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Lary v. Rexall Sundown, Inc.

United States District Court, E.D. New York

February 10, 2015

JOHN H. LARY, JR., M.D., individually and as the representative of a class of similarly-situated persons, Plaintiff,

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For John H. Lary, Jr., individually and as the representative of a class of similarly-situated persons, Plaintiff: Aytan Yehoshua Bellin, LEAD ATTORNEY, Bellin & Associates LLC, White Plains, NY; Brian J Wanca, Anderson & Wanca, Rolling Meadows, IL; Max Margulis, Margulis Law Group, Chesterfield, MO; Ryan Kelly, Anderson Wanca, Rolling Meadows, IL.

For Rexall Sundown, Inc., Rexall Sundown 3001, LLC, NBTY, Inc., Defendants, Cross Defendants, Cross Claimants: John Hooper, LEAD ATTORNEY, Eric F. Gladbach, Reed Smith LLP, New York, NY; Henry Pietrkowski, Reed Smith LLP, Chicago, IL.

For Corporate Mailings, Inc. d/b/a CCG Marketing Solutions, Defendant, Cross Defendant, Cross Claimant, ThirdParty Plaintiff: Matthew J. Fedor, LEAD ATTORNEY, Walter J. Fleischer, William A. Wright, Drinker Biddle & Reath LLP, Florham Park, NJ.

For Rexall Inc., United States Nutrition, Inc., Defendants, Cross Claimants, Cross Defendants: John Hooper, Reed Smith LLP, New York, NY.

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Sandra J. Feuerstein, United States District Judge.

This putative class action was commenced pursuant to the Telephone Consumer Protection Act of 1991 (" TCPA" ), as amended by the Junk Fax Protection Act of 2005, 47 U.S.C. § 227 (" JFPA" ). Plaintiff John H. Lary, Jr. (" plaintiff" ) has moved for class certification pursuant to FRCP 23 and for a stay of decision on the certification motion pending discovery. Defendant CCG Marketing Solutions (" CCG" ) has moved to dismiss plaintiff's First Amended Complaint (" FAC" ) pursuant to Federal Rule of Civil Procedure (" FRCP" ) 12(b)(1). For the reasons that follow, CCG's motion is GRANTED and plaintiff's motion is DENIED in its entirety.

I. Background

A. Facts[1]

CCG is a marketing company which entered into a Master Service and Support Agreement with defendant United States Nutrition, Inc., a corporate affiliate of defendant Rexall. FAC at ¶ 16. CCG: (a) created an advertisement (the " fax" ), which was approved by all defendants; (b) created a list or database of physicians; (c) acquired or licensed the advertisement's use for transmission to those persons listed in the database; (d) determined that the advertisement should be sent by fax (with the approval of the other defendants);

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(e) hired and paid for a third-party fax broadcaster to send the advertisement to those persons on the list or in the database; and (f) was reimbursed by the other defendants for these services. Id. at ¶ 17,

On or about March 5, 2013, an unsolicited fax was sent, without permission, to plaintiff and more than forty (40) other recipients via telephone facsimile machine, by or on behalf of defendants, offering a free sample of the dietary supplement Osteo Bi-Flex. Id. at ¶ ¶ 18, 21, 22. The fax failed to contain the JFPA's opt-out notice. Id. at ¶ 37. Plaintiff was allegedly damaged by the: (a) loss of toner and paper used by printing the fax; (b) loss of time spent receiving and reviewing the fax; (c) loss of plaintiff's privacy; and (d) use of plaintiff's facsimile machine without permission. Id. at ¶ 42. As facsimile machines remain operable to receive urgent communications, there is no reasonable means for plaintiff to avoid receiving unauthorized faxes. Id. at ¶ 23.

B. Procedural History

On October 22, 2013, plaintiff filed this action against Rexall Sundown, Inc., Rexall Sundown, LLC, Rexall Sundown 3001, LLC, Rexall Inc., Rexall U.S. Delaware, Inc., NBTY, Inc. (" Rexall defendants" ) and John Does 1-10. On January 7, 2014, plaintiff preemptively[2] moved for class certification and for a temporary stay of decision to prevent defendants from making an offer of judgment to plaintiff. The Rexall defendants filed their answer on February 12, 2014 and on February 26, 2014, filed a third-party complaint against CCG. On March 7, 2014, pursuant to stipulation, plaintiff withdrew the motion for class certification without prejudice to permit the parties to engage in discovery; the Rexall defendants agreed to withdraw any pending individual settlement offers and to refrain from making any offers during this period.

On April 18, 2014, plaintiff filed the FAC, adding CCG as a defendant. On April 28, 2014, the Rexall defendants voluntarily dismissed their third-party complaint and filed a cross-claim for indemnification against CCG. On June 13, 2014, CCG filed its answer to the FAC and cross-claim and filed a cross-claim against the Rexall defendants. On June 27, 2014, CCG filed a third-party complaint against Healthcare Data Experts, LLC, asserting state law claims, including breach of contract and unjust enrichment.

On June 26, 2014, CCG served plaintiff's counsel with an individual offer of judgment in the sum of three thousand, five hundred dollars ($3,500.00). On July 9, 2014, plaintiff filed a second motion for class certification and a temporary stay of the motion to prevent defendants from mooting plaintiff's class-action claims through an offer of judgment prior to certification. On July 21, 2014, CCG served plaintiff with a motion to dismiss pursuant to FRCP 12(b)(1).

II. Discussion

A. Legal Standard

Pursuant to Article III, § 2 of the United States Constitution, the jurisdiction of the federal courts is limited to " Cases" and " Controversies," which " restricts the authority of the federal courts to resolving 'the legal rights of litigants in actual controversies. '" Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523, 1528, 185 L.Ed.2d 636 (2013)

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(quoting Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc., 454 U.S. 464, 471, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982)). Thus, federal courts require that a party have a legally cognizable interest in a case's outcome to " ensure[] that the Federal Judiciary confines itself to its constitutionally limited role of adjudicating actual and concrete disputes, the resolutions of which have direct consequences on the parties involved." Id.

Where there is no case or controversy, FRCP 12(b)(1) provides that a party may move to dismiss a case for lack of subject matter jurisdiction. See Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (" A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." ). In order to survive a defendant's motion to dismiss for lack of subject matter jurisdiction, a plaintiff must allege facts " that affirmatively and plausibly suggest that it has standing to sue." Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011). In deciding such a motion, the Court may consider materials beyond the pleadings, Makarova, 201 F.3d at 113, and must " accept as true all material factual allegations in the complaint," Atl. Mut. Ins. Co. v. Balfour MacLaine Int'l Ltd., 968 F.2d 196, 198 (2d Cir. 1992).


" A corollary to [the] case-or-controversy requirement is that 'an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed.'" Genesis Healthcare, 133 S.Ct. at 1528 (quoting Arizonans for Official English v. Arizona, 520 U.S. 43, 67, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997)). " A case is moot, and accordingly the federal courts have no jurisdiction over the litigation, when 'the parties lack a legally cognizable interest in the outcome. '" Fox v. Bd. of Trs. of State Univ. of New York, 42 F.3d 135, 143 (2d Cir. 1994) (quoting Cnty. of Los Angeles v. Davis, 440 U.S. 625, 631, 99 S.Ct. 1379, 59 L.Ed.2d 642 (1979). See Powell v. McCormack, 395 U.S. 486, 496, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969) (holding that the doctrine of mootness has two aspects: " when the issues presented are no longer 'live' or the parties lack a legally cognizable interest in the outcome." ). Thus, if " an intervening circumstance deprives the plaintiff of a 'personal stake in the outcome of the lawsuit,' at any point during litigation, the action can no longer proceed and must be dismissed as moot." Genesis Healthcare, 133 S.Ct. at 1528 (quoting Lewis v. Cont'l Bank Corp., 494 U.S. 472, 477-478, 110 S.Ct. 1249, 108 L.Ed.2d 400 (1990)). See Fox, 42 F.3d at 140 (" When a case becomes moot, the federal courts 'lack[ ] subject matter jurisdiction over the action.'" ) (quoting New York City Emps. Ret. Sys. v. Dole Food Co., 969 F.2d 1430, 1433 (2d Cir. 1992)). " The required legally cognizable interest has alternatively been described as a requirement that a plaintiff have a 'personal stake' in the litigation." Id. at 140. " 'Without such a personal stake, a court lacks subject matter jurisdiction and the case must be dismissed.'" Franco v. Allied Interstate LLC, No. 13 Civ. 4053, 2014 WL 1329168, at *2 (S.D.N.Y. Apr. 02, 2014) (quoting Ambalu v. Rosenblatt, 194 F.R.D. 451, 452 (E.D.N.Y. 2000)).

B. Rule 68 Offers of Judgment and Mootness

1. FRCP 68

Federal Rule of Civil Procedure 68(a) provides that at least fourteen (14) days before trial, a " party defending against a claim may serve on the opposing party an offer to allow judgment on specified terms, with costs then accrued. If, within fourteen

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(14) days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance . . . . The clerk must then enter judgment." Although, [a]n unaccepted offer is considered withdrawn . . . [i]f the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay costs incurred after the offer was made." Fed.R.Civ.P. 68(b) and (d). The purpose behind the Rule is " to ...

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