In a hotly anticipated decision, the Supreme Court yesterday refrained from permitting defendants to end class action cases by offering to make named plaintiffs whole by paying their damages before plaintiffs move for class certification.
In Campbell-Ewald Co. v. Gomez, 577 U.S. ___ (2016), Jose Gomez alleged that Campbell-Ewald violated the Telephone Consumer Protection Act (TCPA) by sending him unsolicited advertisements by text message. Campbell-Ewald was contracted by the United States Navy to orchestrate a recruiting campaign, which included text message marketing to potential recruits who had “opted in” to receiving marketing solicitations. Gomez, who had not “opted in,” received at least one such text message. Relying on the statutory damages available under the TCPA, Gomez pursued damages and injunctive relief on his own behalf and as part of a class action.
Before Gomez could file for class certification, Campbell-Ewald made a settlement offer that included damages fully satisfying Gomez’s claim and a stipulated injunction. Gomez rejected the settlement offer. In response, Campbell-Ewald filed a motion to dismiss, arguing that its settlement offer mooted Gomez’s individual and class claims. The District Court denied the motion to dismiss, but granted a subsequent summary judgment motion on the grounds that Campbell-Ewald, as a government contractor, was protected by the sovereign immunity doctrine. The Ninth Circuit agreed that the settlement offer did not moot Gomez’s claims, but reversed on the sovereign immunity doctrine.
In a 6-to-3 decision penned by Justice Ginsburg, the Court affirmed the Ninth Circuit, citing to the dissenting decision in Genesis Healthcare Corp. v. Symczyk, 569 U.S. ___ (2013). In Genesis, the majority suggested in dicta that a settlement offer making the plaintiff whole mooted the plaintiff’s individual claims. In Campbell-Ewald, the majority of the Court explicitly adopted Justice Kagan’s dissent in Genesis, which stated that “[w]hen a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before . . . . An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity with no operative effect.” Campbell-Ewald, 577 U.S. slip op. at 7.
The Court in Campbell-Ewald left open the question of whether the decision would differ where a defendant paid the full amount of the offer to the plaintiff. The Court stated, “[w]e need not, and do not, now decide 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.” Campbell-Ewald, 577 U.S. slip op. at 11.
While Justices Kennedy, Breyer, Sotomayor, and Kagan joined Ginsburg’s decision, Justice Thomas filed a separate opinion concurring in judgment only. Justice Thomas insists that the Court should have relied on the “tender rule,” which would have required an offer to pay the entire claim, accompanied by actual payment, before the plaintiff filed the suit in order to moot the claims. Campbell-Ewald, 577 U.S. slip op. at 2 (Thomas, J. concurring).
Justices Roberts, Scalia, and Alito, on the other hand, disagreed, reasoning that a settlement offer making Gomez whole renders the claims moot. Campbell-Ewald, 577 U.S. slip op. at 1-2 (Roberts, C. J. dissenting). Justice Alito wrote a separate dissenting opinion to emphasize that the case was moot because “there was no real dispute that Campbell would make good on its promise to pay Gomez.” Campbell-Ewald, 577 U.S. slip op. at 1 (Alito, J. dissenting) (internal quotation marks omitted).
Had the Court gone the way of the dissenting justices, many believe that most class actions involving statutory damages would be ended by early settlement offers. As it is, the Court leaves open the possibility that defendants can accomplish the same goal by simply tendering a payment to plaintiffs, rather than merely offering to fully satisfy their claims. How lower courts answer that question remains to be seen.