Court Opinion

ID: 2751117
Source: CourtListenerOpinion
Date Created: 2014-11-13 21:01:07.558366+00
Date Added: 2024-06-11T12:08:05.505918
License: Public Domain

In the

      United States Court of Appeals
                      For the Seventh Circuit
                          ____________________  

No.  14-­‐‑1758  
TARA  SMITH,  
                                                            Plaintiff-­‐‑Appellant,  
                                         v.  

GREYSTONE  ALLIANCE,  LLC,  
                                                           Defendant-­‐‑Appellee.  
                          ____________________  

            Appeal  from  the  United  States  District  Court  for  the  
              Northern  District  of  Illinois,  Eastern  Division.  
               No.  09  C  5585  —  Thomas  M.  Durkin,  Judge.  
                          ____________________  

  ARGUED  NOVEMBER  3,  2014  —  DECIDED  NOVEMBER  13,  2014  
                ____________________  

  Before   WOOD,   Chief   Judge,   and   EASTERBROOK   and  
HAMILTON,  Circuit  Judges.  
    EASTERBROOK,   Circuit   Judge.   Contending   that   Greystone  
Alliance,   a   debt   collector,   violated   the   Fair   Debt   Collection  
Practices  Act,  15  U.S.C.  §§  1692–92p,  Tara  Smith  commenced  
this   federal   suit.   The   details   of   her   claim   do   not   matter.   All  
we  need  to  decide  is  whether  she  is  entitled  to  disposition  on  
the  merits.  
2                                                                  No.  14-­‐‑1758  

      Judge   Hibbler,   to   whom   the   suit   was   initially   assigned,  
certified  it  as  a  class  action,  2010  U.S.  Dist.  LEXIS  67365  (N.D.  
Ill.  June  30,  2010),  but  after  ruling  in  Smith’s  favor  on  one  of  
her   two   substantive   theories,   2011   U.S.   Dist.   LEXIS   35283  
(Mar.   29,   2011),   changed   his   mind   and   decertified   the   class,  
2011  U.S.  Dist.  LEXIS  150300  (Dec.  30,  2011).  Following  Judge  
Hibbler’s   death,   the   suit   was   transferred   to   Judge   Shadur,  
who  recertified  the  class  in  order  to  toll  the  statute  of  limita-­‐‑
tions   for   its   members,   2012   U.S.   Dist.   LEXIS   51930   (Apr.   13,  
2012),   but   later   agreed   with   Judge   Hibbler   that   class   treat-­‐‑
ment   is   unwarranted   and   decertified   the   class   once   again  
(order   of   Oct.   16,   2012).   In   2013   the   suit   was   transferred   to  
Judge  Durkin,  who  dismissed  it,  ruling  that  it  had  been  moot  
since  November  2009,  when  Greystone  offered  Smith  $1,500  
plus   costs   and   attorneys’   fees.   2014   U.S.   Dist.   LEXIS   36512  
(Mar.  20,  2014).  This  is  the  decision  now  on  appeal.  
    Smith   seeks   both   statutory   damages   (a   form   of   penalty)  
and   compensatory   damages   for   mental   distress.   Statutory  
damages  are  subject  to  a  cap  of  $1,000  per  plaintiff  per  suit,  
15  U.S.C.  §1692k(a)(2)(A),  no  matter  how  many  violations  of  
the   Act   a   given   debt   collector   commits.   Judge   Durkin   then  
concluded  that  Smith  could  not  hope  to  recover  even  $500  as  
actual  damages  under  §1692k(a)(1).  This  meant  that  the  offer  
exceeded   the   potential   recovery   and   extinguished   the   con-­‐‑
troversy.  
     The  district  judge  called  the  suit  “moot,”  which  is  impre-­‐‑
cise.   A   suit   is   moot   when   relief   is   impossible,   see   Chafin   v.  
Chafin,  133  S.  Ct.  1017,  1023  (2013),  and  there’s  no  doubt  that  
a  court  could  provide  Smith  with  relief  in  the  form  of  money  
damages.   The   problem,   if   there   is   one,   is   that   an   offer   ex-­‐‑
ceeding   what   the   plaintiff   could   gain   from   the   litigation  
No.  14-­‐‑1758                                                                 3  

means  that  there  is  no  “controversy”  within  the  scope  of  Ar-­‐‑
ticle  III.  
     A   controversy   exists   when   the   plaintiff   wants   more,   or  
different,  relief  than  the  defendant  is  willing  to  provide.  If  A  
says   that   B   has   caused   an   injury   of   $100,000,   and   B   offers  
$110,000  in  recompense,  A  cannot  spurn  the  offer  and  sue  for  
$100,000.   See,   e.g.,   Damasco   v.   Clearwire   Corp.,   662   F.3d   891,  
895  (7th  Cir.  2011).  Once  “the  defendant  offers  to  satisfy  the  
plaintiff’s   entire   demand,   there   is   no   dispute   over   which   to  
litigate”  and  no  controversy  to  resolve.  Rand  v.  Monsanto  Co.,  
926   F.2d   596,   597–98   (7th   Cir.   1991).   In   other   words,   “[y]ou  
cannot  persist  in  suing  after  you’ve  won.”  Greisz  v.  Household  
Bank,  N.A.,  176  F.3d  1012,  1015  (7th  Cir.  1999).  
     But  if  A  demands  $200,000,  and  B  offers  $110,000,  there  is  
a  justiciable  controversy  even  if  B  insists  that  A’s  legal  enti-­‐‑
tlement   is   less   than   the   offer.   To   know   whether   A’s   entitle-­‐‑
ment   exceeds   $110,000,   the   court   would   have   to   decide   the  
merits.  We  held  in  Johnson  v.  Wattenbarger,  361  F.3d  991  (7th  
Cir.   2004),   that   a   district   judge   cannot   decide   the   merits   of  
one   claim,   whittle   down   the   amount   in   controversy,   and  
then  dismiss  the  suit  as  below  the  minimum  for  the  diversity  
jurisdiction  of  28  U.S.C.  §1332.  That  conclusion  is  equally  apt  
when  the  defendant  proposes  that  the  judge  decide  a  part  of  
the   merits,   whittle   down   the   amount   in   dispute,   and   then  
dismiss   the   suit   on   the   ground   that   a   larger   offer   had   been  
made.   Yet   that’s   what   happened   here.   The   judge   decided  
that  Smith’s  compensatory  damages  cannot  exceed  $500  and  
then   dismissed   the   suit   for   want   of   jurisdiction,   sending  
Smith   home   empty-­‐‑handed.   Deciding   any   part   of   the   mer-­‐‑
its—and  establishing  the  maximum  amount  of  compensato-­‐‑
ry   damages   resolves   part   of   the   merits—is   possible   only   if  
4                                                                  No.  14-­‐‑1758  

there  is  jurisdiction.  A  court  can’t  decide  the  merits  and  then  
dismiss  for  lack  of  jurisdiction.  
    Gates  v.  Towery,  430  F.3d  429  (7th  Cir.  2005),  put  this  point  
more   generally   by   holding   that   a   jurisdictional   dismissal   is  
proper  only  if  the  defendant  offers  more  than  the  plaintiff’s  
demand.   If   the   plaintiff   asks   for   the   moon,   only   offering   the  
moon   extinguishes   the   controversy.   An   excessive   demand  
may   lead   to   sanctions   for   frivolous   litigation   but   does   not  
diminish   the   court’s   jurisdiction.   A   defendant   cannot   have  
the  suit  dismissed  by  making  an  offer  limited  to  what  it  con-­‐‑
cedes  the  plaintiff  is  entitled  to  receive,  even  if  the  defendant  
happens   to   be   right   about   its   view   of   the   plaintiff’s   entitle-­‐‑
ment,  because  deciding  that  entitlement  resolves  the  merits.  
Smith  wants  more  than  $1,500;  Greystone’s  offer  did  not  sat-­‐‑
isfy  her  demand;  this  suit  therefore  cannot  be  dismissed  for  
lack  of  jurisdiction.  
    A  loss  on  the  merits,  or  a  small  recovery,  does  not  retro-­‐‑
actively   terminate   federal   jurisdiction.   See   Bell   v.   Hood,   327  
U.S.  678  (1946).  If  Smith  ultimately  recovers  less  than  the  of-­‐‑
fer,  then  she  may  be  required  to  pay  Greystone’s  costs  under  
Fed.  R.  Civ.  P.  68(d).  Cf.  28  U.S.C.  §1332(b)  (plaintiff  who  re-­‐‑
covers   less   than   the   jurisdictional   minimum   in   a   diversity  
suit  may  be  denied  costs  and  ordered  to  pay  the  defendant’s  
costs).  But  Smith  will  be  entitled  to  a  remedy  (which,  if  she  is  
right  that  Greystone  violated  the  Act,  is  her  actual  damages  
plus  a  penalty  as  high  as  $1,000).  
    This  conclusion  makes  it  unnecessary  to  decide  whether  
the  right  offer  to  consider  is  the  one  made  in  November  2009  
($1,500   for   Smith,   plus   her   costs   and   attorneys’   fees,   but  
nothing  for  the  class,  which  had  not  yet  been  certified)  or  the  
one  made  in  July  2010  ($1,000  for  Smith,  $1,150  for  the  class  
No.  14-­‐‑1758                                                                  5  

as  a  whole,  plus  costs  and  attorneys’  fees).  Nor  need  we  de-­‐‑
cide  whether  a  Rule  68  offer  can  be  used  to  terminate  a  class  
action   (one   had   been   certified   in   June   2010),   given   the   judi-­‐‑
cial-­‐‑approval  requirement  of  Rule  23(e),  which  prevents  the  
representative   plaintiff   from   making   a   dispositive   response  
to   the   offer.   Nor   need   we   decide   whether   to   modify   the  
judgment   to   be   on   the   merits;   even   by   the   district   judge’s  
analysis,  a  judgment  of  $0  would  be  too  low.  (At  all  events,  
Greystone  did  not  file  a  cross  appeal.)  
    Finally,   we   need   not   decide   whether   to   reconsider   deci-­‐‑
sions  such  as  Damasco  in  light  of  the  view  expressed  by  four  
Justices  in  Genesis  Healthcare  Corp.  v.  Symczyk,  133  S.  Ct.  1523,  
1533–34  (2013)  (Kagan,  J.,  dissenting),  that  an  expired  settle-­‐‑
ment  offer  never  requires  a  suit’s  dismissal.  We  flagged  that  
issue  in  Scott  v.  Westlake  Services  LLC,  740  F.3d  1124,  1126  n.1  
(7th  Cir.  2014),  and  need  not  address  it  today.  
     It  is  enough  to  reiterate  the  holding  of  Gates:  a  court  must  
resolve   the   merits   unless   the   defendant   satisfies   the   plain-­‐‑
tiff’s   demand.   An   offer   that   the   defendant   or   the   judge   be-­‐‑
lieves   sufficient,   but   which   does   not   satisfy   the   plaintiff’s  
demand,  does  not  justify  dismissal.  
   The  judgment  is  vacated,  and  the  case  is  remanded  for  a  
decision  on  the  merits.