Emily DIAZ, оn behalf of herself and all others similarly situated, Plaintiff-Appellant, v. FIRST AMERICAN HOME BUYERS PROTECTION CORPORATION, a California corporation, Defendant-Appellee.
No. 11-57239
United States Court of Appeals, Ninth Circuit
Argued and Submitted May 6, 2013. Filed Oct. 4, 2013.
732 F.3d 948
Joel D. Siegel (argued) and Paul M. Kakuske, SNR Denton U.S. LLP, Los Angeles, CA; Charles A. Newman, SNR Denton U.S. LLP, St. Louis, MO; Edward Patrick Swan, Jones Day, San Diego, CA, for Defendant-Appellee.
Before: HARRY PREGERSON and RAYMOND C. FISHER, Circuit Judges, and JAMES S. GWIN, District Judge.*
FISHER, Circuit Judge:
Emily Diaz, the owner of a home warranty plan from First American Home Buyers Protection Corporation, filed a class action complaint alleging that First American refused to make timely repairs, used substandard contractors and wrongfully denied claims. She asserted state law claims for unfair competition, misrepresentation, concealment, breach of contract and breach of the implied covenant of good faith and fair dealing. The district court dismissed Diaz‘s unfair competition and concealment claims under
We vacate the district court‘s dismissal of Diaz‘s remaining individual claims. We hold that an unaccepted Rule 68 offer that would fully satisfy a plaintiff‘s claim is insufficient to render the claim moot. See McCauley v. Trans Union, L.L.C., 402 F.3d 340, 342 (2d Cir.2005). Diaz‘s remaining claims, therefоre, were not made moot by her refusal to accept First American‘s Rule 68 offer, even assuming that the offer would have fully satisfied her claims. Accordingly, we vacate the Rule 12(b)(1) dismissal of Diaz‘s claims for misrepresentation, breach of contract and breach of the implied covenant of good faith and fair dealing.1
BACKGROUND
Emily Diaz brought this class action against First American Home Buyers Protection Corporation on behalf of a putative nationwide class consisting of all persons who made a claim under a home warranty plan obtained from First American after March 2003. After First American removed the action to federal court, the district court issued a series of orders dismissing Diaz‘s claims for concealment, false promise, unfair competition and violation of the California Consumer Legal Remedies Act under
A short time thereafter, First American made an offer of judgment to Diaz on her remaining individual claims—for misrepresentation, breach of contract and breach of the implied covenant of good faith and fair dealing—pursuаnt to
First American then filed a motion to dismiss the action for lack of subject matter jurisdiction. First American argued that the district court “should dismiss this action pursuant to Rule[] 12(b)(1) of the Federal Rules of Civil Procedure because
In ruling on First American‘s motion, the district court agreed with First American that the Rule 68 offer would have fully satisfied Diaz‘s remaining individual claims. With respect to monetary relief, First American‘s offer provided “the full amount of relief she is entitled to individually.” The court recognized that the Rule 68 offer did not provide for injunctive or declaratоry relief, each of which Diaz had sought in her complaint. But the court found that Diaz was not entitled to either of these forms of relief. The court deemed Diaz‘s request for an injunction “not appropriate” because “she has been offered, and declined, an adequate remedy at law” and “she no longer holds a home warranty plan with First American.” Similarly, the court found that Diaz‘s сlaim for declaratory relief was “duplicative of her breach of contract and breach of the implied covenant claims” and “superfluous” given that she no longer had a home warranty plan with First American.
Having determined that First American‘s offer would have provided Diaz complete relief on her remaining individual claims, the court went on to hold that the unacceрted offer was sufficient to render those claims moot. Like First American, in the absence of Ninth Circuit authority the court reached this conclusion by relying on decisions of the Seventh and Fourth Circuits, citing Thorogood, 595 F.3d at 753, Greisz, 176 F.3d at 1015, Zimmerman, 800 F.2d at 390, and Rand, 926 F.2d at 598. Having determined that the claims were moot, the court granted First American‘s motion and dismissed the claims for lack of subject matter jurisdiction. The court initially entered judgment against Diaz, but subsequently vaсated that judgment and declined to enter judgment or award costs for either party. Diaz appealed.
STANDARD OF REVIEW
“We apply a de novo standard for reviewing a district court‘s decision on subject matter jurisdiction, and, concomitantly, apply that standard in reviewing questions of mootness.” Sample v. Johnson, 771 F.2d 1335, 1338 (9th Cir.1985) (citation omitted).
DISCUSSION
Diaz argues that the district court erred by dismissing her remaining individual claims for lack of subject matter jurisdiction following her refusal to accept First American‘s Rule 68 offer of judgment. She maintains that these claims were not moot, because: (1) an unaccepted Rule 68 offer does not render a claim moot, even if the offer would have fully satisfied the plaintiff‘s claim; (2) even if such an offer does moot a claim, First American‘s offer did not provide complete relief; and (3) her remaining claims were not moot be
Diaz‘s first argument requires us to decide whether an unaccepted Rule 68 offer that would have fully satisfied a plaintiff‘s claim is sufficient to render the claim moot. The Supreme Court has yet to address this issue. See Genesis Healthcare Corp. v. Symczyk, --- U.S. ----, 133 S.Ct. 1523, 1528-29, 185 L.Ed.2d 636 (2013) (“While the Courts of Appeals disagree whether an unaccepted offer that fully satisfies a plaintiff‘s claim is sufficient to render the claim moot, we do not reach this question, or resolve the split, because the issue is not properly before us.” (footnote omitted)). Nor have we squarely addressed the issue. In Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1091-92 (9th Cir.2011), we held “that an unaccepted Rule 68 offer оf judgment—for the full amount of the named plaintiff‘s individual claim and made before the named plaintiff files a motion for class certification—does not moot a class action” (emphasis added), but we did not squarely address whether the offer mooted the plaintiff‘s individual claim. We assumed that an unaccepted offer for complete relief will moot a claim, but we neither held that to be the case nor analyzed the issue. See id. at 1090-92. In GCB Communications, Inc. v. U.S. South Communications, Inc., 650 F.3d 1257, 1267 (9th Cir.2011), we noted that a case will “become moot” when “an opposing party has agreed to everything the other party has demanded,” but we did not address the effects of an unaccepted Rule 68 offer, an issue not presented in that case. We therefore treat this as an open question in this circuit.
Other circuits are divided on the question. The Seventh Circuit holds that an unaccepted Rule 68 offer for complete relief will moot a plaintiff‘s claim and that the plaintiff loses outright. See Rand v. Monsanto Co., 926 F.2d 596, 598 (7th Cir. 1991) (“Once the defendant offers to satisfy the plaintiff‘s entire demand, there is no dispute over which to litigate, and a plaintiff who refuses to acknowledge this loses outright, under
The Sixth Circuit agrees with the Seventh Circuit that “an offer of judgment that satisfies a plaintiff‘s entire demand moots the case,” but disagrees “with the Seventh Circuit‘s view that a plaintiff loses outright when he refuses an offer of judgment that would satisfy his entire demand.” O‘Brien v. Ed Donnelly Enters., Inc., 575 F.3d 567, 574-75 (6th Cir.2009). The Sixth Circuit holds that “the better approach is to enter judgment in favor of the plaintiffs in accordance with the defendants’ Rule 68 offer of judgment.” Id. at 575.
Finally, the Second Circuit disagrees with the Sixth and Seventh Circuits that an unаccepted Rule 68 offer for complete relief moots a plaintiff‘s claim, see McCauley v. Trans Union, L.L.C., 402 F.3d 340, 342 (2d Cir.2005) (“In the absence of an obligation to pay [the plaintiff] the $240 in claimed damages, the controversy between [the plaintiff] and [the defendant] is still alive.“), but agrees with the Sixth Circuit that when such an offer has been made, the “better resolution” is to enter judgment against the defendant, although the Secоnd Circuit may require as a precondition to entering such a judgment that the defendant expressly consents to its entry.
Although the majority of courts and commentators appear to agree with the Seventh Circuit that an unaccepted offer will moot a plaintiff‘s claim,5 four justices of the United States Supreme Court, as well as the Solicitor General of the United States, embraced a contrary position in Genesis Healthcare. As noted, the majority in Genesis Healthcare did not reach whether an unaccepted offer that fully satisfies a plaintiff‘s claim is sufficient to render the claim moot. See Genesis Healthcare, 133 S.Ct. at 1528-29. In a dissenting opinion, however, Justice Kаgan, writing for all four justices who reached the question, agreed with the Second Circuit that “an unaccepted offer of judgment cannot moot a case.” Id. at 1533 (Kagan, J., dissenting); accord Brief for the United States as Amicus Curiae Supporting Affirmance, Genesis Healthcare Corp. v. Symczyk, --- U.S. ----, 133 S.Ct. 1523, 185 L.Ed.2d 636 (2013) (No. 11-1059), 2012 WL 4960359, at *10-15.
Justice Kagan explained:
We made clear earlier this Term that “[a]s long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot.” Chafin v. Chafin, --- U.S. ----, 133 S.Ct. 1017, 1023, 185 L.Ed.2d 1 (2012 [2013]) (internal quotation marks omitted). “[A] case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Ibid. (internal quotation marks omitted). By those measures, an unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court‘s ability to grant her relief. An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient‘s rejection of an offer “leaves the matter as if no offer had ever been made.” Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U.S. 149, 151, 7 S.Ct. 168, 30 L.Ed. 376 (1886). Nothing in Rule 68 alters that basiс principle; to the contrary, that rule specifies that “[a]n unaccepted offer is considered withdrawn.”
Fed. Rule Civ. Proc. 68(b) . So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.For this reason, [the plaintiff‘s] individual claim was alive and well when the District Court dismissed her suit. Recall: [the defendant] made a settlement offer under Rule 68; [the plaintiff] decided not to accept it; after 10 days, it expired and the suit went forward. [The plaintiff‘s] individual stake in the lawsuit thus remained what it had always been, and ditto the court‘s capacity to grant her relief. After the offer lapsed, just as before, [the plaintiff] possessed an unsatisfied claim, which the court could redress by awarding her damages. As long as that remainеd true, [the plaintiff‘s] claim was not moot, and the District Court could not send
her away empty-handed. So a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don‘t try this at home.
Genesis Healthcare, 133 S.Ct. at 1533-34 (Kagan, J., dissenting) (some alterations in original) (emphasis added).
Justice Kagan also emphasized that nothing in Rule 68 authorizes a court to enter judgment in accordance with an unaccepted offer:
Rule 68 precludes a court from imposing judgment for a plaintiff ... based on an unaccepted settlement offer made pursuant to its terms. The text of the Rule contemplates that a court will enter judgment only when a plaintiff accepts an offer. See
Rule 68(a) (“If ... the [plaintiff] serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment“). And the Rule prohibits a court from considering an unaccepted offer for any purpose other than allocating litigation costs—including for the purpose of entering judgment for either party. SeeRule 68(b) (“Evidence of an unacceрted offer is not admissible except in a proceeding to determine costs“). That injunction accords with Rule 68‘s exclusive purpose: to promote voluntary cessation of litigation by imposing costs on plaintiffs who spurn certain settlement offers. See Marek v. Chesny, 473 U.S. 1, 5, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985). The Rule provides no appropriate mechanism for a court to terminate a lawsuit without the plaintiff‘s consent.
Id. at 1536 (alterations in original).
We are persuaded that Justice Kagan has articulated the correct approach. We therefore hold that an unaccepted Rule 68 offer that would have fully
CONCLUSION
We hold that the district court erred by dismissing Diaz‘s remaining individual claims for lack of subject matter jurisdiction. We vacate the dismissal of those claims and remand to the district court. For the reasons stated in the concurrently filed memorandum disposition, we also vacate dismissal of Diaz‘s concealment and unfair competition claims and lack jurisdiction to review the district court‘s order denying Diaz‘s motion to correct or modify the record. Each party shall bear its оwn costs of appeal.
VACATED AND REMANDED.
Notes
First American has offered to allow judgment to be entered against it and in favor of Plaintiff in full resolution of her remaining individual claims asserted against First American in this action. First American has оffered Plaintiff judgment in the total amount of $7,019.32, plus costs allowed under Rule 54 and now accrued that may be taxed by the Court, which, pursuant to Rule 54, do not include attorneys’ fees. The total amount of $7,019.32 includes all damages and relief that could be awarded pursuant to final judgment on Plaintiff‘s claims, including: (a) Plaintiff‘s claimed damages, in the amount of $1,649.00 (calculated to include the claimed purchase price of the home warranty contracts) ($660.00 and $750.00, respectively, for $1,410.00 total), Plaintiff‘s claimed out-of-pocket expenses for a repair in December 2008 ($129.00), and Plaintiff‘s claimed payments for service fees (two payments of $55.00, for $110.00 total); (b) prejudgment interest in the total amount of $423.32, calculated pursuant to