Supreme Court Rules That Offer of Judgment Does Not Moot Class Action Lawsuit
Kelley Drye Client Advisory
On January 20, 2016 in Campbell-Ewald Company v. Jose Gomez, 577 U.S. – (2016), Case No. 14-857, the Supreme Court resolved a prior split of authority among the Courts of Appeals as to whether an unaccepted Rule 68 Offer of Judgment to a named plaintiff in a putative class action renders moot a plaintiff’s claims, thereby depriving the federal court of Article III jurisdiction. The Court, in an opinion authored by Justice Ginsberg, held that such a Rule 68 offer does not moot either the named plaintiff’s claims or the claims of the putative class.
The defendant, Campbell-Ewald, had been hired by the U.S. Navy to develop a mobile marketing campaign to attract new recruits and, in connection with this effort, sent out text messages to over 100,000 individuals who had “opted in” to receive marketing solicitations regarding Navy service. The plaintiff, Jose Gomez, filed a putative class action in California federal court alleging that he and other individuals had received unsolicited text massages recruiting for the U.S. Navy without their consent in violation of the Telephone Consumer Protection Act, see 47 U.S.C. § 227(b)(1)(A)(iii) (the “TCPA”).
Prior to class certification, Campbell-Ewald filed a Rule 68 Offer of Judgment to settle Gomez’s individual claim for (i) trebled damages for each text message that Gomez received in violation of the TCPA; (ii) his costs in bringing the action; and (iii) a stipulated injunction in which Campbell-Ewald agreed to be barred from sending future text messages in violation of the TCPA. Gomez did not respond within fourteen days as provided for in Rule 68 and the offer therefore lapsed.
Campbell-Ewald moved to dismiss the case on the grounds that the unaccepted offer mooted Gomez’s individual claim, as well as the claims of the putative class, since Gomez had not yet moved for class certification. The Central District of California denied the motion and, after limited discovery, granted Campbell-Ewald’s motion for summary judgment on an unrelated issue of sovereign immunity. The Ninth Circuit reversed the grant of summary judgment, but agreed with the court’s earlier determination that the case had not been mooted by the Rule 68 Offer of Judgment.
The Supreme Court affirmed, holding that “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 based its decision on the “basic principle of contract law” that a rejected offer leaves the parties “as if no offer had ever been made.” Accordingly, the Court found that the parties “remained adverse” and that “both retained the same stake in the litigation they had at the outset.” Since Gomez’s individual claim remained viable, the Court also held that the claim of the putative class properly survived dismissal.
Notably, the Supreme Court left open the issue of “whether the result would be different if a defendant deposits the full amount of the plaintiff’s claim in an account payable to the plaintiff, and the court then enters judgment in that amount.” In his dissent, Justice Alito states that the decision “does not prevent a defendant who actually pays complete relief – either directly to the plaintiff or to a trusted intermediary – from seeking dismissal on mootness grounds.” Of course, under this potential exception, the method of payment and the identity of the persons or entities who would qualify as a “trusted intermediary” have not yet been determined. Moreover, the timing and mechanics of obtaining a judgment in the amount tendered by defendants is left open. Until these issues are resolved, courts are likely to see an increase in Rule 68 offers with corresponding efforts at payment and accompanying motions for judgment from defendants who want to test the boundaries of this potential exception to the Court’s ruling.
When making an Offer of Judgment along these lines, defendants should continue to be cognizant of any injunctive or equitable relief requested in the Complaint. An Offer of Judgment must offer complete relief if it has any hope of mooting the plaintiff’s claims. Thus, in the TCPA context, a proposed injunction that the defendant will not call, text, or fax in violation of the statute remains an important element of any Rule 68 Offer of Judgment.