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Fulton Dental, LLC v. Bisco, Inc.

United States District Court, N.D. Illinois, Eastern Division

September 2, 2016

FULTON DENTAL, LLC, Plaintiff,
v.
BISCO, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          Honorable Edmond E. Chang United States District Judge.

         Fulton Dental, LLC filed a class action complaint, alleging that Bisco, Inc. sent it unsolicited fax advertisements in violation of the Telephone Consumer Protection Act.[1] Fulton Dental seeks statutory, injunctive, and declaratory relief for both itself and for members of the proposed class. After Fulton Dental rejected a settlement offer, Bisco filed this motion to deposit $3, 600 with the Court under Federal Rule of Civil Procedure 67. Bisco also asked the Court to enter judgment against it in the amount of $3, 005 plus any accrued costs, and to enjoin Bisco from sending Fulton Dental any future unsolicited faxes. Bisco's unconditional surrender to Fulton Dental has a purpose: Bisco is trying to moot the case so that the class claims cannot proceed. As this Opinion explains, Fulton Dental could have thwarted Bisco's gambit by filing an early motion for class certification. But it did not. So, for the reasons explained below, Bisco's motion to deposit funds is granted. As a result, Fulton Dental's individual and class claims are both moot, and the case is dismissed for lack of jurisdiction under Fed.R.Civ.P. 12(b)(1).

         I. Background

         Fulton Dental is a private dental practice in Birmingham, Alabama. R. 1, Compl. ¶¶ 1-2.[2] It alleges that on July 9, 2015, it received an unwanted fax advertisement from Bisco, an Illinois corporation. Id. ¶¶ 3, 13, 24. The fax promoted Bisco's dental products and services, encouraging recipients to “[b]uy a product never before purchased, [and] receive 10% OFF your TOTAL ORDER!” Id. ¶¶ 15, 17. It also included contact information for Steve Wolf, a Bisco sales territory manager. Id. ¶¶ 18-20. The fax, which was a form document that was not addressed to anyone in particular, did not include an opt-out notice allowing the recipient to request the sender to stop sending faxes. Id. ¶¶ 16, 23, 25. Bisco's actions allegedly invaded Fulton Dental's privacy rights and jammed its fax lines so that it could not receive other legitimate faxes. Id. ¶ 21. Fulton Dental also claims that it suffered damages in the form of paper and toner costs. Id. ¶ 22.

         On behalf of itself and members of a proposed class, Fulton Dental alleges that Bisco violated the Telephone Consumer Protection Act (TCPA) in two ways: (1) by sending unwanted junk faxes; and (2) by failing to include an opt-out notice in those faxes. Id. ¶¶ 39-44. In that vein, Fulton Dental seeks to represent two classes: an “unsolicited advertisement class” of plaintiffs who received unsolicited faxes from December 8, 2011 (four years before the complaint was filed) to the date of class certification, and an “opt out notice class” of all plaintiffs who received, during the same time period, unsolicited faxes that did not contain an opt-out notice. Id. ¶ 31. Fulton Dental seeks injunctive relief to prevent Bisco from sending future unsolicited faxes, id. ¶¶ 45-46, and from “altering, deleting or destroying any documents or records that could be used to identify the class members, ” id. at 8, ¶¶ 2, 5. Fulton Dental also seeks a declaration that the fax it received violated the TCPA, and statutory damages of up to $500 for each negligent violation or $1, 500 for each willful violation of the statute. Id. ¶ 4; id. at 8, ¶¶ 1, 4; see also 47 U.S.C. § 227(b)(3). Although Fulton Dental's “prayer for relief” also seeks class certification, id. at 8 ¶ 3, it has not yet filed a motion for class certification-a failure that turns out to be fatal, as discussed later in the Opinion.

         On January 18, 2016, a little over a month after Fulton Dental filed its complaint, Bisco made a settlement offer of $3, 005 plus costs, which Fulton Dental rejected on January 24. R. 21, Def's Mot. to Deposit Funds ¶ 2. The next day, Bisco moved to deposit $3, 600 with this Court under Federal Rule of Civil Procedure 67. See generally Id. Bisco's position is that this amount exceeds what Fulton Dental could ever hope to recover in this action, because it assumes maximum liability: $3, 005 for two willful violations of the TCPA-one for sending an unwanted junk fax, and one for failing to include an opt-out notice (remember, the TCPA imposes $1, 500 per willful violation)-and $595 to cover costs. Id. ¶ 2. Bisco also asks the Court to enter judgment in Fulton Dental's favor for $3, 005, to enjoin Bisco from further activity that violates the TCPA, and to direct Futon to file a bill of costs. Id. ¶ 9; R. 24, Def.'s Br. at 6. After Bisco's motion, the Court requested briefing from both parties on the applicability of Rule 67 to this case, and on why depositing the funds with the Court should result in the entry of judgment. R. 23, 1/26/16 Minute Entry. In its brief, Bisco argued that this deposit, if allowed, would moot the entire case. Def.'s Br. at 5.

         II. Legal Standard

         A. Rule 67

         Rule 67 provides that “[i]f any part of the relief sought is a money judgment or the disposition of a sum of money or some other deliverable thing, a party-on notice to every other party and by leave of court-may deposit with the court all or part of the money or thing, whether or not that party claims any of it.” Fed.R.Civ.P. 67(a). Once a court grants a Rule 67 motion, those funds “must be deposited in an interest-bearing account or invested in a court-approved, interest bearing document.” Fed.R.Civ.P. 67(b). Generally, “[t]he purpose of Rule 67 is to relieve the depositor of responsibility for a disputed fund while the parties litigate its ownership.” Engineered Med. Sys., Inc. v. Despotis, 2006 WL 1005024, at *2 (S.D. Ind. Apr. 14, 2006) (allowing plaintiff to deposit royalty payments with the court during dispute about a patent licensing agreement); 12 Charles Alan Wright & Arthur R. Miller, § 2991 (2d ed. 1997) (“The purpose of the deposit is to relieve the depositor of responsibility for a fund in dispute.”). For example, Rule 67 can be used in interpleader actions, most commonly when an insurance company deposits an insurance payout with the court, leaving the claimants to argue about who is entitled to the funds. E.g., The Sportsman's Guide, Inc. v. Havana Nat. Bank, 2009 WL 4923092, at *3 (C.D. Ill.Dec. 7, 2009) (in interpleader actions, “the holder of the fund may put the money … in dispute into court, withdraw from the proceeding, and leave the claimants to litigate between themselves the ownership of the fund in court” (citation and quotations omitted)); Am. Skandia Life Assur. Corp. v. McCarty, 2007 WL 3232496, at *1 (C.D. Ill. Nov. 1, 2007) (permitting insurance company to deposit annuity payment under Rule 67, as claimants disputed ownership of the death benefits). Overall, the Court has broad discretion in determining whether to grant a Rule 67 motion. See Maher Eng'g Co. v. Screwmatics of S. Carolina, Inc., 2014 WL 4979167, at *1 (N.D. Ill. Oct. 6, 2014); Engineered Med. Sys., Inc., 2006 WL 1005024, at *2.

         B. Rule 12(b)(1)

         Bisco has not explicitly invoked Federal Rule of Civil Procedure 12(b)(1), but it argues that if it is allowed to deposit $3, 600 under Rule 67, then Fulton Dental's individual and class claims would both be moot, leaving the Court with no live case or controversy. Def.'s Br. at 5. A moot case, in turn, would require a Rule 12(b)(1) dismissal for lack of subject matter jurisdiction.

         When evaluating a dismissal for lack of jurisdiction under Rule 12(b)(1), a court initially must accept all well-pled allegations as true and draw reasonable inferences in the plaintiff's favor. Ezekiel v Michel, 66 F.3d 894, 897 (7th. Cir. 1995) (citation omitted). But the court may “look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue.” Id. (quotations omitted) (quoting Capital Leasing Co. v. Fed. Deposit Ins. Corp., 999 F.2d 188, 191 (7th Cir. 1993)). Mootness is evaluated under Rule 12(b)(1) because it involves constitutional limits on the jurisdiction of federal courts. U.S. Const. art. III, § 2. Article III authorizes jurisdiction only over a live case or controversy, and demands that the parties maintain a personal stake in the case “through all stages of federal judicial proceedings, trial and appellate.” Spencer v. Kemna, 523 U.S. 1, 7 (1998) (citations and quotations omitted). A case becomes moot, then, when the plaintiff no longer “suffer[s], or [is no longer] threatened with, an actual injury traceable to the defendant and likely to be redressed by a favorable judicial decision.” Id. (citation and quotations omitted). And when there is nothing left to litigate, a dismissal is appropriate under Rule 12(b)(1) because the plaintiff “has no remaining stake” in the case. Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th Cir. 1994) (citation and quotations omitted).

         III. Analysis

         This case presents several tough questions. First, does Rule 67 permit Bisco to deposit the proposed $3, 600 with the Court? If so, do these funds afford full relief to Fulton Dental such that it no longer has a personal stake in the litigation, rendering its individual TCPA claims moot? And if Fulton Dental's individual claims are moot, are the class action claims moot as well? The Court addresses each question below and answers each with a “yes.”

         A. Rule 67

         Bisco seeks permission to deposit $3, 600 with this Court under Rule 67. According to Bisco, this sum represents the maximum amount of damages and fees that Fulton Dental could possibly recover for its TCPA claims. Bisco's motivation is no secret: it wants to moot Fulton Dental's individual and class claims. See generally Def.'s Br.

         There is very little Seventh Circuit authority on the infrequently litigated Rule 67. In general, it is used “to relieve the depositor of responsibility for a disputed fund while the parties litigate its ownership.” Engineered Med. Sys., Inc., 2006 WL 1005024, at *2. As mentioned above, Rule 67 is commonly used in interpleader actions, when “the holder of the fund may put the money … in dispute into court, withdraw from the proceeding, and leave the claimants to litigate between themselves the ownership of the fund in court.” The Sportsman's Guide, Inc., 2009 WL 4923092, at *3 (citation and quotations omitted). For example, an insurance company can deposit an insurance payout with the court, leaving the claimants to litigate over the priority and ownership of those benefits. See McCarty, 2007 WL 3232496, at *1 (permitting insurance company to deposit annuity payments under Rule 67 until dispute over entitlement to funds was resolved). Few standards govern the court's discretion to grant Rule 67 deposits, but courts generally agree that the deposited funds must truly be in dispute. See United States v. Jupiter Aluminum Corp., 2010 WL 1881453, at *2 (N.D. Ind. May 10, 2010) (defendant could not deposit penalties with the court, rather than directly pay the plaintiff, because the district court had already determined the amount and validity of the penalties on two prior occasions); Suraleb, Inc. v. Prod. Ass'n “Minsk Tractor Works, ” Republic of Belarus, 2007 WL 551568, at *2-3 (N.D. Ill. Feb. 20, 2007) (Rule 67 did not allow a party to deposit funds ordered by an arbitration award, because there was no real dispute over the funds, as the arbitrator had already entered judgment and determined the funds' legal ownership). This requirement seems to restrain courts from unnecessary intervention when there is no actual dispute between the parties. See Surelab, 2007 WL 551568, at *2 (N.D. Ill. Feb. 20, 2007) (court should not “supervise the transfer of … assets” when there is no dispute about their ownership).

         Rule 67 can also be “useful in cases of … tender of an undisputed sum.” 12 Charles Alan Wright & Arthur R. Miller, § 2991. (“Undisputed” in this sense refers not to the funds' legal status, but to their amount.) Courts have used Rule 67 in cases like this one, where a defendant wished to hand over money to satisfy the plaintiff's claim. For example, in Brause, an early case interpreting Rule 67, an insurance company tendered $5, 000 to the plaintiffs, who sued for that amount in building losses under an insurance policy. Brause v. Travelers Fire Ins Co, 19 F.R.D. 231, 233 (S.D.N.Y. 1956). Even though the plaintiffs refused this tender, the court permitted the deposit, concluding that “[t]here does not appear to be any reason why this motion should not be granted.” Id. at 235. Rule 67 permits tenders and deposits even when the defendant does not admit liability or disclaim all of its interests in the money; the rule was modified in 1983 to allow for “situations in which a litigant may wish to be relieved of responsibility for a sum or thing, but continue[s] to claim an interest in all or part of it.” Fed.R.Civ.P. 67 advisory committee's notes to 1983 amendment. The amendments responded to earlier cases that misconstrued Rule 67 by “permit[ting] deposit only when the party making it claims no interest in the fund or thing deposited.” Id. In one of these earlier cases, the defendant was not permitted to deposit disputed rents in an action about the validity of a sublease, because the defendant “still clings to its affirmative defenses which are directly relevant to the issue of whether there is in fact an obligation to pay.” Blasin-Stern v. Beech-Nut Life Savers Corp., 429 F.Supp. 533, 535 (D. P.R. 1975). In another, the court did not allow the defendant to deposit money allegedly owed in a contract dispute with plaintiff, when “[d]efendant is not seeking to rid itself of responsibility for a sum of money which it concededly owes to someone. Defendant's difficulty stems from its reluctance to commit itself as to whether it owes the money at all.” Dinkins v. General Aniline & Film Corp., 214 F.Supp. 281 (S.D.N.Y. 1963). The 1983 amendments clarified that Rule 67 deposits should be allowed in situations like Blasin-Stern and Dinkins, where a defendant wishes to tender money to satisfy a plaintiff's claim despite maintaining that she does not legally owe the sum.

         Ultimately, “[u]nder the plain language of Rule 67, the circumstances in which a party might be allowed to deposit money with the court are quite broad.” Engineered Med. Sys., Inc., 2006 WL 1005024, at *3; see also Kansas City S. Ry. Co. v. Borrowman, 2009 WL 3188305, at *4 (C.D. Ill. Sept. 30, 2009) (“Whether to grant leave for such a deposit is solely within the Court's discretion.” (citations omitted)). In deciding a Rule 67 motion, courts may also consider “whether the amount sought to be deposited was definite; whether the funds could be deposited all at once or whether there would be repeated deposits that would impose an undue burden on the clerk of court; and whether the party seeking leave to deposit the funds had demonstrated a likelihood of success on the merits.” Borrowman, 2009 WL 3188305, at *4 (citations omitted). For example, deposits that “could involve a substantial sum of money and could entail an ongoing series of deposits” may be rejected because they would “impose an unnecessary burden upon the clerk of the court.” Design Ben. Plans, Inc. v. Enright, 940 F.Supp. 200, 207 (N.D. Ill. 1996).

         In this case, Bisco seeks to deposit $3, 600 with the Court: $3, 005 to cover the maximum amount of damages allowed by the TCPA, and $595 for potential costs. The Court holds that Rule 67 permits this deposit. First, the deposit fits within the plain language of the rule, which allows deposits of “all or part of the money or thing” if “any part of the relief sought is a money judgment or the disposition of a sum of money.” Fed.R.Civ.P. 67(a). And in this TCPA action, part of Fulton Dental's desired relief is money in the form of statutory damages. Compl. ¶¶ 39-44. In addition, Bisco's tender is consistent with Brause and Rule 67's 1983 amendments, which allow for “situations in which a litigant may wish to be relieved of responsibility for a sum or thing, but continue[s] to claim an interest in all or part of it.” Fed.R.Civ.P. 67 advisory committee's notes to 1983 amendment. As the amendments show, a deposit is permissible even though Bisco has not admitted liability under the TCPA or conceded that Fulton Dental is legally entitled to these funds. Id.; see also Engineered Med. Sys., Inc., 2006 WL 1005024, at *3 (allowing a Rule 67 deposit “as long as the money is truly in dispute”).

         The discretionary factors in this case also point towards permitting the deposit. For one, “the amount sought to be deposited [is] definite”-$3, 600. Borrowman, 2009 WL 3188305, at *4. And there is no dispute that this sum, which includes $3, 005 for statutory damages and $595 for costs, provides more than Fulton Dental's maximum statutory recovery for its individual claims. Individuals who sue under the TCPA, which regulates solicitations by telephones and other automated equipment, can obtain (1) an injunction; (2) the amount of actual loss or $500 in statutory damages, whichever is greater; or (3) both. 47 U.S.C. § 227(b)(3). The actual loss, or $500, whichever is greater, can be tripled if there is a willful violation of the statute. Id. Fulton Dental alleges receiving only one unsolicited fax. Compl. ¶¶ 13-25. It also alleges that Bisco violated the TCPA twice, at the most- once for sending this unsolicited fax, and another time for failing to include opt-out information in this fax. Id. Because Fulton Dental does not allege that it lost more than $500 in paper and toner costs for receiving one junk fax, and instead pursues statutory damages, it would recover $500 for each negligent violation (instead of actual damages). 47 U.S.C. § 227(b)(3)(B). And even assuming that Bisco acted willfully, the most Fulton Dental could actually recover is $1, 500 for each violation, for a maximum total of $3, 000. Id. § 227(b)(3)(C). So the amount sought to be deposited-$3, 600-is not only definite, but undisputedly covers all of Fulton Dental's statutory damages. Finally, as to the other discretionary factors, this is not a case where there would be repeated deposits that would unduly burden the clerk's office. C.f., Design Ben. Plans, Inc., 940 F.Supp. at 207 (denying plaintiff's motion to deposit disputed funds because the amount and number of deposits was unclear, and could exceed over four million dollars).

         Fulton Dental's primary objection to this deposit is that Rule 67 is a “procedural device” that cannot be used to transform the parties' substantive rights. R. 25, Pl.'s Resp. at 4-6 (citing Maher Eng'g, 2014 WL 4979167, at *1 (“[I]t is well-settled that Rule 67 … shall not abridge, enlarge or modify any substantive right[.]” (quoting LTV Corp. v. Gulf States Steel, Inc. of Ala., 969 F.2d 1050, 1063 (D.C. Cir. 1992)) (quotations omitted)). Although the parties' briefs leave much to be desired on this issue (and most others as well), the crux of this argument seems to be that a deposit should not be permitted if it results in substantive consequences-such as mootness-on the plaintiff. The limited authority on Rule 67, however, shows the opposite: a deposit is permissible even if it results in substantive effects on the parties. For example, courts have held that a Rule 67 deposit can stop the running of prejudgment interest (or some other form of interest on a principal-liability amount). E.g. Lich v. Cornhusker Cas. Co., 774 F.Supp. 1216, 1223 n.5 (D. Neb. 1991) (defendant's deposit stopped the running of prejudgment interest where the defendant had conceded liability on a bond and deposited the face value of the bond into the court's registry); see also Maher Eng'g, 2014 WL 4979167, at *2 (noting that “[i]t is true that a few courts have allowed Rule 67 deposits to stop the running of interest under certain circumstances” (citing cases));[3] 12 Charles Alan Wright & Arthur R. Miller, § 2991 (“Under some circumstances it may suffice to stop the running of interest.” (citing cases)). In fact, the 1983 amendments to Rule 67 were made in direct response to earlier cases like Blasin-Stern, which held that “[n]othing in [Rule 67] provides for the stopping of interest accrual upon deposit in court.” 429 F.Supp. at 534; Fed.R.Civ.P. 67 advisory committee's notes to 1983 amendment. The amendments thus clarified that the stopping of interest accrual- an action that has a substantive effect on the parties' claims and defenses-was a permissible use of Rule 67.

         Similarly, in other cases, a Rule 67 deposit was deemed to satisfy a litigant's legal obligations. For example, in Borrowman, the district court for the Central District of Illinois held that the plaintiffs' deposit of disputed tax payments put them in compliance with their tax obligations so that the plaintiffs “will have fulfilled their respective obligations to the [state tax commissioners] until this matter is resolved.” Borrowman. 2009 WL 3188305, at *6. The court cited to Gulf States Utilities, a Fifth Circuit case where the plaintiff challenged its electricity contract but was permitted to avoid breach by depositing payments under Rule 67. Id. at *4 (citing Gulf States Util. Co. v. Alabama Power Co., 824 F.2d 1465, 1475 (5th Cir.), amended on other grounds, 831 F.2d 557 (5th Cir. 1987)). The appellate court held that there was “no reason to force [the plaintiff]” to withhold money and be in breach during the pendency of the lawsuit. Gulf States Util. Co., 824 F.2d at 1475; but see Engineered Med. Sys., Inc. v. Despotis, 2007 WL 1021866, at *7 (S.D. Ind. Mar. 30, 2007) (plaintiff was in breach because it did not pay royalties to defendant, even when it deposited royalties with the court during the pendency of litigation). The approach taken by Borrowman and Gulf States is consistent with the 1983 amendments, which allow the depositing party to “be relieved of responsibility for a sum or thing, [while] continu[ing] to claim an interest in all or part of it.” Fed.R.Civ.P. 67 advisory committee's notes to 1983 amendment. As noted earlier, these amendments were enacted in response to cases like Dinkins, which previously suggested that Rule 67 was limited to interpleader actions. Dinkins, 214 F.Supp. at 283. In Dinkins, the plaintiff sued for tortious interference of contract, and the defendant counterclaimed for breach of contract. Id. at 282. The court held that the defendant could not deposit the money it allegedly owed to the plaintiff under the contract, because Rule 67 could not be used “to preserve all [of] [defendant's] rights under the contract and to avoid the risk of a breach of contract on its part if its position should turn out to be wrong.” Id. at 283. In response, the 1983 amendments clarified that this interpretation was too limited; Rule 67 is not restricted to interpleader actions, and it can be used even when legal consequences may flow from the deposit-like avoiding breach of contract during litigation. Thus, the Court must reject Fulton Dental's argument that, simply because the deposit may have mootness consequences, Rule 67 categorically prohibits Bisco's deposit.

         In a similar vein, Fulton Dental argues that allowing the deposit would affect its substantive right to litigate this case as a class action. Pl.'s Resp. at 5. In other words, if the deposit is allowed, and the case becomes moot, then Fulton Dental would be denied the opportunity to pursue class certification and obtain class-wide relief. Id. Fulton Dental bases its argument on one Supreme Court statement in Campbell-Ewald that “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663, 672 (2016); Pl.'s Resp. at 2. To evaluate the impact of this statement (or lack of it) on the issue at hand, it is necessary to understand Campbell-Ewald. In that case, the Supreme Court held that an unaccepted or lapsed settlement offer under Rule 68 cannot moot a named plaintiff's individual claims, and thus the rejected offer did not prevent him from pursuing either his individual or class claims. Id. The Court relied on the plain language of Rule 68, which states that after fourteen days, “[a]n unaccepted offer is considered withdrawn, ” Fed.R.Civ.P. 68(b), leaving the parties back in their original positions, Campbell-Ewald, 136 S.Ct. at 660. Similarly, “basic principles of contract law” instructed that a “Rule 68 offer of judgment, ...


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