The U.S. Supreme Court issued a decision earlier this week in a case raising the issue whether a defendant can cut off a Telephone Consumer Protection Act class action by making an offer of full relief to individual named plaintiffs. See Campbell-Ewald Co. v. Gomez, No. 14-857 (U.S. 1/20/16).

Here is the background: the Navy contracted with petitioner Campbell to develop a multimedia recruiting campaign that included the sending of text messages to young adults, but only if those individuals had “opted in” to receipt of marketing solicitations on topics that included Navy service. Respondent Gomez alleged that he did not consent to receive text messages and, at age 40, was not in the Navy’s targeted age group anyway. Gomez filed a nationwide class action, alleging that Campbell violated the Telephone Consumer Protection Act (TCPA), 47 U. S. C. §227(b)(1)(A)(iii), which prohibits “using any automatic dialing system” to send a text message to a cellular telephone, absent the recipient’s prior express consent. He sought treble statutory damages for a willful and knowing TCPA violation and an injunction against Campbell’s involvement in unsolicited messaging.

Before the deadline for Gomez to file a motion for class certification, Campbell proposed to settle Gomez’s individual claim and filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68. Gomez did not accept the offer and allowed the Rule 68 submission to lapse on expiration of the time (14 days) specified in the Rule. Campbell then moved to dismiss the case pursuant to Rule 12(b)(1) for lack of subject-matter jurisdiction. Campbell argued first that its offer mooted Gomez’s individual claim by providing him with complete relief. Next, Campbell urged that Gomez’s failure to move for class certification before his individual claim became moot caused the putative class claims to become moot as well.

The District Court denied the motion. After limited discovery, the District Court then granted Campbell’s motion for summary judgment on the merits, relying on the Navy’s sovereign immunity from suit under the TCPA. The Ninth Circuit reversed. It agreed that Gomez’s case remained live but concluded that Campbell was not entitled to “derivative sovereign immunity.” 

The Supreme Court took the case and ruled that a mere unaccepted settlement offer or offer of judgment does not automatically moot a plaintiff’s case, so the District Court retained jurisdiction to adjudicate Gomez’s complaint.  While Article III’s “cases” and “controversies” limitation requires that “an actual controversy . . . be extant at all stages of review, not merely at the time the complaint is filed,” Arizonans for Official English v. Arizona, 520 U. S. 43, 67, a case does not become moot as “long as the parties have a concrete interest, however small,” in the litigation’s outcome. Here Gomez’s complaint was not effaced by Campbell’s unaccepted offer to satisfy his individual claim. Under principles of contract law, Campbell’s settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy. With no settlement offer operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset. (Of course, our readers may well recognize that laying a legal controversy to rest may not be quite the same thing as making a contract.) 

On the merits, less interesting to our readers, Campbell’s status as a federal contractor did not entitle it to immunity from suit for its violation of the TCPA. Unlike the United States and its agencies, federal contractors do not enjoy absolute immunity. A federal contractor who simply performs as directed by the Government may be shielded from liability for injuries caused by its conduct. But no “derivative immunity” exists when the contractor has exceeded its authority or its authority was not validly conferred.

The decision resolved a circuit split on the settlement offer issue, and closed the loop on an issue left open by the Court in its 2013 decision in Genesis Healthcare Corp. v. Symczyk.

Interestingly, the majority declined to address the related issue whether the result would have been different if Campbell had actually paid up rather than merely offered to pay. “That question is appropriately reserved for a case in which it is not hypothetical. "

The Chief Justice dissented, arguing that “The problem for Gomez is that the federal courts exist to solve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking.”  It seemed beyond dispute that the offer made would have fully satisfied Gomez’s claims. "That makes the case moot, and Gomez is not entitled to a ruling on the merits of a moot case.”  

The ruling may impact other consumer type claims under statutes, such as the TCPA, under which damages can be easily calculated.  But one has to wonder about a rule in which  federal courts are forced to preside over cases where plaintiffs insist on litigating, with all of the burden and expenses, even when they have been offered 100% of what they could possibly recover.