UNITED STATES – In Campbell-Ewald Co. v. Gomez, the Supreme Court refused to allow class-action defendants to escape liability through an unaccepted offer of full payment of the named plaintiff’s claims. This resolved a deep circuit split on the issue. The Court concluded that “basic principles of contract law” established that once the offer was rejected, the offer could not moot the claim. Interestingly, the Court expressly refused to decide whether a defendant could escape liability by taking the next step of actually paying the offered settlement into court.
This case arose from a common fact pattern. The United States Navy hired Defendant to conduct a text message marketing campaign to individuals who had “opted in” to receiving marketing messages. Plaintiff was one of thousands of recipients of these text messages. He denied consenting to receive this marketing and filed a nation-wide class action alleging violations of the Telephone Consumer Protection Act.
From there, things got interesting. Defendant filed a Rule 68 offer of judgment offering Plaintiff full statutory damages of $1,503, plus court costs. Plaintiff rejected that offer by allowing it to expire. Defendant thereafter moved to dismiss. In support, it argued that the offer of full damages mooted Plaintiff’s claim by providing complete relief. Defendant further argued that the claims of the putative class must fail because Defendant had not sought certification before his claims were mooted. Both the Central District of California and the Ninth Circuit rejected this mootness argument.
The Supreme Court granted cert to address the effect of an unaccepted offer of full payment to a class representative. In affirming the rejection of Defendant’s mootness argument, the Court likened the settlement offer to other unaccepted contract offers. It explained that such rejection creates no lasting right or obligation. This reasoning adopted Justice Kagan’s dissent from the Court’s 2013 Genesis Healthcare Corp. v. Symczyk case. There, Justice Kagan explained that she would have held that an unaccepted offer of judgment cannot moot a case because “the recipient’s rejection of an offer leaves the matter as if no offer had ever been made.” Because the rejected offer effectively “disappeared”, Plaintiff’s claims were not mooted by the rejected offer.
This ruling drew a strong dissent. Chief Justice Roberts argued 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.” The dissent refused to accept that there should be a different outcome merely because the defendant had offered settlement and not yet paid it. To remedy this problem of proving the genuineness of an offer, the dissent suggested that the court should “have the [defendant] deposit a certified check with the trial court.”
The majority opinion did not go so far as to completely rule out an escape through an early settlement offer. Instead, it explicitly refused to determine whether actually paying a settlement, rather than just offering, would be sufficient to moot a plaintiff’s case. Moreover, the dissent suggested that paying funds into court may be a viable method to moot plaintiff’s claims. Campbell-Ewald therefore does not entirely foreclose a potential escape through an early settlement offer. While it is now clear that simply serving a Rule 68 offer of judgment is not enough, Defendants may still be able to escape by accompanying that offer with full payment into court. Stay tuned to this space for further updates on this evolving area of the law.
