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Second Circuit Revives Class-Action Against Collection Agency, For The Second Time

The Court of Appeals for the Second Circuit has revived – for the second time – a class-action lawsuit that was filed against a collection agency.

The lower court has twice dismissed the suit against the defendant, but has lost both times on appeal.

The issue at hand is whether a settlement offer made by a defendant, in this case a collection agency, nullifies a claim made by a plaintiff, even if a judge grants a judgment in favor of the defendant.

Allied Interstate, a collection agency, was sued by a plaintiff, Gilberto Franco, after the plaintiff received a collection letter that warned about a 15% wage garnishment. The defendant offer a settlement to Franco, but not the rest of the class. The settlement offer was not accepted, and the defendant moved to have the case dismissed, saying that the unaccented offer rendered the case moot. A District Court judge agreed. The case was appealed to the Second Circuit and revived. The Second Circuit ruled that an unaccepted offer of judgment did not moot the claims and remanded the case back to the District Court. The defendant subsequently moved for — and received — an entry of judgment. That ruling was appealed to the Second Circuit, which ruled yesterday that Supreme Court precedent holds that an unaccepted offer does not moot a claim even if a judgment has been entered in favor of the plaintiff at the defendant’s request.

A copy of yesterday’s ruling can be accessed here.

The Second Circuit cited the Supreme Court ruling in Campbell-Ewald v. Gomez as well as its own ruling in Geismann v. ZocDoc. The Supreme Court ruling noted:

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.

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