
there is no longer a ‘case or controversy’ within the meaning of Article III of the
Constitution.” Id. Indeed, “a lawsuit brought as a class action must present jusiticiable
claims at each stage of the litigation; if the named plaintiffs’ individual claims become
moot before a class has been certified, no justiciable claims are at that point before the
court and the case must as a general rule be dismissed for mootness.” Id. at 1046.
D.

The Fifth Circuit’s Exception: The Relation Back Doctrine

In Zeidman, however, the Fifth Circuit recognized that, were such a strict rule to
control in all cases, “[a] series of individual suits, each brought by a new named plaintiff,
could individually be ‘picked off’ before class certification.” Id. at 1050. In order to
preserve the viability of class actions where defendants could easily satisfy individual
plaintiffs’ claims, the Fifth Circuit held that the “general rule must yield when the district
court is unable reasonably to rule on a motion for class certification before the individual
claims of the named plaintiffs become moot.” Id. at 1045. The Court reasoned that,
“[a]lthough the case did not present the type of ‘transitory’ claims typically involved in
the ‘capable of repetition yet evading review’ exception to the mootness doctrine, . . . the

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same logic applied to situations in which ‘the defendants have the ability by tender to
each named plaintiff effectively to prevent any plaintiff in the class from procuring a
decision on class certification.’” Murray v. Fidelity National Financial, Inc., 594 F.3d
419, 421 (5th Cir. 2010) (citing Zeidman, 651 F.2d at 1050).
The Court found that the Zeidman named plaintiffs’ class certification motion was
pending when the defendants made an offer of judgment satisfying their claims.4 Under
these circumstances, the Court concluded “that a suit brought as a class action should not
be dismissed for mootness upon tender to the named plaintiffs of their personal claims, at
least when . . . there is pending before the district court a timely filed and diligently
pursued motion for class certification.” Id. at 1051.
The Zeidman court explained that, although the individual plaintiffs’ claims
would be moot as a technical matter by the time the district court certified a class, the
“relation back” doctrine would allow the certification to “relate back” to the filing of the
complaint, when the plaintiff’s claims presented a live controversy. Id. at 1047-1051.
Thus, through the relation back mechanism, the class members would take the place of
the named plaintiff(s) for Article III purposes while the plaintiff(s) still possessed live
claims. Under appropriate circumstances, therefore, the relation back doctrine preserves
a live controversy at each stage in the litigation, allowing the district court to retain
subject matter jurisdiction and proceed to the merits of the named plaintiff’s class
certification motion.
In Sandoz v. Cingular Wireless LLC, the Fifth Circuit extended the reasoning
4

The defendants in Zeidman argued that the district court had already denied the plaintiffs’ class
certification motion when they made the plaintiffs an offer of full relief. The Fifth Circuit agreed that,
under the defendants’ version of the facts, the case would have been moot; however, it found that the
district court’s opinion on class certification was a limited one that left “the plaintiffs’ motion for
certification pending before the court.” Zeidman, 651 F.2d at 1037.

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articulated in Zeidman to collective actions filed under the Fair Labor Standards Act
(“FLSA”). 5 553 F.3d 913 (5th Cir. 2008). The Sandoz court also made clear that the
“relation back” doctrine’s applicability is not limited to cases in which a motion for class
certification is pending when the defendant satisfies the named plaintiff’s demand.
Of course, in Zeidman, the plaintiff filed a class certification motion before the
defendant’s offer of judgment; thus, the Fifth Circuit was not presented with the precise
circumstances raised in Sandoz. The defendant in Sandoz, however, made its offer of
judgment to the named plaintiff roughly a month after receiving her complaint and before
the plaintiff had an opportunity to move for certification of her collective action. In fact,
the plaintiff did not file her motion to certify until approximately nine months after the
defendant’s offer of judgment. The Court, nonetheless, found that the “relation back”
doctrine could apply to the circumstances presented, as long as Sandoz filed a timely
motion for class certification. Id. at 920-921 (“[W]hen a FLSA plaintiff files a timely
motion for certification of a collective action, that motion relates back to the date the
plaintiff filed the initial complaint, particularly when one of the defendant’s first actions
is to make a Rule 68 offer of judgment.”).
In turn, the Court made clear that, in order to be timely, a plaintiff need not rush
to the courthouse and file her motion for class certification before the defendant can
satisfy her individual demand for relief. Certainly, had the Fifth Circuit demanded a
pending class certification motion as a prerequisite to the application of the relation back
doctrine, Sandoz would not have met this standard. But the Fifth Circuit did not dismiss
the Sandoz case as moot. Rather, the Court stated, “[A]lthough the district court was
5

Although Sandoz was decided in the context of a Fair Labor Standards Act collective action and the
current case involves a Rule 23 class action, the Fifth Circuit has recognized that Sandoz is “instructive” in
the class action context. Murray, 594 F.3d at 422 n. 2.

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correct to suggest that [defendant’s] motion to dismiss was premature, it failed to give the
proper reason: that so long as [plaintiff] timely filed a motion to certify her collective
action, that motion would relate back to the date she filed her initial state court petition.”
Id. at 921. Given the unique circumstances presented—that the plaintiff had waited
thirteen months after filing her complaint to move for class certification—the Fifth
Circuit remanded the case to the district court for consideration of the timeliness of
Plaintiff’s class certification motion. Id. On remand, the district court found that the
plaintiff’s thirteen month delay in moving for certification was not unreasonable under
the circumstances. See Sandoz v. Cingular Wireless, LLC, Civil Action No. 07-1308,
2009 WL 2370643, at *3 (W.D. La. July 29, 2009). Applying the relation back doctrine,
the district court concluded that it possessed jurisdiction to rule on the plaintiff’s motion
for certification. Id. at *4.
In short, Zeidman and Sandoz reveal that, so long as a plaintiff timely files and
diligently pursues a motion to certify her collective or class action, that motion will relate
back to the date the plaintiff filed her initial class or collective action complaint,
regardless of the precise sequence of defendant’s offer of complete relief. As the Fifth
Circuit has explained, the relation back mechanism thereby ensures that plaintiffs have a
reasonable opportunity to move for class certification without being picked off by
defendants employing Rule 68 as a sword. Sandoz, 553 F.3d at 919.
E.

Mechanics of the Relation Back Doctrine

The Sandoz court also articulated the appropriate procedure for applying the
relation back doctrine. When presented with a timely filed and diligently pursued motion
for class certification, a district court may properly deny a motion to dismiss challenging

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its subject matter jurisdiction on the basis that the defendant’s offer of judgment mooted
the named plaintiff’s claims. “If the court ultimately grants the motion to certify, then the
Rule 68 offer to the individual plaintiff would not fully satisfy the claims of everyone in
the collective action” or class action. Id. at 921. Accordingly, the case would present a
live controversy between the class members and the defendant and the case would not be
moot. On the other hand, “if the court denies the motion to certify, then the Rule 68 offer
of judgment renders the individual plaintiff’s claims moot.” Id. Certainly, at that point,
under general principles instructing that a purported class action becomes moot when the
personal claims of all named plaintiffs are satisfied and no class has properly been
certified, the controversy would be moot and the case would be dismissed for lack of
subject matter jurisdiction.
F.

The Justiciability of Plaintiff’s Original Complaint

In this case, if Plaintiff’s motion for class certification was timely filed and the
Court certifies a class, that certification will relate back to the date Plaintiff filed her
original complaint. Of course, as previously discussed, a lawsuit must present a live
controversy at each stage in order to be justiciable. Therefore, in order to avoid dismissal
on mootness grounds, the certification of a class must “relate back” to a complaint that
presented a live case or controversy when it was filed. Hometown does not appear to
dispute that Plaintiff’s original complaint presented a live controversy between Plaintiff
and Hometown when it was filed.6 Hometown argues, rather, that any future class
certification cannot properly relate back to Plaintiff’s original complaint because it lacks

6

Although Hometown titled the section of its Memorandum of Law discussing this issue, “The Original
Complaint Did Not Create a Case or Controversy,” it does not appear to actually argue that Plaintiff’s
original complaint failed to present a live case or controversy within the meaning of Article III. Rather, it
asserts only that Plaintiff failed to plead sufficient facts to establish federal jurisdiction through the EFTA.

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sufficient facts to demonstrate federal jurisdiction.
To illustrate its argument, Hometown directs the Court to Murray v. Fidelity
National Financial, Inc., in which the Fifth Circuit found that the entire case was moot
following an offer of judgment. 594 F.3d 419 (5th Cir. 2010). Indeed, in that case, after
the complaint was filed, it became clear that the named plaintiffs had not, in fact,
conducted business with any of the defendants. Id. at 420. As a result, the original
plaintiffs filed a motion for leave to amend their complaint in order to add the Murrays,
who had actually dealt with one of the defendants. Id. Before the district court could
rule on that motion, however, the relevant defendant tendered the full amount of the
Murrays’ individual claims. Id. The district court granted the defendants’ motion to
dismiss challenging subject matter jurisdiction. The Fifth Circuit affirmed, holding that
the original plaintiffs lacked standing and the Murrays’ claims were moot before they
were added to the complaint. Thus, in Murray, neither the original nor the amended
complaint presented a live case or controversy to which a future class certification could
relate back.
Hometown contends that, as in Murray, Plaintiff’s class, if certified, would relate
back to a void. The essence of Hometown’s argument is that Plaintiff’s complaint lacks
sufficient factual allegations to establish the existence of federal jurisdiction; therefore,
even if a class is certified, there will be no valid class complaint to which the certification
can relate back. In other words, Plaintiff’s failure to state certain jurisdictional facts in
her original complaint inhibits the relation back doctrine from successfully operating to
save the case from mootness.7 Although Hometown acknowledges that plaintiffs may be

7

Curiously, Hometown does not bring the Court’s alleged lack of federal question jurisdiction as a separate
ground for dismissal under Rule 12(b)(1). It raises this alleged deficiency only as part of its argument

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permitted to supply omitted jurisdictional facts via amendment, it argues that Plaintiff’s
claims were mooted before she filed her amended complaint. Thus, the only pleading
that presented a live case or controversy when filed was the original complaint, which
Hometown contends, fails to adequately plead federal jurisdiction.
There are a number of problems with Hometown’s argument. First, significant
differences exist between the facts presented in Murray and those currently before the
Court that make Murray’s reasoning inapplicable. Certainly, unlike here, the Murray
case never involved a live controversy. Indeed, the original plaintiffs lacked standing and
the Murrays’ claims were mooted before they were added to the complaint.

As

previously discussed, neither the original complaint, nor the amended complaint the
Murrays’ sought leave to file, presented a justiciable controversy to the court. The Fifth
Circuit held, therefore, that the relation back doctrine as articulated in Sandoz and
Zeidman could not save the case from mootness and declined the Murrays’ invitation to
extend the doctrine to protect plaintiffs with already moot claims seeking to be added to a
lawsuit via amendment.8
Second, a lack of sufficient facts to establish federal jurisdiction is simply not
analogous to a factual lack of Article III standing in a number of important ways. For
example, even if a plaintiff’s original complaint fails to allege sufficient facts to establish
federal jurisdiction, she may amend the complaint to add the omitted facts and, in most

regarding the inapplicability of the relation back doctrine.
8
The Murrays argued that Zeidman’s relation back rule should apply where a defendant attempts to moot
the proposed named plaintiff’s individual claims while a motion to amend seeking to add the plaintiffs is
pending. Indeed, the plaintiffs were required by Rule 15(a)(2) to seek leave of the court before amending,
which informed the defendants of the proposed class representatives, allowing them to be picked off before
they were protected by the Zeidman rule. The Court rejected the Murray’s argument, reasoning that, unlike
Sandoz and Zeidman, the Murrays had a readily available means of preventing the defendants from
mooting their claims—filing a separate lawsuit. Id. at 422.

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cases, that amendment will relate back to the date of the original pleading.9 See Fed. R.
Civ. P. 15(c)(1)(B). By contrast, a case that is factually moot under Article III cannot be
cured by amendment of the complaint.

Given this key doctrinal distinction, it is

unsurprising that Hometown is unable to provide legal authority extending Murray’s
limited holding to preclude the relation back doctrine’s application to an original
complaint lacking sufficient jurisdictional facts when filed.
Third, Hometown has not demonstrated that Plaintiff actually failed to plead
sufficient facts to demonstrate the existence of federal jurisdiction.10 Hometown argues
that, in order to establish subject matter jurisdiction pursuant to the EFTA, Plaintiff must
allege that the ATM owner was a person “other than a financial institution holding a
consumer’s account.” (Def.’s Mem. of Law at 15.) Although such an allegation may be
necessary to state a claim under Rule 12(b)(6), Hometown has failed to persuade the
Court that failure to allege this fact has jurisdictional consequences. The only case
Hometown cites for the proposition that failure to allege this fact deprives the Court of
subject matter jurisdiction is readily distinguishable.

United States ex rel. Branch

Consultants, L.L.C. v. Allstate Ins. Co., the case to which Hometown directs the Court,
involved a qui tam action under the Federal Claims Act, a statute with clear jurisdictional
bars, several of which the, defendants argued, deprived the court of jurisdiction. ---

9

The Court notes that Plaintiff’s First Amended Complaint, in fact, supplies the allegedly omitted fact.
(Pl.’s First Am. Compl. ¶ 16.)
10
Hometown urges that, by failing to timely oppose its motion to dismiss pursuant to Rule 12(b)(6),
Plaintiff has conceded that the necessary jurisdictional facts were missing from her original complaint. The
Court disagrees. Plaintiff filed her amended complaint on February 7, 2011, only three days after her
February 4, 2011, response deadline. In support of its position, Hometown cites Southern District of Texas
Local Rule 7.4, which states that “[f]ailure to respond will be taken as a representation of no opposition.”
This rule, when read in conjunction with Local Rule 7.3, makes clear that the district court may rule on an
opposed motion 21 days from the motion’s filing, regardless of whether a response has been filed, as it may
be deemed unopposed. The rule does not mean, however, that by failing to timely respond, the non-movant
concedes the movant’s version of the facts and/or the correctness of the movant’s arguments.

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F.Supp.2d ----, 2011 WL 322367 (E.D. La. Jan. 24, 2011). In that case, the court agreed
with the defendants that many of the relator’s claims had to be dismissed for lack of
subject matter jurisdiction, inter alia, because the relator failed to meet pre-filing
disclosure requirements. Id. at *18. By contrast, the allegedly missing fact in Plaintiff’s
complaint lacks the clear jurisdictional significance of pre-filing disclosure requirements
in the context of a qui tam action.
In conclusion, the Court is unconvinced by Hometown’s attempts to impose
additional hurdles to the applicability of the relation back doctrine.11 At this stage in the
litigation, in order to avoid dismissal on mootness grounds, Plaintiff need only timely file
and diligently pursue a motion for class certification that, if granted, will relate back to
her class complaint, which clearly presented a live controversy between Plaintiff and
Hometown when it was filed.

Thus, the Court will continue its analysis of the

applicability of the relation back by considering the timeliness of Plaintiff’s motion for
class certification.
G.

Timeliness of Plaintiff’s Class Certification Motion

As previously explained, although the applicability of the relation back
mechanism is not limited to cases in which a motion for class certification is pending
when the defendant satisfies the named plaintiff’s demand, the Fifth Circuit has provided
little guidance regarding the precise definitions of “timely” and “diligently pursued.” It is

11

Hometown attempts to impose still an additional requirement on the applicability of the Fifth Circuit’s
relation back doctrine. Specifically, Hometown argues that the doctrine applies only when “there are
sufficient allegations to demonstrate that invocation of a class action has colorable merit.” (Def.’s Mem. of
Law at 9.) Whether a complaint contains sufficient factual allegations is an entirely separate inquiry that
does not ordinarily impact a court’s mootness analysis. As Hometown has also filed a motion to dismiss
under Rule 12(b)(6), the Court will undertake that analysis in section III of this Order. The Court will also
resolve Plaintiff’s pending motion for class certification once it has been fully briefed. As Hometown has
cited no authority requiring the Court to pre-judge the merits of Plaintiff’s proposed class prior to applying
the relation back doctrine, the Court declines to do so.

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clear, however, that a motion for class certification must be filed “without undue delay”
in order to warrant application of the relation back doctrine. Sandoz, 553 F.3d at 921. To
meet this standard, courts generally require that such a motion be filed in compliance
relevant court rules and deadlines.
Federal Rule of Civil Procedure 23(c)(1)(A) provides that at “an early practicable
time after a person sues or is sued as a class representative, the court must determine by
order whether to certify the action as a class action.” There is no Federal Rule of Civil
Procedure or local rule in the United States District Court for the Southern District of
Texas mandating that a plaintiff file a motion for class certification within a certain
timeframe. In this case, when Plaintiff filed her class certification motion, no scheduling
order was yet in place setting a deadline for her to file such a motion.
In urging that Plaintiff’s motion was untimely and/or not diligently pursued,
Hometown directs the Court to a number of class action settlement agreements in cases
brought by Plaintiff’s counsel involving similar allegations. Hometown argues that,
given the simplicity of Plaintiff’s claims, the fact that she seeks only statutory damages,
and that her counsel has used the same class structure in previous cases, the three and a
half month delay in filing her motion for class certification demonstrates a lack of
diligence. Indeed, in light of these factors, Hometown urges, “there is no realistic reason
for there to have been any delay in filing a motion to certify a class in this case.” (Def.’s
Mem. of Law at 11.) Hometown’s arguments, thus, imply that Plaintiff should have filed
her class certification motion along with her class complaint, or at least at some time
shortly thereafter.
The Court finds Hometown’s references to other cases to be unavailing and

18

disagrees with Hometown’s conclusion that Plaintiff engaged in undue delay in filing her
motion for class certification. When examining the circumstances of this case it is clear
that Plaintiff was diligent in filing her class certification motion on February 7, 2011, less
than four months after she filed her class complaint and only four days after receiving
Hometown’s offer of judgment. At the time, Hometown had not yet filed a response to
her complaint on the merits and no discovery had taken place.
In the absence of a rule requiring Plaintiff’s class certification to have been filed
earlier, the Court is reluctant to find that the motion was untimely under the
circumstances. Certainly, many courts, including the Fifth Circuit, have not required a
pending class certification motion as a prerequisite to application of the relation back
doctrine because they believe such a rule would create a race to the courthouse and
encourage premature class certification filings. The same reasoning is relevant to the
Court’s timeliness determination in this case.

See Schaake v. Risk Management

Alternatives, Inc., 203 F.R.D. 108, 112 (S.D.N.Y. 2001) (“Taken to its absurd logical
conclusion, the policy urged by defendant would clearly hamper the sound administration
of justice, by forcing a plaintiff to make a class certification motion before the record for
such motion is complete–indeed before an Answer is filed–would result in sweeping
changes to accepted norms of civil litigation in the Federal Courts.”); Wilder
Chiropractic, Inc. v. Pizza Hut of Southern Wisconsin, Inc., 754 F.Supp.2d 1009, 1015
(W.D. Wis. 2010) (“It would make little sense to fashion a rule that would allow the fate
of a case to be resolved by a race to the courthouse, particularly when the deadline for
filing a motion for class certification is still months away. . . . Such an arbitrary result
would serve no purpose other than providing defendants a procedural advantage or

19

requiring plaintiffs in every class action to accompany their complaint with a motion for
class certification.”); Liles v. American Corrective Counseling Services, Inc., 201 F.R.D.
452, 455 (S.D. Iowa 2001) (“Hinging the outcome of this motion on whether or not class
certification has been filed is not well-supported in the law nor sound judicial practice; it
would encourage a ‘race to pay off’ named plaintiffs very early in litigation, before they
file motions for class certification.”); Stewart v. Cheek & Zeehandelar, LLP, 252 F.R.D.
384, 386 (S.D. Ohio 2008) (“[I]f the putative class representatives’ claims could be
mooted by a settlement offer tendered before the certification motion is filed–each side
will endeavor to beat the other to the punch. Plaintiffs will be forced to swiftly file their
certification motions, possibly before completing class-related discovery, in order to
maintain their claims. . . . Defendants, on the other hand, will race to make their
settlement offers before plaintiffs file their certification.”); Zeigenfuse v. Apex Asset
Management, LLC, 239 F.R.D. 400, 402 (E.D. Pa. 2006) (“The validity of a Rule 68 offer
should not be determined by who wins the race to the courthouse–the filer of the motion
for class certification or the filer of a Rule 68 offer.”); Hrivnak v. NCO Portfolio
Management, Inc., No. 1:10-CV-646, 2010 WL 5392709, at *8 (N.D. Ohio Dec. 22,
2010) (a rule that does not depend on the precise timing of the class certification motion
vis-à-vis the offer of judgment “discourages premature motion practice and allows the
court to set reasonable time frames for the filing of motions for class certification without
fear that it has provided a substantial litigation advantage to the defendant by having done
so”); see also, Jancik v. Cavalry Portfolio Services, LLC, Civil No. 06-3104 (MJD/AJB),
2007 WL 1994026, at *3 (D. Minn. July 3, 2007).

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Hometown implies that Plaintiff should have filed her motion for class
certification immediately. In the interest of discouraging gamesmanship and premature
class certification filings, however, the Court believes that plaintiffs should be permitted
a reasonable period of time in which to move for class certification. A three and a half
month delay from the filing of Plaintiff’s complaint to the filing of her motion for class
certification was certainly reasonable under the circumstances.
H.

Conclusion

In sum, Hometown’s motion to dismiss pursuant to Rule 12(b)(1) must be
DENIED. The Court finds that Plaintiff’s motion for class certification was timely and
has been diligently pursued. If the Court grants Plaintiff’s class certification motion, the
certification will relate back to the date of her original complaint. At that point, even if
Plaintiff’s personal claims are moot, the class members’ claims will present a justiciable
controversy. If the class certification motion is denied, the case may be moot if the Court
finds that Hometown’s offer of relief was sufficient to satisfy Plaintiff’s individual
claims.
III.

MOTION TO DISMISS PURSUANT TO RULE 12(b)(6)

In addition to its motion to dismiss pursuant to Rule 12(b)(1), Hometown has also
challenged the sufficiency of the allegations contained in Plaintiff’s original complaint
under Rule 12(b)(6). As a preliminary matter, Hometown argues that Plaintiff’s First
Amended Complaint (“FAC”) is a nullity because it was filed after the period for
amending as a matter of course under Rule 15(a)(1)(B). The Court, however, “should
freely give leave” to amend “when justice so requires.” Fed. R. Civ. P. 15(a)(2). In this
case, Plaintiff’s FAC was filed only three days after the period for amending as a matter

21

of course had elapsed. The Court believes that good cause exists for the Court to give
Plaintiff leave to amend.
Thus, the Court will analyze Hometown’s arguments for dismissal under Rule
12(b)(6) with reference to Plaintiff’s FAC, not her original complaint. As set forth
below, any arguable defects Hometown identified in Plaintiff’s original complaint have
been cured by the filing of her FAC. As Hometown has not yet had an opportunity to
move for dismissal of Plaintiff’s FAC, if Hometown believes defects persist in the
amended pleading, the Court will permit Hometown to file a Rule 12(b)(6) motion
challenging its sufficiency.
A.

Rule 12(b)(6) Legal Standard

“To survive a Rule 12(b)(6) motion to dismiss, a complaint ‘does not need
detailed factual allegations,’ but must provide the plaintiff’s grounds for entitlement to
relief—including factual allegations that when assumed to be true ‘raise a right to relief
above the speculative level.’” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007)
(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). That is, “a complaint must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. ---, 129 S. Ct. 1937, 1949 (2009)
(quoting Twombly, 550 U.S. at 570). A claim has facial plausibility “when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).
The plausibility standard is not akin to a “probability requirement,” but asks for more
than a sheer possibility that a defendant has acted unlawfully. Id. A pleading need not
contain detailed factual allegations, but must set forth more than “labels and conclusions,

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and a formulaic recitation of the elements of a cause of action will not do.” Twombly,
550 U.S. at 555 (citation omitted).
Ultimately, the question for the court to decide is whether the complaint states a
valid claim when viewed in the light most favorable to the plaintiff. The court must
accept well-pleaded facts as true, but legal conclusions are not entitled to the same
assumption of truth. Iqbal, 129 S. Ct. at 1950 (citation omitted). The court should not
“‘strain to find inferences favorable to the plaintiffs’” or “accept ‘conclusory allegations,
unwarranted deductions, or legal conclusions.’” R2 Investments LDC v. Phillips, 401
F.3d 638, 642 (5th Cir. 2005) (quoting Southland Sec. Corp. v. Inspire Ins. Solutions,
Inc., 365 F.3d 353, 362 (5th Cir. 2004)). A district court can consider the contents of the
pleadings, including attachments thereto, as well as documents attached to the motion, if
they are referenced in the plaintiff’s complaint and are central to the claims. Collins v.
Morgan Stanley Dean Witter, 224 F.3d 496, 499 (5th Cir. 2000). Furthermore, a Court
may refer to matters of public record when deciding a motion to dismiss. Chauhan v.
Formosa Plastics Corp., 212 F.3d 595, 595 (5th Cir. 2000). Importantly, the court
should not evaluate the merits of the allegation, but must satisfy itself only that plaintiff
has adequately pled a legally cognizable claim. United States ex rel. Riley v. St. Luke’s
Episcopal Hosp., 355 F.3d 370, 376 (5th Cir. 2004). “Motions to dismiss under Rule
12(b)(6) are viewed with disfavor and are rarely granted.” Lormand v. US Unwired, Inc.,
565 F.3d 228, 231 (5th Cir. 2009) (internal citation omitted).
B.

Analysis12

Hometown argues that Plaintiff has failed to state claim under the EFTA because

12

As previously discussed, the Court rejects Hometown’s argument that Plaintiff’s tardy FAC filing
amounts to a concession that the original complaint lacked sufficient factual allegations.

23

she did not allege 1) that Hometown is not the financial institution that holds the account
from which Plaintiff made the relevant transfer; 2) that Plaintiff was the owner of the
account to or from which the relevant transfer was made; or 3) that the transfer involved
an “account” subject to the EFTA.
In order to gain relief under § 1693(b) of the EFTA, a plaintiff must show that the
defendant was acting as an “automated teller machine operator,” which is defined as any
person who “operates an automated teller machine at which consumers initiate electronic
fund transfers” and “is not the financial institution that holds the account of such
consumer from which the transfer is made.” 15 U.S.C. § 1693b(d)(3)(D)(i). Hometown
argues that Plaintiff’s complaint contains no factual allegations regarding whether
Hometown is the financial institution holding the account from which Plaintiff made the
alleged transfers. Without this fact, Hometown argues, Plaintiff cannot state a claim
against Hometown because it has not alleged that Hometown meets the definition of an
ATM operator subject to liability under the EFTA.
In Plaintiff’s FAC, she alleges that Bank of America is the financial institution
that holds the account from which she made two withdrawals on May 23, 2010. (Pl.’s
FAC ¶ 16.) Of course, if Bank of America holds the relevant account, Hometown is not
the financial institution that holds the account and, thus, Plaintiff has sufficiently alleged
that Hometown is an ATM operator within the meaning of the EFTA.
Hometown also contends that Plaintiff has failed to plead any facts alleging that
she was the owner of the account from which the relevant transfers were made. This
failure, Hometown contends, raises the issue of whether Plaintiff has standing to assert
claims under the EFTA. In Plaintiff’s FAC, however, she makes clear that the account

24

from which she made the relevant withdrawals on May 23, 2010, was her personal
checking account. Thus, there is no question that she possesses standing to sue for
violations of the EFTA’s notice provisions.
The EFTA limits the types of accounts that are subject to its provisions. Pursuant
to 15 U.S.C. § 1693a(2), “the term ‘account’ means a demand deposit, savings deposit, or
other asset account . . . established primarily for personal, family, or household
purposes.”

Hometown contends that Plaintiff failed to demonstrate that she made

transfers from an account meeting this statutory definition.
Plaintiff’s FAC alleges that, on May 23, 2010, she made two withdrawals from
her checking account used primarily for personal or household purposes. (Pl.’s FAC ¶
16.) These allegations are sufficient to demonstrate that the account is subject to the fee
notice requirements of 15 U.S.C. § 1693b(d)(3).
In short, even if Plaintiff’s original complaint failed to allege the facts Hometown
identifies, which are necessary to state a claim for statutory damages under 15 U.S.C. §
1693b(d)(3), her FAC cured any such deficiencies. Thus, Hometown’s motion to dismiss
under Rule 12(b)(6) must be DENIED.
IV.

CONCLUSION

The Court finds that Plaintiff’s motion for class certification was timely filed and
diligently pursued and Plaintiff’s original complaint presented a live controversy when it
was filed. Thus, if the Court certifies a class in this case, it will relate back to the original
complaint, which presented a live controversy when filed.

Hometown’s motion to

dismiss pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction (Doc. No. 14)
must, therefore, be DENIED at this time.

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Hometown’s motion to dismiss for failure to state a claim pursuant to Rule
12(b)(6) (Doc. No. 8) must also be DENIED. Indeed, the Court believes that Plaintiff
should be given leave to amend her complaint and any arguable deficiencies that
Hometown identifies in Plaintiff’s original complaint were cured by Plaintiff’s FAC.
IT IS SO ORDERED.
SIGNED at Houston, Texas, on this the 27th day of June, 2011.

KEITH P. ELLISON
UNITED STATES DISTRICT JUDGE

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