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SEVENTH CIRCUIT HOLDS
UNACCEPTED OFFER LETTER DOES
NOT BAR SUIT
September 2017 - Mandy Brown
The Seventh Circuit has held that receiving an unaccepted
settlement offer from a corporation before a complaint is filed
against it does not deprive a plaintiff of standing. The court
applied the standard the U.S. Supreme Court outlined in Spokeo,
Inc. v. Robins, which evaluates standing by determining whether
a plaintiff suffered an injury in fact that is fairly traceable to the
defendant and likely to be redressed by a favorable decision.
The Seventh Circuit has held that receiving an unaccepted settlement offer
from a corporation before a complaint is filed against it does not deprive a plaintiff of standing.
(Laurens v. Volvo, 2017 WL 3598070 (7th Cir. Aug. 22, 2017).)
In April 2016, Xavier Laurens sued Volvo individually and on behalf of a class of others similarly situated
under the Class Action Fairness Act, alleging that Volvo’s misleading marketing led him to purchase a
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hybrid vehicle with gas mileage well below what had been advertised. While Laurens was the named
plaintiff, only his wife, Khadija Laurens, was listed on the vehicle purchase agreement and title.
In June 2016, Khadija Laurens received a letter from Volvo offering her a “full refund upon return of the
vehicle.” Volvo then moved to dismiss the lawsuit, arguing that Xavier Laurens lacked standing because
he was not the purchaser and had not been injured. The couple responded by amending the complaint
to add Khadija. Volvo filed another motion to dismiss under Fed. R. Civ. P. 12(b)(1), claiming that Khadija
Laurens also lacked standing because the letter had offered complete relief for her before she filed
suit. The district court agreed and dismissed the action.
Reversing, the Seventh Circuit held that an unaccepted pre-litigation offer does not deprive a plaintiff of
her day in court. The court applied the standard the U.S. Supreme Court outlined in Spokeo, Inc. v.
Robins, 136 S. Ct. 1540 (2016), which evaluates standing by determining whether a plaintiff suffered an
injury in fact that is fairly traceable to the defendant’s conduct and likely to be redressed by a favorable
judicial decision. The Seventh Circuit also noted that when a defendant raises a factual challenge to
standing, the plaintiff bears the burden of proving standing by a preponderance of the evidence.
The court observed that the second and third elements of the Spokeo test—causation and
redressability—were not challenged by Volvo and that the plaintiffs’ allegations that Volvo engaged in
false advertising and caused them financial harm that could be satisfied by a judgment appeared
sufficient. The court then returned to the first element of the test, analyzing whether the plaintiffs had
suffered an injury in fact.
The court found that while Xavier alone did not have standing in federal court, the case could continue
because Khadija did. As the purchaser of the car, she suffered a financial injury and because she did
not accept Volvo’s offer, her injury-in-fact from Volvo’s alleged misrepresentations remains
unredressed. The court cited the Supreme Court’s reasoning in Campbell-Ewald Co. v. Gomez, 136 S.
Ct. 663 (2016), noting that Campbell-Ewald ’s “core lesson is that unaccepted contract offers are
nullities; settlement proposals are contract offers; and therefore unaccepted settlement proposals are
nullities.” The court remanded the case for further proceedings, including a determination of whether
the plaintiffs also showed standing for injunctive relief.
New York City consumer protection attorney Annika K. Martin noted this decision validates the
important role that consumers play in monitoring corporate behavior. “As the Seventh Circuit
recognized, this pick-off attempt by the defendant is just one new variation on a corporation trying to
evade being held accountable. That corporations are trying every which way to avoid class actions
illustrates what a powerful—and essential—device they are for concentrating the power of consumers
and for delivering a strong message to corporations to deter them from lying to their customers.”
For Chicago attorney Todd McLawhorn, who represents the plaintiffs, the ruling highlights that these
types of procedural maneuvers do little to advance a defendant’s case or credibility before a court. “I
believe this decision is a clear statement that the Seventh Circuit would prefer to address cases on the
merits, as opposed to allowing various permutations of defense gambits to pick off class plaintiffs and
thereby attempt to decapitate the class. In that regard, I note that the Seventh Circuit awarded costs to
the plaintiffs as part of its ruling reversing the district court,” McLawhorn said.
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“On appeal, I wanted to emphasize that, as a legal matter, an unaccepted offer has no effect and is a
nullity,” McLawhorn continued. “I also wanted to point out the oddity that would result if the court ruled
in Volvo’s favor. Defendants could engage in wrongdoing (here, fraud); dictate what they deemed to be
the acceptable damages; offer those damages to the plaintiff; and if the plaintiff refused, then claim the
plaintiff had somehow forfeited her right to proceed in litigation. I hope that this decision makes clear
for plaintiffs that they need not choose between accepting an inadequate offer and risking dismissal of
their cases; plaintiffs cannot be forced to accept settlement offers—period.”
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