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Judgment Offer Refusal Doesn’t Moot Claim

(CN) - A California woman's refusal to accept an offer of judgment does not moot her claims against a home warranty company, the 9th Circuit ruled Friday.

Emily Diaz filed a class action lawsuit in San Diego District Court against American Home Buyers Protection Corporation, claiming that the company had failed to repair her home as agreed and that the contractors it had hired were not up to the job, among other things.

U.S. District Judge Marilyn Huff denied class certification and dismissed Diaz's claims for unfair competition and concealment on procedural grounds, but let stand her individual state law claims for unfair competition, misrepresentation, concealment, breach of contract and bad faith.

Thereafter, First American made an offer of judgment under Rule 68 of the Federal Rules of Civil Procedure that the company argued would have settled all of her claims, offering $7,019.32 plus costs. Diaz refused the offer, and First American moved to dismiss the claims, contending that they were now moot.

Judge Huff agreed and tossed the rest Diaz's claims, but the 9th Circuit reversed on Friday.

The unanimous, three-judge panel of the federal appeals court agreed with Diaz's argument that "an unaccepted Rule 68 offer does not render a claim moot, even if the offer would have fully satisfied the plaintiff's claim."

In doing so, the panel cited U.S. Supreme Court Justice Elena Kagan's dissenting opinion in this year's Healthcare Corp. v. Symczyk, in which she wrote that "an unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer - however good the terms - her interest in the lawsuit remains just what it was before. And so too does the court's ability to grant her relief. An unaccepted settlement offer - like any unaccepted contract offer - is a legal nullity, with no operative effect."

The panel found that the offer of judgment, had Diaz accepted it, would not have settled her claims for injunctive and declaratory relief.

"We are persuaded that Justice Kagan has articulated the correct approach," wrote Judge Raymond Fisher for the Pasadena-based panel. "We therefore hold that an unaccepted Rule 68 offer that would have fully satisfied a plaintiff's claim does not render that claim moot. This holding is consistent with the language, structure and purposes of Rule 68 and with fundamental principles governing mootness."

The panel revived Diaz's claims for misrepresentation, breach of contract and breach of the implied covenant of good faith and fair dealing and remanded them to San Diego District Court.

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