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McClain v. Hanna

United States District Court, E.D. Michigan, Southern Division

May 31, 2019




         This case presents the question of what happens if the lead plaintiff in a proposed class action lawsuit files a “placeholder” motion for class certification and then immediately accepts a defendant's offer of individual judgment under Rule 68 of the Federal Rules of Civil Procedure, before the motion for class certification is fully briefed. Is the Court required to enter judgment in the plaintiff's favor on the individual claims and dismiss the class claims, or can the complaint's “captain-less” vessel sail forward on the sea of class-action litigation? Applying the Sixth Circuit's precedent governing this area of law, the Court concludes that, at least in this case, the complaint is sunk.

         Plaintiff Theodore McClain brought suit against Defendants, Dalen Patrick Hanna, Hanna PLLC, and Hanna LLP, an attorney and his law firm, under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., and Michigan Regulation of Collection Practices Act, Mich. Comp. Laws § 445.252(e) et seq. Plaintiff claims Defendants sent him two letters and later called him on the telephone to collect a debt that was time-barred. In accord with Rule 68, Defendants made an offer of judgment on Plaintiff's individual claims and Plaintiff accepted that offer-but not before filing a self-described “placeholder” motion for class certification. While settling his own claim Plaintiff nevertheless seeks to maintain this suit in order to certify a class of all individuals with Michigan addresses who received similar letters from Defendants between March 8, 2018 and March 8, 2019.

         Several matters are currently before the Court: from Plaintiff, his motion for class certification (ECF No. 13), his acceptance of the Rule 68 offer of judgment (ECF No. 14), and a motion for an extension of time to file his reply to Defendants' response to his motion for class certification (ECF No. 18); from Defendants, a motion to dismiss the complaint (ECF No. 22). The motion for class certification, expressly described by Plaintiff as a mere “placeholder, ” was filed to procedurally preserve class claims even though Plaintiff had already resolved to accept Defendants' offer of judgment on his individual claims. Moreover, Plaintiff acknowledges he does not yet have adequate facts to support his motion for class certification. Having closely examined relevant precedent, the Court concludes that the mootness doctrine requires dismissal of Plaintiff's putative class claims. Accordingly, the Court will instruct the Clerk of Court to enter Rule 68 judgment on Plaintiff's individual claims and will dismiss Plaintiff's class claims as moot. Plaintiff's motion to certify a class (ECF No. 13), and for extension of time to file his reply (ECF No. 18), as well as Defendants' motion to dismiss the complaint (ECF No. 22), will accordingly be denied as moot.


         Plaintiff Theodore McClain filed his class action complaint on March 8, 2019, on behalf of himself and others similarly situated, alleging that Defendants sent him two threatening letters and attempted to contact him by phone to collect a time-barred debt. See ECF No. 1. Defendant Dalen Hanna is an attorney licensed by the State of Michigan and the District of Columbia. ECF No. 1 PageID.4. Defendant Hanna Law PLLC is a domestic professional limited-liability company organized under the laws of the State of Michigan. ECF No. 1 PageID.4. And Defendant Hanna LLP is the name of an entity that appears on the letters at issue in this case. ECF No. 1 PageID.4. Defendants' website advertises that they represent “a wide range of creditors in the area of collecting past-due and otherwise uncollectible debt(s).” Practice, Hanna LLP,

         Plaintiff received a letter from Defendants dated March 26, 2018 claiming that he was “in default of payment in the amount of $93.22 USD” and “require[d]” to remit payment in full within 10 days to avoid “the filing of a costly and damaging lawsuit.” ECF No. 1 PageID.6. Plaintiff avers that he sent a letter to Defendants on April 5, 2018 in which he wrote: “This is notice for all contact to cease per FDCPA. Any further contact is by mail ONLY. . . . You are also directed to send me proof of this debt including Insurance billings.” ECF No. 16-1 PageID.129. The debt at issue, according to Plaintiff, was for medical services with Nationwide Foot & Ankle Care, P.C., the principal amount being $63.22. ECF No. 1 PageID.7. Plaintiff maintains that the debt “was more than six-years old from the date the payment was due when the letter dated March 26, 2018, was sent [by Defendants].” The debt was therefore time-barred and not collectible. ECF No. 1 PageID.7. But after sending his “cease-contact letter” to Defendants, Plaintiff received another letter from Defendants, dated May 10, 2018, which stated, “Our office has not received any payment as was demanded in our communications. . . . We are simply going to file a lawsuit against you.” ECF No. 1 PageID.8. The letter also directed Plaintiff to contact Defendants “If you believe there has been a mistake, or you have not received [Defendants'] previous letters.” ECF No. 1 PageID.8. Additionally, Plaintiff contends “Defendants have placed at least one phone call to Plaintiff after the receipt of Plaintiff's letter dated April 5, 2018.” ECF No. 1 PageID.9. Defendants never filed any lawsuit to collect the debt. ECF No. 1 PageID.9. Instead, Plaintiff filed this complaint alleging individual and class claims for violation of various Fair Debt Collection Practices Act provisions. ECF No. 1.

         On March 15, 2019, Defendants sent Plaintiff an offer of Rule 68 judgment “offer[ing] to allow Judgment to be entered against them and in favor of Plaintiff . . . as to all counts of Plaintiff's complaint, ” including actual damages in the amount of $600.00 and statutory damages in the amount of $1, 501.00, as well as Plaintiff's costs accrued to-date and reasonable attorney's fees. ECF Nos. 14-4, 14-2. The judgment appears to represent the maximum amount of relief Plaintiff could receive for his personal FDCPA claims. Four days later, on March 19, 2019, Plaintiff filed a motion seeking to certify a class of plaintiffs who received letters from Defendants from March 8, 2018 through and including March 9, 2019.[1] See ECF No. 13 at PageID.48-49. Plaintiff described the motion for class certification as “simply a placeholder motion, a belt and suspenders motion, in light of Defendants' Rule 68 Offer of Judgment, which will subsequently be accepted by Plaintiff.” ECF No. 13 PageID.46. Obviously, at the time the motion to certify a class was filed, Plaintiff had already decided to accept the individual offer of judgment and settle Plaintiff's individual claims.

         The same day Plaintiff filed his motion for class certification, he also filed a notice communicating his acceptance of Defendants' offer of judgment. In the notice, Plaintiff argued that his acceptance of the offer “does not moot the claims of the putative class members or . . . Plaintiff's ability to seek to have a class certified and represent the certified class.” ECF No. 14 PageID.64. He also emphasized that the offer of judgment encompassed only Plaintiff's individual claims. Id. Defendants then opposed the motion for class certification on the basis that Plaintiff had already accepted Defendants' offer of judgment and thereby resolved his individual claims, causing the potential class action to become moot. See generally ECF No. 16. Additionally, Defendants urge that the proposed class cannot meet Rule 23's requirements of numerosity, commonality, and typicality. Id.; see Fed. R. Civ. P. 23(a). Plaintiff then filed a motion asking this Court to allow a substantial extension of time to reply to Defendants' response to the motion for class certification so that he can conduct class discovery. See ECF No. 18. Plaintiff says he needs to gather additional information to provide support for his motion for class certification. Id. Defendants, in turn, filed a motion to dismiss the complaint on the basis of Plaintiff's acceptance of the offer of judgment, urging that judgment must now be entered on Plaintiff's individual claims, and the proposed class action claims dismissed. ECF No. 22.


         Rule 68 of the Federal Rules of Civil Procedure provides that a defendant “may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued.” Fed.R.Civ.P. 68(a). If, within 14 days of being served, the plaintiff “serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.” Id. (emphasis added). The Sixth Circuit has described operation of Rule 68 as “mandatory, ” explaining that it “leaves no discretion in the district court to do anything but enter judgment once an offer had been accepted.” Mallory v. Eyrich, 922 F.2d 1273, 1279 (6th Cir. 1991). Because Rule 68 directs that “the clerk shall enter judgment after proof of offer and acceptance have been filed, ” the Rule expressly contemplates that “the district court possesses no discretion to alter or modify the parties' agreement.” Id. (emphasis in original). Entry of a Rule 68 judgment is therefore “ministerial rather than discretionary.” Id. Its purpose “is to encourage settlement and avoid litigation.” Carroll v. United Compucred Collections, Inc., 399 F.3d 620, 624 (6th Cir. 2005) (quoting Marek v. Chesny, 473 U.S. 1, 5 (1985)). “The rule prompts both parties to a suit to evaluate the risks and costs of litigation, and to balance them against the likelihood of success upon trial on the merits.” Mallory, 922 F.2d at 1277 (quoting Marek, 473 U.S. at 5).

         Receiving an offer of judgment that fully addresses a plaintiff's claims appears at first blush to be purely a beneficial outcome for any plaintiff. But when the suit includes a request to certify a class action, accepting such an offer may also doom that request if no class has yet been certified. This is because Article III of the Constitution requires that “federal courts may adjudicate only actual, ongoing cases or controversies.” Kentucky v. U.S. ex rel: Hagel, 759 F.3d 588, 595 (6th Cir. 2014) (internal quotation marks omitted). If a class has already been certified, the settling of the named plaintiff's claim will not moot the entire action. The court will continue to have jurisdiction to decide the merits of the action so long as a controversy continues to exist between any other class member and the defendant. Wilson v. Gordon, 822 F.3d 934, 942 (6th Cir. 2016) (citing Brunet v. City of Columbus, 1 F.3d 390, 399 (6th Cir. 1993)). But “‘[if] the named plaintiff's claim becomes moot before [class] certification,' the ordinary rule is that ‘dismissal of the action is required.'” Wilson, 822 F.3d at 942 (quoting Brunet, 1 F.3d at 399 (emphasis in original)).

         The Sixth Circuit has acknowledged three exceptions to the general rule requiring dismissal of an action where the named plaintiff's claims become moot before class certification. See Wilson, 822 F.3d at 944-952. These exceptions include the “picking off” exception, so-called to describe the situation where the defendant “picks off” representative plaintiffs in an otherwise valid class action by offering Rule 68 judgment, negotiating settlement, or otherwise causing a lead plaintiff's claims to become moot (whether voluntarily or involuntarily) in an attempt to undermine the class action process. The other two exceptions, not relevant here, are the “inherently transitory” exception[2] and the “capable of repetition but evading review” exception. See Wilson, 822 F.3d at 944-52 (discussing all three exceptions).

         Of these, the most relevant is the “picking off” exception to the mootness doctrine; it originates from the Supreme Court's decision in Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 339 (1980). In that case, the Supreme Court held that neither the defendant's unaccepted offer of Rule 68 judgment on the individual putative representatives' claims nor the district court's entry of judgment in favor of named plaintiffs over their objections mooted their individual claims, and that plaintiffs were therefore permitted to appeal the district court's denial of class certification. Id. at 339-40. Notably, the Court expressed concern that denying the right to appeal simply because the defendant unsuccessfully sought to “buy off” the named plaintiffs' individual claims “would be contrary to sound judicial administration” and “frustrate the objectives of class actions” by requiring multiple plaintiffs to bring separate actions, only to be “picked off” by a defendant's tender of judgment before ...

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