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Claim Moot After Rule 68 Offer Spurned

A debtor suing on an alleged Truth-in-Lending Act disclosure violation lost his right to pursue his claim when he rejected defendant’s Rule 68 offer of judgment; an Alexandria U.S. District Court says because the Rule 68 offer provided for complete relief of statutory damages and “reasonable” attorney’s fees, debtor’s claim has been mooted and the court no longer has jurisdiction over the matter.

This case addresses the jurisdictional consequences of declining, or allowing to lapse, an offer of judgment under Fed. R. Civ. P. 68, that provides complete relief to a plaintiff asserting a claim under the Truth in Lending Act, 15 U.S.C. §§ 1601.

Plaintiff borrower has established as an undisputed fact that “various mandatory TILA disclosures were not provided at the time of closing, such that he was entitled to rescind his loan within the extended statutory three-year period.” Plaintiff filed four amended complaints in this matter, in part due to delays in identifying the note holder. After a status conference on the fourth amended complaint, defendant Residential Funding Co. LLC tendered a Rule 68 offer of judgment to plaintiff on Dec. 14, 2011, offering to allow plaintiff to take judgment against it for a single violation of TILA § 1641(g) in the amount of $4,001, plus costs and reasonable attorney’s fees. Plaintiff allowed the offer to lapse. Defendant RFC moved to dismiss the suit, arguing that because the offer would have afforded full relief to plaintiff on his § 1641(g) claim had the offer been accepted, the offer served to render that claim moot and dismissal is required for lack of subject matter jurisdiction.

The parties’ dispute centers on whether the Rule 68 offer of judgment, to qualify as affording complete relief, must have included a sum-certain amount for the attorney’s fees plaintiff asserts are actual damages caused by RFC’s § 1641(g) nondisclosure violation.

By explicitly providing in TILA for a successful claimant’s recovery of reasonable attorney’s fees expended in litigating the TILA action, Congress made unmistakably clear its intent to distinguish sharply between “actual damage” under TILA and a “reasonable attorney’s fee” recoverable under TILA.

Because plaintiff’s attorney’s fees are not “actual damage” under TILA, it follows that RFC’s Rule 68 offer of full statutory damages plus one dollar, the costs of the action and “reasonable attorney’s fees” would have provided plaintiff with all the relief to which he was entitled for his § 1641(g) claim and therefore rendered the claim moot. Once the Rule 68 offer was received, plaintiff no longer needed to litigate to obtain all the relief he sought through litigation. Plaintiff, in other words, lost any personal stake in litigating the § 1641(g) claim after receiving RFC’s Rule 68 offer of judgment, and his § 1641(g) claim was thereby rendered moot. The claim must now be dismissed.

Authority from the 4th Circuit on this point is sparse, but nonetheless supportive of the result reached here. Some courts, including the 6th Circuit, have taken the position that judgment on a claim rendered moot by a Rule 68 offer should be entered per the offer’s terms, notwithstanding that the offer has lapsed or been rejected. The decision of those courts, none of which is binding here, are unpersuasive because a federal court has no power to enter judgment on a moot claim absent a stipulation to entry of judgment, a point that none of these decisions addresses.

In sum, consistent with authority from the 4th Circuit and elsewhere, plaintiff’s § 1641(g) claim must be dismissed for lack of jurisdiction.

Bradford v. HSBC Mtge. Corp. (Ellis) No. 1:09cv1226, Feb. 23, 2012; USDC at Alexandria, Va. VLW 012-3-093, 13 pp.

VLW 012-3-093

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