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Settlement Offer Defeats Class Action Lawsuit (Thursday, July 12, 2012)

Jerome Damasco filed a class-action lawsuit against Clearwire Corporation in an Illinois state court. Demasco alleged that Clearwire violated the Telephone Consumer Protection Act by sending unsolicited text messages to cellphone users.

Clearwire offered to settle the suit by giving Damasco and up to ten others $1,500 for each text message received from Clearwire, together with court costs. Clearwire also offered to stop sending unsolicited text messages to mobile subscribers.

Sometimes timing is everything. Clearwire next removed the case to federal court. Damasco then moved for class certification. As it turns out, he waited too long. Clearwire moved to dismiss the case, arguing that the settlement offer eliminated Damasco's personal stake in the case and made his claim moot. The district court dismissed the case, and denied Damasco's motion to reconsider.

Demasco filed an appeal which proved to be unsuccessful. Under Holstein v. City of Chicago, 29 F.3d 1145 (7th Cir. 1994), Clearwire's offer mooted Damasco's claim. The mootness doctrine requires that the parties have a personal stake in the outcome at all stages of the litigation. When the defendant offers to satisfy the plaintiff's entire demand, there is no remaining dispute to litigate.

In the court of appeals, Damasco tried to create an exception to the mootness doctrine in potential class actions where defendants offer relief to named plaintiffs before they have a reasonable opportunity to seek class certification.

Damasco argued that Holstein should be overruled or distinguished. The appeals court recognized that four circuits have disagreed with its approach. Those circuits have ruled that unless there is undue delay, a plaintiff may seek to certify a class even after being offered complete relief.

The court of appeals, however, determined that the exception created by the other circuits was unnecessary. To allow a case to continue in federal court when the sole plaintiff no longer maintains a personal stake defies the limits on federal jurisdiction.

The appeals court stated that the mere fact that the complaint identifies the suit as a class action is not enough, by itself, to keep the case in federal court. There is an easy solution: class-action plaintiffs can move to certify the class at the same time that they file their complaint. This motion, while pending, would protect the class from attempts to settle with the named plaintiffs.

The appeals court also pointed out that counsel can ask the district court to delay its ruling, in order to provide time for additional discovery or investigation.

The court of appeals also reminded district courts that they must engage in a "rigorous analysis" before ruling on class certification.

Damasco also argued that the result would be different if Clearwire had made its offer under Rule 68. This was unavailing. Clearwire made its offer while the case was in state court, and Illinois has no rule similar to F.R.Civ.P. Rule 68.

The appeals court held that the district court did not abuse its discretion in denying Damasco's request for reconsideration. Damasco v. Clearwire Corporation, 652 F.3d 891 (7th Cir. 2011)

· Michael R. Lied
· Howard & Howard Attorneys PLLC
· One Technology Plaza, 211 Fulton Street, Suite 600, Peoria, IL 61602
· (309) 999-6311
· MLied@howardandhoward.com