Court Opinion

ID: 2825273
Source: CourtListenerOpinion
Date Created: 2015-08-11 06:03:11.256908+00
Date Added: 2024-06-11T12:08:38.163456
License: Public Domain

In the

         United States Court of Appeals
                       For the Seventh Circuit
                            ____________________  

Nos.  14-­‐‑2773  &  14-­‐‑2775  
ARNOLD  CHAPMAN,  
                                                              Plaintiff-­‐‑Appellant,  
                             and  
ALL  AMERICAN  PAINTING,  INC.,  
                                  Putative  Intervenor-­‐‑Appellant,  
                                          v.  
FIRST  INDEX,  INC.,  
                                                            Defendant-­‐‑Appellee.  
                            ____________________  

             Appeals  from  the  United  States  District  Court  for  the  
               Northern  District  of  Illinois,  Eastern  Division.  
                    No.  09  C  5555  —  Sara  L.  Ellis,  Judge.  
                            ____________________  

          ARGUED  MAY  19,  2015  —  DECIDED  AUGUST  6,  2015  
                     ____________________  

        Before  POSNER,  EASTERBROOK,  and  MANION,  Circuit  Judg-­‐‑
es.  
   EASTERBROOK,  Circuit  Judge.  This  is  another  of  the  surpris-­‐‑
ingly   many   junk-­‐‑fax   suits   under   47   U.S.C.   §227,   the   Tele-­‐‑
phone   Consumer   Protection   Act,   which   together   with   the  
FCC’s   implementing   regulations   establishes   some   simple  
2                                                Nos.  14-­‐‑2773  &  14-­‐‑2775  

rules  that  many  fax  senders  ignore.  This  suit  involves  two  of  
those  requirements:  first,  that  commercial  faxes  be  sent  only  
to   those   who   have   agreed   to   receive   them;   second,   that  
commercial  faxes  include  instructions  about  how  to  opt  out  
of  receiving  more.  
     When   this   suit   began   in   2009,   its   sole   plaintiff,   Arnold  
Chapman,  proposed  to  represent  a  class  of  persons  who  re-­‐‑
ceived  faxes  from  First  Index  despite  not  having  given  con-­‐‑
sent.   First   Index   responded   that   it   always   had   recipients’  
consent,  though  it  may  have  been  verbal  (at  trade  shows  or  
during  phone  conversations).  Discovery  was  conducted  and  
experts’   reports   submitted.   Chapman   then   asked   the   judge  
to  certify  a  class  of  all  persons  who  had  received  faxes  from  
First   Index   since   August   2005   (four   years   before   the   com-­‐‑
plaint  was  filed)  without  their  consent.  The  district  court  de-­‐‑
clined,   ruling   that   the   difficulty   of   deciding   who   had   pro-­‐‑
vided  oral  consent  made  it  infeasible  to  determine  who  is  in  
the  class.  2014  U.S.  Dist.  LEXIS  27556  (N.D.  Ill.  Mar.  4,  2014).  
     Chapman   then   proposed   a   different   class:   All   persons  
whose  faxes  from  First  Index  either  lacked  an  opt-­‐‑out  notice  
or  contained  one  of  three  specific  notices  that  Chapman  be-­‐‑
lieves   violate   the   FCC’s   regulations.   The   district   court   de-­‐‑
clined  to  certify  that  class  too,  ruling  that  the  proposal  came  
too   late—more   than   18   months   after   discovery   had   closed.  
2014  U.S.  Dist.  LEXIS  96397  (N.D.  Ill.  July  16,  2014).  The  dis-­‐‑
trict  judge  found  that  Chapman  had  known  about  the  poten-­‐‑
tial   notice   issue   from   the   outset   of   the   litigation   but   had  
made  a  strategic  decision  not  to  pursue  it  earlier.  Changing  
the  focus  of  the  litigation  almost  five  years  into  the  case  was  
impermissible,   the   judge   concluded.   For   good   measure,   the  
Nos.  14-­‐‑2773  &  14-­‐‑2775                                                 3  

judge  dismissed  Chapman’s  own  claim  as  moot  and  entered  
a  final,  take-­‐‑nothing  judgment.  
     The   parties   and   the   district   judge   have   proceeded   as   if  
Chapman’s  proposal  to  certify  a  class  defined  with  reference  
to   the   opt-­‐‑out   notice   requires   an   amendment   to   the   com-­‐‑
plaint,  to  which  the  standards  of  Fed.  R.  Civ.  P.  15(a)(2)  ap-­‐‑
ply.  They  don’t  say  why,  and  we  can’t  see  why.  A  complaint  
must   contain   three   things:   a   statement   of   subject-­‐‑matter   ju-­‐‑
risdiction,   a   claim   for   relief,   and   a   demand   for   a   remedy.  
Fed.  R.  Civ.  P.  8(a).  Class  definitions  are  not  on  that  list.  In-­‐‑
stead   the   obligation   to   define   the   class   falls   on   the   judge’s  
shoulders  under  Fed.  R.  Civ.  P.  23(c)(1)(B).  See  Kasalo  v.  Har-­‐‑
ris  &  Harris,  Ltd.,  656  F.3d  557,  563  (7th  Cir.  2011).  The  judge  
may  ask  for  the  parties’  help,  but  motions  practice  and  a  de-­‐‑
cision   under   Rule   23   do   not   require   the   plaintiff   to   amend  
the  complaint.  
       This  does  not  affect  the  disposition,  however,  because  no  
matter   how   the   subject   is   approached   a   district   judge   has  
discretion   to   reject   an   attempt   to   remake   a   suit   more   than  
four  years  after  it  began.  The  judge  thought  Chapman’s  de-­‐‑
lay   inexcusable.   He   knew   about   the   potential   opt-­‐‑out   issue  
from  the  outset  but  did  not  propose  a  class  centered  on  it  un-­‐‑
til   the   parties   had   borne   the   expense   of   discovery   into   how  
First   Index   obtained   consent   from   the   recipients,   and   the  
judge   had   resolved   motions   addressed   to   that   topic.   Chap-­‐‑
man   wanted   a   fallback   position,   but   the   court   thought   that  
the   opt-­‐‑out   issue   should   have   been   pressed   earlier.   The  
judge   wrote:   “Such   gamesmanship   is   not   appropriate,   par-­‐‑
ticularly  where  Chapman  was  aware  of  the  potential  that  his  
class  definition  was  deficient  yet  spurned  several  opportuni-­‐‑
ties   to   cure   that   deficiency.”   2014   U.S.   Dist.   LEXIS   96397   at  
4                                                   Nos.  14-­‐‑2773  &  14-­‐‑2775  

*10.  Insisting  that  representative  plaintiffs  put  their  class  def-­‐‑
initions   on   the   table   “[a]t   an   early   practicable   time”   (Rule  
23(c)(1)(A))  is  not  an  abuse  of  discretion,  as  that’s  the  Rule’s  
own   schedule   for   judicial   action.   Four   and   a   half   years   into  
the  case  cannot  be  called  “early”.  
    Having   declined   to   certify   a   class   identified   by   the   opt-­‐‑
out   notices,   the   district   court   concluded   that   All   American  
Painting,   Inc.,   could   not   intervene   as   a   new   representative  
plaintiff.  All  American  wanted  to  replace  Chapman,  should  
the  district  court  dismiss  his  claim,  but  only  if  the  court  certi-­‐‑
fied   a   class   centered   on   the   opt-­‐‑out   notices.   Given   our   con-­‐‑
clusion  that  the  court  was  entitled  to  reject  an  opt-­‐‑out-­‐‑notice  
class,   we   also   affirm   its   denial   of   All   American’s   motion   to  
intervene.  
      This  brings  us  to  Chapman’s  personal  claim.  He  contends  
that   he   did   not   agree   to   receive   faxes   from   First   Index   but  
got   two   anyway.   Section   227(b)(3)(B)   authorizes   awards   of  
actual   damages   or   $500   per   fax,   whichever   is   greater,   and  
can   be   trebled   if   the   violation   was   willful,   so   Chapman   de-­‐‑
manded   $3,000   plus   an   injunction   under   §227(b)(3)(A).  
(Chapman  does  not  identify  actual  damages  beyond  the  an-­‐‑
noyance   and   modest   costs   in   paper   and   toner   of   receiving  
unwanted   faxes.)   While   Chapman’s   motion   to   represent   a  
class   of   non-­‐‑consenting   recipients   was   pending,   First   Index  
made  an  offer  of  judgment  under  Fed.  R.  Civ.  P.  68:  $3,002,  
an  injunction,  and  costs,  but  not  attorneys’  fees  (§227  is  not  a  
fee-­‐‑shifting   statute).   First   Index   recognized   that   Chapman  
could  not  accept  this  offer  while  the  motion  for  class  certifi-­‐‑
cation  was  pending  (that  would  amount  to  abandonment  of  
the   persons   he   undertook   to   represent),   but   it   did   not   want  
to   leave   the   offer   open   indefinitely.   The   offer   stated   that   it  
Nos.  14-­‐‑2773  &  14-­‐‑2775                                                 5  

would  expire  14  days  after  the  district  court  ruled  on  the  mo-­‐‑
tion  for  class  certification.  Chapman  never  replied  to  the  of-­‐‑
fer,  which  lapsed  on  March  18,  2014.  First  Index  then  asked  
the   district   court   to   dismiss   Chapman’s   personal   claim   as  
moot,  and  the  court  granted  that  motion.  
     “A   case   becomes   moot   only   when   it   is   impossible   for   a  
court  to  grant  any  effectual  relief  whatever  to  the  prevailing  
party.”   Knox   v.   Service   Employees   International   Union,   132   S.  
Ct.   2277,   2287   (2012)   (internal   quotation   marks   and   source  
omitted).   Many   other   decisions   say   the   same   thing.   By   that  
standard,   Chapman’s   case   is   not   moot.   The   district   court  
could  award  damages  and  enter  an  injunction.  Chapman  be-­‐‑
gan  this  suit  seeking  those  remedies;  he  does  not  have  them  
yet;  the  court  could  provide  them.  
      We   acknowledge   that   many   courts,   this   one   included,  
have   applied   the   label   “moot”   when   a   plaintiff   declines   an  
offer  that  would  satisfy  his  entire  demand.  See,  e.g.,  Damasco  
v.  Clearwire  Corp.,  662  F.3d  891,  895  (7th  Cir.  2011);  Thorogood  
v.  Sears,  Roebuck  &  Co.,  595  F.3d  750,  752  (7th  Cir.  2010);  Rand  
v.   Monsanto   Co.,   926   F.2d   596,   598   (7th   Cir.   1991)   (dismissal  
required,  but  the  opinion  does  not  call  the  dispute  moot).  Cf.  
Smith  v.  Greystone  Alliance,  LLC,  772  F.3d  448  (7th  Cir.  2014)  
(an  offer  has  this  effect  only  if  it  covers  everything  the  plain-­‐‑
tiff   wants,   as   opposed   to   what   the   defendant   concedes   is  
due).   But   Justice   Kagan’s   dissent   in   Genesis   Healthcare   Corp.  
v.   Symczyk,   133   S.   Ct.   1523,   1532–37   (2013)   (joined   by   Gins-­‐‑
burg,   Breyer   &   Sotomayor,   JJ.),   shows   that   an   expired   (and  
unaccepted)  offer  of  a  judgment  does  not  satisfy  the  Court’s  
definition  of  mootness,  because  relief  remains  possible.  
   None  of  the  other  Justices  in  Genesis  Healthcare  disagreed  
with   Justice   Kagan’s   analysis;   instead   the   majority   thought  
6                                                        Nos.  14-­‐‑2773  &  14-­‐‑2775  

that  the  issue  had  not  been  presented  for  decision.  Courts  of  
appeals   that   have   considered   this   issue   since   Genesis  
Healthcare   uniformly   agree   with   Justice   Kagan.   See,   e.g.,   Ta-­‐‑
nasi  v.  New  Alliance  Bank,  786  F.3d  195  (2d  Cir.  2015);  Gomez  
v.   Campbell-­‐‑Ewald   Co.,   768   F.3d   871   (9th   Cir.   2014),   cert.  
granted,   135   S.   Ct.   2311   (2015).   The   issue   is   before   the   Su-­‐‑
preme  Court  in  Gomez,  and  we  think  it  best  to  clean  up  the  
law   of   this   circuit   promptly,   rather   than   require   Chapman  
and   others   in   his   position   to   wait   another   year   for   the   Su-­‐‑
preme  Court’s  decision.  
      If   an   offer   to   satisfy   all   of   the   plaintiff’s   demands   really  
moots  a  case,  then  it  self-­‐‑destructs.  Rule  68  is  captioned  “Of-­‐‑
fer  of  Judgment”.  But  a  district  court  cannot  enter  judgment  
in   a   moot   case.   All   it   can   do   is   dismiss   for   lack   of   a   case   or  
controversy.  So  if  the  $3,002  offer  made  this  case  moot,  then  
even  if  Chapman  had  accepted  it  the  district  court  could  not  
have  ordered  First  Index  to  pay.  It  could  have  done  nothing  
but  dismiss  the  suit.  Likewise  with  First  Index’s  offer  to  have  
the   district   court   enter   an   injunction.   As   soon   as   the   offer  
was  made,  the  case  would  have  gone  up  in  smoke,  and  the  
court  would  have  lost  the  power  to  enter  the  decree.  Yet  no  
one  thinks  (or  should  think)  that  a  defendant’s  offer  to  have  
the   court   enter   a   consent   decree   renders   the   litigation   moot  
and  thus  prevents  the  injunction’s  entry.  
    Rule  68(d)  provides  the  consequence  of  a  decision  not  to  
accept:  “If  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.”   Failure   to  
accept  a  fully  compensatory  offer  also  may  suggest  that  the  
plaintiff  is  a  bad  representative  of  the  class,  for  he  has  noth-­‐‑
ing   to   gain   (implying   poor   incentives   to   monitor   counsel)  
Nos.  14-­‐‑2773  &  14-­‐‑2775                                                    7  

and  may  have  given  up  something  the  class  values  (here,  an  
injunction   that   would   have   stopped   any   further   improper  
faxing).  But  all  of  these  upshots  differ  from  outright  dismis-­‐‑
sal  on  the  basis  of  mootness.  
    We   overrule   Damasco,   Thorogood,   Rand,   and   similar   deci-­‐‑
sions   to   the   extent   they   hold   that   a   defendant’s   offer   of   full  
compensation  moots  the  litigation  or  otherwise  ends  the  Ar-­‐‑
ticle   III   case   or   controversy.   As   Circuit   Rule   40(e)   requires,  
this   opinion   has   been   circulated   to   all   judges   in   active   ser-­‐‑
vice.  None  favored  a  hearing  en  banc.  
   No   more   need   be   said   to   resolve   this   appeal,   for   by   the  
time   the   district   court   dismissed   the   suit   the   offer   had   long  
expired,   and   First   Index   has   not   argued   for   affirmance   on  
any  ground  other  than  mootness.  
    Rejecting   a   fully   compensatory   offer   may   have   conse-­‐‑
quences   other   than   mootness,   however.   As   we   put   it   in  
Greisz  v.  Household  Bank,  176  F.3d  1012,  1015  (7th  Cir.  1999),  
“[y]ou   cannot   persist   in   suing   after   you’ve   won.”   Although  
even   a   defendant’s   proof   that   the   plaintiff   has   accepted   full  
compensation   (“accord   and   satisfaction”   in   the   language   of  
Rule  8(c)(1))  is  an  affirmative  defense  rather  than  a  jurisdic-­‐‑
tional   bar,   the   conclusion   that   a   particular   doctrine   is   not  
“jurisdictional”  does  not  make  it  vanish.  The  question  raised  
by  Greisz  and  similar  opinions  is  whether  a  spurned  offer  of  
complete   compensation   should   be   deemed   an   affirmative  
defense,   perhaps   in   the   nature   of   an   estoppel   or   a   waiver.  
That  would  be  consistent  with  Rule  68,  which  is  designed  for  
offers  of  compromise  (the  normal  kind  of  settlement)  rather  
than   offers   to   satisfy   the   plaintiff’s   demand   fully.   Cost-­‐‑
shifting   under   Rule   68(d)   is   not   necessarily   the   only   conse-­‐‑
quence  of  rejecting  an  offer,  when  the  plaintiff  does  not  even  
8                                                  Nos.  14-­‐‑2773  &  14-­‐‑2775  

request  that  the  court  award  more  than  the  defendant  is  pre-­‐‑
pared  to  provide.  
    Genesis   Healthcare   and   most   of   the   other   decisions   we  
have   mentioned   arose   from   class   actions.   Settlement   pro-­‐‑
posals   designed   to   decapitate   the   class   upset   the   incentive  
structure   of   the   litigation   by   separating   the   representative’s  
interests   from   those   of   other   class   members.   So   it   may   be  
that,  in  class  actions,  the  conclusion  “not  moot”  implies  that  
the   case   should   be   allowed   to   continue—for   even   a   settle-­‐‑
ment   offer   after   the   district   judge   has   declined   to   certify   a  
class   may   be   designed   to   prevent   an   effective   appeal   (or   at  
least  change  everyone’s  incentives  about  whether  to  appeal).  
     If  there  is  only  one  plaintiff,  however,  why  should  a  court  
supply  a  subsidized  dispute-­‐‑resolution  service  when  the  de-­‐‑
fendant’s  offer  means  that  there’s  no  need  for  judicial  assis-­‐‑
tance,  and  when  other  litigants,  who  do  need  the  court’s  aid,  
are  waiting  in  a  queue?  Ordering  a  defendant  to  do  what  it  is  
willing   to   do   has   no   legitimate   claim   on   judicial   time.   Why  
should   a   judge   do   legal   research   and   write   an   opinion   on  
what   may   be   a   complex   issue   when   the   plaintiff   can   have  
relief   for   the   asking?   Opinions   are   supposed   to   be   the   by-­‐‑
products   of   real   disputes.   But   defendants   do   not   make   an  
argument  along  these  lines.  Nor  did  their  offer  remain  open,  
so  a  court  could  not  say  (as  may  well  be  true)  that  there  is  no  
sum  currently  in  dispute.  A  fleeting  offer  could  not  reasona-­‐‑
bly  be  equated  to  full  compensation.  Is  14  days  long  enough  
for   an   offer’s   consideration?   How   a   court   should   deal   with  
these  situations  can  be  left  for  another  day,  when  the  parties  
have  addressed  them.  
      The  district  court’s  order  denying  All  American’s  motion  
to   intervene   is   affirmed.   The   district   court’s   judgment   is   af-­‐‑
Nos.  14-­‐‑2773  &  14-­‐‑2775                                           9  

firmed  to  the  extent  it  declines  to  certify  a  class  but  vacated  
with   respect   to   Chapman’s   personal   claim,   and   the   case   is  
remanded  for  decision  on  the  merits  of  that  claim.