T.S. ELLIS, III, District Judge.
This ease addresses the jurisdictional consequences of declining, or allowing to lapse, a Rule 68, Fed. R. Civ. P, offer of judgment that provides complete relief to a plaintiff asserting a claim under the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. ("TILA"). At issue, more specifically, arc the following questions:
On September 20, 2006, plaintiff Norman Bradford ("Bradford") and defendant HSBC Mortgage Corp. ("HSBC") agreed to refinance the loan that had originally financed Bradford's purchase of his primary residence in Ashburn. Virginia (the "Ashburn home"). To this end. Bradford signed a promissory note (the "Note"), which was secured by a deed of trust on the Ashburn home that named HSBC as the lender. At the time of the refinancing. Bradford was not provided with a "Truth in Lending" statement that would have informed him of his right to rescind the transaction pursuant to TILA. Indeed, Bradford has established as an undisputed fact "that various mandatory TILA disclosures were not provided at the time of closing, such that he was entitled to rescind his loan within the extended statutory three-year period." Bradford v. HSBC Mortg. Corp., 799 F.Supp.2d 625, 627 (E.D. Va. 2011). Several months after the refinancing, HSBC sold the Note to Ally Bank ("Ally"). Neither HSBC nor Ally informed Bradford of the sale at that time. On October 16. 2008, Bradford sent a letter to HSBC purporting to "exercise [Bradford's) right to rescind the mortgage transaction[.]" (Doc. 30-5). HSBC responded by letter dated December 17, 2008 declining to comply with Bradford's rescission request.
Bradford filed the instant action on October 29, 2009 alleging, inter alia, that several defendants, including HSBC, had violated § 1635 of TILA by failing to honor Bradford's request for rescission. On December 30, 2009, RFC purchased the Note from Ally in a transaction that involved RFC's acquisition of a bundle of mortgage loans.
On July 22, 2011, Bradford's § 1635 claims were dismissed as untimely given TILA's three-year statute of repose for rescission claims. See Bradford, 799 F. Supp. 2d at 635. Thereafter, Bradford was allowed to file yet another amended complaint—the fourth—to add a claim that RFC violated § 1641(g) by failing to disclose in a timely fashion that it had acquired the Note. RFC then moved to dismiss the fourth amended complaint arguing, with respect to the § 1641(g) claim, that the claim was untimely. RFC's motion to dismiss was converted into a motion to summary judgment pursuant to Rule 12(d), Fed. R. Civ. P. and then denied as to the § 1641(g) claim on the ground that the claim had been timely asserted. See Bradford v. HSBC Mortg. Corp., ___ F. Supp. 2d ___. 2011 WL 6148486, at *8 n.32 (E.D. Va. Dec. 8, 2011). Subsequently, an Order issued scheduling a status conference. See Bradford v. HSBC Mortg. Corp., 1:09cv1226 (E.D. Va. Dec. 8, 2011) (Order).
After the status conference, RFC tendered a Rule 68 offer of judgment to Bradford on December 14. 2011. This offer read as follows:
(Doc. 261-1 at 2). Bradford allowed the offer to lapse as he did not accept it "within 14 days after being served[.]" Rule 68(a), Fed. R. Civ. P. Thereafter, on January 19, 2012, RFC filed the dismissal motion at bar pursuant to Rule 12(b)(1), Fed. R. Civ. P., arguing that because the offer of judgment would have afforded full relief to Bradford on his § 1641(g) claim had the offer been accepted, the offer served to render Bradford's § 1641(g) claim moot and thus dismissal of the claim is now required for lack of subject-matter jurisdiction. In his untimely response to RFC's motion,"
A motion to dismiss pursuant to Rule 12(b)(1), Fed. R. Civ. P., challenges the existence of subject-matter jurisdiction over the plaintiffs claim. When "the defendant challenges the veracity of the facts underpinning subject matter jurisdiction," then a district court "may go beyond the complaint, conduct evidentiary proceedings, and resolve the disputed jurisdictional facts." Kerns v. United States, 585 F.3d 187, 193 (4th Cir. 2009). Accord Velasco v. Gov't of Indonesia, 370 F.3d 392, 398 (4th Cir. 2004) (noting that in deciding a Rule 12(b)(1) motion, a district court "may consider evidence outside the pleadings without converting the proceeding to one for summary judgment"). It is well-settled that a plaintiff"bears the burden of proving that this Court has subject matter jurisdiction" over his claim. Johnson v. Portfolio Recovery Assocs., 682 F.Supp.2d 560, 566 (E.D. Va. 2009) (citing Richmond, Fredericksburg & Potomac R.R. Co. v. United Stales, 945 F.2d 765, 768 (4th Cir. 1991)). Accord Vuyyuru v. Jadhav, 555 F.3d 337, 347 (4th Cir. 2009) (noting that when "a defendant challenges the existence of subject matter jurisdiction in fact, the plaintiff bears the burden of proving the truth of such facts by a preponderance of the evidence").
At issue on RFC's motion to dismiss is whether the Rule 68 offer of judgment to Bradford on the § 1641(g) claim rendered the claim moot. The Fourth Circuit has recognized that "the doctrine of mootness constitutes a part of the constitutional limits of federal court jurisdiction" under Article III, and that "a case is moot when . . . the parties lack a legally cognizable interest in the outcome." United States v. Hardy, 545 F.3d 280, 283 (4th Cir. 2008) (citations and brackets omitted). For example, a claim becomes moot "when the claimant receives the relief he or she sought to obtain through the claim." Simmons v. United Mortg. & Loan Invs., 634 F.3d 754, 763 (4th Cir. 2011) (citation and quotation marks omitted). In this respect, it is well-settled in the Fourth Circuit that "[w]hen a Rule 68 offer unequivocally offers a plaintiff all the relief she sought to obtain, the offer renders the plaintiffs action moot." Warren v. Sessoms & Rogers, P.A., ___ F.3d ___, 2012 WL 76053, at *3 (4th Cir. Jan. 11, 2012) (citations and quotation marks omitted). Nor is this result unique to this circuit; all the circuits have addressed this issue have reached the same result.
In this case, whether Bradford's § 1641(g) claim is now moot depends, in turn, on whether RFC's Rule 68 offer of judgment offered "the full amount of damages . . . to which [Bradford] claimed individually to be entitled" on his § 1641(g) claim such that "there was no longer any case or controversy" between Bradford and RFC. Zimmerman v. Bell, 800 F.2d 386, 390 (4th Cir. 1986) (affirming dismissal of claim rendered moot by Rule 68 offer of judgment). If the Rule 68 offer of judgment provided Bradford with everything he could have obtained through litigation, then the offer would have deprived Bradford of any personal stake in continuing to litigate the § 1641(g) claim and thereby rendered the claim moot.
There is no disagreement that the offer of statutory damages in the amount of $4,001.00 exceeded the amount of statutory damages that Bradford could have received at trial. See 15 U.S.C. § 1640(a)(2)(A)(iv) (providing that statutory damages for Bradford's particular TILA claim cannot be "greater than $4,000"). Instead, the parties' dispute centers on whether the Rule 68 offer of judgment, to qualify as affording complete relief, must have included a sum-certain amount for the attorney's fees Bradford asserts arc actual damages caused by RFC's § 1641(g) nondisclosure violation. RFC argues that its offer of full statutory damages "plus costs and reasonable attorney's fees in connection with [the § 1641(g) claim], if provided by statute" would have fully satisfied the claim. Bradford counters that the offer of judgment was not sufficient to moot the claim because at least some of the attorney's fees he incurred prosecuting the instant action were "actual damage"
To resolve this dispute, the starting point is the text of TILA, which provides that "any creditor who fails to comply with any requirement imposed under this part," which includes the disclosure requirement of § 1641(g), is liable to the person entitled to receive such notice in an amount determined by a formula that includes several statutorily defined liabilities. One such liability is "any actual damage sustained by such person as a result of the failure[.|" 15 U.S.C. § 1640(a)(1). Thus, the question presented here is whether Congress intended the statutory phrase "actual damage" to include attorney's fees.
It did not so intend; indeed, Congress' contrary intent is manifest. Under TILA, a creditor's liability for a TILA violation also includes, "in the case of any successful action to enforce the foregoing liability . . . the costs of the action, together with a reasonable attorney's fee as determined by the court." 15 U.S.C. § 1640(a)(3). By explicitly providing in TILA for a successful claimant's recovery of reasonable attorney's fees expended in litigating the TILA action,
The distinction between attorney's fees incurred in pursuing a claim and damages attributable to the claim is firmly rooted in this country's jurisprudence through the American Rule, which provides that "unless Congress provides otherwise, parties arc to bear their own attorney's fees." Fogerty v. Fantasy, Inc., 510 U.S. 517, 533 (1994) (citing Aleyska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247-62 (1975)).
Because Bradford's attorney's fees arc not "actual damage" under TILA, it follows that RFC's Rule 68 offer of full statutory damages plus one dollar, the costs of the action, and "reasonable attorney's fees" would have provided Bradford with all the relief to which he was entitled for his § 1641(g) claim and therefore rendered that claim moot. See Simmons, 634 F.3d at 766 n.8 (holding that under TILA "when as here, the defendants have offered to pay the plaintiffs their reasonable attorney's fees as determined by the district court, the plaintiffs have been offered full relief" in that respect). Once the Rule 68 offer was received, Bradford no longer needed to litigate to obtain all the relief he sought through litigation, viz., a judgment against RFC for $4,000 in statutory damages, as well as reasonable attorney's fees and costs. Bradford, in other words, lost any personal stake in litigating the § 1641(g) claim after receiving RFC's Rule 68 offer of judgment, and his § 1641(g) claim was thereby rendered moot.
Because Bradford's § 1641(g) claim is now moot, the claim must be dismissed. As a constitutional matter,
Fourth Circuit authority on this point is sparse, but nonetheless supportive of the result reached here. In Zimmerman, the Fourth Circuit affirmed a district court's dismissal of an individual plaintiffs securities-fraud claims after "defendants had offered [plaintiff] the full amount of damages [] to which she claimed individually to be cntitled[.]" 800 F.2d at 390 (noting that "federal courts do not sit simply to bestow vindication in a vacuum"). Also pertinent are two recent cases where the Fourth Circuit was presented with the question whether a particular offer of judgment rendered a claim moot. In each case, the Fourth Circuit reversed the district court's dismissal of the action for mootness because the offer at issue did not actually afford full relief. See Warren, 2012 WL 76053, at *6; Simmons, 634 F.3d at 767. There is no doubt, however, that in the Fourth Circuit's view, had the offer of judgment at issue provided full relief, the claim would have been rendered moot. See Warren, 2012 WL 76053, at *3 (noting that "had |plaintiff] made a specific demand in the amended complaint for actual damages and the defendants offered that amount or more, the offer of judgment would have mooted [plaintiffs] action"); Simmons, 634 F.3d at 762-63 (acknowledging that a claimant's receipt of full relief can render a claim moot as a constitutional matter). Thus, the conclusion that Bradford's § 1641(g) claim must be dismissed as moot is fully consistent with Fourth Circuit precedent.
The expiration of the Rule 68 offer that rendered Bradford's § 1641(g) claim moot extinguished power to enter judgment on the claim. Some courts, including the Sixth Circuit, have taken the position that judgment on a claim rendered moot by a Rule 68 offer should be entered per the offer's terms, notwithstanding that the offer has lapsed or been rejected. See, e.g., O'Brien v. Ed Donnelly Enters., 575 F.3d 567, 575 (6th Cir. 2009).
In sum, consistent with authority from the Fourth Circuit and elsewhere, Bradford's § 1641(g) claim must be dismissed for lack of jurisdiction. See, e.g., Holstein v. City of Chi., 29 F.3d 1145, 1147 (7th Cir. 1994) (concluding that "[plaintiff] may not spurn this offer of all the damages he is owed" and that "his claim must be dismissed for lack of subject matter jurisdiction").
An appropriate Order will issue.
The Clerk is directed to send a copy of this Memorandum Opinion to all counsel of record.