UNITED STATES – As our colleague Michael McCutcheon wrote in his blog post of May 29, 2015, the Supreme Court of the United States has agreed, in the case of Campbell-Ewald v. Gomez, to review the issue of whether a defendant’s early settlement offer of complete relief moots a representative individual plaintiff’s claim by destroying standing to sue. This practice has proven to be effective in some courts in obtaining dismissals of putative class actions at an early stage. Given the Supreme Court’s decision to review the issue, federal courts of appeal might understandably await the Supreme Court’s ruling before deciding whether to address the issue.
In its August 6, 2015, decision in Chapman v. All American Painting, Inc., however, a panel of the Court of Appeals for the Seventh Circuit decided not to await the Supreme Court ruling in Gomez. Instead, after circulating its opinion to all judges in active service prior to publication (as it was required to do under local rules), and receiving no votes in favor of a rehearing en banc, the panel held that a defendant’s offer of full compensation does not moot the litigation or otherwise end the Article III case or controversy. In so ruling, the panel overruled an earlier line of its own cases, and specifically relegated its earlier decisions in Damasco v. Clearance Corp., Thorogood v. Sears Roebuck & Co., and Rand v. Monsanto to the dustbin.
The panel believed that it was not ruling prematurely, stating that “[t]he issue is before the Supreme Court in Gomez, and we think it best to clean up the law of this circuit promptly, rather than require Chapman and others in his position to wait another year for the Supreme Court’s decision.” The panel expressed confidence in its belief that a similar ruling for the Supreme Court is only a matter of time. The panel looked to Justice Kagan’s earlier dissent (joined by three other Supreme Court justices) in the 2013 case of Genesis Healthcare Corp. v. Symczyk to support the conclusion that “an expired (and unaccepted) offer of judgment does not satisfy the Court’s definition of mootness, because relief remains possible.” The panel noted both that none of the justices in the Genesis Healthcare majority disagreed on that point with the dissent and other courts of appeal that have addressed the issue since Genesis Healthcare have held to the same effect.
Notwithstanding its ruling, the panel suggested that offers of complete relief may nonetheless retain value in class action litigation. If such an offer is accepted, for example, the panel surmised that a defendant may avail itself of the Rule 8 affirmative defense of accord and satisfaction. The panel also left open the possibility that spurned offers might serve as the basis for other types of affirmative defenses, such as estoppel or waiver.
It will be interesting to see whether the Seventh Circuit has correctly predicted the outcome in Gomez, and whether its invitation to defense lawyers to predicate other affirmative defenses on spurned offers of complete relief to the named plaintiff in class actions proves to be fruitful.
