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Supreme Court: Settlement Offers Do Not Moot Class Actions, But...
The United States Supreme Court on Wednesday resolved the long-standing circuit split on whether an offer to satisfy the named plaintiff’s individual claims is sufficient to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of similarly situated individuals. In a 6-3 decision authored by Justice Ginsburg, the Supreme Court held that an unaccepted settlement or Rule 68 offer cannot moot a class action. However, the Court refused to address and explicitly left open the question of whether its ruling would be different if a defendant deposited the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then entered judgment for the plaintiff in that amount. By leaving this question open, defendants in a position to unilaterally provide complete relief may still be able to “pick off” putative class representatives and avoid class action suits.
In Campbell-Ewald Co. v. Gomez, No. 14-857 (Jan. 20, 2016), the United States Navy contracted with Campbell-Ewald Company to develop a multimedia recruiting campaign that included sending text messages to young adults, but only those who had opted in to receiving these type of marketing solicitations. Campbell’s subcontractor generated a list of cellular phone numbers and transmitted the Navy’s message to over 100,000 recipients, allegedly including some people who had not opted into receiving such solicitations. The plaintiff filed a nationwide putative class action alleging that Campbell violated the Telephone Consumer Protection Act (TCPA) and seeking treble statutory damages, attorneys fees and costs, and an injunction. Campbell attempted to moot the claim by offering (i) treble statutory damages for each unsolicited text it sent to the sole plaintiff; and (ii) a stipulated injunction that it would no longer violate the TCPA. Campbell actually made two offers, one in writing conveyed to the plaintiff, and the other substantively the same but under the auspices of Rule 68. Under Rule 68, if the judgment is not more favorable than the unaccepted settlement offer, the offeree must pay the costs incurred after the settlement offer was made. Both offers were made prior to the plaintiff moving for class certification. The plaintiff did not accept the offers and allowed Campbell’s Rule 68 submission to lapse after the 14 day deadline specified in the Federal Rules. Campbell then moved to dismiss under Rule 12(b)(1), arguing that its offers mooted the plaintiff’s individual claim by providing him complete relief and that because the plaintiff had not moved for class certification prior to his claim becoming moot, the putative class action claims also were moot. The district court denied the motion and the Ninth Circuit affirmed.
The Supreme Court affirmed. Writing for the majority, Justice Ginsburg held that the unaccepted settlement offers did not moot the case. Relying upon language from Justice Kagan in a dissenting opinion, the majority reasoned that an unaccepted settlement offer, like any unaccepted contract offer, is a legal nullity with no operative effect. “In short, with no settlement offer still operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset.”
Justice Thomas wrote a concurring opinion relying on the common-law history of formal tenders, i.e., deposit of the entire claim amount in trust for the plaintiff. However, his opinion seems to suggest that such formal tenders would suffice to moot the action. The conservative dissenters would have held any offer, tender or unilateral transfer that fully satisfies the plaintiff’s claims would moot the action. Indeed, even the majority distinguished actual transfer and tender cases from the case here. Thus, there still remains some avenues for attempting to moot consumer lawsuits.