Judges: Easterbrook
Filed: Aug. 06, 2015
Latest Update: Mar. 02, 2020
Summary: In the United States Court of Appeals For the Seventh Circuit _ Nos. 14---2773 & 14---2775 ARNOLD CHAPMAN, Plaintiff---Appellant, and ALL AMERICAN PAINTING, INC., Putative Intervenor---Appellant, v. FIRST INDEX, INC., Defendant---Appellee. _ Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 09 C 5555 — Sara L. Ellis, Judge. _ ARGUED MAY 19, 2015 — DECIDED AUGUST 6, 2015 _ Before POSNER, EASTERBROOK, and MANION, Circuit Judg--- es. EA
Summary: In the United States Court of Appeals For the Seventh Circuit _ Nos. 14---2773 & 14---2775 ARNOLD CHAPMAN, Plaintiff---Appellant, and ALL AMERICAN PAINTING, INC., Putative Intervenor---Appellant, v. FIRST INDEX, INC., Defendant---Appellee. _ Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 09 C 5555 — Sara L. Ellis, Judge. _ ARGUED MAY 19, 2015 — DECIDED AUGUST 6, 2015 _ Before POSNER, EASTERBROOK, and MANION, Circuit Judg--- es. EAS..
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In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 14-‐‑2773 & 14-‐‑2775
ARNOLD CHAPMAN,
Plaintiff-‐‑Appellant,
and
ALL AMERICAN PAINTING, INC.,
Putative Intervenor-‐‑Appellant,
v.
FIRST INDEX, INC.,
Defendant-‐‑Appellee.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 09 C 5555 — Sara L. Ellis, Judge.
____________________
ARGUED MAY 19, 2015 — DECIDED AUGUST 6, 2015
____________________
Before POSNER, EASTERBROOK, and MANION, Circuit Judg-‐‑
es.
EASTERBROOK, Circuit Judge. This is another of the surpris-‐‑
ingly many junk-‐‑fax suits under 47 U.S.C. §227, the Tele-‐‑
phone Consumer Protection Act, which together with the
FCC’s implementing regulations establishes some simple
2 Nos. 14-‐‑2773 & 14-‐‑2775
rules that many fax senders ignore. This suit involves two of
those requirements: first, that commercial faxes be sent only
to those who have agreed to receive them; second, that
commercial faxes include instructions about how to opt out
of receiving more.
When this suit began in 2009, its sole plaintiff, Arnold
Chapman, proposed to represent a class of persons who re-‐‑
ceived faxes from First Index despite not having given con-‐‑
sent. First Index responded that it always had recipients’
consent, though it may have been verbal (at trade shows or
during phone conversations). Discovery was conducted and
experts’ reports submitted. Chapman then asked the judge
to certify a class of all persons who had received faxes from
First Index since August 2005 (four years before the com-‐‑
plaint was filed) without their consent. The district court de-‐‑
clined, ruling that the difficulty of deciding who had pro-‐‑
vided oral consent made it infeasible to determine who is in
the class. 2014 U.S. Dist. LEXIS 27556 (N.D. Ill. Mar. 4, 2014).
Chapman then proposed a different class: All persons
whose faxes from First Index either lacked an opt-‐‑out notice
or contained one of three specific notices that Chapman be-‐‑
lieves violate the FCC’s regulations. The district court de-‐‑
clined to certify that class too, ruling that the proposal came
too late—more than 18 months after discovery had closed.
2014 U.S. Dist. LEXIS 96397 (N.D. Ill. July 16, 2014). The dis-‐‑
trict judge found that Chapman had known about the poten-‐‑
tial notice issue from the outset of the litigation but had
made a strategic decision not to pursue it earlier. Changing
the focus of the litigation almost five years into the case was
impermissible, the judge concluded. For good measure, the
Nos. 14-‐‑2773 & 14-‐‑2775 3
judge dismissed Chapman’s own claim as moot and entered
a final, take-‐‑nothing judgment.
The parties and the district judge have proceeded as if
Chapman’s proposal to certify a class defined with reference
to the opt-‐‑out notice requires an amendment to the com-‐‑
plaint, to which the standards of Fed. R. Civ. P. 15(a)(2) ap-‐‑
ply. They don’t say why, and we can’t see why. A complaint
must contain three things: a statement of subject-‐‑matter ju-‐‑
risdiction, a claim for relief, and a demand for a remedy.
Fed. R. Civ. P. 8(a). Class definitions are not on that list. In-‐‑
stead the obligation to define the class falls on the judge’s
shoulders under Fed. R. Civ. P. 23(c)(1)(B). See Kasalo v. Har-‐‑
ris & Harris, Ltd., 656 F.3d 557, 563 (7th Cir. 2011). The judge
may ask for the parties’ help, but motions practice and a de-‐‑
cision under Rule 23 do not require the plaintiff to amend
the complaint.
This does not affect the disposition, however, because no
matter how the subject is approached a district judge has
discretion to reject an attempt to remake a suit more than
four years after it began. The judge thought Chapman’s de-‐‑
lay inexcusable. He knew about the potential opt-‐‑out issue
from the outset but did not propose a class centered on it un-‐‑
til the parties had borne the expense of discovery into how
First Index obtained consent from the recipients, and the
judge had resolved motions addressed to that topic. Chap-‐‑
man wanted a fallback position, but the court thought that
the opt-‐‑out issue should have been pressed earlier. The
judge wrote: “Such gamesmanship is not appropriate, par-‐‑
ticularly where Chapman was aware of the potential that his
class definition was deficient yet spurned several opportuni-‐‑
ties to cure that deficiency.” 2014 U.S. Dist. LEXIS 96397 at
4 Nos. 14-‐‑2773 & 14-‐‑2775
*10. Insisting that representative plaintiffs put their class def-‐‑
initions on the table “[a]t an early practicable time” (Rule
23(c)(1)(A)) is not an abuse of discretion, as that’s the Rule’s
own schedule for judicial action. Four and a half years into
the case cannot be called “early”.
Having declined to certify a class identified by the opt-‐‑
out notices, the district court concluded that All American
Painting, Inc., could not intervene as a new representative
plaintiff. All American wanted to replace Chapman, should
the district court dismiss his claim, but only if the court certi-‐‑
fied a class centered on the opt-‐‑out notices. Given our con-‐‑
clusion that the court was entitled to reject an opt-‐‑out-‐‑notice
class, we also affirm its denial of All American’s motion to
intervene.
This brings us to Chapman’s personal claim. He contends
that he did not agree to receive faxes from First Index but
got two anyway. Section 227(b)(3)(B) authorizes awards of
actual damages or $500 per fax, whichever is greater, and
can be trebled if the violation was willful, so Chapman de-‐‑
manded $3,000 plus an injunction under §227(b)(3)(A).
(Chapman does not identify actual damages beyond the an-‐‑
noyance and modest costs in paper and toner of receiving
unwanted faxes.) While Chapman’s motion to represent a
class of non-‐‑consenting recipients was pending, First Index
made an offer of judgment under Fed. R. Civ. P. 68: $3,002,
an injunction, and costs, but not attorneys’ fees (§227 is not a
fee-‐‑shifting statute). First Index recognized that Chapman
could not accept this offer while the motion for class certifi-‐‑
cation was pending (that would amount to abandonment of
the persons he undertook to represent), but it did not want
to leave the offer open indefinitely. The offer stated that it
Nos. 14-‐‑2773 & 14-‐‑2775 5
would expire 14 days after the district court ruled on the mo-‐‑
tion for class certification. Chapman never replied to the of-‐‑
fer, which lapsed on March 18, 2014. First Index then asked
the district court to dismiss Chapman’s personal claim as
moot, and the court granted that motion.
“A case becomes moot only when it is impossible for a
court to grant any effectual relief whatever to the prevailing
party.” Knox v. Service Employees International Union, 132 S.
Ct. 2277, 2287 (2012) (internal quotation marks and source
omitted). Many other decisions say the same thing. By that
standard, Chapman’s case is not moot. The district court
could award damages and enter an injunction. Chapman be-‐‑
gan this suit seeking those remedies; he does not have them
yet; the court could provide them.
We acknowledge that many courts, this one included,
have applied the label “moot” when a plaintiff declines an
offer that would satisfy his entire demand. See, e.g., 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); Rand
v. Monsanto Co., 926 F.2d 596, 598 (7th Cir. 1991) (dismissal
required, but the opinion does not call the dispute moot). Cf.
Smith v. Greystone Alliance, LLC, 772 F.3d 448 (7th Cir. 2014)
(an offer has this effect only if it covers everything the plain-‐‑
tiff wants, as opposed to what the defendant concedes is
due). But Justice Kagan’s dissent in Genesis Healthcare Corp.
v. Symczyk, 133 S. Ct. 1523, 1532–37 (2013) (joined by Gins-‐‑
burg, Breyer & Sotomayor, JJ.), shows that an expired (and
unaccepted) offer of a judgment does not satisfy the Court’s
definition of mootness, because relief remains possible.
None of the other Justices in Genesis Healthcare disagreed
with Justice Kagan’s analysis; instead the majority thought
6 Nos. 14-‐‑2773 & 14-‐‑2775
that the issue had not been presented for decision. Courts of
appeals that have considered this issue since Genesis
Healthcare uniformly agree with Justice Kagan. See, e.g., Ta-‐‑
nasi v. New Alliance Bank, 786 F.3d 195 (2d Cir. 2015); Gomez
v. Campbell-‐‑Ewald Co., 768 F.3d 871 (9th Cir. 2014), cert.
granted, 135 S. Ct. 2311 (2015). The issue is before the Su-‐‑
preme Court in Gomez, and we think it best to clean up the
law of this circuit promptly, rather than require Chapman
and others in his position to wait another year for the Su-‐‑
preme Court’s decision.
If an offer to satisfy all of the plaintiff’s demands really
moots a case, then it self-‐‑destructs. Rule 68 is captioned “Of-‐‑
fer of Judgment”. But a district court cannot enter judgment
in a moot case. All it can do is dismiss for lack of a case or
controversy. So if the $3,002 offer made this case moot, then
even if Chapman had accepted it the district court could not
have ordered First Index to pay. It could have done nothing
but dismiss the suit. Likewise with First Index’s offer to have
the district court enter an injunction. As soon as the offer
was made, the case would have gone up in smoke, and the
court would have lost the power to enter the decree. Yet no
one thinks (or should think) that a defendant’s offer to have
the court enter a consent decree renders the litigation moot
and thus prevents the injunction’s entry.
Rule 68(d) provides the consequence of a decision not to
accept: “If the judgment that the offeree finally obtains is not
more favorable than the unaccepted offer, the offeree must
pay the costs incurred after the offer was made.” Failure to
accept a fully compensatory offer also may suggest that the
plaintiff is a bad representative of the class, for he has noth-‐‑
ing to gain (implying poor incentives to monitor counsel)
Nos. 14-‐‑2773 & 14-‐‑2775 7
and may have given up something the class values (here, an
injunction that would have stopped any further improper
faxing). But all of these upshots differ from outright dismis-‐‑
sal on the basis of mootness.
We overrule Damasco, Thorogood, Rand, and similar deci-‐‑
sions to the extent they hold that a defendant’s offer of full
compensation moots the litigation or otherwise ends the Ar-‐‑
ticle III case or controversy. As Circuit Rule 40(e) requires,
this opinion has been circulated to all judges in active ser-‐‑
vice. None favored a hearing en banc.
No more need be said to resolve this appeal, for by the
time the district court dismissed the suit the offer had long
expired, and First Index has not argued for affirmance on
any ground other than mootness.
Rejecting a fully compensatory offer may have conse-‐‑
quences other than mootness, however. As we put it in
Greisz v. Household Bank, 176 F.3d 1012, 1015 (7th Cir. 1999),
“[y]ou cannot persist in suing after you’ve won.” Although
even a defendant’s proof that the plaintiff has accepted full
compensation (“accord and satisfaction” in the language of
Rule 8(c)(1)) is an affirmative defense rather than a jurisdic-‐‑
tional bar, the conclusion that a particular doctrine is not
“jurisdictional” does not make it vanish. The question raised
by Greisz and similar opinions is whether a spurned offer of
complete compensation should be deemed an affirmative
defense, perhaps in the nature of an estoppel or a waiver.
That would be consistent with Rule 68, which is designed for
offers of compromise (the normal kind of settlement) rather
than offers to satisfy the plaintiff’s demand fully. Cost-‐‑
shifting under Rule 68(d) is not necessarily the only conse-‐‑
quence of rejecting an offer, when the plaintiff does not even
8 Nos. 14-‐‑2773 & 14-‐‑2775
request that the court award more than the defendant is pre-‐‑
pared to provide.
Genesis Healthcare and most of the other decisions we
have mentioned arose from class actions. Settlement pro-‐‑
posals designed to decapitate the class upset the incentive
structure of the litigation by separating the representative’s
interests from those of other class members. So it may be
that, in class actions, the conclusion “not moot” implies that
the case should be allowed to continue—for even a settle-‐‑
ment offer after the district judge has declined to certify a
class may be designed to prevent an effective appeal (or at
least change everyone’s incentives about whether to appeal).
If there is only one plaintiff, however, why should a court
supply a subsidized dispute-‐‑resolution service when the de-‐‑
fendant’s offer means that there’s no need for judicial assis-‐‑
tance, and when other litigants, who do need the court’s aid,
are waiting in a queue? Ordering a defendant to do what it is
willing to do has no legitimate claim on judicial time. Why
should a judge do legal research and write an opinion on
what may be a complex issue when the plaintiff can have
relief for the asking? Opinions are supposed to be the by-‐‑
products of real disputes. But defendants do not make an
argument along these lines. Nor did their offer remain open,
so a court could not say (as may well be true) that there is no
sum currently in dispute. A fleeting offer could not reasona-‐‑
bly be equated to full compensation. Is 14 days long enough
for an offer’s consideration? How a court should deal with
these situations can be left for another day, when the parties
have addressed them.
The district court’s order denying All American’s motion
to intervene is affirmed. The district court’s judgment is af-‐‑
Nos. 14-‐‑2773 & 14-‐‑2775 9
firmed to the extent it declines to certify a class but vacated
with respect to Chapman’s personal claim, and the case is
remanded for decision on the merits of that claim.
