USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#: ____________
DA TE FILED: APR 0 2 2014
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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GILBERTO FRANCO, on behalf of himself
and all others similarly situated,
Plaintiff, 13 Civ. 4053 (KBF)
-v- MEMORANDUM
DECISION & ORDER
ALLIED INTERSTATE LLC flk/a ALLIED
INTERSTATE, INC.,
Defendant.
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KATHERINE B. FORREST, District Judge:
On June 13, 2013, plaintiff Gilbel'to Franco brought this action against
defendant Allied Interstate, LLC alleging violations of the Fair Debt Collection
Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq. (ECF No. 1.) Now before the
Court are plaintiffs motion for class certification and defendant's motion to dismiss.
For the reasons set forth below, defendant's motion to dismiss is GRANTED, and
plaintiffs motion for class certification is DENIED.
1. BACKGROUND
For purposes of this motion, the Court assumes the truth of the following
allegations set forth in the amended complaint (ECF No. 67).
Plaintiff claims that defendant used false, deceptive, and misleading
practices in violation of the FDCPA in connection with its attempts to collect an
alleged debt from plaintiff and others. (Id~ '1'[ 12-34,47, 48.) Specifically, plaintiff
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alleges that defendant sent written communications to Massachusetts residents,
including plaintiff, which warned them that they might be subject to an
administrative wage garnishment of 15% of their pay. (Id. ,r,r 20-24, Ex. A.)
According to plaintiff, this statement violates §§ 1692e and 1692f of the FDCPA
because the maximum allowable wage garnishment is in fact 15% of disposable
income; thus, defendant falsely represented that a larger amount of plaintiffs pay
was subject to garnishment than is actually permitted by law. (Id.'-;~ 25, 26.)
The FDCPA allows a successful individual plaintiff to recover only "any
actual damage sustained" as a result of a defendant's violation of the statute, as
well as "such additional damages as the court may allow, but not exceeding $1,000,"
and "the costs of the action, together with a reasonable attorney's fee determined by
the court." 15 U.S.C. § 1692k(a)(2)(A).
On June 13, 2013, plaintiff filed the complaint in this action. (ECF No. 1.)
Plaintiff alleges only statutory damages, not actual damages. (See Mem. of L. in
Supp. of Pl.'s Mot. for Class Cert. 9, ECF No. 43.)
On September 10, 2013, defendant offered judgment to plaintiff pursuant to
Federal Rule of Civil Procedure 68 in the amount of $1,501 plus reasonable
attorneys' fees and costs to be determined by the Court. (Def.'s Mem. of L. in Supp.
of Mot. to Dismiss ("Def.'s Mot.") Ex. B, ECF No. 65-2.) Plaintiff did not accept the
offer of judgment, and informed defendant that he would only agree to resolve the
case on a class-wide basis. (Pl.'s Resp. in Opp. to Def.'s Mot. to Dismiss 1, ECF No.
75.) On September 24,2013, the offer of judgment expired. (See Def.'s Mot. Ex. B.)
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On December 2,2013, plaintiff moved to certify a class of consumers who
received a letter similar to the letter that he received, and on January 28, 2014,
plaintiff filed an amended complaint. (ECF Nos. 42, 67.) On January 24,2014,
defendant moved to dismiss the action for lack of subject matter jurisdiction under
Fed. R. Civ. P. 12(b)(1) and opposed plaintiffs motion for class certification. (ECF
No. 64.) Those motions became fully briefed on February 10, 2014. (ECF No. 76.)
II. LEGAL STANDARD
"A case is properly dismissed for lack of subject matter jurisdiction
under Rule 12(b)(1) when the district court lacks the statutory or constitutional
power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir.
2000) (citing Fed. R. Civ. P. 12(b)(1». "The plaintiff bears the burden of proving
subject matter jurisdiction by a preponderance of the evidence." Aurecchione v.
Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005); see also Amidax
Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011) ("[T]o survive
[defendant's] Rule 12(b)(1) motion to dismiss, [plaintiff] must allege facts that
affirmatively and plausibly that it has standing to sue."). In resolving such a
motion to dismiss, the Court must construe all ambiguities and draw all inferences
in plaintiffs favor. Sef. Makarova, 201 F.3d at 113.
"When a case becomes moot, the federal courts lack subject matter
jurisdiction over the action." Fox v. Bd. of Trustees of State Univ. of N.Y., 42 F.3d
135, 140 (2d Cir. 1994) (internal punctuation omitted). "Simply stated, a case is
moot when the issues presented are no longer 'live' or the parties lack a legally
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cognizable interest in the outcome." Powell v. McCormack, 395 U.s. 486, 496
(1969). "The required legally cognizable interest has ... been described as a
requirement that plaintiff have a 'personal stake' in the litigation. Without such a
personal stake, a court lacks subject matter jurisdiction and the case must be
dismissed." Ambalu v. Rosenblatt, 194 F.R.D. 451, 452 (E.D.i'J.Y. 2000) (citing Fox,
42 F.3d at 140).
III. DISCUSSION
A. Mootness
For the following reasons, defendant's Rule 68 offer of judgment to plaintiff
rendered his claim moot. Accordingly, the Court lacks subject matter jurisdiction
over the case, notwithstanding the pending motion for class certification.
Rule 68 permits a defendant to "serve on an opposing party an offer to allow
judgment on specified terms." Fed. R. Civ. P. 68(a). A valid offer of judgment that
would satisfy a plaintiffs entire claim for relief by offering the maximum
recoverable amount under the statute renders a plaintiffs claim moot, even if
plaintiff refuses the offer of judgment. See Doyle v. Midland Credit Management,
Inc., 722 F.3d 78, 81 (2d Cir. 2013).
Here, defendant offered plaintiff more than plaintiffs maximum recoverable
damages pursuant to Rule 68. The FDCPA authorizes damages for actual damage
sustained, as well as additional damages "not exceeding $1,000," and "the costs of
the action, together with a reasonable attorney's fee determined by the court." 15
U.S.C. § 1692k. Because plaintiff does not allege actual damages, defendant's Rule
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68 offer, which permitted judgment to be taken against it for $1,501 plus reasonable
costs and attorneys' fees as allowed by the Court, exceeds the available amount of
statutory damages, costs, and allowable attorneys' fees. Because plaintiff refused
that offer, plaintiffs claim is moot. See Doyle, 722 F.3d at 81.
Plaintiff argues that, because plaintiffs motion for class certification is
pending before the Court but has not yet been decided, the offer of judgment to him
individually-rather than to all members of the class-does not moot the class
action. The law is clear that, when a court has already granted or denied class
certification, mootness of the named plaintiffs personal claim does not render the
entire action moot. U.S. Parole Comm'n v. Geraghty, 445 U.S. 388, 404 (1980);
Sosna v. Iowa, 419 U.S. 393, 394 (1975). It is also clear that mootness of a named
plaintiffs individual claim renders a collective action requesting statutory damages
under the Fair Labor Standards Act (FLSA) moot even prior to certification.
Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 1526 (2013).
However, neither the Supreme Court nor the Second Circuit has ruled on the
effect of a Rule 68 offer made prior to resolution of a Rule 23 (rather than FLSA)
certification motion, as in this case. "[I]n general, if the claims of the named
plaintiffs become moot prior to class certification, the entire action becomes moot,"
subject to certain exceptions. Comer v. Cisneros, 37 F.3d 775, 798 (2d Cir. 1994).
In particular, class certification may relate back to the filing of the complaint in
circumstances that are "so inherently transitory that the trial court will not have
even enough time to rule on a motion for class certification before the proposed
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representative's individual interest expires." Id. at 799 (quoting Cnty. of Riverside
v. McLaughlin, 500 U.S. 44, 52 (1991); Sosna v. low':!, 419 UB. 393, 402 n.ll
(1975».
Thus, district courts in this Circuit are split on the question of whether an
offer of judgment to an individual plaintiff made while a certification motion is
pending or before a certification motion is filed moots the putative class action. See
Morgan v. Account Collection Tech., LLC, No. 05 Civ. 2131 (Kl\1K), 2006 WL
2597865, at *4-5 (S.D.N.Y. Sept. 6, 2006) (discussing the split). Some courts agree
that a Rule 68 offer moots a class action in such circumstances, although courts
have most commonly dismissed such actions before plaintiff has even filed a class
certification motion, unlike here. 1 See, e&, Greifv. Wilson, Elser, Moskowitz,
Edelman & Dicker LLP, 258 F. Supp. 2d 157, 161 (E.D.N.Y. 2003); Edge v. C. Tech
Collections, Inc., 203 F.RD. 85, 88 (E.D.N.Y. 2001); Wilner v. OSI Collection Servs.,
Inc., 201 F.RD. 321 (S.D.N.Y. 2001); Tratt v. Retrieval Masters Creditors Bureau,
Inc" No. 00 Civ. 4560 CILG), 2001 WL 667602, at *1 (E.D.N.Y. 2001); Ambalu v.
Rosenblatt, 194 F.RD. 451, 453 (E.D.N.Y. 2000). Other courts have stated that a
case should only be dismissed as moot based on a Rule 68 offer prior to resolution of
a class certification motion only if the plaintiff lacked a "reasonable opportunity" to
file such a motion prior to the Rule 68 offer. See, e.g., Nasca v. GC Servs. Ltd.
P'ship, No. 01 Civ. 10127 (DLC), 2002 WL 31040647 (S.D.N.Y. Sept. 12,2002);
White v. OSI Collection Servs., Inc., No. 01 Civ. 1343 CARR), 2001 WL 1590518, at
1 Defendant made its Rule 68 offer on September 10, 20l3; plaintiff moved for class certification on
December 2,2013; and defendant moved to dismiss the action as moot on January 24,2014.
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*4 (E.D.N.Y. Nov. 5, 2001); Schaake v. Risk Mgmt. Alternatives, Inc., 203 F.R.D.
108, 112 (S.D.N.Y. 2001).
This Court adopts the views of the first line of cases. As a general matter, "if
the claims of the named plaintiffs become moot prior to class certification, the entire
action becomes moot." Comer, 37 F.3d at 798. The Court is mindful that several
courts have nonetheless denied motions to dismiss actions as moot based on the
"relation back" doctrine, which hinges on "transitory" circumstances. Those courts
have also noted the Supreme Court's concern in Deposit Guar. Nat'l Bank, Jackson,
Miss. v. Roper that defendants could "pick off' plaintiffs by offering judgment before
class certification, thus frustrating the objective of class actions. See 445 U.S. 326,
340 (1980); see, e.g., Nasca, 2002 \VL 31040647, at *2; White, 2001 WL 1590518, at
*2-3; Schaake, 203 F.R.D. at 110.
However, for substantially the same reasons as the Supreme Court stated in
Genesis Healthcare Corp., the "relation back" doctrine and the "picking off' concern
are inapposite here. In that case, the Court held that the respondent's collective
action pursuant to the FLSA became moot when her individual claim became moot.
The Supreme Court rejected the applicability of the "relation back" cases not only
because they related to the Rule 23 context rather than the FLSA context, but for
the following reasons:
The "inherently transitory" rationale was developed to address circumstances
in which the challenged conduct was effectively unreviewable, because no
plaintiff possessed a personal stake in the suit long enough for litigation to
run its course. A plaintiff might seek, for instance, to bring a class action
challenging the constitutionality of temporary pretrial detentions. In doing
so, the named plaintiff would face the considerable challenge of preserving
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his individual claim from mootness, since pretrial custody likely would end
prior to the resolution of his claim.... [T]his doctrine has invariably focused
on the fleeting nature of the challenged conduct giving rise to the claim, not
on the defendant's litigation strategy.
Genesis Healthcare Corp., 133 S. Ct. at 1531 (emphasis added) (citations omitted).
A situation involving statutory damages rather than injunctive relief does not
raise such concerns for the following reasons, which are equally applicable to the
FDCPA as to the FLSA context:
Unlike claims for injunctive relief challenging ongoing conduct, a claim for
damages cannot evade review; it remains live until it is settled, judicially
resolved, or barred by a statute of limitations. Nor can a defendant's attempt
to obtain settlement insulate such a claim from review, for a full settlement
offer addresses plaintiffs alleged harm by making the plaintiff whole. While
settlement may have the collateral effect of foreclosing unjoined claimants
from having their rights vindicated in respondent's suit, such putative
plaintiffs remain free to vindicate their rights in their own suits. They are no
less able to have their claims settled or adjudicated following respondent's
suit than if her suit had never been filed at alL
at 1531 (emphasis added).
In this case, defendant here has offered to address plaintiffs harm and make
plaintiff whole; other potential plaintiffs remain "free to vindicate their rights in
their own suits" despite the mootness of plaintiffs individual claim. Id. The Court
is mindful that FLSA collective actions are subject to less strict principles than Rule
23 class actions, because plaintiffs must opt in to FLSA actions, unlike class actions.
Hoffmann v. Sbarro, Inc., 982 F. Supp. 249, 263 (S.D.N.Y. 1997). However, that
distinction is irrelevant here. Plaintiffs seeking statutory damages under the
FDCPA, which are capped at $1,000, are able to pursue those individual claims and
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thus vindicate their individual rights even if a class action proves untenable-just
as in the FLSA context.
For similar reasons, the Supreme Court's concern in Roper about "picking off'
plaintiffs was inapplicable in Genesis Healthcare Corp., just as it is inapplicable
here. "Roper's holding turned on a specific factual finding that the plaintiffsD
possessed a continuing personal economic stake in the litigation, even after the
defendants' offer of judgment," because the plaintiffs there could shift a portion of
their attorney's fees and expenses to class litigants. Genesis Healthcare Corp., 133
S. Ct. at 1532. By contrast, here as in Genesis Healthcare Corp., defendant's offer
of judgment offered plaintiff complete relief on his individual claims, and plaintiff
"failed to assert any continuing economic interest in shifting attorney's fees and
costs to others." id.
For these reasons, defendant's Rule 68 offer of judgment rendered plaintiffs
claim moot notwithstanding the pending class certification motion. Accordingly, the
Court lacks subject matter jurisdiction over the action, and the complaint must be
dismissed.
B. Class Cel,tification
In the absence of a claim against defendant, plaintiff cannot adequately
represent the purported class. "[A] class action cannot be maintained unless there
is a named plaintiff with a live controversy both at the time the complaint is filed
and at the time the class is certified." Swan v. Stoneman, 635 F.2d 97, 102 n.6 (2d
Cir. 1980). Accordingly, plaintiffs motion to certify a class is denied. Comer, 37
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F.3d at 798 ("[I]f the claims of the named plaintiffs become moot prior to class
certification, the entire action becomes moot."); Ambalu, 198 F.R.D. at 395.
IV. CONCLUSION
For the reasons stated above, plaintiffs motion for class certification is
DENIED and defendant's motion to dismiss is GRANTED. The Clerk of Court is
directed to close the motions at ECF Nos. 42 and 64 and to terminate this action.
SO ORDERED.
Dated: New York, New York
April '2-, 2014
KATHERINE B. FORREST
United States District Judge
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