SCOTUS Holds That Unaccepted Rule 68 Settlement Offer Doesn’t Moot Consumer Class Action Lawsuit
January 20, 2016 Leave a comment
January 20, 2016 Leave a comment
The U.S. Supreme Court ruled today (January 20, 2016) in Campbell-Ewald Co. v. Gomez (No. 14-857) that an unaccepted Rule 68 offer of judgment for full relief does not moot a consumer lawsuit. Gomez will undoubtedly have far reaching implications for future class action cases, especially those filed under the Telephone Consumer Protection Act (“TCPA”), where damages per violation are set by statute, and are generally easy to quantify. While the decision seems to favor class action plaintiffs by precluding defendants from “picking off” named class representatives, it leaves open the question of whether the result would be different where a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.
The facts of the case are straightforward. The U.S. Navy hired Campbell-Ewald Company (“Campbell”) to assist it with a recruiting campaign. As part of that campaign, Campbell hired a third party to sent text messages to the cell phones of over 100,000 recipients who had supposedly consented to receiving such solicitations. Jose Gomez filed a nationwide class action in the District Court for the Central District of California, alleging that Campbell violated the TCPA by sending him a text message without his consent.
A successful plaintiff in a TCPA action may recover her actual monetary loss or $500 for each violation, whichever is greater, and the penalty can be trebled for a knowing or willful violation. Gomez sought treble damages, costs, attorney’s fees, and an injunction against Campbell.
Prior to the agreed-upon deadline for a class certification motion to be filed, and before Gomez moved for class certification, Campbell made an offer of judgment to Gomez under Rule 68. Specifically, Campbell offered to pay Gomez his costs, excluding attorneys’ fees, and $1,503 per message—thereby satisfying any claim for potential treble damages. Campbell also proposed a stipulated injunction, whereby Campbell would agree to be barred from sending texts in violation of TCPA. However, the proposed injunction denied liability and disclaimed the existence of grounds for such an imposition. Campbell did not offer attorney’s fees as such fees are not available under the TCPA. Gomez did not accept the offer, and it lapsed by operation of time under Rule 68.
Thereafter, Campbell moved to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction. Campbell argued that no Article III case or controversy remained, since its offer mooted Gomez’s individual claim by providing him with complete relief. The District Court denied the motion. The Ninth Circuit agreed, finding that an unaccepted offer of judgment can not moot a class action. The Supreme Court granted certiorari to resolve a split among the Courts of Appeals over whether an unaccepted offer can moot a claim, thereby depriving federal courts of Article III jurisdiction.
On review, opinion author Justice Ginsberg relied heavily on Justice Kagan’s dissenting opinion in Genesis HealthCare. In that case, Justice Kagan wrote that “[a]n unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer leaves the matter as if no offer had ever been made.” Reasoning that nothing in Rule 68 changed that result, the Court expressly adopted Justice Kagan’s analysis and held that Campbell’s unaccepted offer did nothing to alter the course of his claim. Thus, the Court held that “in accord with Rule 68 of the Federal Rules of Civil Procedure,  an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.”
The Court distinguished several cases that seemed to go the other way. In each of those cases, the defendants’ payments had fully satisfied the asserted claims. In contrast, even though the offer of judgment appeared to resolve Gomez’s claims, the Court reasoned that his individual claim was not made moot by the expiration of a settlement offer that was never accepted. Once the offer of judgment to Gomez expired, he was left with nothing; his TCPA claim was “wholly unsatisfied.”
The Court seemed to hint at a potentially different result had Campbell admitted liability. Over the course of the relatively short opinion, the court mentioned at least five times that Campbell continued to deny liability despite the offer of judgment. The Court also left open the question of “whether the result would be different if a defendant deposits the full amount of the plaintiff ’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.”
The decision also discussed whether Campbell should be entitled to derivative sovereign immunity, having performed its actions at the direction of the Navy. The Court found that Campbell was not entitled to share such immunity.
Notably, Justice Thomas concurred in the judgment, but rejected the majority’s reliance on modern contract principles and Justice Kagan’s dissent in Genesis HealthCare concerning Rule 68. Instead, Justice Thomas stated that he would rely on the common law history of tenders (that led to Rule 68), which demonstrates 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.
Chief Justice Roberts, joined by Justices Scalia and Alito (Justice Alito also wrote separately), sharply dissented. The dissenting Justices found that Campbell offered to pay Gomez the maximum he could recover under the TCPA (e.g., $1500 per text message, plus the costs of filings suit), but that Campbell wanted more – “He wants a federal court to say he is right.” The dissenting Justices stated that the real problem for Gomez is that federal courts exist to resolve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking. They agreed with the majority that Gomez’s rejection of the offer was a legal nullity as a matter of contract law, but that the question is not whether there is a contract, but rather whether there is a case or controversy under Article III. Thus, they argued that because the District Court found that Campbell agreed to fully satisfy Gomez’s claims by giving him everything he asked for, there is no case or controversy to adjudicate and the case is moot.