Advance Sheet: No Touch of Class

Foreign clients, especially, are dazzled by these actions, which until recently were hardly known abroad at all. The risk, or even the reality, has seldom caused them to forgo business in the hugely profitable U.S. market, but lawyers end up tying themselves in knots trying to explain to their European or Asian clients what even is going on. Class certification? The numbers boggle. Notice? The idea of telling potential claimants how to join a suit is incomprehensible. Claim forms? Gibberish. Even amidst the other arcana of American litigation, class actions are an unsolvable mystery for overseas businesses. And those who know of them live in unmitigated fear of the consequences.

How different this all appears from the perspective of plaintiffs’ class action lawyers, and some consumers and employees too. Without the ability to aggregate small damage claims, significant wrongs against consumers, investors, or employees as a group would go unpunished. The potential class damages and correspondingly larger attorney fees are necessary for lawyers to be willing to invest the time and money required to develop, file, and litigate these highly uncertain and even risky endeavors. Without such sums at stake, corporate clients would simply use their disproportionate position and power to overwhelm the aggrieved. As the tobacco and asbestos cases prove, to say nothing of major civil rights matters, major societal wrongs might never come to light, let alone be redressed. If there have been some abuses, they are in the minority, a small price to pay for the good otherwise achieved.

Often there seems no middle ground between these two opposing viewpoints. And over the years, the courts have swung like a pendulum between the two extremes. When these actions first reached their maturity, the courts found few reasons to deny the existence of commonality, and class action lawyers used their rhetorical skills to find classes even in improbable circumstances. Class actions were sometimes too dangerous to defend, as the risk of a catastrophic outcome, while low, was just too great to take. Many plaintiffs’ lawyers found both lucre and fame in these cases.

In the last few years, however, the pendulum has swung in the other direction. Congress has restricted some forms of class actions, and Supreme Court decisions have demanded higher levels or at least a more careful scrutiny of commonality and have permitted broader use of arbitration provisions that limit or preclude class actions. In some cases, class action lawyers have avoided such limitations by migrating to the state courts, many of which are more hospitable to class action claims. And the arrival of hybrids, like common actions under the Fair Labor Standards Act, have sweetened the pot somewhat. But on the whole, the naysayers seem to be in the ascendant.

Gomez and Class Mooting

Whether you are for or against, or even somehow have remained a disinterested observer, one element that would seem critical is certainty in the process, so that the rules of engagement will be clear and the lawyers at least will understand what can and should be done. Just such greater certainty was expected of the Supreme Court’s decision in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), but to no avail. The background to this case was a simmering controversy over a seemingly minor procedural issue packing a big punch. Here’s the issue: Assume for a moment that a plaintiff has a claim for a small and easily determined amount, maybe an individual claim worth $10. Assume now that millions of others theoretically have the same claim. If there is no basis for attorney fees or exemplary damages, or even when there is, an individual action proves ineffective from a cost perspective. Nor does it get to the heart of the matter, the larger impact in society. So, banking on a large pool of damages from a big class, the prospect of fees, and a big social impact, the plaintiff’s lawyer files a class action.

The defendant wants out and sees how little there is at stake for the individual plaintiff. May the defendant dispose of the case by paying $10 to the plaintiff and be done with it? Or at least be done with it unless and until the plaintiff’s lawyer can find a new class representative? What’s then to prevent the defendant from picking off that plaintiff too? There may be scores of class plaintiffs, but even scores of payments making the claim moot still add up to a paltry sum. And there’s nothing to be had for the lawyers who labored to bring the case in the first place.

Simple enough? But different courts over the years have said different things about this stratagem. Some say no, a class action, once filed, cannot be mooted in this way. Others say yes, if a class has only been alleged but a class certification motion has not been filed. Then there are those courts that say there is no class action unless and until a class is certified, making the class representative easy pickings even while the court is pondering the matter. And what about after a class is certified? If a class plaintiff has access to all he can recover, why does he not become unrepresentative of the class, which may then go unrepresented for want of a named plaintiff?

Gomez provided the Court with the perfect opportunity to settle this issue once and for all. There, the Navy contracted with Campbell-Ewald Company to run a recruiting campaign by way of text messages to the cell phones of young adults, assuming they had opted in to relevant marketing solicitations. Campbell botched the job and sent messages to people who never consented to receive the solicitations. One was Gomez. He sued under the Telephone Consumer Protection Act, claiming intentional wrongdoing and treble damages and seeking an injunction. The act did not provide for attorney fees, but Gomez styled his action as a class action.

Before a class certification motion was brought, Campbell provided Gomez with a Rule 68 offer of judgment providing for the nominal amount Gomez could recover personally in the litigation. Gomez did not accept the offer. Undaunted, Campbell thereafter argued that the case was moot because Gomez had available to him all the relief he ever was entitled to. Campbell also argued that it was entitled to the protection of sovereign immunity, as an agent of the U.S. government. The district court denied the mootness challenge but granted summary judgment on the sovereign immunity theory. The Ninth Circuit reversed, rejecting both.

A majority of the Supreme Court affirmed. In her majority opinion, Justice Ginsburg limited her consideration to a single fact: The Rule 68 offer had not been accepted. As a result, there was no offer and acceptance. The claim could not be moot under such circumstances, and Gomez should be entitled to proceed (she also rejected any claim of sovereign immunity). But she was not quite finished. In a curious aside at the end of the decision, Justice Ginsburg limited the scope of her ruling: “We need not, and do not, now 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.” Wait!! Come again? According to Justice Ginsburg, the decision turned, or at least may have turned, on the means Campbell used to pay off Gomez. It should never have used Rule 68 but might have succeeded had it tried a different route. Whether some other course would have worked, she said, was a pure hypothetical. One wonders whether Campbell should have put the money in a paper bag and stuck it through Gomez’s mail slot.

Justice Ginsburg’s narrow holding allowed her to command not just the votes of the Court’s liberals, and Justice Kennedy’s swing vote, but a sixth vote from an unlikely source, in the form of a concurrence by Justice Thomas. His view was that, as long as the opinion was limited to a question of offer and acceptance, he could agree that there had been no acceptance here.

Nonsense, thundered the dissenters. The real issue is whether there really was any claim left. Gomez could not, as all agreed, recover more than Campbell provided. This meant there was no real case or controversy to be had. The legal system does not exist to vindicate hypothetical possibilities. Gomez must have a real beef. And he no longer had one because Campbell had voluntarily provided him with exactly what he was suing for. This was actually a better deal than litigation because it eliminated risk.

What is striking about the opinions is that, except for a vague allusion or two (Justice Ginsburg mentioned the thousands-of-times damages that might exist if the claim were not moot), neither the majority nor the dissent, nor the concurring opinion and the separate dissent, analyzed the matter from the standpoint of a class action. Indeed, the words “class action” were barely used by any justice. It’s as if the entire matter were taking place in a vacuum, where the argument was about “case or controversy” or “offer and acceptance” with no importance whatsoever for the litigation process beyond that.

The Elephant in the Room

Practitioners, at least, did not fail to see the elephant in the room. The press reports accompanying the decision quoted class action plaintiffs’ lawyers as cheering the decision, believing it precluded the kind of picking-off tactics that some defendants had used to moot class actions. Just as assuredly, class action defendants’ lawyers saw new possibilities in Justice Ginsburg’s non-decision on the issue of method. They now know to work more directly. Perhaps create a separate account in the plaintiff’s name and put the money there? Locate his bank account number during discovery and direct-deposit the money into his account? Surprise him during his deposition with a wad of bills? Will one of these satisfy Justice Ginsburg?

It’s hard to see why not. Indeed, in the absence of any discussion of class actions, Chief Justice Roberts seems to have the better of the argument. The legal system does not provide for damages to facilitate litigation. It permits litigation only to remedy claims. To put it somewhat differently, Gomez had a complaint about something done to him and said he was injured as a result. In that event, he is not entitled to a lawsuit; he is entitled to his damages. Once he has received the full amount of those damages, the claim disappears. It has no life or substance on its own. No one has a right to a lawsuit. Everyone has a right to his or her damages. Receiving the latter eliminates the former.

Unless there is more to the story, of course. And the “more” here is the class action. Consider it hypothetically first. When does a class action become a class action? When it’s filed? When the class certification motion is filed? Certainly no later than when the motion is granted. If it’s already a class action when it’s filed, then the money given to Gomez is not a full payment of damages. It is a partial payment only, to the named class member alone. All of the other class members have not had their damages paid. This suggests that the payment to Gomez does not moot the case because the “case or controversy” involves a class and the class claims have not been resolved.

Likewise, if the case is not a class action until a class is certified, the payment of damages to Gomez should be sufficient. The only damages in the case until that moment are his damages, and the class element of the case never comes into being. Of course, the middle ground is to hold the matter in abeyance as soon as the class certification motion is filed, letting the judge determine whether it is suitable for class treatment so long as the plaintiffs’ lawyers have asked her to. But then, of course, all class plaintiffs’ lawyers will file their class certification motion with their action. And then we are back deciding whether an action merely called a class action should be treated as one.

One can easily see that the resolution of the matter may depend on the good or evil one sees as inherent in class actions. If you think they are a vital element of our justice system, you would tend to view the filing of the complaint as the critical moment. View them as the bane of existence and the granting of class certification would seem the right moment. There is not much in the way of legal precedent to draw on here. It is more a matter of policy.

That is not to say there is nothing to go on. Once a complaint is filed as a class action, for example, there are certain obligations that attach to the lawyers. The plaintiffs’ lawyers are usually not permitted to settle the matter on behalf of the named plaintiff only. They already have obligations to the putative class, and the court is obligated to enforce them. Of course, there is an easy dodge around this element—a settlement can be achieved by the two sets of lawyers making a deal and dismissing the class action complaint without prejudice, assuming the defendants’ lawyers trust the plaintiffs’ lawyers not to refile with another class representative. A settlement agreement that proscribes the plaintiffs’ lawyers from filing another action is void as a matter of public policy. But this would suggest the recital of class allegations in a complaint is not a nullity.

Coming back to the Court, however, we can easily see from these ruminations that it has absolutely shirked its role as the panel charged with guiding the legal system. Justice Ginsburg’s silly stratagem has really only delayed a decision on the issue of mootness and, more important, given little if any guidance on class actions generally. Chief Justice Roberts’s assertion that the case is moot similarly dodges the key issue. It’s not moot, if the matter is already a class action for all intents and purposes. Perhaps both jurists wanted to avoid the legal entanglement of debating the future of class actions in this context. But it’s difficult to see why. The case may help us ruminate on what is to be done hereafter, but it would have been far better for the Court to tell us instead.