Today the U.S. Supreme Court decided Campbell-Ewald Co. v. Gomez, No. 14-857. The question presented was whether an unaccepted offer of full relief on the named plaintiff’s individual claim will render a putative class action moot. The answer is “no,” according to a 5-3 opinion by Justice Ginsburg (with a separate concurrence by Justice Thomas). But the Court left open the question of whether, if the defendant had actually deposited the money being offered into court, or into a bank account payable to the plaintiff, the case would be moot. That is almost certainly what defendants will now do in some putative class actions. The Court eventually will have to decide that question.
Gomez involved a claim for violation of the federal Telephone Consumer Protection Act. The plaintiff received a single unwanted text message on his cell phone (it probably seems absurd to most non-lawyers that this kind of thing is what leads to Supreme Court cases, but Congress provided for even a single unwanted text message to trigger a potential statutory violation). The plaintiff was theoretically entitled to $1,503 plus costs as the maximum recovery under the statute. The defendant offered (both under Rule 68 and as a freestanding offer) to pay the full amount and consent to an injunction, but the plaintiff did not accept the offer.
Justice Ginsburg’s majority opinion adopted Justice Kagan’s dissent in Genesis Healthcare v. Symczyk, concluding that “[a]n unaccepted settlement offer – like any unaccepted contract offer – is a legal nullity, with no operative effect.” (Slip op. at 7.) That result is unsurprising as a matter of contract law and the plain language of Rule 68, which treats an unaccepted offer as withdrawn. Six of the federal courts of appeals reached the same result after Genesis Healthcare.
The majority distinguished other cases in which the defendant had actually paid or deposited the money at issue, or entered into a unilateral covenant not to sue to resolve equitable claims. Importantly, Justice Ginsburg’s opinion made clear that the result might be different if the defendant in this case had deposited the money being offered:
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. That question is appropriately reserved for a case in which it is not hypothetical.
(Slip op., at 11-12 (emphasis added).)
Chief Justice Roberts wrote a dissent joined by Justices Scalia and Alito. The dissent agreed that an unaccepted settlement offer is a legal nullity as a matter of contract law, but viewed the question of whether a “case or controversy” exists under Article III as not controlled by contract law. Chief Justice Roberts reasoned that “[i]f the defendant is willing to give the plaintiff everything he asks for, there is no case or controversy to adjudicate, and the lawsuit is moot.” (Roberts, C.J., dissenting, at 9.) Chief Justice Roberts argued that the majority’s focus on the fact that the defendant had not yet tendered the money was exalting form over substance. Because the defendant was a multimillion dollar company, “it would be mere pettifoggery to argue that Campbell might not make good on [its] promise.” (Id. at 5.) Chief Justice Roberts noted that “[t]he good news is that this case is limited to its facts” because “the majority’s analysis may have come out differently if Campbell had deposited the offered funds with the District Court.” (Id. at 10.)
There were two additional separate opinions. Justice Thomas wrote a concurrence focusing on the historical common law practice with regarding to tenders (offers to pay the entire claim), finding that the common law required actual delivery of the money, which was deemed an admission of liability. But Justice Thomas did not reach a conclusion on whether an admission of liability would be required today. Justice Alito wrote a separate dissent, explaining that the “linchpin” for him was the defendant’s clear ability to pay the amount offered. Justice Alito would not find mootness where a defendant’s ability to pay was not clear. He also suggested that depositing the money with the court or a “trusted intermediary,” with delivery of the money to the plaintiff conditioned on dismissal of the case, might be sufficient rather than actual delivery of the money to the plaintiff. That might avoid the prospect of the delivery of money being potentially characterized as a purported admission of liability.
Gomez was not a win for the plaintiffs’ bar. Defendants seeking to defeat putative class actions by providing complete relief to named plaintiffs will live to fight another day. Defendants will now ignore Rule 68 and simply tender a check to the plaintiff, or pay money into court or use Justice Alito’s tactic of depositing the funds with a “trusted intermediary,” contingent on dismissal of the case when the money is transferred. Where the defendant provides complete relief on the plaintiff’s individual claim through one of these mechanisms, will that bar the plaintiff from continuing to prosecute a putative class action? There might be a majority of the Supreme Court to support that proposition. But we probably will not know that for a year or two.