On May 18, the U.S. Supreme Court granted certiorari in Campbell-Ewald Co. v. Gomez,1 a Telephone Consumer Protection Act (TCPA) class action. The case raises two related questions that are the source of frequent litigation and circuit conflict in class actions: (1) whether a Federal Rule of Civil Procedure 68 offer of complete relief to a plaintiff moots the plaintiff’s individual claim; and (2) whether that same offer of complete relief tendered before class certification moots a named plaintiff’s class claim under Federal Rule of Civil Procedure 23. The Court will also clarify whether government contractors and subcontractors are protected from liability for damages under the TCPA, pursuant to the doctrine of derivative sovereign immunity. See Sutherland’s Law360 Article: Calling The High Court On TCPA and Sovereign Immunity
In the underlying case, the plaintiff received a single, unsolicited recruitment text message from the defendant, a marketing consultant for the United States Navy. The plaintiff responded by filing a putative class action against the marketing consultant, alleging a single violation of the TCPA. Before any class was certified and before the plaintiff moved for class certification, the defendant marketing consultant attempted to resolve the case by offering Plaintiff complete relief on his claim. The marketing consultant made a Rule 68 offer of judgment to the plaintiff prior to class certification for $1,500 (the maximum amount of statutory damages the plaintiff could recover for a single violation of the TCPA), plus reasonable costs. The plaintiff declined the offer. Thereafter, the defendant moved to dismiss the plaintiff’s claim, arguing that the claim was moot because it had already offered the plaintiff the full amount he could possibly recover under the TCPA. After the district court denied that motion, the defendant moved for summary judgment, claiming derivative sovereign immunity under Yearsley v. W.A. Ross Construction Co.2 The district court granted the defendant’s motion for summary judgment.
On appeal, the U.S. Court of Appeals for the Ninth Circuit reversed, holding that derivative sovereign immunity did not extend to claims under the TCPA.3 The Ninth Circuit also held that an unaccepted Rule 68 offer does not moot a plaintiff’s individual claims or putative class claims. The court offered no further explanation. Although the mootness rulings were consistent with Ninth Circuit precedent, there is disagreement among several federal circuit courts of appeals on these issues. Following the Ninth Circuit’s decision, the defendant/marketing consultant sought Supreme Court review.
In its petition to the Supreme Court, the defendant emphasized that the Ninth Circuit’s ruling conflicts with the majority of other circuits addressing the effect of a Rule 68 offer of judgment. Specifically, the Third, Fourth, Fifth, Sixth and Seventh Circuits have each held that a Rule 68 offer of judgment that satisfies fully a plaintiff’s claim moots a plaintiff’s individual claim. Conversely, the Eleventh Circuit follows the Ninth Circuit’s rule that an unaccepted Rule 68 offer of judgment does not moot a plaintiff’s individual claim (and cannot moot a putative class claim based on that plaintiff’s claim).4 Adding to the fray, the Second Circuit adopted an intermediate approach, holding that a defendant’s offer of judgment does not itself moot the individual plaintiff’s claim, but suggests that the defendant may seek a default judgment based on the offer.5 In 2013, the Supreme Court had the opportunity to determine the effect of a Rule 68 offer of judgment in the context of a collective action under the Fair Labor Standards Act. See Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013). The Court’s majority declined to address the mootness question, explaining that the issue was not properly before the Court. See Sutherland’s Legal Alert covering Genesis Healthcare Corp. v. Symczyk. By granting certiorari in Campbell-Ewald, the Supreme Court is poised to resolve the circuit conflict.
In addition to the Rule 68 offer of judgment issues addressed above, the Supreme Court will decide whether the defendant/marketing consultant properly asserted the defense of derivative sovereign immunity as a defense to plaintiff’s TCPA claim. The defendant raised the defense based on the premise that because the Navy has the authority to contract with firms to help with its recruitment efforts, and the marketing consultant acted at the discretion of the Navy, it may assert the same sovereign immunity defense available to the Navy. The marketing consultant also argued that the Ninth Circuit interpreted and applied Yearsley too narrowly, contending that the Court’s opinion does not limit application of the derivative sovereign immunity doctrine only to cases involving property damage caused by public works projects. The marketing consultant cited to Boyle v. United Technologies Corp.,6 where the Court favorably recounted its holding in Yearsleythat “if [the] authority to carry out the project was validly conferred, that is, if what was done was within the constitutional power of Congress, there is no liability on the part of the contractor for executing its will.” According to the marketing consultant, derivative sovereign immunity applies because it operated within the scope of its delegated authority from the Navy.
Campbell-Ewald will likely have significant ramifications far beyond TCPA class actions. Rule 68 offers of judgment have evolved into a common class action defense strategy, and the Campbell-Ewald case will either expand that strategy or completely eliminate it. In the TCPA context, the case is one of first impression and should clarify the scope of immunity for government contractors performing duties within the scope of delegated authority and, more specifically, in connection with TCPA claims.
This case is also significant because TCPA class actions are on the rise nationwide. Getting clarification from the Supreme Court and resolving the split among the circuits on the impact of Rule 68 offers of judgment will help entities across virtually every industry segment better understand and possibly control their potential TCPA liability. The Court's decision will also have applicability to class actions beyond the TCPA context.