Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—E.D.N.Y.: Settlement offer moots individual fax recipient’s TCPA claim, (Feb 12, 2015)

By Jody Coultas, J.D.

Marketing company CCG Marketing Solutions was granted summary judgment for lack of jurisdiction of Telephone Consumer Protection Act (TCPA) claims filed by a fax recipient based on the settlement offer made to the named plaintiff, the federal district court in Central Islip, New York has held (Lary v. Rexall Sundown, Inc., February 10, 2015, Feuerstein, S.).

CCG created a fax advertisement on behalf of United States Nutrition, Inc., a corporate affiliate of defendant Rexall Sundown, Inc., and hired and paid for a third-party fax broadcaster to send the advertisement to persons on a list of physicians. More than forty fax recipients received the unsolicited fax by or on behalf of defendants, offering a free sample of the dietary supplement Osteo Bi-Flex. The fax failed to contain an opt-out notice. The named plaintiff sought to represent anyone who received, without permission, any type of unsolicited fax which did not contain an opt-out notice.

After receiving an individual offer of judgment from CCG, the named plaintiff filed a second motion for class certification and a temporary stay of the motion to prevent defendants from mooting plaintiff's class-action claims through an offer of judgment prior to certification. CCG argued that the Rule 68 offer of judgment rendered the case moot because the offer provided more relief than plaintiff could otherwise recover and, consequently, plaintiff no longer has a personal stake in the litigation. CCG also argued that the court lacked subject matter jurisdiction because the offer of judgment rendered the named plaintiff’s case moot.

The Second Circuit has not definitively ruled on whether an unaccepted Federal Rule of Civil Procedure 68 offer made prior to the filing of a Rule 23 or collective action certification motion or while one is pending, moots a case. District courts have split on whether an offer of judgment to an individual plaintiff made while a certification motion is pending or before a certification motion is filed moots the putative class action. However, it is well settled that Rule 68 applies to class actions. Courts are alert to attempts by defendants to avoid class actions by making Rule 68 offers of judgment to individual named plaintiffs before class certification.

CCG’s motion to dismiss for lack of subject matter jurisdiction was granted by the court. An unaccepted offer, accounting for all the relief a plaintiff could obtain, is a sufficient basis to dismiss a case for lack of subject matter jurisdiction. The named plaintiff no longer had an interest in the suit, and did not have a continuing interest in obtaining relief for the putative class. Generally, if the claims of the named plaintiff become moot prior to class certification, the entire action becomes moot. In the case at hand, the individual plaintiffs may bring individual suits to recover their damages. Thus, there was no danger of CCG avoiding liability by settling with the named plaintiff. There was no interest in shifting a portion of attorney fees and costs among a successful class of litigants because the TCPA does not provide for an award of fees or costs.

Differing view. In Suttles v. Specialty Graphics, Inc., the federal district court in Austin determined that an offer of judgment filed ten days before a motion to certify class did not moot the TCPA claim.

The case is No. 13-CV-5769 (SJF).

Attorneys: Aytan Yehoshua Bellin (Bellin & Associates LLC) for John H. Lary, Jr. John Hooper (Reed Smith LLP) for Rexall Sundown, Inc., Rexall Sundown 3001, LLC, and NBTY, Inc. Matthew J. Fedor (Drinker Biddle & Reath LLP) for Corporate Mailings, Inc., and United States Nutrition, Inc.

Companies: CCG Marketing Solutions; United States Nutrition, Inc.; Rexall Sundown, Inc.

Cases: ConsumerProtection NewYorkNews