2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-28-2002

Colbert v. Dymacol Inc

Precedential or Non-Precedential: Precedential

Docket No. 01-4397

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Recommended Citation

"Colbert v. Dymacol Inc" (2002). 2002 Decisions. Paper 539.

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PRECEDENTIAL 

 Filed August 28, 2002 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 01-4397 

BRENT COLBERT, ON BEHALF OF 

HIMSELF AND ALL OTHERS SIMILARLY 

SITUATED 

v. 

DYMACOL, INC.; 

INTELLIRISK MANAGEMENT CORP., 

 Appellants 

Appeal from the United States District Court 

For the Eastern District of Pennsylvania 

D.C. No.: 01-cv-03577 

District Judge: Honorable Clarence C. Newcomer 

Argued: June 14, 2002 

Before: ROTH, RENDELL, and ROSENN, Circuit Jud ges. 

(Filed: August 28, 2002) 

 David A. Searles (Argued) 

 Donovan Searles 

 1845 Walnut Street, Suite 1100 

 Philadelphia, PA 19103 

 

 James A. Francis 

 Francis & Mailman 

 100 South Broad Street, Suite 208 

 Land Title Building, 19th Floor 

 Philadelphia, PA 19110 

 Counsel for Appellee 

 Robert W. Hayes (Argued) 

 Robert V. Dell’Osa 

 Cozen & O’Connor 

 1900 Market Street 

 The Atrium 

 Philadelphia, PA 19103 

 Counsel for Appellants 

 Richard J. Rubin 

 1300 Canyon Road 

 Santa Fe, NM 87501 
 Counsel for Amicus-Appellee 

 National Consumer Law Center 

OPINION OF THE COURT 

ROSENN, Circuit Judge. 

This appeal presents an important question of first 

impression in this circuit concerning the continued 

presence of federal jurisdiction in class action litigation 

when a putative class’s named representative’s claim 

becomes moot before he or she files a Motion for Class 

Certification. Defendant Dymacol, Inc. (Dymacol) made an 

Offer of Judgment to the named plaintiff, Brent Colbert, 

pursuant to Federal Rule of Civil Procedure (FRCP) 68,1 

_________________________________________________________________ 

1. The pertinent portion of Rule 68 provides: 

 At any time more than 10 days before the trial begins, a party 

 defending against a claim may serve upon the adverse party an offer 

 to allow judgment to be taken against the defending party for the 

 money or property or to the effect specified in the offer, with costs 

 then accrued. . . . An offer not accepted shall be deemed withdrawn 

 and evidence thereof is not admissible except in a proceeding to 

 determine costs. If the judgment finally obtained by the offeree is 

 not more favorable than the offer, the offeree must pay the costs 

 incurred after the making of the offer. 

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that provided Colbert with the maximum relief he could 

obtain by winning on the merits. The District Court held 

that Rule 68 is fundamentally incompatible with class 

action litigation and granted Colbert’s Motion to Strike the 

Offer of Judgment and his Motion for Class Certification, 

the latter having been filed after Dymacol’s offer had been 

made. Because Dymacol’s offer of full relief mooted 

Colbert’s claim before Colbert had filed his Motion for Class 

Certification, we hold that there is no longer federal 

jurisdiction over this litigation and the District Court’s 

Order will be vacated. 

I. 

On July 19, 2000, Colbert received a dunning letter from 

Dymacol, a collection agency and wholly-owned subsidiary 

of defendant Intellirisk Management Corp., requesting that 

payment be made on merchandise purchased from an 

entity known as Sound and Spirit. 

Colbert filed a Class Action Complaint with the United 

States District Court for the Eastern District of 

Pennsylvania on July 17, 2001, alleging violations of the 

Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 

SS 1692-1693r, and the Pennsylvania Fair Credit Extension 

Uniformity Act, PA. STAT. ANN. tit. 73, SS 2270.1-2270.6, as 

applied pursuant to the Pennsylvania Unfair Trade 

Practices and Consumer Protection Law, PA. STAT. ANN. tit. 
73, S 201-1 to S 209-6. In the Complaint, Colbert sought to 

represent a class of persons in the Commonwealth of 

Pennsylvania who, in the preceding two years, had received 

dunning letters from the defendants. 

On September 7, 2001, before filing an Answer to the 

Complaint, Dymacol served Colbert with an Offer of 

Judgment, pursuant to FRCP 68, for the maximum amount 

of statutory damages recoverable under the FDCPA, 

including reasonable costs and attorneys’ fees. 

On September 10, 2001, Colbert moved to certify the 

Class. Two days later, Colbert moved to strike Dymacol’s 

Offer of Judgment. The defendants opposed both motions. 

On October 2, 2001, the District Court held that"because 

Rule 68 would bypass court approval of settlement, plaintiff 

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has filed this suit as a class action, and this Court has not 

determined that plaintiff ’s class action is improper, Rule 68 

is not applicable here, and the Court will strike defendants’ 

Offer of Judgment." The Court likewise granted Colbert’s 

Motion for Class Certification. 

On October 12, 2001, the defendants, pursuant to FRCP 

23(f),2 filed an Application for Permission to Appeal from the 

District Court’s Order. On December 10, 2001, we granted 

defendants’ Application and now turn to the merits of this 

interlocutory appeal.3 

II. 

Under the United States Constitution, federal judicial 

power extends only to "cases" or "controversies." U.S. 

CONST. art. III, S 2; Flast v. Cohen, 392 U.S. 83, 94 (1968); 

Lusardi v. Xerox Corp., 975 F.2d 964, 974 (3d Cir. 1992). 

Thus, it is axiomatic that a litigation becomes moot and 

federal jurisdiction is lost when a dispute between the 

parties no longer exists or when a party loses a personal 

interest in the outcome of the litigation. Holstein v. City of 

Chicago, 29 F.3d 1145, 1147 (7th Cir. 1994)."Article III 

requires that a plaintiff ’s claim be live not just when he 

first brings the suit but throughout the entire litigation, 

and once the controversy ceases to exist the court must 

dismiss the case for lack of jurisdiction." Lusardi, 975 F.2d 

at 974. 

On September 7, 2001, before Colbert filed a Motion for 

Class Certification, Dymacol made him an Offer of 

Judgment, pursuant to FRCP 68, in the amount of $1100 

and reasonable costs and attorneys’ fees, which is the 

maximum statutory amount Colbert could recover under 

the FDCPA.4 As Colbert conceded at oral argument, an offer 

_________________________________________________________________ 

2. The Rule provides, in pertinent part: "A court of appeals may in its 

discretion permit an appeal from an order of a district court granting or 

denying class action certification . . ." 
3. We have appellate jurisdiction pursuant to 28 U.S.C. S 1292(e). 

4. On appeal, Colbert argues that he suffered actual damages and that 

Dymacol’s Offer of Judgment was therefore not the maximum amount he 

could recover in this litigation. The District Court noted, however, that 

Colbert did "not dispute that th[e Offer of Judgment] represents the 

maximum he could hope to recover." (JA 10, n.1) Thus, Colbert has 

waived any argument that Dymacol’s Offer of Judgment did not 

represent his maximum potential recovery. 

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of complete relief in an individual action moots the 

litigation. 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 Fed.R.Civ.P. 12(b)(1), because he has no 

remaining stake.") (citation omitted); Zimmerman v. Bell, 

800 F.2d 386, 390 (4th Cir. 1986) (holding no case or 

controversy when defendant offers plaintiff full damages); 

Abrams v. Interco Inc., 719 F.2d 23, 32 (2d Cir. 1983) (no 

justification for expending court resources after defendant 

offered plaintiff more than plaintiff could recover on merits); 

Wright, Miller & Cooper, Federal Practice and Procedure: 

Jurisdiction 2d S 3533.2 ("Even when one party wishes to 

persist to judgment, an offer to accord all of the relief 

demanded may moot the case."). Colbert, however, argues 

that because this litigation was filed as a class action, 

typical mootness rules do not apply and he should be 

permitted to continue as named representative of the 

putative class. 

The District Court accepted Colbert’s argument, and 

granted his motions to strike Dymacol’s Offer of Judgment 

and to certify the class. Although decisions to grant or deny 

class certification are usually reviewed for abuse of 

discretion, Newton v. Merrill Lynch, Pierce, Fenner & Smith, 

Inc., 259 F.3d 154, 165 (3d Cir. 2001), the District Court 

applied legal precepts in deciding the mootness issue, and 

thus our review is plenary. Davis v. Thornburgh, 903 F.2d 

212, 213 n.2 (3d Cir. 1990). 

The District Court held that Rule 68 is inapplicable in the 

class action context. In the case at bar, however, the Rule 

68 issue is a red herring. Rule 68 operates merely as a feeshifting device, requiring plaintiffs who reject Offers of 

Judgment to accept the risk of being taxed costs if the 

ultimate judgment obtained by the plaintiff is less than the 

defendant had offered. Assuming arguendo that the District 

Court is correct and Rule 68 is inapplicable in class action 

litigation, this assumption does not affect this case. 

Dymacol’s Offer of Judgment was for the maximum relief 

Colbert could have obtained on the merits. Dymacol’s use 

of Rule 68 as the means of transmitting its Offer of 

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Judgment is therefore irrelevant; the significant factor is 
that Dymacol offered Colbert maximum relief under the 

governing statute. The focus on Rule 68 was therefore 

misplaced. 

Colbert asserts that permitting a defendant to moot a 

class action through an offer of maximum relief to the 

single named plaintiff is inconsistent with FRCP 23(e), 

which provides that "[a] class action shall not be dismissed 

or compromised without the approval of the court . .." This 

argument elevates form over substance and we therefore 

reject it. The purpose of Rule 23(e) is "to protect the 

nonparty members of the class from unjust or unfair 

settlements affecting their rights." Wilson v. Southwest 

Airlines, Inc., 880 F.2d 807, 818 (5th Cir. 1989)(internal 

quotations omitted). Thus, a court with jurisdiction over a 

class action will give careful scrutiny to any settlement 

agreements between named representatives and 

defendants. However, in this case, there were no non-party 

members of the putative class when Dymacol tendered 

judgment. A court cannot use Rule 23(e) to circumvent the 

"case or controversy" requirement of Article III, as it is selfevident that the Federal Rules of Civil Procedure cannot 

create federal jurisdiction outside the perimeters of Article 

III. Accordingly, the essence of the question facing this 

Court is: Did Dymacol’s Offer of Judgment to Colbert 

deprive Colbert of a stake in this case and, concomitantly, 

deprive the District Court of jurisdiction over the matter? 

Although Dymacol’s Offer of Judgment came before 

Colbert filed a Motion for Class Certification, Colbert and 

his amicus, National Consumer Law Center, cite Phillips v. 

Allegheny County, Pa., 869 F.2d 234 (3d Cir. 1989), for the 

proposition that "even though an action has not been 

certified as a class action, an action filed as a class action 

should be treated as if certification has been granted for the 

purposes of settlement until certification is denied." Id. at 

237. Colbert and his amicus look to Kahan v. Rosenstiel, 

424 F.2d 161 (3d Cir. 1970), for further support. There, the 

District Court had dismissed a putative class action on the 

ground that the underlying claim was meritless. We 

reversed, and stated that "[i]n the present case it is also 

appropriate to follow the view . . . that a suit brought as a 

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class action should be treated as such for purposes of 

dismissal or compromise, until there is a full determination 

that the class action is not proper." Id. at 169 (emphasis 

added). 

The general principle, appropriately followed in Phillips 

and Kahan, is not applicable here. Cf. Bd. of School 

Comm’rs v. Jacobs, 420 U.S. 128, 129 (1975) (high school 

graduation of representative students mooted case"unless 

it was duly certified as a class action"). In Phillips, in 

contrast to the case at bar, a Motion for Class Certification 

was pending when the parties settled the case, and it was 

therefore not inappropriate to treat the case as if class 

certification had been granted. Kahan’s facts centered 
around the question whether the District Court erred in its 

determination that the named plaintiff ’s claim was without 

merit; it did not involve a question of federal jurisdiction. 

The facts here, on the other hand, are different and are 

controlled by Lusardi v. Xerox Corp., 975 F.2d 964 (3d Cir. 

1992). 

Although acknowledging that once a class has been 

certified, "special mootness rules apply in the class action 

context," we held in Lusardi that "[a] different general rule 

operates when a class has yet to be certified." Id. at 974. 

"Normally, when claims of the named plaintiffs become 

moot before class certification, dismissal of the action is 

required." Id. "In such a situation, there is no plaintiff . . . 

who can assert a justiciable claim against any defendant 

and consequently there is no longer a ‘case or controversy’ 

within the meaning of Article III of the Constitution." Id. at 

974-75 (internal quotations omitted). 

There are, however, two exceptions to this class action 

mootness precept. First, a named representative who no 

longer has a personal stake can continue "to argue a 

certification motion that was filed before his claims expired 

and which the district court did not have a reasonable 

opportunity to decide." Id. at 975. Second, a named 

representative whose individual claim has expired can 

appeal a denial of a class certification motion filed when her 

claims were alive. Id. Because Colbert’s individual claim 

expired before he filed a motion for class certification, 

neither exception is applicable here. 

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The second exception finds its origins in United States 

Parole Commission v. Geraghty, 445 U.S. 388 (1980). In 

Geraghty, the Supreme Court recognized that a plaintiff 

litigating a class action presents two separate issues to the 

court: (1) the merits of the litigation, and (2) the claim that 

he is entitled to represent a class. Id. at 402. The denial of 

class certification is an adjudication of the second issue. Id. 

The Court took pains to note that its holding "is limited to 

the appeal of the denial of the class certification motion." 

Id. at 404; Lusardi, 975 F.2d at 975 ("Recognizing the 

potential breadth of this theory of third-party standing, the 

Court took pains to limit its application."). The significance 

of this limitation cannot be overstated. 

As Geraghty noted, "when a District Court erroneously 

denies a procedural motion . . . an appeal lies from the 

denial and the corrected ruling ‘relates back’ to the date of 

the original denial." Id. at 406-07 n.11. 5 The "relation back" 

theory is what prevents the evisceration of Article III’s "case 

or controversy" requirement. Lusardi, 975 F.2d at 976 ("The 

‘relation back’ rationale rescues Article III’s‘case or 

controversy’ requirement from virtual extinction."); id. at 

983 ("Without a rule that plaintiff have a live claim at least 

when the motion to certify is filed, the ‘case or controversy’ 

requirement would be almost completely eviscerated in the 

class action context, since almost anybody might be 
deemed to have standing to move to certify a class."). And, 

of course, there must be something to "relate back" to, 

which is the filing of the Motion for Class Certification. 

When a named representative’s claim expires before a 

Motion for Class Certification has been filed, there is 

nothing to "relate back" to, id. at 978, the litigation is moot, 

and there is no longer federal jurisdiction over the matter. 

See Holmes v. Pension Plan, 213 F.3d 124, 135-36 (3d Cir. 

_________________________________________________________________ 

5. Dicta from an earlier United States Supreme Court decision noted that 

there could be times when a named representative’s personal claim is 

mooted before a District Court can reasonably rule on class certification. 

In such circumstances, the Court indicated that perhaps "the 

certification can be said to ‘relate back’ to the filing of the complaint." 

Sosna v. Iowa, 419 U.S. 393, 402 n.11 (1975). As noted, however, 

Geraghty made clear that in such a contingency, the certification relates 

back to when the motion was filed and not the filing of the Complaint. 

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2000) ("If . . . the putative class representative’s individual 

claim becomes moot before he moves for class certification, 

then any subsequent motion must be denied and the entire 

action dismissed."). 

Colbert argues that as a matter of policy, we should not 

countenance a system that allows defendants to moot class 

actions by "picking off " claim after claim of putative 

representatives before they file a Motion for Class 

Certification. Although this argument has superficial 

appeal, it lacks real substance. First, it should be noted 

that Lusardi rejected this argument. "[E]ven so far as these 

opinions [accept the "picking off " argument], they still 

require the named plaintiff to have a personal stake when 

the class certification motion at issue was filed." Lusardi, 

975 F.2d at 982 (emphasis in original). Second, it is highly 

unlikely that the defendants here are attempting to"pick 

off " putative representatives in order to frustrate the class 

action device. This is because the FDCPA limits defendants’ 

potential liability to unnamed class members to"the lesser 

of $500,000 or 1 per centum of the [defendant’s] net 

worth." 15 U.S.C. S 1692k(a)(2)(B). In their Answer to 

Colbert’s Complaint, the defendants admitted that more 

than 42,000 dunning letters had been sent to Pennsylvania 

consumers. Thus, it would cost the defendants more to 

continue to "pick off " putative representatives than it would 

to go to trial. Therefore, at least in this case, Colbert’s 

argument is unconvincing. Even in other higher-stakes 

contexts, such as asbestos litigation, "picking off " putative 

representatives would obviously be cost-prohibitive and 

otherwise impractical. We see no compelling policy 

argument that can overcome the jurisdictional structure 

delineated in Article III. 

III. 

Accordingly, Colbert’s individual claim had become moot 

and the District Court lost federal jurisdiction when 
Dymacol offered Colbert maximum relief. The District 

Court’s Order granting Colbert’s Motion to Strike Dymacol’s 

Offer of Judgment and granting Colbert’s Motion for Class 

Certification will be vacated. 

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A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

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