Opinion
C.A. No. 01-177 L
February 21, 2002
Report and Recommendation
Plaintiff Joyce Bond filed a putative class action complaint with this Court asserting claims against defendant Fleet Bank (RI), N.A. ("Fleet" or "Fleet Bank"). Plaintiff complains of the manner in which Fleet set a payment date for, and posted a payment to, her credit card account, and contends that it violated state and federal law.
This matter is before the Court on the motion of the defendant to dismiss for lack of subject matter jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1). Plaintiff had filed an opposition thereto. This matter has been referred to me for a report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). Oral arguments were conducted on February 14, 2002. For the reasons that follow, I recommend that Fleet's motion to dismiss be denied.
Procedural Posture
Plaintiff Joyce Bond filed a Complaint, styled as a class action, on April 11, 2001, and named as a defendant Fleet Bank. Plaintiff sought as relief actual, statutory, and punitive damages, in addition to declaratory and injunctive relief. Six days after the filing of the complaint, prior to the defendant's entry of appearance and prior to the defendant's filing of a responsive pleading, Fleet served on Bond an offer to satisfy her individual claims, pursuant to Fed.R.Civ.P. 68. See Defendant's Exhibit A. The offer did not extend to the class of individuals which the plaintiff sought to represent. On May 1, 2001, plaintiff made a counteroffer, which defendant did not accept.
On June 1, 2001, Defendant filed a motion to dismiss for lack of subject matter jurisdiction. On June 19, 2001, Plaintiff then filed an Amended Complaint and a motion to certify the class. Plaintiff thereafter filed a motion to bar enforcement of Fed.R.Civ.P. 68.
Fleet was given an extension of time, until March 22, 2002, to respond to Bond's motion to certify a class.
Fleet has not filed an objection to Bond's Motion to Bar Enforcement of Rule 68. The Court will consider this motion following a determination of class certification.
On August 1, 2001, Defendant then filed a motion to dismiss the amended complaint for lack of subject matter jurisdiction. Plaintiff filed an opposition thereto. The only matter before the court at this time is the defendant's motion to dismiss.
The Amended Complaint
The following are the factual allegations culled from the Amended Complaint:
Fleet issued the plaintiff a credit card. Fleet's monthly billing statements for its credit card refers to a "payment due date." The payment due date is, as the phrase indicates, the date upon which payment is due. On the back side of the monthly statements, in small print, Fleet states that payments must be received by 9:00 AM on business days to be credited on the date the payment is received. Business days are defined as Monday through Friday, excluding holidays. Payments received after 9:00 AM, or on a non-business day, will be credited to the next business day.
The monthly billing statement Fleet sent the plaintiff for the billing cycle ending December 4, 2000, listed the payment due date at December 31, 2000, which was a Sunday. The previous day, Saturday, December 30, 2000, and the following day, Monday, January 1, 2001 — a holiday, were non-business days. Plaintiff sent Fleet a payment, which was not posted on the day it was received, but rather on January 2, 2001. As a result, Fleet charged the plaintiff a $35.00 late fee, excess interest, and other charges.
Plaintiff contends that these allegations set forth a violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq., and the Rhode Island Deceptive Trade Practices Act ("RIDTPA"), R.I. Gen. Laws 6-13.1-1 et seq. Plaintiff also asserts common law claims for breach of contract and breach of the covenant of good faith and fair dealing.
Defendant has moved to dismiss for lack of subject matter jurisdiction, claiming that the plaintiff's claims are moot, since Fleet offered to satisfy those claims. Plaintiff has objected thereto.
Discussion
Article III of the United States Constitution limits the judicial authority of the federal courts to "Cases" and "Controversies." U.S. CONT. art. III, § 2. Because of this constitutional limitation on judicial power, a federal court lacks subject matter jurisdiction over an action unless it presents an actual case or controversy. Deposit Guarantee Nat'l Bank v. Roper, 445 U.S. 326, 335, 100 S.Ct. 1166 (1980). Article III denies federal courts the power to decide questions that cannot affect the rights of the litigants in the case before them, and confines them to resolving real and substantial controversies admitting of specific relief through a decree of conclusive character. Lewis v. Continental Bank Corp., 494 U.S. 472, 477, 110 S.Ct. 1249 (1990).
No justiciable controversy is presented when the question sought to be adjudicated has been mooted. Lusardi v. Xerox Corp., 975 F.2d 964, 974 (3rd Cir. 1992). Moot cases must be dismissed for lack of jurisdiction.Roper, 445 U.S. at 335. It is not enough that a dispute was very much alive when the suit was filed. Lewis, 494 U.S. at 477. The parties must continue to have a personal stake in the outcome of the lawsuit. Id. Whenever it appears that the court lacks subject matter jurisdiction, the court must dismiss the action. Fed.R.Civ.P. 12(h)(3).
There is no question that plaintiff's allegations initially satisfied the case or controversy requirement. Fleet contends, however, that this action should be dismissed because plaintiff Bond's claims have been mooted by Fleet's offer of judgement to her pursuant to Fed.R.Civ.P. 68. Fleet's offer of judgement provided that judgement be entered against Fleet as follows: (i) on the TILA claim, $1000.00, plus any actual damages sustained, i.e., late fees and any interest imposed, plus Ms. Bond's costs and reasonable attorney fees incurred to date; and (ii) on the RIDTPA claim, $200.00, or any actual damages Ms. Bond sustained, whichever is greater. See Defendant's Exhibit A. Fleet's offer of judgement also encompassed Bond's claims of breach of contract and breach of the covenant of good faith and fair dealing. Id.
Ms. Bond accepted the offer conditionally. See Defendant's Exhibit B. Her conditions included that either (1) Fleet's offer of judgement extend to the entire putative class, with appropriate injunctive relief and the costs of administering the class; or, alternatively, (2) Ms. Bond will accept the offer as it applies to her, but retains the right to prosecute this case on behalf of the class. Id. Fleet did not accept Bond's conditions, and this motion to dismiss ensued. See Defendant's Exhibit C.
A. Did Fleet's Rule 68 Offer of Judgement Provide for the Maximum Relief Obtainable by Plaintiff Bond, Had She Prevailed on her Individual Claims?
Fleet's offer of judgement did in fact provide for the maximum statutory relief obtainable by Bond under the TILA. Fleet offered any and all actual damages sustained, attorney's fees, costs, and $1000.00. This satisfies plaintiff's claim pursuant to the TILA. See 15 U.S.C. § 1640(a). Plaintiff's claims for breach of contract and breach of the covenant of good faith fair dealing are equally satisfied since Fleet agreed to compensate for any actual damages.
With respect to plaintiff's claims under RIDPTA, Fleet offered $200.00, or any actual damages sustained by Bond. This satisfies plaintiff's statutory damages as set forth by RIDPTA. See R.I. Gen. Laws 6-13.1-5.2. However, plaintiff contends that Fleet's offer did not satisfy her claim for punitive damages.
Although disfavored in the law, punitive damages are authorized pursuant to R.I. Gen. Laws 6-13.1-5.2(a) for plaintiff's RIDPTA claim.See R.I. Gen. Laws 6-13.1-5.2(a). That section expressly provides that "[t]he court may, in its discretion, award punitive damages . . . that it deems is necessary or proper. Id. Although expressly provided for in the statute, no standard is set forth on which to base an award of punitive damages. Plaintiff contends that such an award should be based upon the standard set forth in the Uniform Trade Secrets Act, R.I. Gen. Laws 6-41-3(b). However, Plaintiff has provided no basis to support such a contention. Thus, since the applicable standard is not set forth in the RIDPTA, this Court will employ the common law standard.
Rhode Island law severely limits punitive damages. A plaintiff seeking punitive damages must show that the defendant acted with malice or bad faith. Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 182 F.R.D. 386, 399 (D.R.I. 1998). The plaintiff must also allege that the defendant intended to cause harm. Id. Here, plaintiff's allegations are completely devoid of any facts that would support an award of punitive damages. No allegations indicate that Fleet intended to harm the plaintiff, or that Fleet acted in bad faith or with malice. Thus, plaintiff is not entitled to an award of punitive damages on the RIDPTA claim.
To the extent that plaintiff seeks punitive damages on the TILA claim, plaintiff's claim is equally lacking. The TILA does not provide for punitive damages. See 15 U.S.C. § 1640(a) (providing for the amount of relief recoverable for a violation of the TILA). Similarly, Rhode Island law does not provide for punitive damages on contract based claims, such as plaintiff's. See Ross-Simons, 182 F.R.D. at 402-403. Simply put, plaintiff is not entitled to an award of punitive damages under any theory of relief.
Bond next contends that Fleet failed to provide injunctive relief in its offer of judgement. However, injunctive relief is not available to Bond. In order to sustain a claim for injunctive relief, Bond must be under the threat of some type of future harm. Bond can not make such a showing, since she no longer obtains an credit card account with Fleet. See i.e. City of Los Angeles v. Lyons, 461 U.S. 95, 111, 103 S.Ct. 1660 (1983). Thus, Bond has no claim for injunctive relief.
This fact was conceded at Oral Arguments by the plaintiff.
A few words need to be said about plaintiff's amending of her complaint. Plaintiff filed an amended complaint after Fleet's offer of judgement. Thus, the question becomes whether the amended complaint changed plaintiffs potential recovery, since the offer of judgement was based upon the original complaint. I find that it has not.
The amended complaint is virtually identical to the original complaint. Sure, plaintiff changed a few words around, but the only new allegation contained therein is that Fleet violated the TILA by issuing a billing statement that reflected a payment due date on a day when Fleet does not accept payments. However, this additional claim for a violation of the TILA does not provide the plaintiff with an additional recovery. The TILA permits a plaintiff only one recovery per transaction regardless of the number of the specific violations. See 15 U.S.C. § 1640(g);Smith v. Fidelity Consumer Discount Company, 898 F.2d 896, 898 (3rd Cir. 1990). Here, plaintiff's amended complaint focuses upon one billing cycle, ending on December 4, 2000. Accordingly, no additional recovery is permitted under the TILA.
Thus, Fleet has provided Bond with everything she could hope to obtain if she had gone to trial and recovered on her individual claims.
B. May Fleet "Pick Off" Bond's Individual Claims to Avoid a Class Action, When Bond Did Not Have a Reasonable Opportunity to Move for Class Certification?
The amended complaint seeks an additional recovery: that on behalf of the class that Bond seeks to represent. Fleet's offer of judgement provided no relief for the putative class members and ignored that portion of the complaint. Thus, the next question is whether Fleet may "pick off" the named plaintiff, by using Fed.R.Civ.P. 68, before Bond had an reasonable opportunity to move for class certification, in an attempt to circumvent a class action? I find that Fleet may not.
First Circuit has not addressed the 'pick off' issue, but has recognized its existence. See Wilson v. Secretary of Health and Human Services, 671 F.2d 673, 679 (1st Cir. 1982).
Generally, when claims of the named plaintiff become moot before class certification, dismissal of the action is required. See e.g. Kremens v. Bartley, 431 U.S.119, 132-133, 97 S.Ct. 1709, 1716-17 (1977). In such a situation, "there is no plaintiff (either named or unnamed) who can assert a justiciable claim against any defendant and consequently there is no case or controversy within the meaning of Article III of the Constitution." Zeidman v. J. Ray McDermott Co., 651 F.2d 1030, 1041 (5th Cir. 1981); See also Wilson v. Secretary of Health and Human Services, 671 F.2d 673, 679 (1st Cir. 1982); Lusardi, 975 F.2d at 974. A different legal rule operates once a class is certified. Mooting of the class representative's claims does not moot the entire action because the class acquired legal status separate from the interest asserted by the named plaintiff. Sosna v. Iowa, 419 U.S. 393, 399 n. 8, 95 S.Ct. 553 (1975).
The procedural requirements established by Fed.R.Civ.P. 23 come into play only after a class has been certified. See Roper, 445 U.S. at 332, n. 5, (1980) (stating that "once a class is certified, a class action may not be dismissed or compromised without the approval of the court").
Because mootness presents unique questions in the class action context, the Supreme Court has acknowledged exceptions to the general rules set forth above. In Sosna v. Iowa, 419 U.S. 393, 95 S.Ct. 553 (1975), the Supreme Court recognized the relation back exception to mootness:
There may be cases in which the controversy involving the named plaintiffs is such that it becomes moot before the district court can reasonably be expected to rule on the certification motion. In such instances, whether the certification can be said to relate back to the filing of the complaint may depend upon the circumstances of the [particular case] and especially the reality of the claim that would otherwise evade review. Id. at 402 n. 11.
Class certification may relate back when (i) the named plaintiffs claim has expired as a result of the transitory nature of the claim; (ii) the defendant has purposefully mooted the claim; or (iii) some other action has occurred between the filing of the suit and certification which unreasonably impairs the plaintiffs right to seek judicial review. See Zeidman, 651 F.2d at 1045-51. When a court relates certification back to the original filing of the complaint, the putative class representative retains standing to litigate the question of certification even though her claims are moot. See e.g. Candy H. v. Redemption Ranch, Inc. 563 F. Supp. 505, 518 (M.D. Ala. 1983). This general exception to mootness is intensely fact bound.
Several courts have demonstrated their concern with a defendant's ability to "pick off" plaintiffs prior to a ruling on class certification. For example, the Supreme Court has considered the defendant's role in mooting plaintiff's claims prior to certification in deciding whether a mootness exception applies, noting the potential for abuse by defendants if offers can moot a putative representative's standing:
A district court's ruling on the certification issue is often the most significant decision rendered in these class action proceedings. To deny the right to appeal simply because the defendant has sought to "buy off" the individual private claims of the named plaintiffs would be contrary to sound judicial administration. Requiring multiple plaintiffs to bring separate actions, which could be effectively "picked off" by a defendant's tender of judgement before an affirmative ruling on class certification could be obtained, obviously would frustrate the objectives of class actions; moreover it would invite waste of judicial resources by stimulating successive suits brought by others claiming aggrievement. Roper, 445 U.S. at 339.
Other courts have also spoken to the situation where a defendant has tried to pay off, as here, the named plaintiff class representative. As the Fifth Circuit stated:
The notion that a defendant may short-circuit a class action by paying off the class representatives either with their acquiescence, or, as here, against there will, deserves short shrift. Indeed, were it so easy to end class actions, few would survive. Roper v. Consurve, Inc., 578 F.2d 1106, 1110 (5th Cir. 1978).
The Seventh Circuit, in Greisz v. Household Bank, 176 F.3d 1012 (7th Cir. 1999), cautioned against mandating acceptance of Rule 68 tender of judgment when a decision on class certification has not been made:
We would have a different case if the bank had tried to buy off [the plaintiff] with a settlement offer greater than her claim before the judge decided whether to certify the class. For then, [plaintiff's counsel] would have to find another named plaintiff to keep the suit alive, and if the defendants had bought off that plaintiff as well and had repeated this tactic as long as [counsel] scrounged for a class representative, they might have hamstrung the suit. The tactic is precluded by the fact that before a class is certified, which is to say at a time when there are many potential party plaintiffs to the suit, an offer to one is not an offer of the entire relief sought by the suit.Id. at 1015.
Fleet contends that this Court should dismiss this case since Fleet swiftly sent Bond a Rule 68 offer, six days after the complaint was filed, and prior to the filing of the motion for certification. However, to adopt such a position would render the class action mechanisms a nullity. A defendant in a putative class action suit, like here, could tender an offer of judgement to each named plaintiff prior to the motion for class certification being filed. This would frustrate the objectives of a class action. If the class action device is to work, the courts must have a reasonable opportunity to consider and decide motions for class certification.
Defendant places reliance on Ambalu v. Rosenblatt, 194 F.R.D. 451 (E.D.N.Y. 2000). There, the court dismissed Ambalu's class action complaint after the defendant made a Rule 68 offer of judgement for the maximum statutory relief obtainable by the plaintiff. Id. No motion for class certification had been made, although the case had been pending for nearly seventeen months. Id. at 453. The court found that since the defendant had offered the plaintiff all he could have received had he gone to trial, there was no justification for pursuing the action. Id. Fleet, thus, invites this Court to adopt a bright line test, as set forth in Ambalu, that if a Rule 68 offer comes before a motion to certify, the entire case should be dismissed. I decline the invitation to adopt such a holding.
A few courts have adopted the Ambalu holding. See Tratt v. Retrieval Masters Creditors Bureau, Inc., 2001 WL 667602 (E.D.N.Y. 2001) (dismissing plaintiff's putative class action complaint after defendant tendered a Rule 68 offer, where no motion to certify had ever been filed); Edge v. C. Tech Collections, Inc., 203 F.R.D. 85, 87 (E.D.N.Y. 2001) (Agreeing with the sound reasoning" of Ambalu, but since defendant had failed to offer all plaintiff was entitled, denied defendant's motion to dismiss).
First, Ambalu is easily distinguishable from the instant case. Ambalu never moved for class certification, after nearly seventeen months after the filing of the complaint. Id. Here, however, Bond didn't even have an opportunity to file such a motion, since Fleet tendered the offer of judgement a mere six days after the filing of the complaint. Thus,Ambalu, is of no moment to the instant case.
Second, as the Court in Liles v. American Corrective Counseling Services, Inc., 201 F.R.D. 452 (S.D. Iowa 2001), pointed out:
Hinging the outcome of the motion [to dismiss] on whether or not class certification has been filed is not well-supported in the law nor sound judicial practice; it would encourage a "race to pay off" named plaintiffs very early in the litigation, before they file motions for class certification. A different situation could be presented if class certification had been considered and denied, but that is not the case here. Class certification has not been denied, and the defendant will not be permitted to force an end to the putative class action. Id. at 454.
In Liles, the plaintiff filed a putative class action complaint. Id. at 452. Prior to the plaintiff's filing a motion for class certification, the defendant Corrective Counseling made an offer of judgement to the plaintiff. Id. at 453. The offer provided for the maximum relief obtainable by the plaintiff on her individual claims. Id. at 453-454. After plaintiff rejected the defendant's offer, the defendant moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(1). Id. The court denied the defendant's motion. Id. The Court found that the defendant could not force mootness on the plaintiff as a consequence of the defendant's own actions, and that" [j]udgement should be entered against a putative class representative on a defendant's offer of payment only where class certification has been denied and the offer satisfies the representative's entire demand for injuries and costs of the suit. This rule protects a class representative's responsibilities to the putative class members from being terminated by a defendant's attempts to pay off the representative's claims." Id.
In White v. OSI Collection Services, Inc., 2001 WL 1590518 (E.D.N.Y. 2001), Judge Ross of the Eastern District of New York was faced with similar circumstances as here. There, plaintiff White filed a putative class action complaint against defendant OSI Collection Services. Id. A day after the defendant filed an answer to the complaint, it served on plaintiff White a Rule 68 offer. Id. The defendant then moved to dismiss the complaint for lack of subject matter jurisdiction, arguing the claims were moot. Id. The Court found that the strategic tender of an offer of judgement early on in the litigation, before the plaintiff had a reasonable opportunity to move for class certification, could not moot plaintiff's claims. Id. at 4. The Court found that the relation back exception to the mootness doctrine applied, and denied the defendant's motion. Id.
Other courts have reached similar results in similar circumstances.See e.g. Silva v. National Telewire, 2000 WL 1480269 (D.N.H. 2000) (unpublished); Littledove v. JBC Associates, 2000 WL 33141233 (E.D.Cal. 2000); Schaake v. Risk management Alternatives, Inc., 203 F.R.D. 108 (S.D.N.Y. 2001). In each of these cases, as in the instant matter — the defendant tendered an offer of judgement prior to a decision on the class certification issue being rendered, and the defendant then moved to dismiss the matter as moot. Silva at 1;Littledove at 1; Schaake at 110. The Court in each rejected each respective defendant's motion, viewing the offer as being inapplicable prior to the certification issue being decided. Silva at 1; Littledove at 1; Schakke at 112.
Here, Fleet tendered its offer of judgement on April 17, 2001, a meresix days after the filing of the Complaint, prior to an entry of appearance by Fleet, and prior to the filing of a responsive pleading. Fleet is asking this Court to deem plaintiff's claims moot as a result of its strategic offer, made before the plaintiff could have reasonably moved for certification. Essentially, Fleet seeks to use Rule 68 as a sneaky device to render plaintiff's claims so transitory that the court could not appropriately address the class certification issue, or, more precisely, before the plaintiff could appropriately bring the motion for class certification. See White v. OSI Collection Services, Inc., 2001 WL 1590518, at 4 and n. 7 (E.D.N.Y. 2001). To permit Fleet to intentionally moot Bond's claims, before Bond had an opportunity to move for class certification, in an effort to avoid a class action, would do violence to the interests of justice.
Where, as here, the defendant's offer of judgement comes very early in the litigation and before the plaintiff, who indicated in her complaint her intention to pursue a class action, can reasonably bring a motion to certify, it is appropriate to apply the relation back doctrine. Thus, I find that plaintiff's motion for certification relates back to the filing of her complaint. Accordingly, Fleet's motion to dismiss should be denied.
Conclusion
Accordingly, for the reasons stated above, I recommend that Fleet's motion to dismiss for a lack of subject matter jurisdiction be denied. Any objection to this Report and Recommendation must be specific and must be filed with the Clerk of Court within ten days of its receipt. Fed.R.Civ.P. 72(b); Local Rule 32. Failure to file timely, specific objections to this report constitutes a waiver of both the right to review by the district court and the right to appeal the district court's decision.United States v. Valencia-Copete, 792 F.2d 4 (1st Cir. 1986) (per curiam); Park Motor Mart, Inc. v. Ford Motor Co., 616 F.2d 603 (1st Cir. 1980).