Antitrust Law Daily Wrap Up, PRIVACY—NDIll: Settlement Offer Moots Putative Class Representative’s TCPA Claim, (Jun 12, 2013)

By Tobias J. Gillett, J.D., LL.M.

A company’s offer, prior to a motion for class certification, to pay the maximum statutory penalty under the Telephone Consumer Protection Act (TCPA) for each dialer-generated call it allegedly made in violation of the TCPA to a putative class representative, to pay the representative’s costs, and to agree to an injunction prohibiting it from making future telephone calls to the representative without her prior express consent mooted the representative’s claims, even though the representative rejected the offer, the federal district court in Chicago has ruled (Scott v. Westlake Services, LLC, June 6, 2013, Castillo, R.).

Etta Scott alleged that Westlake Services, LLC placed 20 calls to her telephone using an automatic telephone dialing system, without her consent and without a prior business relationship between Scott and Westlake. Scott asserted that these calls violated the TCPA.

Several months after Scott commenced her action, Westlake e-mailed her a settlement offer under which Westlake would pay her “the sum of $1,500 for each and every dialer-generated call” made to her, and would reimburse her for “all costs which she would recover if she were to prevail in the lawsuit.” Westlake also agreed to an injunction prohibiting it from making future telephone calls to Scott without her prior express consent. The e-mail also claimed that its records only reflected six dialer generated calls made to Scott, but offered to discuss the number of calls with her.

Scott rejected the offer and filed a motion for class certification. Westlake moved to dismiss the case as moot.

The court explained that Article III of the Constitution limits federal court jurisdiction to live “cases” or “controversies,” and that the doctrine of mootness arose out of this “case or controversy” requirement. The court cited the Supreme Court’s decision in Powell v. McCormack, 395 U.S. 486 (1969), in which the Court stated that “a case is moot when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.”

The court noted that, in the Seventh Circuit, “once the defendant offers to satisfy the plaintiff’s entire demand, there is not dispute over which to litigate, and a plaintiff who refuses to acknowledge this loses outright, under Fed. R. Civ. P. 12(b)(1).” The court cited the Seventh Circuit’s decision in Holstein v. City of Chicago., 29 F.3d 1145 (1994), in which the court found, in the context of putative class actions, “that when a defendant makes a complete offer of relief to the plaintiff class representative before the plaintiff class representative moves for class certification, the plaintiff class representative’s individual claim is mooted.” However, the court noted that the Seventh Circuit had also found that, if the offer is made after a grant of class certification, “court adjudication of the merits remains appropriate because the interests of class members are sufficiently represented by the named party so that controversy between the class members and the opponent is still alive and being litigated in the action.”

The court noted that the Supreme Court had recently avoided the issue in the present case, in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), by declining to decide “whether an unaccepted offer that fully satisfies a plaintiff’s claim is sufficient to render the claim moot.” Nonetheless, the court found it was bound by the Seventh Circuit’s decision in Holstein.

The Seventh Circuit had affirmed this result in subsequent cases, including in the context of TCPA class actions in Damasco v. Clearwire Corp., 662 F.3d 891 (2011). In Damasco, the Seventh Circuit affirmed a district court’s conclusion that an indeterminate offer to “pay for each and every message” received by the plaintiff mooted the plaintiff’s claim.

The court found the present case to be “almost perfectly on all fours with Damasco.” As in Damasco, “Westlake did not offer Scott a specific amount of relief, but rather offered to pay for ‘each and every’ violating telephone call that is discovered to have occurred,” as well as agreeing to pay all costs she could recover in a lawsuit and to an injunction prohibiting it from making further telephone calls to Scott without her prior express consent. The court rejected Scott’s argument that the offer was incomplete because it only referred to six dialer-generated calls, since Westlake had offered to pay the maximum statutory penalty for “each and every” telephone call. Therefore, Scott could no longer “demonstrate a personal stake in the outcome” of the case, according to the court, and the court lacked subject matter jurisdiction over the dispute.

However, the court concluded that it would retain ancillary jurisdiction to enforce the terms of the settlement agreement. The court cited the Supreme Court’s decision in Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994), in which the Court stated that when a district court makes the terms of a settlement agreement part of an order of dismissal “a breach of the agreement would be a violation of the order, and ancillary jurisdiction to enforce the agreement would therefore exist.” The court entered an order directing the parties to conduct limited discovery to determine the number of dialer-generated calls Westlake made to Scott, and then directing Westlake to pay Scott $1,500 for each such call, plus taxable costs. Following tender of payment, Scott would be ordered to execute a release of her claims against Westlake, and the court would enter an injunction prohibiting Westlake from making future calls to Scott without her prior express consent.

The case is No. 12 C 9289.

Attorneys: Sergei Lemberg (Lemberg & Associates, LLC) for Etta Scott. David Luther Hartsell (McGuireWoods LLP) for Westlake Services, LLC.

Companies: Westlake Services, LLC

Cases: Privacy IllinoisNews