An unaccepted Rule 68 offer of judgment that would fully satisfy a named plaintiff’s individual claim does not moot individual or class claims opined the U.S. Supreme Court, resolving a split in the circuits. Campbell-Ewald Co. v. Gomez, No. 14-857 (January 20, 2016). The Court also held that the petitioner’s status as a government contractor does not entitle it to the protection of derivative sovereign immunity. The Campbell-Ewald case was brought under the Telephone Consumer Protection Act (TCPA), but the ruling applies to all class actions where the defendant has made (or could make) a Rule 68 offer of judgment. Left unresolved by the Court is the question whether actual payment in some form, rather than merely offering to pay a settlement or judgment, would lead to the same result.
In the underlying case, the plaintiff received a single, unsolicited recruitment text from the defendant, a marketing consultant hired by the United States Navy. The plaintiff responded by filing a putative class action against the marketing consultant, alleging a violation of the TCPA. Before the plaintiff moved for class certification, the defendant marketing consultant made a Rule 68 offer of judgment to the plaintiff for $1,503—$3 more than the maximum amount of treble statutory damages the plaintiff could recover for a single violation of the TCPA. The plaintiff declined the offer. Thereafter, the defendant moved to dismiss the plaintiff’s claim, arguing that the claim was moot because it had already offered the plaintiff full and complete relief under the TCPA. The district court denied the motion.

On appeal, the U.S. Court of Appeals for the Ninth Circuit held that an unaccepted Rule 68 offer does not moot a plaintiff’s individual claims or putative class claims.1Although the mootness ruling was consistent with Ninth Circuit precedent, several other federal circuit courts of appeals had held otherwise.

On review of the mootness issue, the Supreme Court held that an unaccepted offer of judgment does not moot a plaintiff’s individual claim or the claims of a putative class, embracing the reasoning of Justice Elena Kagan’s dissent in Genesis HealthCare Corp. v. Symczyk, 133 S. Ct. 1523 (2013).2 In that dissent, Justice Kagan, and now the majority of the Court in Campbell-Ewald, characterized the unaccepted offer as a “legal nullity, with no operative effect.” The rejection of a Rule 68 offer of judgment leaves the case as a live controversy in the same position as it would have been had the defendant never made the offer. In deciding only the specific issue before the Court, Justice Ruth Bader Ginsburg, writing for the majority, declined to opine on the hypothetical situation in which “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.” Justice Clarence Thomas concurred with the judgment on that basis, agreeing that a mere offer does not end the case; he suggested, however, that his analysis may have been different had there been actual tender of the funds.

Chief Justice John Roberts, writing in dissent, advocated for a rule that a complete offer made pursuant to Rule 68 moots the action. According to Justice Roberts, “[w]hen a plaintiff files suit seeking redress for an alleged injury, and the defendant agrees to fully redress that injury, there is no longer a case or controversy for purposes of Article III.” In such circumstances, “the plaintiff cannot demonstrate an injury in need of redress by the court.”

Sutherland Practice Point

The decision limits the defense strategy in class actions of picking off the named plaintiff by offering complete relief on an individual basis. This ruling will have a particular impact in cases where the named plaintiff’s damages are limited and well-defined, such as in TCPA cases, because defendants will no longer be able to moot class claims simply by making an offer of individual relief.

Finally, on the question of derivative sovereign immunity for federal contractors under the TCPA, the Supreme Court concluded that a contractor cannot claim this shield when the contractor’s actions are alleged to have violated both federal law and the government’s explicit instructions. According to the Court, the Navy relied on the contractor’s representation that the list of recipients for text message solicitations included only individuals who had opted in to receive them. The Court embraced the Ninth Circuit’s vicarious liability determination on claims against the contractor, and rejected the sovereign immunity defense.