An Offer to Settle Does Not End the Case!

by Phyllis Pollack
February 2016

PGP Mediation Blog by Phyllis G. Pollack

Phyllis  Pollack

In November 2015, I discussed a Ninth Circuit Court of Appeals decisionCampbell Ewald Company v Gomez, 768 F. 3d 781 (9th Cir. 2014)- in which that court held that where Plaintiff rejects Defendant’s Federal Rule of Civil Procedure Rule 68 Offer of Judgment offering plaintiff all of the relief he requests, the case is not moot.  (blog)

Plaintiff Gomez contended that Defendant violated the Telephone Consumer Protection Act, (47 U. S. C. §227(b) (1) (A) (iii) (2012)) by having one of its outside contractors text an unwanted message to his mobile phone. He sued and in response, the defendant served an Offer of Judgment for $1503.00 or more than three times the alleged statutory damages of $500 for each violation. Defendant also offered to pay any and all reasonable costs under the law and to allow the court to enter an injunction against it in the form attached.

Plaintiff allowed the Offer of Judgment to lapse by its own terms, thereby implicitly rejecting it. Defendant then filed a motion to dismiss on the grounds that the court lacked “subject matter jurisdiction” because it’s rejected offer to settle –providing full and complete relief to plaintiff- mooted the case.

The Ninth circuit disagreed determining that a rejected Rule 68 Offer of Judgment did not moot the case. Defendant appealed.

On January 20, 2016, the U. S. Supreme Court issued its opinion  ( 14-857_8njq ), affirming the Ninth Circuit’s opinion that an unaccepted Rule 68 Offer of Judgement does not moot the case. In doing so, it looked to the U. S. Constitution’s Article III “case or controversy” requirement which gives the Court jurisdiction only over matters in which an actual controversy exists at all stages of the litigation and not just merely when the lawsuit was filed. (U. S. Supreme Court Slip Opinion at 6 (“Slip Opinion”).  Noting that a case becomes moot only “‘when it is impossible for a court to grant any effectual relief whatever to the prevailing party.’” (Id.), the Court turned to basic principles of contract law that an unaccepted offer has no force or effect; it is a legal nullity with no operative effect. (Id. at 7-8.)  Quoting a dissent of Justice Kagen from an earlier case, the Court noted what every first year student learns in the law of contracts:  “‘… the  recipient’s rejection of an offer leaves the matter as if no offer had every been made.’“  (Id. at 8.)

Justice Thomas issued his own opinion concurring in the judgment but on a different basis. In his opinion, he discusses the law of tender dating back to the common law and refined in the 18th and 19th century.  In order to avoid a lawsuit from even being filed, the proposed defendant had to do more than just merely offer to make the plaintiff whole. The prospective defendant had to also actually produce the proposed sum (i.e. actually “tender” it) before the suit was filed “in an unconditional” manner. (Id. at Concurring Slip Opinion at 2.) That is, the defendant could neither actually proffer the amount due, and at the same time, deny liability, nor could the defendant tender less than the full amount due.  (Id. at 2.)  A tender of the full amount due unconditionally was deemed an admission of liability by state and federal courts.  (Id.)

Justice Thomas noted that Federal Rule 68 was modeled after a New York state rule adopted by that state in the mid 1800’s. The federal rule adopted in 1938 allows for the rejection of the “tender” stating that if the offer is not accepted, it is considered withdrawn. (Id. at 4-5.)  Thus, by its own terms, Rule 68 prohibits the use of a withdrawn offer as an admission of liability by defendants. Rather, it is as though the offer was never made in the first place. (Id.)

This distinction of actually tendering the sums is also discussed by Justice Roberts in his dissent. He notes that this case is limited to its facts:

The majority holds that an offer of complete relief is insufficient to moot a case. The majority does not say that payment of complete relief leads to the same result. For aught that appears, the majority’s analysis may have come out differently if Campbell [defendant] had deposited the offered funds with the district court. See ante, at 11-12. This Court leaves that question for another day- assuming there are other plaintiffs out there who, like Gomez, won’t take “yes” for an answer.” (Justice Roberts Dissenting Opinion, Slip Opinion, at 10.)

I dwell on this point of actual tender because I recently mediated a case under the Automobile Sales Finance Act (California Civil Code sections 2981 et seq.) in which defendants sought to avoid paying attorney’s fees by threatening to deposit the sum due to plaintiff into the court, pursuant to California Civil Code section 2983.4:

Reasonable attorney’s fees and costs shall be awarded to the prevailing party in any action on a contract or purchase order subject to the provisions of this chapter regardless of whether the action is instituted by the seller, holder or buyer. Where the defendant alleges in his answer that he tendered to the plaintiff the full amount to which he was entitled, and thereupon deposits in court, for the plaintiff, the amount so tendered, and the allegation is found to be true, then the defendant is deemed to be a prevailing party within the meaning of this section.

Plaintiffs countered that the tender would be too late as defendants had already filed their answer. (Akin to the common law of tender that it had to be done before the litigation commenced.) Whose contention was correct will never be known as the matter settled.

In addition, California’s Civil Code also provides for evidence of tender:

 2074.  An offer in writing to pay a particular sum of money, or to deliver a written instrument or specific personal property, is, if not accepted, equivalent to the actual production and tender of the money, instrument, or property.

2075.  Whoever pays money, or delivers an instrument or property, is entitled to a receipt therefor from the person to whom the payment or delivery is made, and may demand a proper signature to such receipt as a condition of the payment or delivery.

 2076. The person to whom a tender is made must, at the time, specify any objection he may have to the money, instrument, or property, or he must be deemed to have waived it; and if the objection be to the amount of money, the terms of the instrument, or the amount or kind of property, he must specify the amount, terms, or kind which he requires, or be precluded from objecting afterwards.

What this leads to is the question: is an actual “tender” a good settlement strategy? I do not know, but it is…..

… Just something to think about.

Biography


Phyllis Pollack with PGP Mediation uses a facilitative, interest-based approach. Her preferred mediation style is facilitative in the belief that the best and most durable resolutions are those achieved by the parties themselves. The parties generally know the business issues and priorities, personalities and obstacles to a successful resolution as well as their own needs better than any mediator or arbitrator. She does not impose her views or make decisions for the parties. Rather, Phyllis assists the parties in creating options that meet the needs and desires of both sides.  When appropriate, visual aids are used in preparing discussions and illustrating possible solutions. On the other hand, she is not averse to being proactive and offering a generous dose of reality, particularly when the process may have stalled due to unrealistic expectations of attorney or client, a failure to focus on needs rather than demands, or when one or more parties need to be reminded of the potential consequences of their failure to reach an agreement.



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