The United States Supreme Court further removed a valuable tool from class action defendants’ arsenals Wednesday, ruling 6-3 that a class action cannot be mooted by an offer of judgment conferring full relief to an individual plaintiff. The majority opinion in Campbell-Ewald Company v. Gomez, penned by Justice Ruth Bader Ginsburg, rejected the defendant’s contention that a settlement offer and the filing of a Rule 68 offer of judgment of more than three times the statutory amount for Telephone Consumer Protection Act violations mooted the plaintiff’s claims. This decision closes the door on a strategy permitting putative class action defendants to moot the action by making an offer of judgment providing complete relief to the would-be class representative prior to class certification.
Noting that even after an offer of complete relief the case remained an active “case” or “controversy” sufficient to satisfy jurisdictional requirements, Justice Ginsburg wrote that “an unaccepted settlement offer has no force,” and that “[l]ike other unaccepted contract offers, it creates no lasting right or obligation.” Accordingly, with the settlement offer “off the table, and the defendant’s continuing denial of liability, adversity between the parties persists,” justifying continued federal court jurisdiction.
The Court’s decision answered a question left lingering since its 2013 ruling in Genesis HealthCare Corp. v. Symczyk, 133 S. Ct. 1523 (2013): whether the claim of a plaintiff who let a Rule 68 offer of judgment lapse was mooted by that offer. Justice Ginsburg explicitly stated that the answer is no, quoting from Justice Kagan’s dissent in Genesis, wherein she noted that “[a]n unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer ‘leaves the matter as if no offer had ever been made.’” (quoting Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U. S. 149, 151 (1886)).
For some, the ruling came as no surprise, because despite the Court’s failure to rule on the issue in Genesis, every Court of Appeals to consider the issue since that decision found that unaccepted offers do not moot claims. Justice Ginsburg countered the Chief Justice’s suggestion that the holding transferred authority from the district court to plaintiffs by asserting that permitting an unaccepted settlement offer to an individual plaintiff to moot the claims of a similarly situated class “would place the defendant in the driver’s seat.” However, the Court did decline to rule on whether “the result would be different if a defendant deposits the full amount of the plaintiff ’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.”
While the decision on the Rule 68 issue will likely earn the most attention, the Court also ruled that the defendant’s status as a government contractor did not entitle it to governmental immunity.
The Campbell-Ewald Company ruling will make it more difficult for defendants to cut off putative class actions in the early stages, placing defendants at a higher risk of extended and expensive litigation. However, the full consequences of this apparently plaintiff-friendly decision remain to be seen.
Client Alert 2016-025