Date: 08-25-2017

Case Style: Xavier Laurens and Khadija Laurens v. Volvo Cars of North America, LLC and Volvo Cars USA, LLC

Case Number: 16-3829

Judge: Wood

Court: United States Court of Appeals for the Seventh Circuit on appeal from the Northern District of Illinois (Cook County)

Plaintiff's Attorney: Joe Siprut, Todd McLawhorn, Ke Liu

Defendant's Attorney: Jennifer L. Ilkka, Henry Pietrkowski, Robert Alan Roth

Description: The idea of a theme and variations is a
common one in music. It should be in law, too. Here we return
to the familiar theme of a defense effort to pretermit a proposed
class action by picking off the named plaintiff’s claim.
Several variations on that theme have been tried and have
failed. See Campbell‐Ewald Co. v. Gomez, 136 S. Ct. 663 (2016)
2 No. 16‐3829
(Rule 68 offers of judgment); Fulton Dental, LLC v. Bisco, Inc.,
860 F.3d 541 (7th Cir. 2017) (Rule 67 payments to court registry).
Undeterred, the defendant in the case now before us asserts
that an unaccepted offer of relief before a putative plaintiff
files a lawsuit deprives that plaintiff of standing. We see
no reason why the timing of the offer has such a powerful effect.
Black‐letter contract law states that offers do not bind recipients
until they are accepted. See, e.g., ALI Restatement
(Second) of Contracts § 17 (1981). Hence while the legal effect
of every variation on the strategic‐mooting theme has not yet
been explored, we are satisfied that an unaccepted pre‐litigation
offer does not deprive a plaintiff of her day in court.
I
This case, at base, is about a car purchaser’s disappointed
expectations. The cars are Volvos, and the dispute centers on
the difference between the model XC90 and the XC90 T8
(“the T8”). Both are luxury SUVs, but the XC90 runs on gas,
whereas the T8 is a plug‐in hybrid. The latter feature comes at
a premium; the 2016 T8 retailed for around $20,000 more than
its gas‐only sibling. Plaintiffs Xavier and Khadija Laurens
overcame the sticker shock and paid $83,475 for a new T8.
They also purchased, for an additional $2,700, a charging station
that was installed in their garage.
The Laurenses quickly realized that the car they bought
fell short of the car the ads had promised. Volvo’s advertisements
had claimed that the T8’s battery range was 25 miles,
and the Laurenses had relied on this representation when deciding
to purchase that model for a premium price. In practice
their T8 averaged a puny eight to ten miles of battery‐only
No. 16‐3829 3
driving, far below the promised distance. On April 21, 2016,
Xavier filed this action, both on his own behalf and for a class
of others similarly situated. He relied on the Class Action Fairness
Act (CAFA), 28 U.S.C. § 1332(d), for subject‐matter jurisdiction,
because he was a citizen of Illinois, whereas Volvo
Cars USA is a Delaware limited liability company controlled
by Volvo Cars of North America (another Delaware LLC),
which is itself wholly owned by its Swedish parent (a publicly
traded, share‐based limited liability company, or AB, with its
principal place of business in Gothenburg, Sweden), and the
aggregate amount in controversy exceeds (he asserted)
$5,000,000. For himself, Xavier sought damages equal to the
premium he paid for the hybrid model ($20,000), the cost of
the charging station ($2,700), injunctive relief, punitive damages,
and attorney’s fees.
The complaint’s core theory was that Volvo’s misleading
advertising caused Xavier to pay the extra money for the
hybrid version of the car. A wrinkle arose when it turned out
that Xavier was not listed on either the car’s purchase
agreement or the title; only Khadija was. On June 8, 2016, the
Laurenses received a letter from Volvo that offered
“immediately” to give Khadija (but not Xavier) “a full refund
upon return of the vehicle if you are not satisfied with it for
any reason” and to “arrange to pick up your vehicle at your
home.” The next day Volvo moved to dismiss Xavier’s suit on
the theory that he lacked standing; it argued that Khadija, the
titleholder, was the only person with any possible injury, and
she was not at that moment a party. Before the district court
ruled on the motion, the Laurenses added Khadija to the
complaint. Volvo responded with a motion to dismiss under
Federal Rule of Civil Procedure 12(b)(1); its motion contended
that Khadija also lacked standing because its letter had
4 No. 16‐3829
offered complete relief for her before she filed suit. The district
judge agreed with Volvo, finding that Xavier had never
suffered an Article III injury and that Volvo’s offer had
redressed Khadija’s injury before she became a party. The
court dismissed the action, and this appeal followed.
II
While the Constitution does not define the precise extent
of “[t]he judicial Power of the United States,” it does say that
this power is limited to “Cases” and “Controversies,”
U.S. CONST. art. III §§ 1, 2. This requires federal courts to police
their own authority, so that they do not entertain matters
outside the scope of these terms. Of the several doctrines that
perform the policing task, the one with which we are concerned
is standing. The Supreme Court has said that “the irreducible
constitutional minimum of standing contains three
elements.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). In
the Court’s words, “[t]he plaintiff must have (1) suffered an
injury in fact, (2) that is fairly traceable to the challenged conduct
of the defendant, and (3) that is likely to be redressed by
a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct.
1540, 1547 (2016).
At the pleading stage, it is normally not difficult to pass
the standing bar. Plaintiffs need only “‘clearly … allege facts
demonstrating’ each element.” Id. (quoting Warth v. Seldin,
422 U.S. 490, 518 (1975)). Things get more complicated when
the defendant challenges a plaintiff’s standing in a motion to
dismiss for want of Article III jurisdiction, pursuant to
Rule 12(b)(1). District courts deciding such motions “must accept
as true all material allegations of the complaint, drawing
all reasonable inferences therefrom in the plaintiff’s favor, unless
standing is challenged as a factual matter.” Remijas v.
No. 16‐3829 5
Neiman Marcus Grp., LLC, 794 F.3d 688, 691 (7th Cir. 2015) (emphasis
added) (quoting Reid L. v. Ill. State Bd. of Educ., 358 F.3d
511, 515 (7th Cir. 2004)). If a defendant raises a factual challenge
to standing, the plaintiff bears the burden of proving
standing by a preponderance of the evidence. Kathrein v. City
of Evanston, Ill., 636 F.3d 906, 914 (7th Cir. 2011). We review the
district court’s standing decision de novo, accepting any underlying
factual findings unless they are clearly erroneous.
Winkler v. Gates, 481 F.3d 977, 982 (7th Cir. 2007).
Causation and redressability are not in question here. The
Laurenses maintain that Volvo caused their injury by misleading
them, and they seek damages that would redress the
financial harms that flowed from the misrepresentation. Their
complaint also includes a request for injunctive relief, but it is
premature for us to say whether they do or do not have standing
for this part of the case. On the one hand, even an individual
plaintiff “bears the burden of showing that he has standing
for each type of relief sought.” Summers v. Earth Island
Inst., 555 U.S. 488, 493 (2009). That means that either Xavier or
Khadija had to demonstrate a stake in injunctive relief in particular.
In Summers, the plaintiffs failed to meet that burden,
because the parties had settled their dispute with respect to
the only national forest in which they had a personal stake,
and Volvo suggests that the Laurenses’ claim for injunctive
relief should fail for similar reasons. Once burned, twice shy,
it argues: how will either Xavier or Khadija ever be fooled
again by its advertising? But there is another side to this argument.
First, unlike the plaintiffs in Summers, as we discuss
below, the question whether the underlying dispute has been
settled is a live one. Second, the fact that the Laurenses are
seeking to serve as class representatives complicates matters.
The Supreme Court held in United States Parole Comm’n v.
6 No. 16‐3829
Geraghty, 445 U.S. 388 (1980), that “an action brought on behalf
of a class does not become moot upon expiration of the
named plaintiff’s substantive claim, even though class certification
has been denied.” Id. at 404. “When the claim on the
merits is ‘capable of repetition, yet evading review,’ the
named plaintiff may litigate the class certification issue despite
loss of his personal stake in the outcome of the litigation.”
Id. at 398. This may be one of those situations: at some
point each class member will discover that the performance
of the T8 falls far short of what was promised. But that is a
different form of pick‐off. Moreover, if the Laurenses’ real dispute
is that Volvo engages in misleading advertising more
generally, then the fact that one lie has been uncovered may
not, in fact, resolve the full dispute.
These matters were not explored in any detail in the district
court, because of its conclusions that Xavier has no claim
and the offer of relief to Khadija killed the case before it began.
The question whether those conclusions are correct is
squarely before us. If either named plaintiff has a live damages
claim that will support injury‐in‐fact, further proceedings
will be necessary, and that would be the best time to explore
whether either one also has standing to pursue any type
of injunctive relief. Since Volvo has not raised a factual challenge
to causation or redressability, and the latter allegations
appear sufficient to us, we consider these requirements to be
satisfied.
III
The outcome of this case thus turns on injury‐in‐fact—in
particular, on who was injured and whether any such injury
had already been fully redressed by the time the injured party
was involved in the litigation. We begin with the “who,” and
No. 16‐3829 7
we discuss Xavier first. Volvo’s motion to dismiss asserted
that Xavier suffered no injury‐in‐fact because his name does
not appear on either the purchase agreement for the T8 or the
title. The Laurenses respond that those documents reflect only
who owned the vehicle, not who purchased it. But that is not
accurate. Hypothetically, Xavier could have bought the car
and given it to Khadija, but that is not what the documents
show. Instead, it is Khadija’s name that appears on the purchase
agreement. This indicates that she not only owns the T8,
but also that she bought it. It does not matter that Volvo’s evidence
does not definitively indicate who furnished the funds.
That was not its burden. All Volvo needed to do was to challenge
Xavier’s standing as a factual matter, and the documentation
it provided was enough to do so. That put the ball in
the Laurenses’ court; it became their burden to “com[e] forward
with competent proof that standing exists.” Apex Digital,
Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009)
(internal quotation marks omitted). With respect to Xavier,
they did not provide any such evidence. Their failure to do so
means that Xavier has not alleged the personal injury‐in‐fact
that must exist for him to have standing to sue over the T8
purchase.
The Laurenses have one more theory with respect to
Xavier: they argue that he has standing based on his purchase
and installation of the $2,700 charging station for the T8. Here
again the Laurenses rely solely on the allegations in their
complaint. As far as it goes, that is enough, because Volvo
points to no facts contradicting the complaint’s allegations,
which we thus take as true. Remijas, 794 F.3d at 691. But if all
he has is the charging station, Xavier has a different
jurisdictional problem. There is no indication that CAFA
jurisdiction would lie for this part of the case, and on an
8 No. 16‐3829
individual basis a $2,700 claim is so far below the $75,000
amount‐in‐controversy requirement that we can say that it
appears to a legal certainty that his claim falls below the
necessary amount. See 28 U.S.C. § 1332(a); St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938).
By now, however, Xavier is not the only plaintiff. Khadija
was added as a plaintiff on June 29, 2016, after Volvo sent its
offer of settlement but long before the district court’s October
13, 2016 order of dismissal. If Khadija has standing, her case
can move forward. At that point, if the court concludes that
CAFA jurisdiction is proper (a question on which we make no
comment), then supplemental jurisdiction would likely
extend to Xavier’s related claim. See Exxon Mobil Corp. v.
Allapattah Servs., Inc., 545 U.S. 546, 558 (2005) (citing 28 U.S.C.
§ 1367(a)). With that in mind, we turn to Khadija’s standing.
Khadija undoubtedly would have an injury‐in‐fact if
Volvo had not offered a refund, and we will assume for the
sake of argument that she would not have an injury if she had
accepted its offer. But neither of those things happened. Instead,
we must decide what happens if an offer is made before
the person sues (or, as here, joins an existing action), but that
offer is not accepted.
The Supreme Court’s most recent foray into this general
area is Campbell‐Ewald. Even though it dealt with mootness
rather than standing, the opinion is nonetheless instructive.
Volvo’s position is that Khadija lacked standing at the moment
she was added as a plaintiff. Since “mootness [is] the
doctrine of standing set in a time frame,” Geraghty, 445 U.S. at
397, we begin with a closer look at Campbell‐Ewald.
No. 16‐3829 9
In that case, putative class representative José Gomez sued
the Campbell‐Ewald Company for allegedly violating the Telephone
Consumer Protection Act. Before Gomez moved for
class certification, Campbell‐Ewald submitted an offer of
judgment under Federal Rule of Civil Procedure 68 that
would have provided Gomez complete relief on his individual
claim. When he did not accept, the company argued that
its offer alone was enough to moot the case.
The Supreme Court saw things otherwise. It held that “an
unaccepted offer to satisfy [a] named plaintiff’s individual
claim [is not] sufficient to render a case moot when the complaint
seeks relief on behalf of the plaintiff and a class of persons
similarly situated.” Campbell‐Ewald, 136 S. Ct. at 666. The
key analogy, repeated throughout the opinion, was to contract
law: “An unaccepted settlement offer—like any unaccepted
contract offer—is a legal nullity, with no operative effect.” Id.
at 670 (quoting Genesis Healthcare Corp. v. Symczyk, 133 S. Ct.
1523, 1533 (2013) (Kagan, J., dissenting)); see id. at 666, 670,
672 (other comparisons to contract law). The contract framework
was not confined to the majority opinion. Justice
Thomas concurred because his examination of the common
law history “demonstrate[d] that a mere offer of the sum owed is
insufficient to eliminate a court’s jurisdiction to decide the
case to which the offer related.” Id. at 674 (Thomas, J., concurring)
(emphasis added). In the end, six Justices agreed that an
unaccepted offer of relief, like “other unaccepted contract offers
… creates no lasting right or obligation.” Id. at 666 (majority
opinion).
The only salient differences between this case and
Campbell‐Ewald are that Volvo made its offer before Khadija
sued, and it communicated the offer through a generic letter
10 No. 16‐3829
instead of Rule 68’s more formal process. Neither distinction
matters. Nothing about Campbell‐Ewald’s reasoning is
confined to Rule 68, which is precisely why we extended its
holding to Rule 67 in Fulton Dental, 860 F.3d 541. As we noted
in that opinion, there is
no principled distinction between attempting to force
a settlement on an unwilling party through Rule 68, as
in Campbell‐Ewald, and attempting to force a settlement
on an unwilling party through Rule 67. In either case,
all that exists is an unaccepted contract offer, and as the
Supreme Court recognized, an unaccepted offer is not
binding on the offeree.
Id. at 545. If forcing a contract on an unwilling party is
unacceptable under the judicially supervised procedures of
Rule 68 and Rule 67, we see no reason why an impersonal note
offering a refund should have such a powerful effect. Nor
does it matter that Volvo’s offer preceded Khadija’s lawsuit.
Campbell‐Ewald’s core lesson is that unaccepted contract offers
are nullities; settlement proposals are contract offers; and
therefore unaccepted settlement proposals are nullities.
Nothing about that logic turns on whether a suit has been
filed.
Campbell‐Ewald’s contractual approach is, if anything, a
better fit for claims that have not reached the courthouse. The
Supreme Court has long held “that a cause of action is a species
of property protected by the Fourteenth Amendment’s
Due Process Clause.” Logan v. Zimmerman Brush Co., 455 U.S.
422, 428 (1982) (citing Mullane v. Central Hanover Bank & Trust
Co., 339 U.S. 306 (1950)); see also id at. 429 (approaching Fifth
Amendment’s Due Process Clause the same way). The Court
No. 16‐3829 11
has applied this rule expansively, in contexts ranging from international
relations to banking to employment law. E.g.
Dames & Moore v. Regan, 453 U.S. 654 (1981); Mullane, 339 U.S.
306; Logan, 455 U.S. 422. The bankruptcy code also counts legal
rights among the types of property that can support bankruptcy
claims. See In re Airadigm Commc’ns, Inc., 616 F.3d 642,
659 (7th Cir. 2010). Everyday litigation confirms that understanding.
The reason parties settle cases is because both sides
understand that legal claims have monetary value, just like
any other form of property. Volvo’s offer to trade Khadija’s
claim for $83,475 illustrates the point: it sought to trade one
form of property (claim) for another (currency).
Any first‐year law student knows that contract formation
requires offer, acceptance, and consideration. Whether we
characterize the deal Volvo was proposing as a swap of a car
for money (as we suggested earlier) or a swap of a claim for
money (dropping the claim in exchange for $83,475), until
there is an acceptance there is no contract. (We take no position
on which is the better description.) Khadija considered
the trade and found it wanting. Whether she did so because
of the cost of the charging station, or because she wanted additional
damages for Volvo’s betrayal, or she wanted to be reimbursed
for the nuisance of a short‐range electric car, or she
wanted a bonus for serving as a class representative, is beside
the point. Volvo has no right preemptively to force her to accept
a contract offer. Indeed, an offeror is almost never permitted
to force acceptance on an unwilling offeree. ALI Restatement
(Second) of Contracts §§ 17, 50–70, 159–77; see also
Campbell‐Ewald, 136 S. Ct. at 672 (“In sum, an unaccepted settlement
offer or offer of judgment does not moot a plaintiffʹs
case.”). Consider what this case would look like if the parties’
roles were reversed. Khadija could not argue that she had the
12 No. 16‐3829
right unilaterally to compel an unwilling Volvo to trade a full
refund in exchange for her claim. Our legal system places a
premium on property rights, and protecting them is among
the judiciary’s most important functions.
Volvo’s position is also at odds with the traditional rule
that “a mere offer” does not strip the court of jurisdiction.
Campbell‐Ewald, 136 S. Ct. at 675 (Thomas, J., concurring).
Plaintiffs may opt for trial in the face of offers far more concrete
than Volvo’s letter; they could even reject “tender,”
which was “an offer to pay the entire claim before a suit was
filed, accompanied by ‘actually produc[ing]’ the sum ‘at the
time of tender’ in an ‘unconditional’ manner.” Id. at 675 (quoting
M. BACON, A NEW ABRIDGMENT OF THE LAW, 314–15, 321
(1856)).
While Campbell‐Ewald dictates the outcome here, we note
that pragmatic considerations point in the same direction.
Both of the Campbell‐Ewald dissents argued that some Rule 68
offers could moot claims, but only if the defendant makes “absolutely
clear” that it will pay the relief it has offered. Id. at
683 (Alito, J., dissenting); id. at 680 (Roberts, C.J., dissenting).
This was not a passing concern—Justice Alito stressed that the
inevitability of payment was “the linchpin for finding mootness
in this case.” Id. at 683 (Alito, J., dissenting). Certainty
may be in the eye of the beholder, and so some plaintiffs may
contend that it is not clear enough that a defendant will make
good on an offer of relief. Nonetheless, when offers are made
during litigation, judicial oversight should mitigate the uncertainty:
a defendant’s failure to follow through would incur the
wrath of the supervising court, and egregious misconduct
might lead to sanctions. Those safeguards do not apply to ofNo.
16‐3829 13
fers made before the lawsuit begins. Here, if Khadija had accepted
Volvo’s offer and then Volvo had failed to pay, she
would be right back where she started, with a new breach of
contract claim.

* * *

14 No. 16‐3829
KANNE, Circuit Judge, concurring. I join in the majority’s
opinion reversing and remanding the district court’s decision
for further consideration. I write separately to further
emphasize that on remand the district court is free to draw,
or not to draw, the conclusion that Khadija has not met her
burden to show standing for injunctive relief.

Outcome: Since Khadija did not accept Volvo’s offer, her injury‐infact
from Volvo’s alleged misrepresentations remains unredressed.
We therefore REVERSE the judgment of the district
court dismissing this case for lack of standing and remand for
further proceedings consistent with this opinion.

Plaintiff's Experts:

Defendant's Experts:

Comments: