Supreme Court Holds an Unaccepted Rule 68 Offer of Judgment Does Not Moot the Case

Supreme Court Holds an Unaccepted Rule 68 Offer of Judgment Does Not Moot the Case

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

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 case was remanded back to the U.S. District Court for the Central District of California to decide the case.

[The Court also considered whether the doctrine of derivative sovereign immunity applies to claims for violation of the TCPA, and held that federal contractors do not share the Government's absolute immunity from liability and litigation.]

The facts: in 2005 the U.S. Navy entered into a contract with the defendant, Campbell-Ewald Co., where Campbell would provide recruiting and advertising services.  As part of this contract, Campbell orchestrated more than 100,000 Navy-branded text messages to cell phone subscribers.  Many of the texts were issued to individuals who had not opted-in to receive such messages.  The named 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 extended a Rule 68 offer of judgment and a separate settlement offer to Gomez which Gomez refused.  Campbell argued that this offer of "complete relief" to Gomez rendered his individual and class claims moot.

At trial, the U.S. District Court for the Central District of California held that Gomez's claims were not moot, and when Campbell appealed that ruling, the U.S. Court of Appeals for the Ninth Circuit affirmed the district court decision.  Campbell petitioned the U.S. Supreme Court for review, which was granted on May 18, 2015.

Justice Ruth Bader Ginsburg issued the Court's majority opinion affirming the Ninth Circuit's holding.  Justice Ginsburg explained that Gomez's complaint was not eliminated by Campbell's unaccepted offer to satisfy his individual claim.  The Court's majority applied basic principles of contract law, reasoning 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's continuing denial of liability, Gomez gained no entitlement to the relief Campbell previously offered."

In a detailed and pointed dissenting opinion, Chief Justice John Roberts thoroughly examined and criticized the majority opinion's reliance on contract law to resolve the central issue in the case.  Chief Justice Roberts said, "[t]he 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 there is 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 FCRA, the TCPA and the FDCPA. 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 may not successfully utilize 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 "[t]he 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."

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 only fixed statutory damages, but also attorneys' fees, which are in an undetermined amount.

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