Damasco v. Clearwire Corp.

• Decision Date: 18 November 2011
• Docket Number: No. 10–3934.,10–3934.
• Citation: 662 F.3d 891
• Parties: Jerome DAMASCO, Plaintiff–Appellant, v. CLEARWIRE CORPORATION, Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

662 F.3d 891

Jerome DAMASCO, Plaintiff–Appellant,

v.CLEARWIRE CORPORATION, Defendant–Appellee.

No. 10–3934.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 8, 2011.Decided Nov. 18, 2011.

Michael J. McMorrow (argued), Attorney, Edelson McGuire, LLC, Chicago, IL, for Plaintiff–Appellant.

Mark B. Blocker (argued), Attorney, Sidley Austin LLP, Chicago, IL, for Defendant–Appellee.

Before MANION, ROVNER, and TINDER, Circuit Judges.

ROVNER, Circuit Judge.

Jerome Damasco filed this putative class-action lawsuit against Clearwire Corporation in an Illinois state court, alleging that Clearwire violated the Telephone Consumer Protection Act, 47 U.S.C. § 227, by sending unsolicited text messages to cellphone users. Before Damasco moved for class certification, Clearwire offered him his full request for relief. Clearwire then removed the case to federal court and moved to dismiss, arguing that the offer mooted Damasco's claim. The district court agreed, dismissed Damasco's complaint, and later denied his motion to reconsider. Damasco appeals both rulings. Under Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th Cir.1994), Clearwire's offer mooted Damasco's claim. We thus affirm the court's judgment and its decision to deny reconsideration.

I.

Damasco asked the state court to enjoin Clearwire from sending unsolicited text messages and to grant damages to all those injured by this practice. See 47 U.S.C. § 227(b)(3). He estimated that more than 1,000 people had received these messages and requested damages fixed by the Act, $500 for each violation. See id. § 227(b)(3)(B). Damasco added that the court could award three times that amount, up to $1,500 for each violation, if it determined that Clearwire had acted “willfully and knowingly.” See id. § 227(b)(3)(C).

Within a month, Clearwire sent a letter to Damasco's attorneys offering to settle the case by giving Damasco and up to ten other affected people $1,500 for each text message received from Clearwire, plus court costs. In addition, Clearwire offered to stop sending unsolicited text messages to “mobile subscribers.” Clearwire warned that, in its view, this offer rendered the case moot. Damasco never responded to Clearwire's letter.

Four days after sending the letter, Clearwire removed the suit to federal court. Damasco moved for class certification within a few hours of the removal. The following day, Clearwire moved to dismiss the case, arguing that its settlement offer stripped Damasco of his personal stake in the case's outcome and rendered his claim moot.

Damasco opposed Clearwire's motion. He contended that Clearwire's letter did not constitute an offer under Illinois law because its terms were not “definite and certain.” But even if the offer was valid, he urged that the controversy remained live, primarily for three reasons. First, he insisted that defendants should be prohibited from mooting a potential class action by buying off named plaintiffs through “involuntary” settlements. Second, he argued that this type of claim is “inherently transitory”—that is, bound to become moot before the class is certified—so his motion for certification should “relate back” to the filing of his complaint, as permitted in Sosna v. Iowa, 419 U.S. 393, 402 n. 11, 95 S.Ct. 553, 42 L.Ed.2d 532 (1975). Finally, he maintained that if Clearwire had made an offer under Federal Rule of Civil Procedure 68, then he would have had 10 days (now 14 days under a revised version of the rule) to ask the court to certify the class and avoid mootness. He argued that Clearwire should not be allowed to circumvent Rule 68 by casting its offer in the form of a settlement.

The district court agreed with Clearwire and dismissed the case. Finding the settlement offer to be sufficiently definite under Illinois law, the court ruled the case moot. The court observed, citing Holstein, that “[t]he rule in the Seventh Circuit is clear—a complete offer of settlement made prior to the filing for class certification moots the plaintiff's claim.” The court acknowledged Damasco's concerns about defendants buying off class representatives, but emphasized that “ Holstein has not been overturned and it is directly on point.” Some district courts, the court noted, have allowed plaintiffs to avoid mootness by seeking class certification after being offered complete relief under Rule 68. But when, as here, an offer is “not made pursuant to Rule 68,” the court reasoned, applying that rule's timeframe for accepting an offer would be “arbitrary.” The court also rejected Damasco's argument that his claim was inherently transitory.

Damasco moved for reconsideration, arguing that “new evidence” showed that Clearwire's offer was not valid. He pointed to Fahey v. Career Education Corp., No. 1:10–cv–05635 (N.D.Ill.)—a similar lawsuit pending before the same district judge with the same attorneys but different parties—where defense counsel sent an offer to plaintiff's attorney that was nearly identical to the offer here. Damasco claimed that the named plaintiff in Fahey believed that she had accepted the offer, but that the defendant was proceeding as if no agreement had been reached.

Before ruling on the motion for reconsideration, the district court held a hearing in Fahey to determine whether a settlement had been reached. After the court concluded that no agreement had been reached, the plaintiff's attorney immediately asked the court whether the offer mooted the case. The court replied that it did not. But when pressed for clarification by defendant's counsel, the court revised its comments, explaining that the hearing had not dealt with mootness, only whether the case was settled. Shortly after this hearing, Damasco supplemented his motion for reconsideration, arguing that “[i]f the same letter did not moot Fahey's claim, then it cannot have mooted Damasco's claim.”

The district court then denied Damasco's motion for reconsideration. The court remarked that “even if all the alleged conduct from Fahey happened in this case, the conduct amounts to dishonor of an agreement,” not “newly discovered evidence” under Federal Rule of Civil Procedure 59(e). The court explained that its comments about mootness in Fahey were “merely dicta” since “no party in that case had moved for dismissal on the basis of mootness.” The court noted that the Fahey defendants had since moved to dismiss and that “a full discussion of the issue of mootness in that case is better left to that context.” Fahey is currently being held in abeyance pending the resolution of this appeal.

II.

The doctrine of mootness stems from Article III of the Constitution, which limits the jurisdiction of federal courts to live cases or controversies. Spencer v. Kemna, 523 U.S. 1, 7, 118 S.Ct. 978, 140 L.Ed.2d 43 (1998); A.M. v. Butler, 360 F.3d 787, 790 (7th Cir.2004). The doctrine demands that the parties to a federal case maintain a personal stake in the outcome at all stages of the litigation. United States v. Juvenile Male, ––– U.S. ––––, 131 S.Ct. 2860, 2864, 180 L.Ed.2d 811 (2011); Spencer, 523 U.S. at 7, 118 S.Ct. 978. Therefore, “[o]nce the defendant offers to satisfy the plaintiff's entire demand, there is no dispute over which to litigate, and a plaintiff who refuses to acknowledge this loses outright, under Fed.R.Civ.P. 12(b)(1), because he has no remaining stake.” Rand v. Monsanto Co., 926 F.2d 596, 598 (7th Cir.1991) (citation omitted); accord Breneisen v. Motorola, Inc., 656 F.3d 701, 706 (7th Cir.2011).

Damasco asks us to create an exception to mootness in potential class actions where defendants offer relief to named plaintiffs before they have “a reasonable opportunity to seek certification.” He points out that mootness is a “flexible” doctrine, see U.S. Parole Comm'n v. Geraghty, 445 U.S. 388, 400, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980), and argues that Holstein, which conflicts with his proposed exception, should be restricted to its facts or overturned.

Damasco starts by highlighting that the Supreme Court and this court have emphasized the importance of preventing individual buy-offs from mooting class actions. For example, the Supreme Court has held that defendants cannot prevent an appeal from a denial of certification simply by offering relief to a named plaintiff. Deposit Guar. Nat'l Bank, Jackson, Miss. v. Roper, 445 U.S. 326, 339, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980). The Court reasoned that the alternative—requiring numerous plaintiffs to file separate actions in order to prevent them from being picked off before appellate review of certification—“would frustrate the objectives of class actions” and “invite waste of judicial resources by stimulating successive suits brought by others claiming aggrievement.” Id. Along the same lines, we have long held that a defendant cannot moot a case by making an offer after a plaintiff moves to certify a class, observing that “[o]therwise the defendant could delay the action indefinitely by paying off each class representative in succession.” Primax Recoveries, Inc. v. Sevilla, 324 F.3d 544, 546–47 (7th Cir.2003); see Greisz v. Household Bank (Ill.), N.A., 176 F.3d 1012, 1015 (7th Cir.1999); Susman v. Lincoln Am. Corp., 587 F.2d 866, 869 (7th Cir.1978).

In light of these concerns, Damasco argues that Holstein should be overruled or distinguished so as not to control the outcome in this case. In Holstein, the plaintiff filed a putative class action after the City of Chicago towed his car, arguing that the city's towing procedures were unconstitutional. 29 F.3d at 1147. Before he moved to certify, the city offered him full reimbursement. Id. We refused to let him “spurn this offer” and avoid mootness when he “did not even move for class certification prior to the evaporation of his personal stake.” Id. The plaintiff's lack of a personal stake, we held, stripped us of jurisdiction over his claim. Id. We repeated this holding in Greisz, remarking that an offer to a named plai...