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Trying to Evade a Class Action

In Geismann, M.D., P.C. v. ZocDoc, Inc., Geismann , a Missouri professional corporation, commenced a class action in Missouri state court against the defendant, claiming that it had violated the Telephone Consumer Protection Act by sending unsolicited advertisements by fax.  Geismann, a Delaware corporation, also moved for class certification.  ZocDoc removed the case to the District Court for the Eastern District of Missouri.  Two weeks later, ZocDoc made an offer of judgment to Geismann, pursuant to Rule 68 of the Federal Rules of Civil Procedure for (a) $6,000 plus reasonable attorney's fees in satisfaction of Geismann's individual claims and (b) an injunction prohibiting the defendant from engaging in similar statutory violations in the future.  Geismann rejected the offer of judgment because it did not provide relief to the other members of the class.  ZocDoc moved to transfer the case to the Southern District of New York, which motion was granted.

Upon transfer of the case, ZocDoc moved to dismiss the complaint on the ground that the offer of judgment provided full satisfaction of Geismann's claim and the action was moot.  The District Court granted ZocDoc's motion.  Geismann appealed.

The Second Circuit reversed based on the Supreme Court's decision in Campbell-Ewald Co. v. Gomez, which held that the failure to accept an offer of judgment is not a basis to dismiss an action because such failure, like any unaccepted contract offer, is a legal nullity with no operative effect on a  plaintiff's individual claim.  The Supreme Court, however, left open the possibility that the result would be different if the defendant deposited the full amount of the plaintiff's individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.

Before the Second Circuit had issued its decision but after the Supreme Court's decision in Cambell-Ewald, ZocDoc filed a motion with the District Court to deposit a check in the amount of $6,100 payable to the clerk of the court in satisfaction of Geismann's judgment.  The Court granted the motion.

After the Second Circuit's decision, the judgment was vacated and the case remanded to the District Court.  The Court stated that ZocDoc's deposit on the funds with the clerk did not match the Supreme Court's hypothetical case in Campbell-Ewald in that it was deposited pursuant to a judgment that no longer existed and should not have been entered in the first place.

ZocDoc filed a letter motion to the District Court seeking leave to deposit an additional $13,900 with the Court under Rule 67, explaining that "ZocDoc hereby makes an open-ended offer to Geismann with no expiration date on a total of $20,000 (twenty thousand dollars) and for all injunctive relief Geismann seeks in the operative complaint."  It further stated that after depositing the funds, it would  seek to perfect the Cambell-Ewald hypothetical by filing a motion for summary judgment in which it will ask the Court to enter a judgment in favor of Geismann and against ZocDoc for the full amount of Geismann's individual claims and to dismiss the class allegations without prejudice..  The District Court granted ZocDoc's letter motion to deposit the funds and to make a summary judgment motion.  ZocDoc moved for summary judgment and asked that the Court dismiss the action as moot in that ZocDoc had deposited the money and consented to the injunctive relief.  The Court granted the motion, dismissed the action and dismissed the class claims without prejudice.  Geisman appealed.

The Second Circuit again reversed, holding that the deposit with the clerk of the $20,000 was not the same as a bank account in plaintiff's name (the hypothetical in Campbell-Ewald) because the plaintiff does not have the right to withdraw the funds at any time.  Hence, the deposit did not render Geismann's individual claims moot.  Also, at the time of the deposit, the District Court was not divested of power to enter a judgment in favor of Geismann.  Again, Geismann's individual claims were not mooted by the deposit.  The Court acknowledged that Geismann's claims could be rendered moot if ZocDoc surrendered to the complete relief sought by Geismann, but that complete relief includes its class claims.  The Court concluded that the District Court had to resolve the pending class certification motion before entereing judgment and declaring an action moot based solely on relief provided to a plaintiff on an individual basis.  To hold otherwise would allow a defendant to thwart class litigation at will through the use of tactical procedural maneuvers.

The Second Circuit's decision in this case can be found here.

Full post as published by Second Opinions on December 05, 2018 (boomark / email).