In many cases, defendants facing class actions where the plaintiffs’ damages are statutorily prescribed have been able to derail the class action by offering the named plaintiff the full amount of statutory damages that plaintiff could recover on his or her “best day in court” by way of an Offer of Judgment under Federal Rule of Civil Procedure 68. The offer must have been made before the named plaintiff moved to certify the proposed class. Generally speaking, the rationale of the courts which have adopted this rule is that, because the defendant has agreed to pay the plaintiff the most that he or she could recover for their claim, there is no actual “case or controversy” under Article III to the United States Constitution and, therefore, the courts are without jurisdiction to adjudicate the claim. These courts have adopted this rationale even if the plaintiff declines the offer of judgment. Such results have frustrated the efforts of opportunistic plaintiff’s counsel and benefited corporate defendants. However, the courts have been divided as to whether such an outcome is appropriate.
In Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663 (2016), the United States Supreme Court resolved this issue, holding that a Rule 68 Offer of Judgment to the named plaintiff for the full amount of the named plaintiff’s claim does not moot a class action if the offer is not accepted. In Gomez, the named plaintiff claimed that an advertising company violated the Telephone Consumer Protection Act (“TCPA”) by sending him a text advertisement without his prior express consent. See 47 U.S.C. 227(b)(1)(A)(iii). A plaintiff successful in a TCPA action may recover his or her “actual monetary loss,” or $500 for each violation, “whichever is greater.” Damages may be trebled if the defendant “willfully or knowingly violated” the TCPA. See 47 U.S.C. 227(b)(3).
Prior to the plaintiff’s motion for class certification, the defendant in Gomez filed a Rule 68 Offer of Judgment offering the plaintiff $1,503 per text message, thereby exceeding the damages that the plaintiff could obtain on his “best day” in court. (Unlike many consumer protection statutes, the TCPA does not permit a plaintiff to recover attorney’s fees). The plaintiff did not accept the offer and it lapsed after 14 days pursuant to Rule 68.
The defendant moved to dismiss the case pursuant to Federal Rule of Civil Procedure 12(b)(1), arguing that the court lacked subject-matter jurisdiction. No “case or controversy” remained, the defendant argued, because its offer mooted the plaintiff’s individual claim by providing him with complete relief. Further, the defendant argued that, because the plaintiff had not moved for class certification before his claim became moot, the putative class claims also became moot.
The Supreme Court rejected the defendant’s arguments. In doing so, the Court relied on basic tenets of contract law: “An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect … [T]he recipient's rejection of an offer leaves the matter as if no offer had ever been made. Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that an unaccepted offer is considered withdrawn. So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.” Id. at 670 (2016)(internal citations omitted).
Accordingly, defendants may no longer defeat class actions merely by offering the named plaintiff the full amount of the plaintiff’s claim before a class is sought to be certified. Such a strategy will only work, it appears, if the plaintiff accepts the offer.
Nevertheless, other considerations may yet prove beneficial to class action defendants. The Supreme Court left open the possibility that a defendant may still be able to “moot” an individual plaintiff’s claim by (1) depositing sufficient sums in an account payable to the plaintiff, and (2) having the court enter judgment for the plaintiff in that amount. Id. at 672. Another issue that both plaintiff and defense counsel should consider is whether it is ethical for plaintiff’s counsel to advise his or her client to reject a Rule 68 Offer of Judgment for the full amount of the plaintiff’s statutory claim. Businesses involved in class action litigation will want to stay tuned.