The Supreme Court’s recent decision in Genesis Healthcare Corp. v. Symczyk and Justice Kagan’s spirited dissent have placed in high relief the limitations of Rule 68 of the Federal Rules of Civil Procedure. Whether a solution will emerge or litigators will continue to litigate about how not to litigate remains to be seen.
“The plain purpose of Rule 68 is to encourage settlement and avoid litigation.” That is what the United States Supreme Court said about Rule 68 of the Rules of Civil Procedure in 1985 in Marek v. Chesny, 473 U.S. 1 (1985). Well, that makes Rule 68 the biggest failure in the history of the Federal Rules.
In the almost 30 years since Chief Justice Warren E. Burger’s majority opinion in Marek, there has been a lot of litigation over Rule 68. A lot. Just a few months ago, the justices of the Supreme Court got snippy with each other about Rule 68 in Genesis Healthcare Corp. v. Symczyk.1 Justice Elena Kagan persuaded three other justices to join her dissenting opinion chastising the majority for failing to address the “obviously correct answer,”2 missing a point within the competence of “every first-year law student,”3 and issuing an opinion “that aids no one, now or ever.”4
Justice Kagan’s opinion was the latest illustration of a frustrating fact: the Supreme Court’s opinions on Rule 68 bear little resemblance to what lawyers and trial courts do with the Rule. Symczyk, Marek, and older decisions of the Court that predate Marek5 have not made for a useful practitioner’s guide to Rule 68. Nothing about Rule 68 has been “plain” or “obvious.” After Symczyk, one federal judge issued preemptive orders instructing litigants to not even think about making a particular Rule 68-related motion in reliance on Symczyk.6 One does not need to dig too deep to discover that Rule 68 is not working for federal court litigation. The question is whether Rule 68 can be fixed. The answer is, probably not.
Can Nullities Nullify?
The Judicial Conference of the United States welcomes suggestions for changes to the Federal Rules of Civil Procedure and three of the five submissions posted to the federal courts’ website this year relate to Rule 68.7 But none of the three hit on what I would call Exhibit A to the Rule 68 problem, “subject matter jurisdiction peek-a-boo.” The disparate outcomes generated by subject matter jurisdiction peek-a-boo highlight, in ridiculous fashion, how Rule 68 has lost the battle against itself.
Symczyk involved Rule 68 and mootness doctrine.8 The premise is that a defendant’s offer under Rule 68 to accept judgment against it for a specified sum moots the case if the sum offered is all the offeree could possibly achieve in the case.9 Even if the offeree does not accept the deal, the case is moot.
The relief sought has been offered, and there is no case or controversy for the court to hear. When that’s the case, Article III, Section 2 of the Constitution compels dismissal for lack of subject matter jurisdiction.10
The majority in Symczyk accepted that premise as true11 (because the parties and the lower courts did12) and turned to whether there should be any different result when the offeree seeks to represent similarly situated persons under the Fair Labor Standards Act’s collective action procedure.13 The dissent saw no reason to accept that premise as true when the premise is, in the view of the dissenters, not true.14 Leading the dissenters, Justice Kagan pointed out that the text of Rule 68 deems an unaccepted offer “withdrawn” after 14 days.15 Since the unaccepted offer is deemed withdrawn, it does not exist.16 A court cannot dismiss a case based on something that does not exist.17 To the dissenters, Rule 68 operates only to shift unnecessary litigation costs caused by the offeree’s refusal to accept the deal.18 Rule 68 cannot team up with Article III to end the litigation entirely.19
Common Practice Confused
Except, that is what courts do all the time.20 The dissenters’ opinion does not represent one side of the principal debate among trial courts.21 Instead, trial courts routinely accept the premise that a Rule 68 offer of complete relief moots a case and requires dismissal.22 The dissenters’ “obvious” answer, that dismissal is never appropriate in such circumstances, has not occurred to many. Instead, the principal debate at the Rule 68-Article III nexus is what happens with the money offered at the time of dismissal. Should the dismissal order require the offering defendant to pay the rejecting offeree the sum offered?23 Should the dismissal order operate as a punishment for the offeree’s bad judgment in rejecting the deal, forever barring the rejecting offeree from recovering on their claim?24 Should the matter simply be left up to the parties, seeing as the whole premise is that the court does not have jurisdiction to do anything?25
If one accepts the mootness premise, the intellectually correct answer is that actual payment is left up to the parties. At the moment the offer was made, the case was moot, and the court lacked jurisdiction. Ordering the parties to do things in the dismissal order is inconsistent with the premise that the court’s power to do anything was stripped at the moment the offer was made. But what happens if the order does not require payment and, after the dismissal order, the offeror decides not to pay what they offered? It happens.26 Well, unless one accepts the claim-forfeiture-as-penalty view, the case was only moot in so far as the offeror’s intention to compensate the offeree was sincere. If the offeree is left uncompensated after dismissal, the case or controversy springs back to life. The rejecting offeree should be able to sue again.27 The offeror can then renew the offer, obliging the court to again dismiss. If the offeror refuses to pay the second time, the case or controversy springs back to life once more.
This dance could go on forever. Parties could stand on the courthouse steps, the plaintiff presenting a complaint and the defendant covering the complaint with a Rule 68 offer and then yanking it back, forever. It’s a never ending game of now-you-see-it, now-you-don’t, where “it” is subject matter jurisdiction. It’s subject matter jurisdiction peek-a-boo.
Failure of Rule 68
Subject matter jurisdiction peek-a-boo is ridiculous. It does not avoid litigation. It could increase litigation ad infinitum. That is why many courts have attempted to solve the problem by ordering payment consistent with the rejected offer or barring recovery as a penalty for the unwise rejection.28 Neither solution is correct. Just as it is not clear how a court lacking jurisdiction has the power to order one party to pay the other, it is not clear how a court has the power to strip a claimant of a right of recovery as a penalty for rejecting a settlement offer. That part is certainly not in the text of Rule 68 or Article III of the Constitution.
So, the current posture in 2013 is that litigants have no idea what may happen when an offer of complete relief under Rule 68 goes unaccepted. Litigants then return to the courts to litigate what should happen.29 Rule 68 has failed.
If the problem with Rule 68 was only subject-matter jurisdiction peek-a-boo, there could be a solution. The Symczyk dissenters’ view on the mootness issue is probably correct, even though trial courts have largely not caught on (recall that the majority did not actually decide the mootness issue in the first instance because the parties and the courts below accepted the premise that a complete offer requires dismissal).30 An unaccepted offer is a nullity, and thus cannot moot a case.31 The unaccepted offer continues to exist only as evidence of the parties’ conduct at a particular moment in the case. That conduct then forms the basis of the cost-shifting sanction imposed by the text of Rule 68.32 Article III does not enter into it.
Rule 68 could be amended to specify that an unaccepted offer of complete relief does not affect subject matter jurisdiction. If that issue was properly presented to the Supreme Court, the Symczyk dissenters would only need one additional vote from the pool of five justices who abstained on the issue in Symczyk.33 There is a reasonable likelihood that the subject matter jurisdiction peek-a-boo issue could be resolved by amendment.
However, subject matter jurisdiction peek-a-boo is only Exhibit A to the trial on Rule 68. Fighting over mootness exposed a lot of other problems caused by Rule 68, problems which would not necessarily be solved by an amendment establishing that a Rule 68 offer does not affect subject matter jurisdiction. How does an offer’s language with respect to recovery of attorney’s fees affect the fees that may be recovered on a subsequent petition for fees?34 Is it procedurally proper to strike a Rule 68 offer made to leverage a putative class representative into abandoning their class claim (which means that the offer cannot be resurrected later as the basis for a cost-shifting sanction)?35 What procedures should follow if settlement for an entire class is offered and accepted via Rule 68?36 These issues have generated an enormous amount of litigation and will continue to do so, even if Rule 68 is amended to avoid subject matter jurisdiction peek-a-boo. The fact is that the Rule designed to avoid litigation is ripe for litigation. There is no one fix that will put Rule 68 in line with the purpose ascribed by Chief Justice Burger in Marek.
At a certain point, it is not pessimism to say that litigators simply cannot safely wield a tool designed to avoid litigation. It is the litigator’s nature to explore every possible edge for their client by exploiting ambiguities and challenging assumptions. That means nothing is ever, as the Supreme Court sometimes supposes, “plain” or “obvious.” A procedural rule designed to encourage settlement is just something additional about which to argue.
If parties to federal court litigation can settle, they can do so using all of the (lawful) leverage available in the world other than Rule 68’s rather unsubstantial cost-shifting provision. Rule 68 does not avoid litigation. Rule 68’s many ambiguities and uncertainties when applied in different contexts ensure only that litigators will spend a lot of time litigating about how not to litigate. The solution may well be to abrogate Rule 68 in its entirety.
Brandon McDonough is in the private practice of law with McDonough & Nowicki PLLC in Minneapolis. He is a 2012 graduate of the University of Minnesota Law School.
1 133 S.Ct. 1523, 1532–37 (2013) (Kagan, J., dissenting).
2 Id. at 1535.
3 Id. at 1533.
4 Id. at 1537.
5 E.g., U.S. Parole Comm’n v. Geraghty, 445 U.S. 388 (1980); Deposit Guaranty Nat’l Bank v. Roper, 445 U.S. 326 (1980); Sosna v. Iowa, 419 U.S. 393 (1974).
6 See, Singer v. Illinois State Petroleum Corp., No. 12-cv-9109, 2013 WL 2384314, at *2 (N.D. Ill. 05/24/2013); see also, Falls v. Silver Cross Hosp. and Med. Centers, No. 13-cv-695, 2013 WL 2338154, at *2 (N.D. Ill. 05/24/2013).
7 The Conference publishes instructions and tips for submitting suggestions on its website at http://tinyurl.com/ohjbdnt. This year’s suggestions related to Rule 68 can be found at http://tinyurl.com/nmj4unf
8 Symczyk, 133 S.Ct. 1523, 1526.
9 Id. at 1527
10 Id. at 1527–28; U.S. Const., Art. III, §2.
11 Symczyk, 133 S.Ct. at 1528–29.
12 See, Symczyk v. Genesis Healthcare Corp., 656 F.3d 189 (3d Cir. 2011); Symczyk v. Genesis Healthcare Corp., No. 09-cv-5782, 2010 WL 2038676 (E.D. Pa. 05/19/2010).
13 Symczyk, 133 S.Ct. at 1529–1532.
14 Id. at 1532–33 (Kagan, J., dissenting).
15 Id. at 1534; Fed. R. Civ. P. 68(b).
16 Symczyk, 133 S.Ct. at 1533–34.
18 Id. at 1536.
20 See, O’Brien v. Ed Donnelly Enterprises, Inc., 575 F.3d 567, 575 (6th Cir. 2009); Greisz v. Household Bank (Illinois) N.A., 176 F.3d 1012, 1015 (7th Cir. 1999); Johnson v. Midwest ATM, Inc., 881 F. Supp. 2d 1071, 1075 (D. Minn. 2012); Gonon v. Allied Interstate, LLC, 286 F.R.D. 405, 410 (S.D. Ind. 2012); Bradford v. HSBC Mortgage Corp., 280 F.R.D. 257, 264 (E.D. Va. 2012); Louisdor v. Am. Telecommunications, Inc., 540 F. Supp. 2d 368, 374 (E.D.N.Y. 2008); Ward v. Bank of New York, 455 F. Supp. 2d 262, 270 (S.D.N.Y. 2006); Mackenzie v. Kindred Hospitals E., LLC, 276 F. Supp. 2d 1211, 1221 (M.D. Fla. 2003); Greif v. Wilson, Elser, Moskowitz, Edelman & Dicker LLP, 258 F. Supp. 2d 157, 161 (E.D.N.Y. 2003); and Jones v. CBE Group, Inc., 215 F.R.D. 558, 565 (D. Minn. 2003), among numerous others.
21 Notably, Justice Kagan did not cite to any lower court decision consistent with the Symczyk dissenters’ view. See, 133 S.Ct. 1523, 1532–37.
22 See cases cited note 20, supra.
23 See, O’Brien v. Ed Donnelly Enterprises, Inc., 575 F.3d 567, 575 (6th Cir. 2009); Mackenzie v. Kindred Hospitals E., LLC, 276 F. Supp. 2d 1211, 1221 (M.D. Fla. 2003); Greif v. Wilson, Elser, Moskowitz, Edelman & Dicker LLP, 258 F. Supp. 2d 157, 161 (E.D.N.Y. 2003); Ambalu v. Rosenblatt, 194 F.R.D. 451, 453 (E.D.N.Y. 2000); Iannucci v. Rite Aid Corp., No. 11-cv-281, 2012 WL 5198360, at *4 (W.D.N.C. 10/19/2012); Young v. AmeriFinancial Solutions, LLC, 12-cv-60946, 2012 WL 3848574, at *2 (S.D. Fla. 09/05/2012); Brown v. Kopolow, No. 10-cv-80593, 2011 WL 283253, at *4 (S.D. Fla. 01/25/2011); Dieske v. CCS Commercial, LLC, No. 10-cv-28, 2010 WL 3909868, at *2 and n. 1 (N.D. Ind. 10/01/2011); Muldrow v. Credit Bureau Collection Services, Inc., No. 09-cv-61792, 2010 WL 2650906, at *2 (S.D. Fla. 06/30/2010; Valentine v. Check Plus Sys., L.P., No. 09-cv-1987, 2010 WL 2572845, at *5 (N.D. Ohio 06/23/2010).
24 See, Greisz v. Household Bank (Illinois) N.A., 176 F.3d 1012, 1015 (7th Cir. 1999); Bradford v. HSBC Mortgage Corp., 280 F.R.D. 257, 264 (E.D. Va. 2012); Echlin v. Columbia Collectors, Inc., C12-5878 RBL, 2013 WL 858206, at *3 (W.D. Wash. 03/07/2013); Stilz v. Banco Popular N.A., No. 10-C-2087, 2011 WL 722502, at *5 (N.D. Ill. 02/23/2011).
25 See, Rollins v. Sys. Integration, Inc., 05-cv-408, 2006 WL 3486781, at *5 (N.D. Tex. 12/04/2006); Krim v. Pcorder.com, Inc., A-00-CA-776-SS, 2003 WL 21076787, at *3 (W.D. Tex. 05/05/2003).
26 See Def.’s Mem. in Opp. to Pl.’s R. 60 Mtn., Johnson v. Midwest ATM, No. 11-cv-1926, Doc. 57, 09/28/2012.
27 A potential return to court was expressly contemplated by the disposition in Rollins v. Sys. Integration, Inc. See 2006 WL 3486781, at *5.
28 See cases cited note 23, supra.
29 Echlin v. Columbia Collectors Inc., 12-cv-5878, 2013 WL 1440595 (W.D. Wash. 04/09/2013); Stilz v. Banco Popular N.A., No. 10-C-2087, 2011 WL 722502, at *5 (N.D. Ill. 02/23/2011).
30 133 S.Ct. 1523, 1529, 1533.
31 133 S.Ct. at 1533.
32 Id. at 1536 (“Rule 68’s exclusive purpose [is] to promote voluntary cessation of litigation by imposing costs on plaintiffs who spurn certain settlement offers.”); Fed. R. Civ. P. 68(d).
33 The justices of the Supreme Court prescribe or pass on rules that make it through committees of lower court judges and legal scholars. See 28 U.S.C. §§2072–2073; see also Admin. Office of the U.S. Courts, How the Rule Making Process Works: Overview for the Bench, Bar, and Public, available at http://tinyurl.com/ncyefzl/
34 Compare Bilazzo v. Portfolio Recovery Associates, LLC, 876 F. Supp. 2d 452, 460-61 (D.N.J. 2012) with Johnson v. Midwest ATM, Inc., 881 F. Supp. 2d 1071, 1075 (D. Minn. 2012).
35 Johnson v. U.S. Bank Nat. Ass’n, 276 F.R.D. 330, 336 (D. Minn. 2011) (yes); Stewart v. Cheek & Zeehandelar, LLP, 252 F.R.D. 384, 387 (S.D. Ohio 2008) (yes); Wilder Chiropractic, Inc. v. Pizza Hut of S. Wis., Inc., 754 F. Supp. 2d 1009, 1013 (W.D. Wis. 2010) (no); White v. Ally Fin. Inc., 2:12-CV-00384, 2012 WL 2994302, at *4 (S.D. W.Va. 07/20/2012) (no).
36 See, White v. Alabama, 74 F.3d 1058 (1996).