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)
