In a recent decision, the United States Court of Appeals for the Second Circuit clarified a key question that is becoming more frequent in single plaintiff and class action litigation: whether a Rule 68 offer of judgment that is not accepted moots a plaintiff’s individual claims to continue their case. A Rule 68 Offer of Judgment is a procedural tool that allows defendants to offer a plaintiff a specific amount of money (usually the maximum recovery allowed under a statute) to halt litigation. If a plaintiff rejects such an offer and moves forward, and does not ultimately obtain at least that amount offered, then they owe the defendant the “costs” of the case from the date the offer of judgment was made. Defendants have been successful in other circuit courts throughout the country by using a rejected Rule 68 Offer of Judgment to dismiss cases, the logic being that a rejected Offer “moots” any underlying controversy or case.
In the case of Tanasi v. New Alliance Bank, et al., the Second Circuit determined whether a class action may continue when a class action plaintiff rejects a Rule 68 Offer of Judgment for above his maximum individual recovery. In this case, the plaintiff filed a class action against the defendant companies for improper assessment of overdraft fees on his account. Nine days after the lawsuit was filed, before any motions for class certification, the defendants served him with a Rule 68 Offer of Judgment for $10,000, an amount above what he individually could recover under the law. The plaintiff rejected it by not accepting the offer within the time required, and continued the case. The defendants asked the District Court to dismiss the plaintiff’s individual and class action claims, arguing that the rejected Offer of Judgment effectively “mooted” the entire action, including the claims of the class members.
The District Court denied the defendants’ motion to dismiss, and the issue was raised to the Second Circuit. The Second Circuit recognized that this issue is far from clear, and that many other circuit courts have come to differing conclusions. In sum, the Third, Fourth, Fifth, Seventh, Tenth, and Federal Circuit have all held that a Rule 68 Offer that gives full relief to an individual renders his case moot, meaning that there is no controversy for the federal court to decide (meaning it should be dismissed). In contrast are the Ninth and Eleventh Circuits, which have recently held that an unaccepted rule 68 Offer cannot make an individual plaintiff’s claims moot because it is just that – unaccepted.
The Second Circuit ruled consistently with the Ninth and Eleventh Circuits, and held that “a rejected settlement offer under Rule 68, by itself, cannot render moot a case.” The Court did state, however, that a district court may enter judgment where a plaintiff’s “obstinacy or madness prevents her from accepting a total victory,” but this is in the district court’s discretion, and had not happened in this specific case.
Ultimately, the Court affirmed the District Court’s decision to reject the defendant’s motion to dismiss the class claims because the plaintiff’s individual claims themselves were not made moot simply due to the unaccepted Rule 68 Offer.
The employment lawyers at Fitapelli & Schaffer, LLP have a strong track record for success in single plaintiff and class action litigation. We hope and believe that this decision makes it possible for plaintiffs’ individual and class claims to not be strategically swept out from under them by employers’ strategic use of Rule 68 Offers of Judgment. If you believe you have been subjected to unlawful employment practices, such as failure to pay overtime, failure to pay minimum wages, wage theft, and discrimination, please contact us at (212) 300-0375 or visit our website at www.fslawfirm.com