Supreme Court Rules that Unaccepted Offer Fully Satisfying a Plaintiff’s Claims Cannot Moot a Case


1/21/2016 6:01:00 AM

Justices appear to endorse proposition that actual payment of the amount claimed to be owed may be sufficient to moot a case.

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The U.S. Supreme Court ruled 6-3 Wednesday in favor of a consumer in the class action Telephone Consumer Protection Act case Campbell-Ewald Co. v. Gomez, No. 14-857, 2016 WL 228345, ---S.Ct.---- (U.S., Jan 20, 2016). The principal question the Court addressed in the case was whether an offer of judgment for “complete relief” to the lead plaintiff in a class action that had not yet been certified rendered the plaintiff's class claims moot even if the plaintiff rejected the offer. This question has been the source of frequent litigation and circuit conflict in many other class actions.

The Court also considered whether the doctrine of derivative sovereign immunity applies to claims for violation of the TCPA. 

The Court held that an unaccepted settlement offer or offer of judgment to satisfy the named plaintiff's individual claims does not moot the case when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated; the district court retains jurisdiction to decide the case. The Court also held that federal contractors do not share the Government's absolute immunity from liability and litigation. 

As ACA International reported previously, in 2005 the Navy entered into a contract with the defendant, Campbell-Ewald Co., under which Campbell wouldprovide recruitment-related advertising services. As part of this contract, Campbell workedwith a third party to send more than 100,000 Navy-branded text messages to individuals' cell phones, many of which went to individuals who had not opted-in to receive such messages. One such person, the plaintiff Jose Gomez, filed a class action complaint against Campbell, alleging that the company had violated the TCPA by sending text messages to nonconsenting recipients.  Before Gomez moved for class certification, Campbell made an offer of judgment and tendered a separate settlement offer to Gomez, which Gomez refused. Campbell later claimed that this offer of “complete relief” to Gomez rendered his individual and class claims moot. 

The U.S. District Court for the Central District of California concluded that Gomez'sc laims were not moot, as did the U.S. Court of Appeals for the Ninth Circuit. Campbell subsequently petitioned the U.S. Supreme Court for review, which was granted on May 18, 2015.

Affirming with the Ninth Circuit Court of Appeals, Justice Ruth Bader Ginsburg's majority opinion held that Gomez's complaint was not eliminated by Campbell unaccepted offer to satisfy his individual claim.  Applying basic principles of contract law, the Court's majority reasoned that “Campbell's settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy. Absent Gomez's acceptance, Campbell's settlement offer remained only a proposal, binding neither Campbell nor Gomez. Having rejected Campbell's settlement bid, and given Campbell'sc ontinuing denial of liability, Gomez gained no entitlement to the relief Campbell previously offered.”

In a lengthy dissenting opinion, Chief Justice John Roberts criticized the majority'sreliance on contract law to resolve the central issue in the case saying that “The majority is correct that because Gomez did not accept Campbell's settlement, it is a “legal nullity” as a matter of contract law. The question, however, is not whether thereis a contract; it is whether there is a case or controversy under Article III. If the defendant is willing to give the plaintiff everything he asks for, there is no case or controversy to adjudicate, and the lawsuit is moot.” 

Grounding his dissent on the prohibition against federal courts issuing advisory opinions, Chief Justice Roberts, joined by Justices Scalia and Alito, explained that they dissented from the majority opinion because “federal courts exist to resolve real disputes, not to rule on a plaintiff's entitlement to relief already there for the taking.”   

The Campbell-Ewald case has significant ramifications for “no-injury” statutory damage class action lawsuits filed under federal statutes such as the Fair Credit Reporting Act, the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act. In those suits, plaintiffs often seek the specific damages provided for by statute, not actual damages. As a result, a plaintiff's maximum recovery can be predetermined. Prior to the Supreme Court's decision in Campbell-Ewald, if a defendant made a Rule 68 offer of judgment in the statutory amount, plus attorneys' fees, the plaintiff's claim could be mooted because the plaintiff would have been considered afforded complete relief. But now, under the Campbell-Ewald decision, defendants cannot employ a Rule 68 offer to moot the litigation. 

However, Campbell-Ewald has not completely eliminated Rule 68 as a class action defense tool. Although a mere offer of the sum owed is insufficient to eliminate a court's jurisdiction to decide the case to which the offer related, Justice Roberts confirmed in the dissent that “The good news is that this case is limited to its facts. The majority holds that an offer of complete relief is insufficient to moot a case. The majority does not say that payment of complete relief leads to the same result. . . . the majority's analysis may have come out differently if Campbell had deposited the offered funds with the District Court. . . . This Court leaves that question for another day – assuming there are other plaintiffs out there who, like Gomez, won't take 'yes' for an answer.” 

But although the Campbell-Ewald 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,” the Court, unfortunately, did not consider the practical aspects of how a defendant might actually pay for complete relief, rather than merely offer complete relief, when a plaintiff in a variety of contexts may be entitled to not onlyfixed statutory damages, but also attorneys' fees, which are in an undetermined amount.

To read more about the most recent significant judicial decisions involving the credit and collections industry, ACA members can always find concise summaries of these decisions on ACA's Industry Advancement Program page.

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