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United States Supreme Court Holds That A Defendant’s Unaccepted Offer Of Full Settlement To Named Plaintiff In A Class Action Does Not Require Dismissal Of The Action As Moot

January 26, 2016

Can a defendant in a putative class action obtain dismissal of that action as moot by making an “offer of judgment” under federal rules that, if accepted, would fully satisfy the claim of the individual named plaintiff? It is an issue with implications in a broad set of contexts, from employment and consumer litigations to complex claims involving new technologies.

On January 20, 2016, the United States Supreme Court issued a decision providing a partial answer to this question. In Campbell-Ewald Co. v. Gomez, 577 U.S. ____ (2016), Docket No. 14-857, the Court limited a defendant’s ability to obtain dismissal of a class action in its early stages by offering to satisfy the named plaintiff’s asserted claims in full. In Campbell-Ewald, the defendant (“Campbell”), an advertising and marketing communications agency, had contracted with the United States Navy to execute a multi-media recruiting campaign, including sending text messages to young adults. Contrary to the Navy’s direction, Campbell allegedly had text messages sent to recipients who had not “opted in” to the receipt of marketing solicitations on topics that included service in the Navy. Plaintiff Gomez, a recipient of the Navy’s recruiting message, brought suit against Campbell on behalf of himself and a nationwide class of individuals who had received, but had not consented to receipt of, such text messages. Plaintiff claimed that defendant violated the Telephone Consumer Protection Act, 47 U.S.C. §227(b)(1)(A)(iii).

Prior to plaintiff’s deadline to file a motion for class certification, Campbell filed an “offer of judgement”, pursuant to Federal Rule of Civil Procedure 68, offering to pay Gomez his costs and $1,503.00 in statutory damages for the text messages which Gomez had received. Gomez declined the offer. Thereafter, Campbell moved to dismiss the action as moot, arguing that, since it had offered to pay Gomez full compensation for his alleged claim, there was no “case” or “controversy” providing the federal court with continuing subject matter jurisdiction.

The Supreme Court affirmed the decision of the United States Court of Appeals for the Ninth Circuit denying Campbell’s motion to dismiss the action as moot. In an Opinion by Justice Ginsburg, the Court applied basic principles of contract law and held that once Campbell’s settlement bid and Rule 68 offer of judgment had been rejected by Gomez, those offers no longer had “continuing efficacy” in the action. As Justice Ginsburg explained, “Having rejected Campbell’s settlement bid, and given Campbell’s continuing denial of liability, Gomez gained no entitlement to the relief Campbell previously offered.” Accordingly, his claim was not moot. With respect to the class action claims, Justice Ginsburg further held that, “[w]hile a class action lacks independent status until certified, … a would-be class representative with a live claim of her own must be afforded a fair opportunity to show that certification is warranted.”

In reaching its holding, the Court in Campbell-Ewald distinguished its 2013 decision in a case with similar facts, Genesis HealthCare Corp. v. Symczyk, 569 U.S. ______ (2013), Docket No. 11-1059. In Genesis, the Court held that a collective action brought under the federal Fair Labor Standards Act of 1938 should be dismissed as moot based on defendants’ offer of judgment to the named plaintiff, even though the plaintiff declined to accept the offer. Critically, in Genesis, the plaintiff did not dispute in the lower courts that the offer of judgment mooted her individual claim. The Court in Campbell-Ewald regarded this distinction as dispositive.

Notably, the Court in Campbell-Ewald left open an important related question: whether a class action would be rendered moot, and therefore dismissed, in the event that a defendant — rather than simply offering to satisfy a named plaintiff’s individual claim — deposited the full amount of that offer in an account payable to the plaintiff and the court then entered judgment for the plaintiff in that amount.

The Supreme Court’s decision in Campbell-Ewald provides some, but not comprehensive, practical guidance to a party named as a defendant in a class or collective action. Under Campbell-Ewald, a defendant’s mere offer of judgment to a named plaintiff, if not accepted, will not provide a basis to dismiss the class action as moot. Yet to be determined, however, is the effect on a pre-certification class action of a defendant’s actual deposit of an amount in full satisfaction of a named plaintiff’s individual claim. We caution that, even if such a deposit by defendant results in dismissal of a pre-certification class action as moot, this would not necessarily prevent another, similarly situated plaintiff from bringing a new action on behalf of the same class.

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