On January 20th, The U.S. Supreme Court ruled 6-3 in Campbell-Ewald Co. v. Gomez, that a company cannot terminate a consumer class action simply by making an unaccepted offer of full relief to the named class representative. The Court left open, however, the question whether actual payment in full to the class representative for his individual claim can moot the case.
The Telephone Consumer Protection Act (“TCPA”) prohibits text messages sent without the recipient’s prior express consent. Private suits are permitted, and a successful plaintiff can obtain an injunction and recover $500 for each violation, which amount may be trebled if the defendant willfully violated the Act.
Campbell-Ewald was the U.S. Navy’s contractor for recruitment advertising. The Navy approved a campaign which involved the sending of recruitment text messages to 18-24 year olds who had consented to receive text message solicitations. Jose Gomez was nearly 40 years old and claimed he had received unsolicited recruitment text messages from Campbell. He sued Campbell individually and on behalf of a nationwide class of individuals who had received the text messages without consent, and sought treble statutory damages, costs, attorney’s fees, and an injunction prohibiting such conduct in the future.
Prior to the deadline for Gomez to file a class certification motion, Campbell proposed to settle Gomez’s individual claim by serving a free standing settlement offer and an offer of judgment pursuant to Federal Rule of Civil Procedure 68 (“Rule 68”). That Rule authorizes a defendant to serve on a plaintiff an offer to allow judgment on specified terms, plus costs. If the plaintiff accepts the offer within 14 days, the court is so notified and enters judgment dismissing the suit. If the offer of judgment is not accepted, and the plaintiff ultimately obtains a less favorable judgment, the plaintiff must pay the defendant the costs it incurred after the offer was made. Both offers made by Campbell would have paid Gomez his costs and approximately $500 per unauthorized message he could show he received (apparently there were three), thereby satisfying his personal claim. The proposed injunction, however, denied liability as well as the claims Gomez had made, and did not include attorney’s fees, which are not required under Rule 68 or the TCPA. Gomez did not accept the offer of judgment under Rule 68 or the free-standing settlement offer.
Campbell then moved to dismiss the case, arguing that rejection of the settlement offers mooted the case, including the class claims, because there no longer was a “case or controversy,” as is required for a lawsuit under Article III of the Constitution. Under Article III, once a plaintiff is deprived of a personal stake in the outcome of a lawsuit, the action can no longer proceed and must be dismissed as moot. Both parties must have a concrete interest in the suit for it to continue. Campbell contended that it no longer had an interest in the outcome of the suit once it offered full relief to Gomez. The district court rejected Campbell’s argument, and denied the dismissal motion on the ground that the unaccepted settlement offer did not moot the suit. The Ninth Circuit agreed, and the Supreme Court granted Campbell’s certiorari petition.
The Supreme Court’s Majority Opinion
Quoting from a dissent by Justice Kagan in a prior decision, Justice Ginsburg, writing for the six member majority, declared: “An unaccepted settlement offer—like an unaccepted contract offer—is a legal nullity. . . . the recipient’s rejection of an offer ‘leaves the matter as if no offer had ever been made.’” Justice Ginsburg pointedly commented that by making the offer, Campbell sought to avoid a potentially adverse class action decision, “one that could expose it to damages a thousand-fold larger than the bid Gomez declined to accept.” However, “with no settlement offer still operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset.” She concluded that the Court’s ruling “suffices to decide this case, ”declaring:
We 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. That question is appropriately reserved for a case in which it is not hypothetical.
Justice Thomas separately concurred, stating that he would have dissented if Campbell had tendered the funds. Because it “only offered to pay Gomez’s claim but took no further steps, the court was not deprived of jurisdiction.”
Chief Justice Roberts, on behalf of the three dissenting Justices (including the late Justice Scalia), declared that when 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. When a defendant is willing to forgo litigation by offering full relief, the plaintiff no longer has an injury in need of redress, and the defendant’s interests are not adverse to the plaintiff’s. The agreement of the plaintiff is not required to moot the case.
As to the claims on behalf of a class of unauthorized text message recipients, the Chief Justice noted that Gomez “does not have standing to seek relief solely on the alleged injuries of others, and Gomez’s interest in sharing attorney’s fees among class members . . . does not create Article III standing.”
Significantly, he added the “good news” that the case was limited to its facts.
The majority does not say that payment of complete relief leads to the same result. For aught that appears, the majority may have come out differently if Campbell had deposited the offered funds with the District Court.
It may be that the Supreme Court will in the future rule that a damages class action is moot under Article III if the defendant deposits the full amount of the plaintiff’s individual claim with the district court or in an account payable to the plaintiff prior to class certification, and the court then enters judgment for the plaintiff in that amount. Certainly, the dissenters invited that additional step.
However, that may not turn out to be the “good news” announced by Chief Justice Roberts for a number of reasons.
- While that particular class action may be extinguished, nothing will stop another class member from instituting a new suit.
- A district court judge could require that notice be sent to the putative class under Rule23(d)(1) informing them of the settlement, and perhaps even adding that they have the right to institute a separate suit.
- Nothing in any of the separate opinions in Campbell-Ewald suggests that the district court judge is prohibited from requiring the settling defendant to pay plaintiff’s legal fees—particularly in an antitrust suit under a statute which provides for payment of legal fees to a successful plaintiff.
- A court also may refuse to enter judgment when the class representative is also seeking injunctive relief or the individual damages being sought is stated in the complaint to be undetermined.
- Justice Ginsburg’s multiple references to the fact that Campbell’s offer did not include an admission of liability may also encourage some judges to require such an admission as a condition of entering judgment. Justice Alito’s separate dissent noted, however, that an order of dismissal, rather than judgment for the plaintiff, should be sufficient to moot a case when the plaintiff has received full relief from the defendant.