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January 22, 2016Client Alert

U.S. Supreme Court Rejects Class Action Defendants’ Attempt to “Moot” Named Plaintiffs’ Claims through Early Settlement Offer

The United States Supreme Court has ruled that “an unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case,” even if the offer includes everything the plaintiff would be entitled to recover at trial. By a 6-3 majority, the Court in Campbell-Ewald Co. v. Gomez rejected the defendant’s contention that the named plaintiff in a putative nationwide class action could no longer pursue a claim, either individually or on behalf of a class, after he refused to accept an offer that both sides agreed “would have fully satisfied the individual claims that were asserted, or that could have been asserted” by the plaintiff. This ruling appears to be in direct conflict with the 2013 Supreme Court case Genesis HealthCare Corp. v. Symczyk.

Here, the plaintiff, Jose Gomez, claimed that he received a text message from the defendant but had never consented to receiving such messages. Gomez filed a nationwide class action alleging the defendant violated the Telephone Consumer Protection Act and that he was entitled to statutory damages of $500 per text, which he alleged should be trebled to $1,500. Before Gomez could move for class certification, the defendant made a formal “offer of judgment” to settle Gomez’s individual claim for $1,503 per text message, as well as the court costs he incurred, which amounted to everything Gomez could possibly recover in the lawsuit. Because Gomez never responded, the offer lapsed.

The defendant then moved to dismiss Gomez’s claim on the ground that his claim was moot. The majority principally relied on basic contract principles in rejecting the defendant’s argument, noting that an offer that is not accepted creates no agreement and has no legal effect. Because the plaintiff did not agree to settle the dispute, there remained a live controversy between the parties that the federal courts were obligated to entertain.

Chief Justice Roberts, joined by Justices Scalia and Alito, dissented, noting that: “When 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 [of the United States Constitution].” The dissenting Justices expressed frustration with a plaintiff continuing to pursue a claim merely because the plaintiff “wants a federal court to say he is right.” The dissenters opined that “the federal courts exist to resolve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking.”

The decision in this case precludes parties facing potential class actions from effectively “picking off” named plaintiffs by simply offering to pay what, in many kinds of cases, could be relatively nominal sums of money. The Court did not decide—and expressly reserved for another day—“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.”

This last point is important as it clarifies how the present case can co-exist with Genesis HealthCare Corp. v. Symczyk. In Symczyk, the Court held that mooting a representative plaintiff’s claim does end a collective action. The key distinction between the two cases is that the plaintiff in Symczek conceded that an unaccepted offer of complete relief mooted her claim. In the present case, the plaintiff argued it did not. The Court agreed and held his claim was not moot.

What this ultimately means is that mootness is not dead as a defense to class actions. A defendant, however, must be certain it has actually mooted the named plaintiff’s claim.  

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