Class Action Defense Cases–Stewart v. Cheek & Zeehandelar: Ohio Federal Court Strikes Rule 68 Offer Of Judgment In FDCPA Class Action Holding Rule 68 Offer To Settle Individual Claims After Class Action Certification Motion Filed Cannot Moot Class Claims

Nov 18, 2008 | By: Michael J. Hassen

Class Action Claims not Rendered Moot by Rule 68 Offer of Judgment to Settle Individual Claims of Named Plaintiffs so long as Plaintiffs have not Delayed in Seeking Class Action Treatment of Litigation Ohio Federal Holds

Two class action lawsuits were filed against the law firm of Cheek & Zeehandelar, a consumer debt collection firm, alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and Ohio’s Consumer Sales Practices Act (CSPA); the class action complaints alleged that defendant “engages in misleading and deceptive debt-collection practices” and that it “uniformly fails to properly investigate whether debtor funds are lawfully subject to attachment, prior to seeking and obtaining orders of attachment. Stewart v. Cheek & Zeehandelar, LLP, 252 F.R.D. 384, 384-85 (S.D. Ohio 2008). The class actions were consolidated, and the district court ordered that plaintiffs file their motion for class action certification by February 15, 2008. Id., at 385. Prior to February 15, defendant served a Rule 68 offer of judgment on plaintiffs, which offered to compensate them for their individual claims only; the Rule 68 offer did not offer to settle the claims of the putative class. Id. Plaintiffs moved to strike the offer of judgment and, on February 15, 2008, filed their motion for certification of the litigation as a class action. Id. The district court granted plaintiffs’ motion to strike the offer of judgment.

The district court began its analysis by noting that “[t]he purpose of Rule 68 ‘is to encourage settlement and avoid litigation.’” Stewart, at 385 (quoting Marek v. Chesny, 473 U.S. 1, 5 (1985)). Rule 23 class actions, by contrast, serves to vindicate important constitutional and statutory rights by permitting individually small damage claims to be grouped together so that the amount of money involved is worth the fight. Id. Or as the Supreme Court put it, “Where it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages, aggrieved persons may be without any effective redress unless they may employ the class-action device.” Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 339 (1980). The district court observed at page 385, “The great weight of federal authority holds that a Rule 68 offer of judgment cannot moot the named plaintiffs’ claims after a motion for class certification has been filed.” (Citations omitted.) To hold otherwise would permit defendants to “unilaterally control whether the district court ever heard the certification motion,” id., at 385-86 Moreover, “Although courts are somewhat more divided about the effect of a Rule 68 offer before a class-certification motion has been filed, most have endorsed the view that the settlement offer will not moot the named plaintiffs’ claims so long as the plaintiffs have not been dilatory in bringing their certification motion.: Id., at 386 (citations omitted). After summarizing the reasons behind the majority view, the district court adopted that rule and held, further, that plaintiffs had not been dilatory in seeking class action certification. Id., at 386-87. Accordingly, the district court granted plaintiffs’ motion to strike the Rule 68 offer of judgment, id., at 387.

NOTE: FRCP Rule 68 provides in pertinent part, “[A] party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued…. If the [offer is refused, and 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.”

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