The U.S. Supreme Court has agreed to decide a case that could alter the landscape of federal class action litigation. Granting the defendant’s petition for certiorari in Campbell-Ewald Company v. Gomez, the Court will review (1) whether a case becomes moot, and thus beyond the judicial power of Article III of the Constitution, when the plaintiff receives an offer of complete relief on his claim, and (2) whether the answer to the first question is any different when the plaintiff has asserted a class claim under Federal Rule of Civil Procedure 23, but receives an offer of complete relief before any class is certified.

The Court’s rulings will resolve fundamental constitutional issues that have divided the federal courts of appeals. Article III requires the existence of a “case or controversy” before a federal court can exercise jurisdiction. Several circuit courts, including the Third, Fifth, Sixth, and Seventh Circuits, have concluded that a Federal Rule of Civil Procedure 68 or other settlement offer of complete relief to a plaintiff renders his individual claims moot for purposes of Article III regardless of whether judgment is entered against the defendant. Recently, however, the Ninth Circuit in Gomez, the 11th Circuit in Stein v. Buccaneers Ltd. Partnership and the Second Circuit reached the opposite conclusion.

The issue is compounded when the plaintiff seeks to represent a class. In its 2013 decision in Genesis HealthCare Corp. v. Symczyk, the Supreme Court, by a 5-4 vote, held that an employee plaintiff in a collective action brought pursuant to the Fair Labor Standards Act (FLSA) whose individual claim was mooted by her employer’s offer of judgment had “no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness.” The offer of judgment, made under Rule 68, occurred before the plaintiff moved for conditional certification of a class under the FLSA. In ruling that the entire action should be dismissed for lack of subject matter jurisdiction, the Court assumed that the Rule 68 offer mooted the plaintiff’s individual claims. However, the Court did not decide that issue because it was waived by the plaintiff in the lower court.

Subsequent to Genesis HealthCare, the courts have sharply disagreed on whether the logic of that decision applies in Rule 23 class actions. Many courts have held that Genesis HealthCare does not apply to Rule 23 class actions because they are different from FLSA collective actions. Many other courts have concluded that the differences between collective actions and class actions are immaterial when the offer of complete relief is made before a class is certified, since putative class allegations are not enough to keep the case alive when the named plaintiff’s claims have been mooted. Even before Genesis HealthCare, the Seventh Circuit had ruled that a full settlement offer to the named plaintiff can moot his individual and class claims.

The petitioner in Gomez was sued in a class action under the Telephone Consumer Protection Act. It offered to pay the plaintiff more than he would have been able to obtain had he prevailed in court and sought dismissal of his claims for lack of subject matter jurisdiction because they were mooted by the offer of complete relief. Both the district court and the Ninth Circuit held that the plaintiff’s claims were not moot, reasoning that an unaccepted settlement offer cannot moot either individual or class claims. The Ninth Circuit distinguished Genesis HealthCare because it was a collective action under the FLSA, not a class action under Rule 23.

The Supreme Court’s ruling, expected before the end of June 2016, could have a substantial impact on class action and even individual federal court litigation. A ruling by the Court that an offer of complete relief moots the named plaintiff’s individual and class claims would not only affect numerous pending class actions, but also give defendants an important potential defense to federal statutory and common law claims, including those filed as putative class actions. Notably, while it is pondering the constitutional issues presented in Gomez, the Court will also be weighing the arguments in Spokeo, Inc. v. Robins. In that case, the Court will decide whether allegations of statutory, but not actual, damages create constitutional standing.

For more information, please contact Consumer Financial Services Group Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, Mark J. Levin at 215.864.8235 or levinmj@ballardspahr.com, Burt M. Rublin at 215.864.8116 or Rublin@ballardspahr.com, or Scott M. Pearson at 424.204.4323 or pearsons@ballardspahr.com.


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