A recent Ninth Circuit decision addresses a question left open by the Supreme Court’s decision this year in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013): Does an offer of full relief to the plaintiff under Fed. R. Civ. P. 68, which is not accepted by the plaintiff, render a case moot? The Ninth Circuit, relying on Justice Kagan’s dissent in Genesis Healthcare, held that the answer is “No.”
In Diaz v. First American Home Buyers Protection Corp., No. 11-57239 (9th Cir. Oct. 4, 2013), the defendant made an offer of judgment to the plaintiff after class certification was denied. The plaintiff, however, refused to accept the offer. The district court concluded that the offer of judgment fully satisfied the plaintiff’s claim, and held, relying on authority from the Fourth and Seventh Circuits, that the offer rendered the plaintiff’s claims moot. Slip op. at 6-7. The Ninth Circuit noted that, in addition to the holdings of the Fourth and Seventh Circuits, the Second and Sixth Circuits have held that, when there is an offer of judgment for complete relief that is rejected, the district court should enter judgment against the defendant in accordance with the offer. Id. at 9.
The Ninth Circuit, however, ultimately decided to follow the dissent of Justice Kagan in Genesis Healthcare, which was joined by three other Justices. Justice Kagan’s opinion reasoned, among other points, that: (1) an unaccepted offer has no effect under contract law; (2) the court could still award damages following an unaccepted offer; (3) the text of Rule 68 allows a judgment to enter only when the plaintiff accepts an offer; and (4) Rule 68 provides that an unaccepted offer is not admissible evidence except to determine costs. Id. at 12-14.
The Ninth Circuit’s opinion, however, allows for a significant exception to this rule, stating that: “We recognize that a court may have ‘discretion to halt a lawsuit by entering judgment for the plaintiff when the defendant unconditionally surrenders and only the plaintiff’s obstinacy or madness prevents her from accepting total victory.’” Id. at 15. The court says “[t]hat did not occur here,” but it fails to explain why it did not. It puzzles me why, given the district court’s conclusion that the offer was a full and complete one, the defendant did not “unconditionally surrender” in this case.
Given that there is unquestionably a deep circuit split on this issue, it seems ripe for Supreme Court review. Given Justice Kagan’s opinion in Genesis Healthcare, the question would come down to whether any one of the five justices who did not join her dissent (but did not address the question of mootness) would agree with her position, or if all five would disagree. It is understandable that in the class action context, some judges would be hesitant to create a rule that would freely allow “picking off” of named plaintiffs by paying their claims, to the point where any class action in which the named plaintiff seeks a small dollar amount could be easily defeated unless the case were brought by many plaintiffs. But courts also cannot be in the business of hearing individual cases where there is clearly no controversy whatsoever remaining because the defendant is willing to, in the words of the Ninth Circuit, “unconditionally surrender” in one form or another. Are judges supposed to conduct trials and enter judgments simply because one of the parties insists on it, even if the other party will effectively stipulate to the requested relief? That is the tension in play here, which, along with where you draw the line, appears to require Supreme Court resolution.