On January 20, 2016, the United States Supreme Court rejected a strategy recently used by some defendants to defeat class actions in their infancy. In Campbell-Ewald Co. v. Gomez, No. 14-857 (2016), a majority of the Court held that an unaccepted Rule 68[1] offer of judgment to a representative class action plaintiff does not moot the class action because the “case or controversy” still exists for a federal court to maintain jurisdiction over the lawsuit.  

In this case, Jose Gomez sued the Campbell-Ewald Company (“Campbell”) after he received unwanted text messages that Campbell issued pursuant to a contract it maintained with the United States Navy.[2]  Under the contract, Campbell sent text messages marketing the Navy to over 100,000 18-to-24-year old users; however, it also sent one message[3] to Gomez, who was 40 years old and thus beyond the Navy’s targeted group.  Gomez alleged that he did not consent to receive the message and sued Campbell, on behalf of himself and a class of individuals who had also received the message, under the Telephone Consumer Protection Act (“TCPA”), which “prohibits ‘using any automatic dialing system’ to send a text message to a cellular telephone [without] the recipient’s prior express consent.”[4]  Gomez sought maximum damages and statutory treble damages from Campbell for a willful and knowing violation of the TCPA.  Before the passage of the deadline for Gomez to file for class certification, Campbell offered Gomez the total amount of personal treble damages that he could recover if the lawsuit succeeded.[5]  Campbell did not offer to pay attorney’s fees, because the TCPA does not provide for recovery of those fees.  Gomez rejected the offer and went forward with his class action; Campbell challenged the viability of the suit, claiming that because Gomez had been offered the maximum amount that he could recover, he no longer had a personal stake in the case, and his claim was accordingly moot.

Before the Gomez decision, several defendants had attempted to “pick off” representative plaintiffs in class actions by offering representative plaintiffs – rather than the class – complete relief.  The lower federal courts were divided as to whether such an offer eliminated a plaintiff’s legitimate stake in the action and mooted it.

In its decision, the Supreme Court resolved the split by concluding that an unaccepted Rule 68 settlement offer does not moot the action.  Writing for the majority, Justice Ginsberg held that a live “case or controversy” still existed when a Rule 68 settlement offer was rejected, just as it did before the settlement offer was made – regardless of the amount of the settlement offer.[6]  Likening a settlement offer to a contract, Ginsberg concluded that a rejected settlement offer “‘leaves the matter as if no offer had ever been made,’” and a reviewing court thus retains jurisdiction.[7]  Justice Ginsberg was careful to note, however, that this analysis only applied where a settlement offer was rejected, explicitly saving the question of accepted offers for another day.[8]

Justices Roberts, Scalia, and Alito dissented, with Roberts and Alito writing separate opinions.  The dissenters argued that no real dispute exists where a defendant both wants to and is able[9]to make a plaintiff whole, with Justice Roberts asserting that “federal court[s] exist to resolve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking.”[10]  Even where a plaintiff rejects a Rule 68 settlement offer, Roberts argued, “[t]he agreement of the plaintiff is not required to moot a case . . . [where] the defendant is willing to give plaintiff everything he asks for, there is no case or controversy to adjudicate.”[11]

In the wake of Gomez, defendants facing class actions in federal court should be aware that the court will not dismiss, as moot, an action in which the defendant has made a Rule 68 offer of judgment that would have made the plaintiff whole, but which the plaintiff nevertheless rejects.  According to the Court, class action plaintiffs are permitted to litigate their claims to the full extent of the law, regardless of whether a defendant can and will make them whole.  As a result, defendants will not be able to dismiss the claims of representative class plaintiffs through Rule 68 settlement offers alone.  Defendants should be prepared, therefore, to litigate class actions against every individual plaintiff, even if they have been offered, but reject, an offer of settlement.  An open question for the Court to decide, however, is the effect of an accepted settlement offer on the viability of a class action or if a defendant deposited an offered settlement into a court account as a judgment against the defendant.