Diaz v. First American

A party’s refusal to accept a Rule 68 Offer of Judgment, that would fully satisfy the party’s claim, is not sufficient to make the claim moot.

Emily Diaz owned a home warranty plan from American Home Buyers Protection Corporation. She filed a state class action lawsuit against First American alleging misrepresentation, unfair competition, breach of contract, concealment and breach of the implied covenant of good faith and fair dealing. The class action was removed to federal court and the claims for unfair competition and concealment were dismissed by the district court under Fed. R. Civ. P. 12(b)(6). In addition, the court denied class action status to Diaz’s suit. After Diaz was denied class action status, First American made a Rule 68 Offer of Judgment on the remaining claims. Diaz did not accept the offer. First American then filed a motion to dismiss the remaining claims for lack of subject matter jurisdiction because “the action is moot in light of Plaintiff’s refusal to accept a Rule 68 Offer of Judgment for full satisfaction of the amount she could possible recover at trial.” The district court agreed and granted First American’s motion. Diaz appealed. The Ninth Circuit held that district court had improperly granted First American’s Rule 12(b)(6) motion to dismiss because “an unaccepted Rule 68 offer that would have fully satisfied a plaintiff’s claim does not render that claim moot.” The panel adopted Justice Kagan’s analysis from her dissenting opinion in Genesis Healthcare Corp. v. Symczyk. Justice Kagan explained that, “[a]n unaccepted settlement offer – like any unaccepted contract offer – is a legal nullity, with no operative effect,” and Rule 68 does not change this principle. Rule 68 in fact “specifies that ‘[a]n unaccepted offer is considered withdrawn.’ Fed. R. Civ. P. 68(b).” Therefore, as long as the “the case was live before – because the plaintiff had a stake and the court could grant relief – the litigation carries on, unmooted.” VACATED AND REMANDED.