August 13, 2015

Seventh Circuit: Unaccepted Offer of Judgment Does Not Moot a Lawsuit

Since the United States Supreme Court decision in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), whether a lawsuit becomes moot when a plaintiff declines an offer that would satisfy his entire demand has been the subject of considerable discussion, particularly in the class-action context. On August 6, 2015, the United States Court of Appeals for the Seventh Circuit held in Chapman v. All American Painting Inc., that an unaccepted offer of judgment does not moot a case. Significantly, the Chapman decision specifically overrules Seventh Circuit precedent that held an offer by the defendant completely fulfilling the plaintiff's claim moots a suit because it takes away the requisite underlying case or controversy. See Damasco v. Clearwire Corp., 662 F.3d 891, 895 (7th Cir. 2011); Thorogood v. Sears, Roebuck & Co., 595 F.3d 750, 752 (7th Cir. 2010); and Rand v. Monsanto Co., 926 F.2d 596, 598 (7th Cir. 1991). 

“A case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party,” the Seventh Circuit ruled. The court reasoned that after rejecting an offer or failing to respond to an offer of judgment, the plaintiff had not received the remedies he sought and the court still had the power to provide such relief, such as awarding damages or entering an injunction. 

The court went on to say that “[r]ejecting a fully compensatory offer may have consequences other than mootness, however.” The decision raised the possibility, but did not decide, that a defendant’s offer of full relief might be an affirmative defense, perhaps in the nature of an estoppel or a waiver. Also, if the offer remained open, a court might decide that there was no sum then in dispute and, therefore, no basis for proceeding with the case.

The ruling that an unaccepted offer of judgment does not make a case moot will undermine the attempts of class action defendants to defeat class certification by making an offer that equals or exceeds the claims of the named plaintiffs.

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