U.S. Supreme Court Holds that a Full, Unaccepted Settlement Offer to a Named Plaintiff in a Putative Class Action Does Not Moot the Plaintiff’s Case

SUMMARY

The Supreme Court held yesterday in Campbell-Ewald Co. v. Gomez1 that a defendant’s unaccepted offer to provide the full relief a plaintiff seeks does not render the plaintiff’s claim moot. That question had been reserved in Genesis HealthCare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), which held that a collective action under the Fair Labor Standards Act should be dismissed if the named plaintiff’s individual claim becomes moot. Campbell-Ewald makes clear that defendants in putative class actions cannot dispose of the case based on the rule in Genesis HealthCare merely by offering to settle the named plaintiff’s claims in full. The Court expressly reserved decision, however, on whether actual payment of the sum demanded by a named plaintiff would moot that plaintiff’s claim, and did not cast doubt on the principle that a named plaintiff must maintain individual standing throughout every stage of the proceeding in order for a putative class action to remain justiciable. Accordingly, the decision leaves open the question whether a defendant may ward off a putative class action by unilaterally remedying the named plaintiff’s claimed injuries.2

BACKGROUND

The U.S. Navy engaged marketing firm Campbell-Ewald to conduct a multimedia recruiting campaign that included sending text messages to young cellular phone users who had consented to receiving such marketing solicitations. When Jose Gomez received one of those text messages, he filed a putative class action complaint alleging that Campbell-Ewald had violated the Telephone Consumer Protection Act (“TCPA”) by sending him a marketing text message without his consent. Gomez sought statutory damages of $500 for the offending message he received (which may be trebled under the TCPA) and an  injunction barring Campbell-Ewald from sending future unsolicited text messages. Before Gomez filed a motion to certify the class, Campbell-Ewald filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68, offering to pay Gomez the statutory maximum he could recover under the TCPA ($1,500) plus his court costs. Campbell-Ewald also offered to enter into a stipulated injunction enjoining it from sending future messages in violation of the TCPA, though the proposed injunction denied liability or any grounds for the imposition of an injunction.3    Gomez did not accept the offer, and the offer therefore lapsed after 14 days, as provided by Rule 68.

Campbell-Ewald then moved to dismiss the case for lack of subject-matter jurisdiction, arguing that, because it had offered Gomez all the relief he could obtain on his TCPA claim, there was no case or controversy under Article III of the U.S. Constitution. The District Court denied Campbell-Ewald’s motion to dismiss, and the Ninth Circuit affirmed, holding that “an unaccepted Rule 68 offer of judgment . . . does not moot a class action.”4

THE SUPREME COURT’S DECISION

In a 6-3 decision, the Supreme Court held that an unaccepted offer to settle a plaintiff’s claim does not render the case moot under Article III.5 Adopting the reasoning of Justice Kagan’s dissent in Genesis HealthCare, the Court concluded that, under contract-law principles, Campbell-Ewald’s settlement offer and Rule 68 offer of judgment lacked any legal effect once Gomez refused to accept them. Once the settlement offer lapsed, the Court held, Gomez and Campbell-Ewald remained just as adverse as they had been when Gomez first filed his complaint. That was enough, according to the Court, to satisfy the “case or controversy” requirement of Article III.6

In reaching that conclusion, the Court distinguished prior cases in which defendants had actually paid— rather than merely offered to pay—the full amount in controversy. The Court expressly reserved any decision as to “whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.”7

Chief Justice Roberts, joined by Justices Scalia and Alito, dissented. In his view, once Campbell-Ewald agreed to fully redress Gomez’s claimed injury, there no longer existed any real dispute for the federal courts to resolve—and thus no case or controversy for purposes of Article III.8 Noting that the majority did not dispute that a named plaintiff must maintain individual standing at every stage of the proceeding in order for a putative class action to remain justiciable, Chief Justice Roberts criticized the majority’s reasoning for allowing a plaintiff, rather than the court, to determine when a case becomes moot based on a mere desire to obtain a judgment from a court.9 Chief Justice Roberts also underscored the majority’s refusal to decide whether the actual payment of complete relief does suffice to moot a case, suggesting that a different result would follow in that instance.10 Similarly, Justice Alito wrote separately to emphasize his view that an offer of full relief should only moot a named plaintiff’s claim where it is “absolutely clear that the plaintiff will be able to receive the offered relief”—including (but not limited to) when a defendant actually pays a plaintiff the contested sum.11

IMPLICATIONS

As a result of yesterday’s decision in Campbell-Ewald, defendants seeking to dispose of a plaintiff’s lawsuit by providing the relief demanded cannot do so merely by offering to satisfy the plaintiff’s claim. Critically, however, the Court expressly declined to decide whether actually providing the requested relief renders a case moot for purposes of Article III. Given the Court’s previous determination in Genesis HealthCare Corp. that a collective action is not justiciable once a named plaintiff’s claim becomes moot, in any class or collective action where the named plaintiff’s individual claims seek relatively modest damages or where recovery is capped by statute, defendants may wish to attempt to dispose of the case by paying the full amount of relief requested.