Fulton Dental, LLC v. Bisco, Inc.

• Decision Date: 20 June 2017
• Docket Number: No. 16-3574,16-3574
• Citation: 860 F.3d 541
• Parties: FULTON DENTAL, LLC, Plaintiff–Appellant, v. BISCO, INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

860 F.3d 541

FULTON DENTAL, LLC, Plaintiff–Appellant,

v.BISCO, INC., Defendant–Appellee.

No. 16-3574

United States Court of Appeals, Seventh Circuit.

Argued February 21, 2017

Decided June 20, 2017

Anthony Paronich, Attorney, Broderick Law, P.C., Boston, MA, Adina Hyman Rosenbaum, Attorney, Public Citizen Litigation Group, Washington, DC, Alexander H. Burke, Attorney, Burke Law Offices, LLC, Chicago, IL, for Plaintiff–Appellant.

Jeffrey J. Halldin, Attorney, Harrison & Held, LLP, Chicago, IL, for Defendant–Appellee.

Before Wood, Chief Judge, and Flaum and Rovner, Circuit Judges.

Wood, Chief Judge.

In recent years, the Supreme Court has twice addressed the question whether an unaccepted offer to a person seeking to represent a class is capable of mooting either the putative representative's claim or the claims of the class as a whole. See Campbell–Ewald Co. v. Gomez , ––– U.S. ––––, 136 S.Ct. 663, 193 L.Ed.2d 571 (2016) ; Genesis Healthcare Corp. v. Symczyk , 569 U.S. 66, 133 S.Ct. 1523, 185 L.Ed.2d 636 (2013). The case now before us presents yet another variation on that theme. Our putative class representative, Fulton Dental, LLC, received an unsolicited fax from Bisco, Inc., and it has sued for damages under the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227 et seq . Before Fulton moved for class certification, Bisco tried to moot its claim by tendering an offer that (Bisco says) gives Fulton all of the individual relief it could possibly expect. This offer, however, was not submitted pursuant to Federal Rule of Civil Procedure 68, as were the offers in Genesis and Campbell–Ewald . Instead, Bisco tried to use Rule 67, which allows a party to deposit a payment with the court. The district court concluded that Bisco's maneuver was enough to moot Fulton's individual claim and to disqualify it from serving as a class representative, and so it dismissed the entire action. We conclude, however, that this step was premature, and so we return the case to the district court for further proceedings.

I

Fulton's case against Bisco arose after Bisco faxed to Fulton a generic, unsolicited advertisement for its dental products. The TCPA prohibits such contacts, unless one of several exceptions applies, such as a previous business relationship or use of certain approved ways to obtain the fax number. In addition, the sender must include an opt-out notice in clear and conspicuous language. Violations of the TCPA can be redressed with statutory damages of $500 per negligent violation, or $1,500 per willful violation. Fulton filed a complaint against Bisco on December 8, 2015. In it, Fulton sought statutory damages for two alleged violations (lack of consent and omission of the opt-out notice), injunctive relief banning future violations, and certification of a class (to be represented by Fulton) of all those who had similarly received faxes from Bisco.

On January 18, 2016, before Fulton had filed a motion for class certification, Bisco made Fulton an offer of judgment pursuant to Federal Rule of Civil Procedure 68. The offer was for $3,005 plus accrued costs, and it included an agreement to have the requested injunction entered against it. Two days after Bisco's offer was filed, the Supreme Court decided Campbell–Ewald , in which it held that "an unaccepted settlement offer or offer of judgment does not moot a plaintiff's case." 136 S.Ct. at 672. Taking its cue from that language, Fulton rejected Bisco's offer on January 24, because the offer provided no relief to the rest of the class. Bisco then tried another tack: it moved for leave to deposit $3,600 with the district court under Rule 67. This sum represented what Bisco regarded as the maximum possible damages Fulton could receive, plus $595 for fees and costs. In light of that fact, along with its renewed acquiescence to the injunction, Bisco argued that the deposit had made Fulton's claim moot, and that the district court should thus enter judgment in Fulton's favor on the moot claims for $3,600 plus the injunction. Fulton opposed the latter motion, on the ground that this was not a proper use of Rule 67 and that the simple deposit of funds could not moot the case.

The district court granted Bisco's motion. It treated the Rule 67 deposit of funds as the equivalent of giving the money directly to Fulton, and it treated Bisco's offer to submit to the injunction as the equivalent of a commitment that it already had stopped sending the offending faxes. The language of mootness appears throughout the order, but the court paradoxically ordered relief on the merits. Fulton has appealed.

II

If Bisco's deposit of money into the court's registry had the effect of mooting this appeal, we would be in a strange situation: there would no longer be a case or controversy between the parties, and we would need to dismiss the action on that basis. In essence, Bisco is arguing that it has forced a settlement that moots the case, along the same lines as the Supreme Court faced in U.S. Bancorp Mortg. Co. v. Bonner Mall P'ship , 513 U.S. 18, 115 S.Ct. 386, 130 L.Ed.2d 233 (1994). There the Court held that the power to order vacatur of the lower court's decision remains, even if the case has become moot. Id. at 21, 115 S.Ct. 386. In the normal case, Bonner Mall continued, "mootness by reason of settlement does not justify vacatur of a judgment under review." Id. at 29, 115 S.Ct. 386. But the Court did not hold that the district court could take steps on the merits, as opposed to steps designed to wrap up a case such as an award of costs or a decision on vacatur. To the contrary, it said "[o]f course, no statute could authorize a federal court to decide the merits of a legal question not posed in an Article III case or controversy." Id. at 21, 115 S.Ct. 386.

A decision that a certain amount of damages should be paid and that an injunction should be entered is quintessentially a ruling on the merits of a case. The logic of Bisco's position is that all it had to do was deposit the estimated damages with the court in order to moot the case. It overlooks the fact that once the case is moot, the court lacks power to enter any judgment on the merits. Logically, money paid into the court's registry would either stay there for five years, after which it would escheat to the United States, see 28 U.S.C. § 2042, or perhaps Bisco could ask the court to return it. Neither of those outcomes would be very satisfactory to Fulton, nor to Bisco if escheat were the result.

Mootness, plainly, is not the correct legal concept for the course of events that took place here. See Chapman v. First Index, Inc. , 796 F.3d 783, 786 (7th Cir. 2015) (circulated to the full court under 7th Circuit Local Rule 40(e)). Bisco is instead talking about something more like accord and satisfaction or payment, both affirmative defenses recognized by Federal Rule of Civil Procedure 8(c)(1). Bisco insists that its Rule 67 payment somehow erased any claim that Fulton may have had against it. In order to decide whether that is true, we find it helpful to take a closer look at Campbell–Ewald , which intimated that such a payment might have legal effects.

The question before the Court was whether "an unaccepted offer to satisfy the named plaintiff's individual claim [is] sufficient to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated." Campbell–Ewald , 136 S.Ct. at 666. Notably, nothing in this question is necessarily limited to a settlement offer presented pursuant to Federal Rule of Civil Procedure 68, which sets out special rules that include the "stick" of liability for post–offer costs for an offeree who gambles on trial and wins less than the offer. See FED. R. CIV. P. 68(d). To the contrary, the Court drew no distinction between unaccepted Rule 68 settlement offers and other unaccepted settlement or contract offers. It wrapped up its discussion of this issue with the following paragraph:

In sum, an unaccepted settlement offer or offer of judgment does not moot a plaintiff's case, so the District Court retained jurisdiction to adjudicate Gomez's complaint. That ruling suffices to decide this case. We need not, and do not, now decide whether the result would be different if a defendant deposits the full amount of the plaintiff's individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount. That question is appropriately reserved for a case in which it is not hypothetical.

136 S.Ct. at 672.

Bisco was quick to test the issue left open by Campbell–Ewald . The $3,600 it paid into the district court's registry represented, in its view, an amount that fully satisfies Fulton's individual claim, either if the "offer" is accepted or if acceptance is irrelevant. It argues that by following the Supreme Court's roadmap (as it sees it), it mooted Fulton's claim and at the same time destroyed Fulton's ability to serve as a class representative. In so arguing, it has assumed that by reserving comment on this situation, the Supreme Court meant to say that a proposed settlement structured this way could be forced on a plaintiff.

That is a risky assumption; it is normally best to take the Court at its word and recognize that it reserves issues when they are not necessary to the decision in the case before it and will benefit from further attention. We begin our inquiry with a closer look at Rule 67. On its face, it is just a procedural mechanism that allows a party to use the court as an escrow agent. Here is what it says, in its entirety:

(a) Depositing Property. If any part of the relief sought is a money judgment or the disposition of a sum of money or some other deliverable thing, a party—on notice to every other party and by leave of court—may deposit with the court all or part of the money or thing, whether or not that party claims any of it. The depositing party must deliver to the clerk a copy of the order permitting

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