U.S. Supreme Court Holds Offers Of Full Relief To Named Plaintiffs Do Not Moot Putative Class Actions

The U.S. Supreme Court holds that settlement offers and other offers of full relief to named plaintiffs do not moot class action claims. The ruling restricts (but may not completely limit) defendants’ ability to use settlement offers or Rule 68 offers of judgment to resolve named plaintiffs’ claims in putative class and collective actions.

OVERVIEW
On January 20, 2016,the United States Supreme Court issued a decision in the closely-watched case of Campbell-Ewald Co. v. Gomez.[1]  The Court held that an unaccepted offer for complete relief in the form of a settlement offer or under Rule 68 of the Federal Rules of Civil Procedure does not moot named plaintiffs’ claims in a putative class action.  The case split along ideological and party lines.  Justice Ginsburg authored the majority opinion, which was joined by Justices Sotomayor, Kagan, Kennedy and Breyer.  Justice Thomas wrote a concurring opinion, while Chief Justice Roberts wrote a dissenting opinion, joined by Justices Scalia and Alito.  Justice Alito authored an additional dissenting opinion.

 

BACKGROUND
Plaintiff Jose Gomez filed a putative nationwide class action against Campbell-Ewald Company, accusing the company of violating the Telephone Consumer Protection ACT (TCPA) by sending unsolicited marketing solicitations via text message.  Gomez was was one of over 100,000 recipients of such texts and sought to represent a putative class.  Gomez sought treble damages for alleged willful violations of the TCPA, as well as costs, attorney fees, and injunctive relief prohibiting Campbell from sending unsolicited text messages.

Campbell made both a settlement offer and an offer of judgment under Rule 68 of the Federal Rules of Civil Procedure that would have given Gomez full relief on his TCPA claim before the deadline to file a motion for class certification. Gomez did not accept either offer and and allowed a 14-day wait period under Rule 68 to expire.  Campbell subsequently moved to dismiss the case for lack of subject-matter jurisdiction.  The district court denied the motion but ultimately granted Campbell summary judgment on an unrelated issue following limited discovery.  The U.S. Court of Appeals for the Ninth Circuit reversed the grant of summary judgment.  The Supreme Court granted certiorari to determine whether a case becomes moot under Article III of the Constitution if the plaintiff receives an offer of complete relief.

THE SUPREMES SUBSTANTIALLY NARROW GROUNDS ON WHICH A DEFENDANT CAN OBTAIN EARLY DISMISSAL OF A CLASS OR COLLECTIVE ACTION
In deciding Campbell-Ewald, the Supreme Court made it clear that an unaccepted offer of full relief under Rule 68 or pursuant to settlement does not moot a case and does not end  putative class or collective action.  The ruling significantly narrows the grounds on which a defendant can obtain early dismissal of a class or collective action.

Applying basic contract principles, the majority opinion held that an unaccepted settlement offer or offer of judgment for full relief cannot alone moot a plaintiff’s claims under Article III of the Constitution. It reasoned that once a settlement offer or offer of judgment is rejected, it has “no continuing efficacy.”[2]  Moreover, the majority held that because Rule 68 provides that an unaccepted offer of judgment is deemed “withdrawn” if not accepted within 14 days of service, that is the “sole built-in sanction.”[3]  Accordingly, if a settlement offer or offer of judgment is not accepted, the parties remain adverse, retaining “the same stake in the litigation they had at the outset.”[4]  The majority opinion did not address whether a request for class relief impacts the mootness analysis because Gomez’s claims were held not to be moot simply by virtue of not accepting the offers of complete relief.

The decision should be read as being limited to situations where the offer of relief fails to satisfy a plaintiff’s claim.  The majority opinion made it clear that it was not deciding whether a claim can be mooted “if a defendant deposits the full amount of the plaintiff’s individual claim in an account to the plaintiff, and the court then enters judgment for the plaintiff in that amount.”[5]  Chief Justice Roberts’ dissent opined that “[t]he agreement of the plaintiff is not required to moot a case.”[6]  Accordingly, he held that an unaccepted offer of judgment is a legal nullity as a matter of contract law but still moots a case because once “the defendant is willing to give plaintiff everything he asks for, there is no case or controversy to adjudicate.”[7]  Roberts held that it was irrelevant whether plaintiff spurned the offer because there would be no injury for the court to redress so long as full relief was made available to plaintiff.

IMPLICATIONS 
The Supreme Court’s ruling substantially limits the ability of defendants to use settlement offers or Rule 68 offers of judgment to resolve named plaintiffs’ claims in putative class or collective actions, a strategy that has often been employed in both consumer and employment maters.  Although the decision does not expressly address the class or collective action context, following the majority’s opinion in Ewald-Campbell, a named plaintiff that lets a settlement offer or Rule 68 offer of judgment lapse avoids the avoid mooting of his or her claims.  Notwithstanding Roberts’ dissent, this makes sense.  A case and controversy remains even where a defendant is willing to satisfy the individual claims of a putative class representative because the representative does not bring claims in an individual capacity and the defendant is not willing to offer full relief to the putative class.  If the putative representative was only seeking relief on individual claims, a class or collective action would never have been filed in the first place.

As stated above, it is worth noting that the decision is limited to unaccepted offers and that majority expressly declined to decide whether a claim can be mooted  if a plaintiff actually receives full relief.  The dissenting opinions suggest that full relief could be deposited with the district court on the condition that it be released to the plaintiff when the case is dismissed as moot.  However, a class action settlement must be approved by a district court as fair to absent members even prior to class certification.  Although courts do not consider whether a class action would be manageable when approving a “settlement class”, settlement classes must otherwise satisfy all the requirements or Rule 23(c) and (b) of the Federal Rules of Civil Procedure.[8]  Similarly, a collective action settlement – such as one involving allegations of wage and hour violations of the Fair Labor Standards Act (FLSA) – must be approved by a Court as fair to putative members in most if not all circumstances.  Having purported to bring an action on behalf of a class of individuals, a putative representative and his or her attorneys have a responsibility to pursue the best interests of these putative class or collective action members.  It is difficult to envision a situation in which a settlement resulting in the deposit of the full amount of the plaintiff’s individual claim would be approved by court if it clearly abandons viable class claims and wholly disenfranchises absent class or collective action members.  Such a determination should, and presumably will, entail a judicial determination that the action was not properly brought on behalf of absent class members.

Some courts have also held that a named plaintiff may still pursue relief on behalf of a class even if a named plaintiff’s claims are moot.  Because the majority opinion does not address this issue, district courts will be obligated to apply any controlling circuit-court precedent that authorizes plaintiffs to serve as class representatives where individual claims are moot.

On a final note, plaintiffs’ counsel also has an obligation to act in the best interest of their clients, and in some circumstances, it may be in the best interest of a client to accept an offer of full relief where a client has sought to act as a class or collective action representative.  Rather than using unanswered questions from the Ewald-Campbell decision to argue that the substantive claims of the class have been mooted, companies could be well served by arguing that acceptance of an offer of full relief renders the plaintiff an inadequate representative under Rule 23 of the Federal Rules of Civil Procedure.

CONTACTS

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact Justin Brooks at jbrooks@gbblegal.com.

GBB’s experienced team of attorneys can assist individuals who wish to vindicate their rights and provide counseling to companies seeking to comply with employment laws or who need defense against litigation.

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[1] No. 14-857 (U.S. Jan. 20, 2016), available at http://www.supremecourt.gov/opinions/15pdf/14-857_8njq.pdf

[2] Id. at 8.

[3] Id. at 9.

[4] Id.

[5] Id. at 11.

[6] Id. at 9 (C.J. Roberts, dissenting).

[7] Id.

[8] Amchem Products, Inc. v. Windsor, 521 U.S. 591, 621 (1997)

Guttman: Whistleblower program will be one of the most significant national gatherings of 2016

Feb. 18 and 19, the Center for Advocacy and Dispute Resolution and the Emory Corporate Governance and Accountability Review will partner to present “Fraud Against the Government & SEC Whistleblower Actions Training.” This event will feature more than 20 authorities on fraud, including U.S. attorneys, experts from the U.S. Securities and Exchange Commission and judges.

The training will be held from 8:30 a.m. to 4 p.m. each day in Tull Auditorium, Gambrell Hall at Emory Law.

Reuben Guttman, partner with Guttman Buschner & Brooks, PLLC and senior fellow with the Center for Advocacy and Dispute Resolution, said, “We think that for would-be whistleblowers and their counsel, the Emory program will be one of the most significant national gatherings in 2016. The program will offer them an opportunity to hear directly from regulators about how they can work to maximize their contributions to federal whistleblower programs.”

Attendees can earn up to 12 CLE credits along with the Certificate of Completion of Emory University School of Law’s Advocacy and Dispute Resolution Training in Case Investigation. Registration is now open.

Featured panelists and instructors include:

  • John A. Horn, U.S. Attorney for the Northern District of Georgia
  • William M. Nettles, U.S. Attorney for the District of South Carolina
  • David Rivera, U.S. Attorney, Middle District of Tennessee
  • Sean McKessey, Director, Office of Whistleblower, U.S. Securities and Exchange Commission
  • Benjamin Singer, Chief, Securities & Financial Fraud Unit, Fraud Section, Criminal Division, U.S. Department of Justice
  • Walter Jospin, Regional Director, Atlanta Regional Office, U.S. Securities and Exchange Commission
  • William P. Hicks, Associate Regional Director, Atlanta Regional Office, U.S. Securities and Exchange Commission
  • Stephen E. Donahue, Assistant Regional Director, Atlanta Regional Office, U.S. Securities and Exchange Commission
  • Randy Chartash, Chief, Economic Crime Section at United States Attorney’s Office
  • Reuben Guttman, Partner, Guttman Buschner & Brooks, PLLC and Senior Fellow, Center for Advocacy and Dispute Resolution, Emory University School of Law
  • John Floyd, Partner, Bondurant Mixson & Elmore LLP
  • Michael A. Sullivan, Partner, Finch McCranie LLP
  • Sam Sheldon, Partner, Quinn, Emmanuel Urquhart & Sullivan, LLP
  • Bob Magnanini, Partner, Stone and Magnanini, LLP
  • David Bocian, Partner, Kessler, Topaz, Meltzer, Check, LLP
  • Traci Buschner, Partner, Guttman, Buschner & Brooks, PLLC
  • Christopher Haney, CPA, CFE, CHC, Forensus Group, LLC
  • Richard Harpootlian, Harpootlian Law
  • Jerry Martinj, Partner, Barrett Johnston Martin & Garrison, LLC
  • Amy Berne, Chief, Civil Division, United States Attorney’s Office, Northern District of Georgia
  • Sally Molloy, Assistant U.S. Attorney at U.S. Attorney’s Office, Northern District of Georgia
  • Paul Zwier, Professor; Director Center for Advocacy and Dispute Resolution, Emory University School of Law
  • Hon. Matt McCoyd, Magistrate Court Judge, DeKalb County; Associate Director Center for Advocacy and Dispute Resolution, Emory University School of Law

The American presidential spectacle

Prominent US trial lawyer Reuben Guttman shares his thoughts on the spectacle that is the US presidential election.

Every four years, the world is treated to the spectacle of the Summer Olympics, where athletes run their legs in a show of skill and strength. Coinciding with this occurrence is the American presidential election, where candidates run their mouths.

The Republicans have enough candidates to stage two debates. Those candidates with lower poll ratings are relegated to sitting at what amounts to the children’s table, where – naturally – the debate starts earlier. Presumably this is so the children can be tucked in while the front runners do their business.

The Democrats only have three major candidates and are having a go at it without any children this time around.

Though hard to discern, there are strategies to these matches of American intellect. Just as an Olympic distance runner saves his or her strength for the final lap, US presidential candidates try not to burn any intellectual reserve this early in the game. Standing behind their podiums, they take notes, adjust their glasses, and give each other gimlet eye glances. The winner is the one who says the least while maintaining the optics of communicating the most.

The Republicans thrive on debating who is a real conservative, who is more electable, and who has more guns.

For their part, the Democratic debate is just as vacuous; is Bernie Sanders a socialist and what extracurricular activities are on the agenda of Hillary’s husband, the former president? The third candidate, Martin O’Malley, seems to get lost in the mix. No surprise there; when he was governor of Maryland, most Marylanders only knew that he was the governor because signs on the highways said so. Sadly, those without an automobile were left clueless.

If Martians were to invade and randomly channel surf, they might actually confuse the debates with a reality TV show. Come to think of it, the Martians would be right.

All of this is unfortunate. There are real issues. The next president will have the ability to make appointments tipping the balance of the judiciary including the Supreme Court. Obamacare is still a work in progress and the next president needs to do something about the Centers for Medicare Services, which in privatising the Medicare system allows more theft than would be sustained by an electronics store with a plate glass window during a lengthy power outage.  There is also much to discuss on the foreign policy front, including a massive trade imbalance and regulation of publicly traded companies in a global economy.

But for now, why talk specifics when we, Americans, are still tuning in to watch the spectacle?

Reuben Guttman is a trial lawyer and founding partner at Washington, DC-based firm Guttman, Buschner & Brooks.

Thoughts on law in theory and reality

Sometime ago, a law student asked me whether law school adequately prepares students for the practice of law.

It seems that students study law and lawyers study fact patterns with an eye toward applying the law. The difference can be traced to the origin of the task: the law professor assigns a case to read presumably with a focus on teaching a rule of law, while the client presents a set of facts to which a lawyer must apply a rule of law.

Stick around long enough and the facts turn into repetitive patterns and the practice of law becomes a study in human nature, mistakes, challenges and ethical dilemmas. At some point the youngster carrying the casebook becomes a meld of psychologist and sociologist, a witness to the flaws, successes and conduct of government, private institutions, and people. Here are some observations:

In large corporations and those that run them, greed in its varying forms is a constant. It manifests itself in efforts to push the boundaries of the law, a calculation of the risk of being caught and, if caught, a colourable argument as to why the conduct fits within some loophole in the law. The argument need not necessarily be a logical extension of legal doctrine; it need only pose a hurdle for prosecutors, a bargaining chip if you will. Of course, ‘loophole’ is really a term used by non-lawyers to describe the law’s inability to clearly address fundamentally reprehensible conduct.

As for clients and witnesses, they seem to relish the comfort of being part of institutions. Our dog has the same level of comfort when she runs in to her dog house, where she’s protected on three sides. Yet, unlike the dog house, an institution can provide a false sense of comfort, as was the case with Enron, Tyco, and WorldCom. Employees who now face being laid-off at Turing Pharmaceutical are learning this lesson the hard way.

Institutions – as in large corporations – can also be manipulative. Think of the pharmaceutical sales representative who is unwittingly tasked with marketing drugs for unapproved purposes or the doctor who is flattered when paid to speak on behalf of a drug company, perhaps without being aware that the company is monitoring his or her prescription writing patterns and conducting return on investment analysis. Why question wrongdoing when a corporation has an internal compliance program? Surely anything bad would have been detected and abated? Not quite. Compliance programs exist in part to convince those within the institution that impropriety is not possible. The need to be accepted by the institution can also be a tide pushing against the questioning of impropriety, even when that impropriety is harmful to the employee. Think of the worker victimised by sexual harassment who continues to laud the employer. Think also of the employer tasking the marketing department to record a victimised employee’s promotion of the company as an evidentiary hedge against a potential claim.

Practice long enough and one learns that there is, as they say, always an elephant in the room. In Friedrichs v. California Teachers Association, the United States Supreme Court will soon determine whether the First Amendment is violated when employees are compelled to pay ‘agency fees’ to a public employee labour union. Yet, is this case really about the First Amendment, or curtailing the power of unions? Are cases compelling arbitration really about judicial efficiency, or protecting powerful business from public exposure for acts that impinge on safety and health? Think about it carefully and what may come into focus is the use of procedural rulings to impact substantive rights.

All of this is to say that the application and interpretation of law has context. Facts do matter and – to some degree – the application of law without regard to context is an exercise in futility. Of course, a legal education is the starting point to reach this conclusion. It just takes time.

Reuben Guttman is a trial lawyer and founding partner at Washington, DC-based firm Guttman, Buschner & Brooks.

GBB Legal team Settles Long Term Care Pharmacy Whistle Blower Case for $2.5 million

A $2.5 million settlement with Pharmerica, a long term care pharmacy servicing hundreds of nursing homes across the nation, completes the final leg of litigation involving the illegal promotion of Aranesp, an anemia drug manufactured by Amgen, Inc. The  settlement brings the government’s recovery inUnited States ex rel. Kurnik v. Amgen et al. to just over $31.5 million.

Kurnik was represented by Dick Harpootlian and Chris Kenney of Richard A. Harpootlian, P.A. in Columbia, South Carolina and Reuben Guttman, Traci Buschner, Justin Brooks and Caroline M. Poplin, J.D., M.D. of Guttman, Buschner & Brooks PLLC in Washington, D.C.

Read the full article here.