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January 20, 2016

U.S. Supreme Court Holds Unaccepted Settlement Offer Cannot Moot Consumer Lawsuits

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January 20, 2016, the United States Supreme Court ruled that an unaccepted offer to satisfy a named plaintiff's individual claim does not moot his individual claim or thereby preclude a right to proceed to seek certification of that claim on behalf of a class of similarly situated persons. Campbell-Ewald Co. v. Gomez, No. 14-857, 2016 WL 228345, 577 U.S. _____ (2016).

The case concerned claims under the Telephone Consumer Protection Act (TCPA), which provides civil penalties for unsolicited phone calls or text messages. Campbell-Ewald Company, a contractor of the United States Navy, designed a text message campaign whereby individuals, who had supposedly consented to solicitations by phone, received text messages with recruiting information. Jose Gomez, a recipient of a recruiting message, brought suit against the contractor seeking damages under the TCPA on his own behalf and on behalf of a putative class, alleging he had not in fact consented. Before Gomez sought class certification, the contractor made Gomez a settlement offer and an offer of judgment under Federal Rule of Civil Procedure 68 in an amount that would satisfy even his statutory individual treble-damages claim and also agreed to entry of an injunction against further TCPA violations. Gomez did not accept the offer, allowing it to lapse and be automatically withdrawn under Rule 68.

The contractor then moved to dismiss for lack of subject-matter jurisdiction, arguing that there was no longer a controversy between the parties because it had offered Gomez the full relief sought on his individual claim. However, as the Supreme Court noted, Campbell-Ewald denied liability, disclaimed any grounds for the injunction sought, and did not provide for any attorney's fees. The district court denied the contractor's motion, and the Ninth Circuit agreed with that holding.

Resolving a circuit split, the Supreme Court, in a split decision, affirmed the Ninth Circuit, agreeing that an unaccepted offer of judgment is essentially a legal nullity. Therefore, a controversy still existed, just as it had before the offer was made. Writing for the majority (joined by four other justices, with Justice Thomas concurring in the judgment), Justice Ginsburg reasoned that when a plaintiff rejects or fails to accept a settlement offer, no matter how good the terms, the plaintiff's interest in the lawsuit remains, and so does the court's ability to grant relief. Therefore, an unaccepted settlement offer has no operative effect and does not moot a plaintiff's individual case. Furthermore, the Court concluded that because Gomez's individual claim was not moot, he could continue to prosecute that claim as a putative class action.

The Court left open the question of "whether the result would be different if a defendant deposits the full amount of the plaintiff's individual claim into an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount."

Companies who had been relying on Rule 68 as a device to help defend against class action lawsuits should be aware of this decision and its impact on defense strategies. For more individualized analysis on the impact of this decision and how it may affect your cases, please feel free to contact a member of Bowman and Brooke's Class Action and Multidistrict Litigation practice group.

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