Supreme Court Restricts Defendants' Use of Settlement Offers to "Pick Off" Named Plaintiffs in Class Actions.

The Supreme Court in Campbell-Ewald Co. v. Gomez, No. 14-587 (Jan. 20, 2016), held that a defendant’s unaccepted offer to fully satisfy the plaintiff’s claim does not moot the plaintiff’s case. The Court’s decision has particular significance for class-action litigation. Following Campbell, a defendant may not avoid a putative class action simply by offering full relief to the named plaintiff—a defendant may not "pick off" individual named plaintiffs merely by offering to settle their individual claims. But the Court’s decision leaves open the possibility that a defendant may achieve the same result by actually paying, rather than merely offering to pay, the plaintiff the full amount of the plaintiff’s individual claim.

Background

Jose Gomez filed a putative class action against the marketing firm Campbell, alleging that Campbell violated the Telephone Consumer Protection Act by sending him a text message without his permission. Campbell, in an offer of judgment under Rule 68 and a settlement proposal, offered to pay Gomez $1,503 for each text message plus costs, the maximum amount Gomez could have recovered on his individual claim. Gomez did not accept the offer. Campbell then moved to dismiss for lack of subject-matter jurisdiction, arguing that no Article III case or controversy remained because its offer mooted Gomez’s individual claim. The district court denied the motion, and the Ninth Circuit affirmed.

The Supreme Court’s Decision

Campbell resolves an issue that has divided the circuits—whether "an unaccepted offer to satisfy the named plaintiff’s individual claim [is] sufficient to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated." Majority Op. at 1. The Court held 6-3 that an unaccepted settlement offer or offer of judgment does not moot a case. Id. Justice Ginsburg, writing for the majority, explained that "[u]nder basic principles of contract law, Campbell’s settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy." Id. at 8. According to the majority, "with no settlement offer still operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset." Id. at 9. The majority further noted that Rule 68, which states that an unaccepted offer of judgment "is considered withdrawn," "hardly supports the argument that an unaccepted offer can moot a complaint." Id. To the contrary, the "sole built-in sanction" for an unaccepted offer is a cost-shifting provision. Id.

Justice Ginsburg’s majority opinion then distinguished the cases relied on by Campbell and Chief Justice Roberts in dissent on the basis that, in those cases, the plaintiffs had in fact received the relief that they claimed. Id. at 10, 11 & n.5. Gomez, by contrast, "remained empty-handed," and so his case "was not made moot by the expired settlement offer." Id. at 11. The majority explicitly declined to 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." Id.

Justice Thomas concurred in the judgment, but rejected the majority’s reliance on "modern contract law principles." Instead, he relied on the common-law history of offers to conclude that "a rejected offer does not end the case." Concurring Op. at 1 (Thomas, J.). And Justice Thomas concluded that, because Campbell "only offered to pay Gomez’s claim but took no further steps, the court was not deprived of jurisdiction." Id. at 5.

Implications and Takeaways

The decision in Campbell has significant implications for class-action defense strategy. Following Campbell, a defendant cannot fend off class actions with merely an offer of complete relief. On the other hand, a defendant might achieve the same result with payment of complete relief. The majority opinion did not decide whether a plaintiff’s claim becomes moot where "a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff." Majority Op. at 11-12; see also Dissenting Op. at 10 (Roberts, C.J.) ("[T]he majority’s analysis may have come out differently if Campbell had deposited the offered funds with the District Court."). And Justice Thomas’s opinion suggests that he might have reached a different conclusion had Campbell paid Gomez’s claims or taken other "further steps" beyond an offer to pay. Concurring Op. at 5 (Thomas, J.). Accordingly, while Campbell precludes defendants from using a Rule 68 offer of judgment to moot a putative class action, it does not entirely remove Rule 68 or other means of satisfying a plaintiff’s claims as potential tools for minimizing class-action exposure. The question of whether the claims of a plaintiff who "won’t take ‘yes’ for an answer" can be mooted by depositing the offered funds with the Court will have to wait for another day. And when that question reaches the Court, the answer may well be different than in Campbell. The Court’s holding turned, in large part, on the distinction between simply offering relief (which does not moot a case) and giving relief (which does). Placing funds in an account payable to the plaintiff looks much more like giving relief than offering it.

Lawyer Contacts

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Cleveland
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New York
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Washington
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Darren K. Cottriel
Irvine
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Rebekah B. Kcehowski
Pittsburgh
+1.412.394.7935
rbkcehowski@jonesday.com 

Amanda Parker of the Washington Office assisted in the preparation of this Alert.

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