Supreme Court: Unaccepted Settlement Offer Doesn’t Moot Class Action

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Supreme Court: Unaccepted Settlement Offer Doesn’t Moot Class Action

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Aphrodite Kokolis

In a highly anticipated decision, the U.S. Supreme Court ruled today that a class action defendant’s offer of complete relief to the named plaintiff does not moot the case if the plaintiff does not accept the offer. Campbell-Ewald Co. v. Gomez, No. 14-857, 2016 WL 228345 (U.S. Jan. 20, 2016).

Class action defendants have attempted to use variations of this technique—sometimes called “picking off” the class representative—with mixed results.  The defendant in Campbell-Ewald made a settlement proposal and also filed an offer of judgment under Federal Rule of Civil Procedure 68.  Although the Supreme Court held that these unaccepted offers did not moot the case, the Court left open the possibility that a case could become moot if the defendant, rather than merely making an “offer,” actually deposits the funds in an account, and the court enters judgment for the named plaintiff in that amount.  Today’s decision also does not apply to state courts, which may have different rules regarding such “pickoffs.”

In Campbell-Ewald, the plaintiff filed a putative class action against the U.S. Navy’s advertising partner, alleging that the defendant had violated the Telephone Consumer Protection Act[1] (TCPA) by sending unsolicited text messages to potential naval recruits.

The defendant then made a settlement proposal and also filed a Rule 68 offer of judgment to settle the plaintiff’s individual claim by paying him $1,503 for each unsolicited text message, plus costs, which the defendant contended was the maximum amount the plaintiff could recover. (TCPA plaintiffs may recover a maximum of $500 per violation; damages may be trebled if the defendant “willfully or knowingly” violated the Act.) Under Rule 68, the offer was valid for 14 days. The plaintiff allowed the 14-day period to lapse without accepting the offer.

The defendant then moved to dismiss the case under Rule 12(b)(1) for lack of subject matter jurisdiction, arguing that the plaintiff’s individual claim was moot and, therefore, that no Article III “case or controversy” remained. The defendant also argued that because the plaintiff had not yet filed a class certification motion, the putative class claims had become moot. The district court denied the motion, and the Ninth Circuit affirmed.

The Supreme Court agreed with the lower courts. The Court held that “an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.” As for the putative class claims, the Court held that because the plaintiff’s individual claim “was not made moot by the expired settlement offer, that claim would retain vitality during the time involved in determining whether the case could proceed on behalf of a class. While a class lacks independent status until certified, . . . a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.”

The Court did leave open one possibility for mooting a class action: “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.” The Court stated, however, that it was not deciding that question now, but was reserving the question “for a case in which it is not hypothetical.”

The precise contours and consequences of such a “tender” of payment are unclear. In a dissenting opinion, Chief Justice Roberts stated: “The good news is that this case is limited to its facts. The majority holds that an offer of complete relief is insufficient to moot a case. The majority does not say that payment of complete relief leads to the same result. . . . [T]he majority’s analysis may have come out differently if Campbell had deposited the offered funds with the District Court.” In a separate dissenting opinion, Justice Alito stated that a defendant “might hand the plaintiff a certified check or deposit the requisite funds in a bank account in the plaintiff’s name. . . . Alternatively, a defendant might deposit the money with the district court (or another trusted intermediary) on the condition that the money be released to the plaintiff when the court dismisses the case as moot.”

The Supreme Court’s decision applies only to federal cases. State courts may take a different approach. In Illinois, for example, a tender of complete relief to the named plaintiff moots the case, so long as the tender is made before the plaintiff files a class certification motion.[2]

 

[1] 47 U.S.C. § 227(b)(1)(A)(iii)

[2] See, e.g., Ballard RN Center, Inc. v. Kohll’s Pharmacy & Homecare, Inc., 2015 IL 118644, ___ N.E.3d ___, 2015 WL 6387653 (Oct. 22, 2015).