14-1389
Tanasi v. New Alliance Bank
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
_______________
August Term, 2014
(Argued: February 25, 2015 Decided: May 14, 2015
Amended: May 21, 2015)
Docket No. 14‐1389
_______________
PATRICK TANASI, ON BEHALF OF HIMSELF AND OTHERS SIMILARLY SITUATED,
Plaintiff–Appellee,
—v.—
NEW ALLIANCE BANK, FIRST NIAGARA FINANCIAL GROUP, INC.,
Defendants–Appellants.
_______________
B e f o r e:
KATZMANN, Chief Judge, WALKER and CHIN, Circuit Judges.
_______________
Interlocutory appeal from decision and order entered on August 27, 2013,
by the United States District Court for the Western District of New York
(Skretny, C.J.), denying the defendants’ motion to dismiss in part on the grounds
that the plaintiff’s putative class action claims remained justiciable even though
the plaintiff’s individual claims were rendered moot by an unaccepted offer of
complete relief made pursuant to Rule 68 of the Federal Rules of Civil Procedure.
We AFFIRM the district court’s denial of the defendants’ motion to dismiss on
the alternative ground that the plaintiff’s individual claims were not rendered
moot by the unaccepted Rule 68 offer because the district court had not entered
judgment against the defendants. We decline to decide whether the plaintiff’s
putative class action claims brought pursuant to Rule 23 of the Federal Rules of
Civil Procedure provided an independent basis for Article III justiciability.
_______________
STEPHEN J. FEARON, JR., Squitieri & Fearon, LLP, New York, NY,
for Plaintiff–Appellee.
HUGH M. RUSS, III, Hodgson Russ LLP, Buffalo, NY,
for Defendants–Appellants.
Adina H. Rosenbaum, Scott L. Nelson, Washington, DC, for Amicus Curiae Public
Citizen, Inc.
_______________
KATZMANN, Chief Judge:
Plaintiff Patrick Tanasi filed a putative class action against the defendants,
First Niagara Financial Group, Inc. and New Alliance Bank. Soon after, the
defendants offered to settle Tanasi’s individual claims pursuant to Rule 68 of the
Federal Rules of Civil Procedure (“Federal Rules”) for an amount greater than
the statutory damages to which Tanasi would have been entitled if successful.
2
After Tanasi refused to accept the offer, the defendants filed a motion to dismiss
arguing, inter alia, that the unaccepted Rule 68 offer rendered Tanasi’s individual
and putative class action claims moot. The United States District Court for the
Western District of New York (Skretny, C.J.) denied the defendants’ motion to
dismiss on this basis, holding that although Tanasi’s individual claims were
rendered moot by the unaccepted Rule 68 offer, his putative class action claims
were not.1
We AFFIRM the district court’s ultimate conclusion that the unaccepted
Rule 68 offer did not render Tanasi’s case moot, but we do so on an alternative
ground. Specifically, we hold that the district court maintained Article III subject
matter jurisdiction over the case because, under the law of our Circuit, an
unaccepted Rule 68 offer alone does not render a plaintiff’s individual claims
moot before the entry of judgment against the defendants. The district court
therefore maintained Article III subject matter jurisdiction over the case
regardless of Tanasi’s putative class action claims. Accordingly, because it is
1
This issue is implicated in several cases pending in other federal courts of appeal, see,
e.g., Weitzner v. Sanofi Pasteur, Inc., No. 14‐3423 (3d Cir. argued Mar. 4, 2015); Bais Yaakov
of Spring Valley v. ACT, Inc., No. 14‐1789 (1st Cir. argued Oct. 7, 2014). The Eleventh
Circuit recently concluded as a matter of first impression in that Circuit that neither
individual claims nor class action claims are rendered moot by an unaccepted Rule 68
offer. See Stein v. Buccaneers Ltd. P’ship, 772 F.3d 698, 704, 709 (11th Cir. 2014).
3
unnecessary to the disposition of this case, we refrain from reaching the certified
question of whether putative class action claims brought under Rule 23 of the
Federal Rules generally provide an independent basis for Article III
justiciability.2
BACKGROUND
On July 9, 2012, Patrick Tanasi filed a putative nationwide class action
against the defendants, First Niagara Financial Group, Inc. and its predecessor in
interest New Alliance Bank, seeking money damages arising from the
purportedly improper assessment of overdraft fees on his account and the
accounts of others similarly situated. Tanasi did not file a simultaneous motion
for class certification with his complaint—nor has he filed such a motion since.
Nine days later, the defendants made a Rule 68 offer of judgment to Tanasi
“on his individual claims” for $10,000 plus interest, reasonable attorneys’ fees,
costs, and any “other damages he seeks on his individual claims.” J.A. 103. The
offer, expressly made pursuant to Rule 68 of the Federal Rules, stated, among
2 We are not strictly confined to the question presented for interlocutory appeal by the
district court. Rather, we “may address any issue fairly included within the certified
order because it is the order that is appealable.” In re U.S. Lines, Inc., 197 F.3d 631, 635–36
(2d Cir. 1999) (quoting Yamaha Motor Corp. v. Calhoun, 516 U.S. 199, 205 (1996)). Here,
that issue is whether Tanasi’s individual claims were rendered moot by the unaccepted
Rule 68 offer.
4
other things, that it was “not, and shall not be construed as, an admission that
First Niagara is liable in this action, or that plaintiff, or any person whose rights
or interests plaintiff purports to represent, or on whose behalf plaintiff purports
to sue have suffered any damages.” Id. at 104. The $10,000 offer exceeded the
individual damages to which Tanasi would have been entitled had he prevailed
on the individual claims alleged in his complaint. Tanasi, however, allowed the
offer to lapse by refusing to respond within fourteen days as required by both
Rule 68 and the express terms of the defendants’ offer.
On August 9, 2012, the defendants moved to dismiss the complaint on
both jurisdictional grounds and the merits. As a jurisdictional matter, the
defendants argued that the unaccepted Rule 68 offer rendered moot Tanasi’s
individual and putative Rule 23 class action claims. In a thoughtful opinion, the
district court disagreed in part and concluded that although the unaccepted Rule
68 offer rendered Tanasi’s individual claims moot, his putative Rule 23 class
action claims nevertheless remained justiciable. The district court then
considered the defendants’ arguments on the merits, dismissing one of Tanasi’s
claims and allowing the others to proceed.
5
Although a denial of a motion to dismiss is generally not a final appealable
order, the defendants filed a motion for a certificate of interlocutory appeal
pursuant to 28 U.S.C. § 1292(b). On December 17, 2013, the district court granted
this motion concluding that the question of “whether a pre‐certification offer of
judgment under Rule 68 moots a putative class action” has divided courts in this
Circuit and around the country. Special App. 19. Moreover, the district court
emphasized that interlocutory review was justified in this case because, “if this
question were resolved in [d]efendants’ favor, the case would effectively be
concluded.” Id. The district court stayed the case during the pendency of the
certification process and this appeal.
DISCUSSION
We review de novo a district court’s decision concerning Article III subject
matter jurisdiction insofar as that decision is based solely on conclusions of law.
See Mackensworth v. S.S. Am. Merch., 28 F.3d 246, 252 (2d Cir. 1994). On appeal,
Tanasi asserts two independent bases for subject matter jurisdiction. First, he
argues that the district court erred in assuming that his individual claims were
rendered moot by the unaccepted Rule 68 offer. Second, he argues that even if
the district court correctly concluded that his individual claims were moot, his
6
putative Rule 23 claims provided an independent basis for Article III subject
matter jurisdiction. The defendants, by contrast, contend that the district court
correctly determined that Tanasi’s individual claims were rendered moot by the
unaccepted Rule 68 offer, but erred in holding that Tanasi’s putative class action
claims were not.
We agree with Tanasi’s first argument and therefore need not address his
second. It is well established that “[t]he Case or Controversy Clause of Article III,
Section 2 of the United States Constitution limits the subject matter jurisdiction of
the federal courts such that the ‘parties must continue to have a personal stake in
the outcome of the lawsuit.’” United States v. Wiltshire, 772 F.3d 976, 978 (2d Cir.
2014) (per curiam) (quoting Lewis v. Cont’l Bank Corp., 494 U.S. 472, 478 (1990)).
That is, “[w]hen the issues in dispute between the parties are no longer live, a
case becomes moot.” Lillbask ex rel. Mauclaire v. Conn. Dep’t of Educ., 397 F.3d 77,
84 (2d Cir. 2005) (internal quotation marks omitted).
Under Rule 68 of the Federal Rules, “[a]t least 14 days before the date set
for trial, a party defending against a claim may serve on an opposing party an
offer to allow judgment on specified terms, with the costs then accrued.” Fed. R.
Civ. P. 68(a). If, within 14 days of a party’s offer, the offeree accepts, “the clerk
7
must . . . enter judgment.” Id. If, however, the offeree does not accept this offer, it
is “considered withdrawn,” id. 68(b), and should the case proceed to trial and
“the judgment that the offeree finally obtains is not more favorable than the
unaccepted offer, [then] the offeree must pay the costs incurred after the offer
was made,” id. 68(d). The purpose of Rule 68 according to the Supreme Court is
“to encourage settlement and avoid litigation.” Marek v. Chesny, 473 U.S. 1, 5
(1985); see also Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 3001 (“It is roundly agreed in the courts that Rule 68 was intended to
encourage settlements and avoid protracted litigation . . . .”).
What Rule 68 does not make clear, however, is the effect, if any, of an
unaccepted offer on the justiciability of a plaintiff’s claim under the
Constitution’s Case or Controversy Clause. “A case becomes moot [pursuant to
Article III’s Case or Controversy Clause] . . . when it is impossible for a court to
grant ‘any effectual relief whatever to the prevailing party.’” Knox v. Serv. Emps.
Int’l Union, Local 1000, 132 S. Ct. 2277, 2287 (2012) (quoting City of Erie v. Pap’s
A.M., 529 U.S. 277, 287 (2000)). Nevertheless, it is not entirely clear whether an
unaccepted offer of complete relief under Rule 68 meets this standard.3
3 Although this issue was arguably presented in Genesis Healthcare Corp. v. Symczyk, the
Supreme Court chose not to consider it because, in the majority’s view, the issue was
8
The federal courts of appeals are split on this question. The Third, Fourth,
Fifth, Seventh, Tenth, and Federal Circuits have all concluded that a Rule 68 offer
of complete relief to an individual renders his case moot for purposes of Article
III, regardless of whether judgment is entered against the defendant.4 On the
other hand, the Ninth and Eleventh Circuits, the two courts of appeals that have
considered this question most recently, have reached the opposite conclusion. See
Stein v. Buccaneers Ltd. P’ship, 772 F.3d 698, 702 (11th Cir. 2014) (holding that an
unaccepted Rule 68 offer cannot moot a case because “[g]iving controlling effect
to an unaccepted Rule 68 offer . . . is flatly inconsistent with the rule”); Diaz v.
waived below and in the petition for writ of certiorari. 133 S. Ct. 1523, 1529 (2013). But
see id. at 1534 (Kagan, J., dissenting) (reasoning that the question of whether a Rule 68
offer renders moot an individual’s claim was “logically prior to [] and thus inextricably
intertwined with [] the question” of whether a Rule 68 offer moots a plaintiff’s collective
claims).
4 See Warren v. Sessoms & Rogers, P.A., 676 F.3d 365, 371 (4th Cir. 2012) (“When a Rule 68
offer unequivocally offers a plaintiff all of the relief she sought to obtain, the offer
renders the plaintiffʹs action moot.” (internal quotation marks and citation omitted));
Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239, 1243 (10th Cir. 2011) (“As Rule
68 operates, if an offer is made for a plaintiff’s maximum recovery, his action may be
rendered moot.”); Thorogood v. Sears, Roebuck & Co., 595 F.3d 750, 752 (7th Cir. 2010)
(“The offer exceeded the amount in controversy and so the case was moot.”); Samsung
Elecs. Co. v. Rambus, Inc., 523 F.3d 1374, 1379 (Fed. Cir. 2008) (“An offer for full relief
moots a claim for attorney fees.”); Krim v. pcOrder.com, Inc., 402 F.3d 489, 502 (5th Cir.
2005) (“[A] full settlement offer, even if refused, would dispose of [the plaintiff’s]
individual claims.”); Weiss v. Regal Collections, 385 F.3d 337, 342 (3d Cir. 2004) (“[U]nder
traditional mootness principles, an offer for the entirety of a plaintiffʹs claim will
generally moot the claim.”).
9
First Am. Home Buyers Prot. Corp., 732 F.3d 948, 954–55 (9th Cir. 2013) (holding
that “an unaccepted Rule 68 offer that would have fully satisfied a plaintiff’s
claim does not render that claim moot . . . [as a result of] the language, structure
and purposes of Rule 68 and . . . fundamental principles governing mootness”).
In this case, the district court summarily concluded that in our Circuit “it is
settled that, if Tanasi were not seeking to represent a class, the [defendants’]
complete offer of judgment would moot his claim and strip this Court of subject‐
matter jurisdiction over it.” Special App. 5. We respectfully differ with this
conclusion.
To be fair, that the district court reached this conclusion is wholly
understandable given that our prior case law has not always been entirely clear
on this subject.5 Consequently, the district courts within our Circuit have not
deduced a single rule from our prior jurisprudence on the issue. See Special App.
9 (listing district court decisions within our Circuit supporting these two
5 As a recent case comment in the Harvard Law Review observed, “the Second Circuit has
produced several opinions addressing this question; other courts interpreting these
opinions have come to opposite views about the Second Circuit’s position without ever
acknowledging these divergent interpretations.” Civil Procedure‐Rule 68 of the Federal
Rules of Civil Procedure‐Ninth Circuit Holds That Unaccepted Rule 68 Offer Does Not Moot
Plaintiff’s Individual Claims.‐Diaz v. First American Home Buyers Protection Corp., 732
F.3d 948 (9th Cir. 2013), 127 Harv. L. Rev. 1260, 1263–64 (2014).
10
contradictory conclusions). Some, like the district court below, have read our
prior cases to stand unequivocally for the proposition that an unaccepted offer of
complete relief renders moot an individual’s claim. Others, like the Ninth Circuit,
have read our case law to stand unequivocally for the opposite conclusion—that
only a judgment and not an unaccepted Rule 68 offer of complete relief renders
moot a plaintiff’s individual claim. See Diaz, 732 F.3d at 952.
In light of this confusion, we find it necessary to the resolution of this case
to clarify and reiterate that it remains the established law of this Circuit that a
“rejected settlement offer [under Rule 68], by itself, [cannot render] moot[] [a]
case.”6 McCauley v. Trans Union, L.L.C., 402 F.3d 340, 342 (2d Cir. 2005). If the
6 Though some have held that our decision in Doyle v. Midland Credit Management, Inc.,
722 F.3d 78 (2d Cir. 2013) (per curiam), compels a contradictory result, we respectfully
disagree with this conclusion. Doyle never purported to hold that the mere offer of
complete relief to an individual moots his claim regardless of whether this offer is
accepted. Doyle expressly held that “an offer need not comply with Federal Rule of Civil
Procedure 68 in order to render a case moot under Article III.” 722 F.3d at 81. Insofar as
it also concluded that “Doyle’s refusal to settle the case in return for Midland’s offer . . .,
notwithstanding Doyle’s acknowledgement that he could win no more, was sufficient
ground to dismiss this case for lack of subject matter jurisdiction,” id., it could have
done so only as a result of the parties’ failure to contest the issue at trial or on appeal.
See, e.g., Genesis Healthcare Corp., 133 S. Ct. at 1529 (noting that where an argument as to
the relevant law is conceded, the court may assume the law as stated by the parties is
correct without deciding). Doyle did not mention McCauley, much less purport to
overrule it. Moreover, even if the Doyle Court had wanted to overrule McCauley, it
could not have done so. A subsequent panel is bound by the decisions of a prior panel
absent a ruling from the Second Circuit sitting en banc or from the United States
Supreme Court. See Lotes Co. v. Hon Hai Precision Indus. Co., 753 F.3d 395, 405 (2d Cir.
11
parties agree that a judgment should be entered against the defendant, then the
district court should enter such a judgment. See id. Then, after judgment is
entered, the plaintiff’s individual claims will become moot for purposes of
Article III. See ABN Amro Verzekeringen BV v. Geologistics Americas, Inc., 485 F.3d
85, 94 (2d Cir. 2007) (“Mootness, in the constitutional sense, occurs when the
parties have no ‘legally cognizable interest’ or practical ‘personal stake’ in the
dispute, and the court is therefore incapable of granting a judgment that will
affect the legal rights as between the parties.”). Absent such agreement, however,
the district court should not enter judgment against the defendant if it does not
provide complete relief. See Cabala v. Crowley, 736 F.3d 226, 230 (2d Cir. 2013).
Applying this standard to the present case, we conclude that Tanasi’s
individual claims were not rendered moot, in the constitutional sense, by the
unaccepted Rule 68 offer. Instead, because the district court had not yet entered
judgment against the defendants when it reached its decision on the motion to
dismiss, the court maintained Article III subject matter jurisdiction over the case
regardless of Tanasi’s putative class action claims.
2014). Where a second panel’s decision seems to contradict the first, and there is no
basis on which to distinguish the two cases, we have no choice but to follow the rule
announced by the first panel.
12
CONCLUSION
Accordingly, for these reasons, we affirm the district court’s decision that
it maintained subject matter jurisdiction over the case, albeit on the alternative
ground that Tanasi’s individual claims were not moot at the time the district
court denied the defendants’ motion to dismiss. We need not consider and leave
for another day the question of whether putative class action claims under Rule
23 generally provide an independent basis for justiciability after a plaintiff’s
individual claims are rendered moot.
13