Campbell-Ewald v. Gomez: High Court Rules Unaccepted Offer to Settle Individual Claim Does Not Moot Class Action

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Last month, in a 6-3 decision, the United States Supreme Court held that an unaccepted offer to settle a named plaintiff’s individual claim in a class action suit does not render the case moot. Campbell-Ewald Co. v. Gomez, No. 14-857 (U.S. Sup. Ct. Jan. 20, 2016) (slip op. available here). Justice Ruth Bader Ginsburg, writing for the majority, held that, in accordance with Rule 68 of the Federal Rules of Civil Procedure, “an unaccepted settlement offer has no force.” Slip op. at 1. The Court found that “like other unaccepted contract offers, it creates no lasting right or obligation.” Id. As such, adversity between the parties continues with the offer off the table and Article III standing persists.

In Campbell-Ewald, plaintiff Jose Gomez brought a nationwide class action alleging that the marketing firm Campbell-Ewald violated the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227(b)(1)(A)(iii), by sending him unauthorized text messages under its contract with the United States Navy as part of a recruitment campaign. The plaintiff alleged he did not consent to any such text messages and sought treble statutory damages for willful and knowing violation of the TCPA and an injunction against Campbell-Ewald’s involvement in unsolicited messaging. Prior to the class certification deadline, Campbell-Ewald sought to settle the plaintiff’s individual claim by offering him approximately $1,500, thereby satisfying his personal treble-damages claim, and proposed a stipulated injunction that included a denial of liability. Campbell-Ewald also filed a Rule 68 offer of judgment, but the plaintiff did not accept the settlement offer and let the Rule 68 offer lapse. Thereafter, Campbell-Ewald sought to dismiss, arguing that its offer mooted the plaintiff’s individual claim by providing him with complete relief and that he had not moved for class certification prior to his claim becoming moot. Both the district court and the Ninth Circuit found that the plaintiff’s case remained a live controversy and was not mooted when the offer was not accepted.

The Court granted certiorari to resolve a split among the Courts of Appeal and determine whether an unaccepted offer can moot a plaintiff’s claim and thus deprive the federal court of Article III jurisdiction. The Court adopted the analysis of Justice Kagan from her dissent in Genesis HealthCare Corp. v. Symczyk, 569 U.S. __ , 133 S.Ct. 1523 (2013), which is a Fair Labor Standards Act (FLSA) case in which the Court assumed, without deciding, that an unaccepted settlement offer under Rule 68 would render an employee’s individual FLSA claim moot. Writing in dissent, Justice Kagan explained that “[w]hen a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief.” Slip op. at 7. Under this reasoning, “[a]n unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect.” Id. The Court noted that since Genesis HealthCare, every federal appeals court that has ruled on this issue has adopted Justice Kagan’s analysis.

The Court found that pursuant to basic principles of contract law, the settlement offer and Rule 68 offer of judgment here, once rejected, have no continuing efficacy. The door was left open for a later determination on whether there would be a different result if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, rather than just making an offer. Nonetheless, the Court’s decision is useful for class action practitioners, as it forecloses one avenue for defendants seeking early dismissal of class actions via offers of complete relief made to the named plaintiffs. 

Authored By:
Liana Carter, Senior Counsel