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August 2015

Seventh Circuit Holds Unaccepted Offer of Judgment Does Not “Moot” Plaintiff’s Claim

On August 6, 2015, the Seventh Circuit Court of Appeals overruled Damasco v. Clearwire Corporation, as well as two of its other earlier decisions, to the extent that they held that a defendant’s offer of full compensation “mooted” a plaintiff’s claim. In Chapman v. First Index, the Seventh Circuit opined that an expired and unaccepted offer of judgment no longer satisfies the United States Supreme Court’s definition of “mootness,” and consequently reversed the district court’s dismissal of the plaintiff’s individual claim on this basis. 2015 U.S. App. LEXIS 13767.

The plaintiff in Chapman brought suit under the Telephone Consumer Protection Act, and sought to certify a class of putative plaintiffs who similarly received unsolicited faxes. While plaintiff’s motion for class certification was pending, First Index made a Rule 68 offer of judgment for the requested injunctive relief, actual damages, and full statutory relief. First Index conditioned that offer by stating that it would expire fourteen days after the district court ruled on the class certification motion. Class certification was denied, plaintiff allowed the offer to lapse, and upon First Index’s motion, the district court dismissed plaintiff’s individual claim as moot.

The Seventh Circuit acknowledged that it had in the past applied the label “moot” and dismissed lawsuits when a plaintiff declined an offer that would satisfy his entire demand, citing to its decisions in Damasco v. Clearwire Corp., 662 F.3d 891 (7th Cir. 2011), Thorogood v. Sears, Roebuck & Co., 595 F.3d 750 (7th Cir. 2010), and Rand v. Monsanto Co., 926 F.2d 596 (7th Cir. 1991). Nonetheless, the Court in Chapman abandoned that standard, explaining that a case will become “moot” only when it is no longer possible for the court to grant any relief to the prevailing party. If a plaintiff rejects a fully compensatory offer, he has not yet obtained relief, and the court can still provide it by entering a judgment. On the other hand, when a case truly is “moot,” a district court cannot enter any decree, and must dismiss it for lack of case or controversy.

Less than four years ago, the Seventh Circuit split from other Circuit Courts of Appeals in Damasco, and permitted a defendant to “pick off” a class representative by offering complete relief. The Seventh Circuit now suggests that such claims cannot be mooted or picked off, and implies that class action claims will be allowed to continue. In cases involving individual plaintiffs, however, the Court suggested that it would be a waste of judicial resources to continue to proceed when full relief had been offered. Thus, the possibility remains that in an individual case for nominal statutory damages, defendants may still be able to avoid extensive and costly litigation by offering relief upfront.

Much-needed clarity thankfully appears to be on the horizon, as this very issue is currently pending before the United States Supreme Court in Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), cert. granted, 135 S. Ct. 2311 (2015). For now, litigants in this particular Circuit need to reconsider the efficacy of making an offer of judgment or settlement in an attempt to moot an action.

Commercial Litigation

Paul Gamboa

Commercial Litigation