District Court (Cal.) Says Rule 68 Offer May Deprive Fed. Court of Jurisdiction; FDCPA/Rosenthal Act Provide for $1,000 Penalty “Per Action”, not “Per Defendant”

In Scott v. Federal Bond and Collection Service, Inc., 2011 WL 176846 (N.D.Cal. 2011), Judge Koh found that a Rule 68 offer made in an FDCPA case might deprive a federal court of jurisdiction to hear the matter due to the absence of a case or controversy.  Judge Koh explained:

In support of their 12(b)(1) motion, Defendants rely on two cases from the Eastern District of New York, in which the court agreed that a plaintiff’s rejection of a Rule 68 offer of $1,000 in statutory damages under the FDCPA and reasonable costs and fees incurred to the date of the offer rendered the action moot. See Greif v. Wilson, Elser, Moskowitz, Edelman & Dicker LLP, 258 F.Supp.2d 157, 159-61 (E.D.N.Y.2003) (granting motion to compel plaintiff to accept Rule 68 offer of $1,000 plus reasonable fees and costs incurred to the date of the offer and granting motion to dismiss the action as moot); Ambalu v. Rosenblatt, 194 F.R.D. 451, 453 (E.D.N.Y.2000) (same). These courts reasoned that once a plaintiff had been offered all she “could hope to recover” through the litigation, the plaintiff no longer has a legally cognizable stake in the action, and the case must be dismissed for lack of subject matter jurisdiction. Greif, 258 F.Supp.2d at 159-60; Ambalu, 194 F.R.D. at 453. Similarly, the Seventh Circuit has held that “[o]nce the defendant offers to satisfy the plaintiff’s entire demand, there is no dispute over which to litigate, and a plaintiff who refuses to acknowledge this loses outright, under Fed.R.Civ.P. 12(b)(1), because he has no remaining stake.”   Rand v. Monsanto Co., 926 F.2d 596, 598 (7th Cir.1991); see also Greisz v. Household Bank (Illinois), N.A., 176 F.3d 1012, 1015 (7th Cir.1999). The Ninth Circuit appears to have approved this reasoning in a recent memorandum decision affirming the dismissal of FDCPA and Rosenthal Act claims for lack of subject matter jurisdiction “because [the defendant’s] offer of judgment was for more than [the plaintiff] was legally entitled to recover.” Marschall v. Recovery Solution Specialists, Inc., No. 08-55247, 2010 WL 3937992, at *1 (9th Cir. Oct.5, 2010).  ¶  Plaintiff does not dispute the basic principle that a case becomes moot once the plaintiff has been offered all that she is legally entitled to recover. Rather, Plaintiff argues that Defendants’ Rule 68 offer does not represent a full recovery under the FDCPA and the Rosenthal Act, for two reasons. First, while conceding that statutory damages under the FDCPA are limited to $1,000 per action, Plaintiff argues that the Rosenthal Act permits her to recover $1,000 per defendant, for a potential total recovery of $3,000 under the California law. The Court agrees with Defendants, however, that Plaintiff’s claims under the FDCPA and the Rosenthal Act, taken together, do not entitle Plaintiff to recover more than a total of $2,000 in statutory damages. Although both statutes state that “any debt collector” shall be liable for additional damages not exceeding $1,000, 15 U.S.C. § 1692k(a); Cal. Civ.Code § 1788.30(b), federal courts within the Ninth Circuit have consistently interpreted both provisions to permit a maximum of $1,000 in statutory damages per lawsuit.FN3 See Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1178 (9th Cir.2006) (indicating that FDCPA limits statutory damages to $1,000 where “numerous violations of the FDCPA are predicated upon one set of circumstances”); Bretana v. International Collection Corp., No. C 07-5934, 2010 WL 1221925, at *2 (N.D.Cal. Mar. 24, 2010) (in a case with multiple defendants, stating that the FDCPA and RFCDPA together allow a “maximum cumulative award of $2,000”); Marseglia v. JP Morgan Chase Bank, No. 09cv2857, 2010 WL 4595549, at *7 (S.D.Cal. Nov.12, 2010) (“statutory damages under the Rosenthal Act are limited to $1,000 per plaintiff”). The Court therefore agrees that Defendants have offered Plaintiff the maximum she could recover in statutory damages.  ¶  FN3. In support of her argument that the Rosenthal Act permits statutory damages of up to $1,000 per defendant, Plaintiff cites Kenyon v. Professional Credit Control, No. S-09-14932010, U.S. Dist. LEXIS 4493 (E.D.Cal. Jan. 20, 2010). The Kenyon court distinguished the Rosenthal Act from the FDCPA on grounds that “[u]nlike the FDCPA, the California Act provides that ‘any debt collector’ shall be liable for up to $ 1,000.” Id. at *4-5. However, the FDCPA similarly provides that “any debt collector” is liable for “such additional damages as the court may allow, but not exceeding $1,000.” 15 U.S.C. § 1692k(a)(2)(A). Indeed, both statutes also state that “any debt collector” is liable for actual damages sustained by the plaintiff, 15 U.S.C. § 1692k(a)(1); Cal. Civ.Code § 1788.30(a), but the Court does not believe that this language would entitle Plaintiff to recover three times her actual damages simply because she names three defendants in her case. The Court thus respectfully disagrees with the Kenyon court’s reasoning and agrees with the decisions of other federal courts that have given the statutory damages provision in the Rosenthal Act the same effect as the FDCPA provision.

Ultimately, Judge Koh found that the Rule 68 offer did not provide the Plaintiff all to which it was entitled because the right it conferred on Plaintiff’s counsel to seek his fees through the date of the offer did not include the right to seeks fees incurred in the preparation and arguing of the fee motion itself.