Three weeks ago, the U.S. Supreme Court raised eyebrows when it granted certiorari in Spokeo, Inc. v. Robins, — S.Ct. —, 2015 WL 1879778 (Apr. 27, 2015), where it appears the Court will decide whether a consumer has “standing” to assert a cause of action for statutory damages without having suffered actual damage. The decision to grant certiorari in Spokeo was surprising given that the Court ducked the chance to address the same issue several years ago, as discussed in our recent blog post “Will the U.S. Supreme Court Use Robins v. Spokeo to Finally Address “Standing” in the Absence of Actual Injury?”
On Monday, it became clear that 2016 will be an important year for the consumer finance industry before the Supreme Court. The Supremes have now agreed to take on Campbell-Ewald Co. v. Gomez, — S.Ct. —, 2015 WL 246885 (May 18, 2015), where the Court will be faced with two major issues involving offers of judgment made pursuant to Rule 68 of the Federal Rules of Civil Procedure. The Court will likely decide: (1) whether a plaintiff lacks standing to assert a claim after he receives an offer of judgment providing him with complete relief and (2) whether the answer to the first question is any different when the plaintiff has asserted a class claim under Rule 23, but receives an offer of complete relief before any class is certified.
In the Gomez case, the plaintiff, Jose Gomez (“Gomez”), asserted a class claim under the Telephone Consumer Protection Act (“TCPA”) against the Campbell-Ewald Company (“Campbell-Ewald”). Gomez alleged that Campbell-Ewald hired a third-party vendor to send unsolicited text messages on behalf of the United States Navy, with whom Campbell-Ewald had a marketing contract. The text stated: “Destined for something big? Do it in the Navy. Get a career. An education. And a chance to serve a greater cause. For a FREE Navy video call [number.]” The Navy and Campbell-Ewald had agreed to “target” young adults aged 18 to 24, and to send messages only to cellular users who had consented to solicitation.
Gomez filed a federal case against Campbell-Ewald in the U.S. District Court for the Central District of California, alleging a violation of 47 U.S.C. § 227(b)(1)(A)(iii) of the TCPA, which prohibits making a call to a cellular telephone without the “prior express consent” of the recipient. The TCPA allows a plaintiff to recover $500 for a violation of the statute, and $1,500 if the plaintiff can establish that the violation was “willful.” Gomez claimed that he did not consent to receipt of the text message and it was undisputed that a text message constituted a “call” for the purposes of the statute. In addition to seeking compensation for his own text message, Gomez also sought to represent a putative class of other unconsenting recipients of the Navy’s recruiting text messages.
Campbell-Ewald tried to settle the case, offering Gomez $1,503.00 per violation, plus reasonable costs. Gomez rejected the offer by allowing it to lapse.
Following rejection of the settlement offer, Campbell-Ewald moved to dismiss the case for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1), arguing that Gomez’s rejection of the offer mooted the personal and putative class claims. The district court denied the Rule 12(b)(1) motion, and Campbell-Ewald moved for summary judgment, seeking derivative immunity. The district court granted summary judgment, holding Campbell-Ewald immune from liability under the doctrine of derivative sovereign immunity.
Gomez appealed the summary judgment order to the U.S. Court of Appeals for the Ninth Circuit, which reversed the district court’s sovereign immunity holding. As a result, the Ninth Circuit took up Campbell-Ewald’s “standing” argument related to the settlement offer Campbell-Ewald had made to Gomez.
Citing several of its own prior rulings, the Ninth Circuit stated that (1) an unaccepted Rule 68 offer of judgment that would fully satisfy a plaintiff’s claim is insufficient to render the individual claim moot and, likewise, that (2) an unaccepted Rule 68 offer of judgment—for the full amount of the named plaintiff’s individual claim and made before the named plaintiff files a motion for class certification—does not moot a class action. Thus, the Ninth Circuit remanded the case back to the district court. Campbell-Ewald filed a petition for a writ of certiorari to the U.S. Supreme Court.
The federal courts of appeals disagree whether an unaccepted offer of judgment that fully satisfies a plaintiff’s claim is sufficient to render the claim moot. The majority of federal appellate courts—including the Third, Fourth, Fifth, Sixth and Seventh Circuits—hold that an offer that fully satisfies a plaintiff’s individual claim moots the claim. Additionally, the Third and Seventh Circuits have gone further, holding that an offer of complete relief to the plaintiff before it moves for class certification “will generally moot the plaintiff’s [individual] claim, as at that point the plaintiff retains no personal interest in the outcome of the litigation.” Weiss v. Regal Collections, 385 F.3d 337, 340 (3rd Cir. 2004); see Damasco v. Clearwire Corp., 662 F.3d 891, 895 (7th Cir. 2011).
The Ninth and Eleventh Circuits have held that an unaccepted Rule 68 offer of judgment does not moot a plaintiff’s individual claim because the controversy is still alive. The Second Circuit has taken an intermediate approach, stating that the “better resolution” of the case in those circumstances is to enter a default judgment against the defendant for the amount contained in the offer.
As for mooting a class claim, the Third, Fifth, Ninth, Tenth and Eleventh Circuits have held that the “relation-back” doctrine may be invoked to keep a class action alive even where the plaintiff’s individual claim becomes moot. By contrast, the Fourth, Seventh and Eighth Circuits have held that the entire class action suit becomes moot along with the named plaintiff’s individual claim when a defendant makes an offer of full relief before class certification.
The Supreme Court’s impending decision in Gomez should serve to unify the circuits. Moreover, while Gomez involves a TCPA claim, the decision will have a significant impact for other consumer protection lawsuits with statutory damages provisions, including the Fair Debt Collection Practices Act, Truth-in-Lending Act, Fair Credit Reporting Act and others.
Now the wait begins. Between the impending decisions in Spokeo and Gomez, there is a good chance that the landscape of consumer finance litigation could be dramatically altered in 2016. Stay tuned to the blog for regular updates regarding these cases.