January 26, 2016 Practice Points

Offer of Complete Relief to Named Plaintiff Does Not Moot Class Action

The Supreme Court characterized an unaccepted offer as a “legal nullity, with no operative effect.”

By Kristine Ellison, Lewis Wiener, and Wilson Barmeyer

Last week, the U.S. Supreme Court resolved a circuit split when holding in Campbell-Ewald Co. v. Gomez¸ No. 14-857, that an unaccepted Rule 68 offer of judgment that would fully satisfy a named plaintiff’s individual claim does not moot individual or class claims. The Court left open the question of whether actual payment in some form, rather than merely offering to pay a settlement or judgment, would lead to the same result.

In the underlying case, the plaintiff received a single, unsolicited recruitment text from a marketing consultant hired by the U.S. Navy. The plaintiff responded by filing a putative class action against the consultant, which alleged a violation of the Telephone Consumer Protection Act (TCPA). Before the plaintiff moved for class certification, the marketing consultant made a Rule 68 offer of judgment to the plaintiff for $1,503—$3 more than the maximum amount of treble statutory damages the plaintiff could recover for a single violation of the TCPA. Rule 68(a) provides that “a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued.” In this case, however, the plaintiff declined the offer. Thereafter, the defendant moved to dismiss the plaintiff’s claim, arguing that the claim was moot because it already had offered the plaintiff full and complete relief under the TCPA. The district court denied the motion.

On appeal, the U.S. Court of Appeals for the Ninth Circuit agreed. The Ninth Circuit held that an unaccepted Rule 68 offer does not moot a plaintiff’s individual claims or putative class claims. 768 F.3d 871 (9th Cir. 2014). Although the mootness ruling was consistent with Ninth Circuit precedent, several other federal circuit courts of appeals had held otherwise.

The Supreme Court agreed with the Ninth Circuit and held that an unaccepted offer of judgment does not moot a plaintiff’s individual claim or the claims of a putative class. The Court embraced the reasoning of Justice Kagan’s dissent in Genesis HealthCare Corp. v. Symczyk, 133 S. Ct. 1523 (2013)—a case examining the effect of a Rule 68 offer in the collective action context under the Fair Labor Standards Act—in characterizing the unaccepted offer as a “legal nullity, with no operative effect.” Accordingly, the rejection of a Rule 68 offer of judgment leaves the case as a live controversy in the same position as it would have been had the defendant never made the offer.

In deciding only the specific issue before the Court, Justice Ginsburg, writing for the majority, declined to opine on the hypothetical situation in which “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.” Justice Thomas concurred with the judgment on that basis, agreeing that a mere offer does not end the case; he suggested, however, that his analysis may be different if an actual tender of the funds occurred.

Chief Justice Roberts dissented, advocating for a rule that a complete offer made pursuant to Rule 68 moots the action. According to Justice Roberts, “[w]hen a plaintiff files suit seeking redress for an alleged injury, and the defendant agrees to fully redress that injury, there is no longer a case or controversy for purposes of Article III.” In such circumstances, “the plaintiff cannot demonstrate an injury in need of redress by the court.”

The Court also held that the petitioner’s status as a government contractor did not allow it to raise derivative sovereign immunity as a defense against a putative class-action claim under the TCPA. The Court concluded that when the contractor’s actions are alleged to have violated both federal law and the government’s explicit instructions, the contractor does not have the benefit of this protection. According to the Court, the Navy relied on the contractor’s representation that the list of recipients for text message solicitations included only individuals who had opted in to receive them.

— Kristine EllisonLewis Wiener, and Wilson Barmeyer, Sutherland Asbill & Brennan LLP, Washington, D.C.

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