Expensify, Inc. v. White

Background

Expensify, Inc. brought an action under the federal Declaratory Judgment Act, a law allowing a court to declare the parties’ legal rights when there is an actual dispute. Expensify sought declarations that:

- its website and mobile applications were not places of public accommodation covered by the Americans with Disabilities Act; - it had not intentionally discriminated in violation of California’s Unruh Civil Rights Act; and - any claim under Pennsylvania’s Human Relations Act was not ready for court because the defendants had not exhausted administrative remedies before Pennsylvania’s Human Rights Commission.

Expensify alleged that Eddie White and Matt Koleslar had asserted that the website and applications failed to accommodate visually impaired users and violated those laws. Before the complaint was filed, the parties exchanged letters and emails referring to possible litigation, including statements that the matter could be filed in Pennsylvania or elsewhere and that the defendants sought to resolve the dispute through settlement or litigation.

After the case began, the defendants sent Expensify a letter and then signed a covenant stating that they unconditionally and irrevocably would not bring claims against Expensify or related business entities concerning the accessibility of Expensify’s past, present, or future websites and mobile applications. Before the motion was fully briefed, the parties stipulated to dismiss Koleslar without prejudice. The remaining defendant, White, pursued dismissal for lack of federal subject-matter jurisdiction because there was no longer a live dispute.

Court’s analysis

The court first held that a legally sufficient controversy existed when Expensify filed the complaint. The pre-suit communications, including references to possible lawsuits and the lawyers’ experience with accessibility claims, gave Expensify a real and reasonable fear that the defendants would sue. The court found that the communications expressing a desire to resolve the dispute without litigation did not outweigh the suggestions that litigation might follow.

The court then held that the later waivers made the case moot. A case is moot when the parties no longer have a legally meaningful dispute for the court to resolve. The court found the waivers materially similar to a broad promise not to sue that the Supreme Court had previously recognized as sufficient to eliminate a continuing controversy. The waivers covered claims involving the accessibility of Expensify’s websites and applications under the Americans with Disabilities Act, the Unruh Act, the Pennsylvania Human Relations Act, and other legal theories.

The court rejected the exception for voluntary cessation. That exception can keep a case alive when a defendant stops challenged conduct but could reasonably resume it. Here, the court found that the unconditional and irrevocable waivers met the defendants’ burden of showing that the challenged conduct could not reasonably be expected to recur.

The court also rejected Expensify’s argument that future lawsuits by other people, potentially represented by the same defense counsel, could keep the case alive under the exception for conduct capable of repetition but likely to end before review. The court stated that this theory involved people who were not parties to the case and speculative future conduct. It also identified possible standing problems and said that deciding the issue would risk issuing an advisory opinion rather than resolving a live dispute between the parties.

Separately, the court concluded that prudential considerations weighed against deciding the requested declarations even if the action had remained constitutionally justiciable. Those considerations included the possibility of needlessly deciding state-law questions, encouraging forum shopping, and engaging in procedural fencing.

The court further held that Expensify’s request for nominal damages did not preserve a live claim. It found that Expensify had not identified a special interest supporting nominal damages and that an alleged affront from being accused of violating accessibility laws was not the type of civil-rights violation that had supported nominal damages in the precedent Expensify cited.

Finally, the court denied three proposed amendments as futile: an amendment alleging fear of a class action, an amendment seeking nominal damages based on defense counsel’s accusations, and an amendment asserting negligent misrepresentation or fraud based on White’s alleged use of Expensify’s website. The court found that Expensify had not identified an ascertainable class, a legal basis for nominal damages in these circumstances, or a misrepresentation by White in a verified pleading.

Disposition

The court granted the defendants’ motion to dismiss with prejudice. It denied Expensify’s requests to amend its complaint. Because Koleslar had already been voluntarily dismissed without prejudice, the court did not rule on the personal-jurisdiction challenge that had applied only to him.