The U.S. Supreme Court heard oral argument  in Campbell-Ewald Co. v. Gomez on October 14, 2015, an important case presenting the question of whether a defendant can defeat a class action by offering complete individual relief to the named plaintiff(s) under Rule 68 of the Federal Rules of Civil Procedure even if the offer is rejected, and even if class allegations have been made.

As discussed in our earlier alert, the circuit courts are deeply divided on this issue. Despite the significant implications the case has for class actions in consumer finance, employment, and other areas, the Supreme Court argument focused almost entirely on technical jurisdictional matters concerning the named plaintiff’s individual claims, and not on policy arguments concerning the costs and benefits associated with class actions.

In Gomez, the defendant/petitioner made a Rule 68 offer of judgment that would give the putative class representative all statutory damages available under the Telephone Consumer Protection Act. After the plaintiff refused the offer, the defendant moved to dismiss the case for lack of subject matter jurisdiction, as there arguably was no longer any Article III case or controversy. The trial court denied the motion to dismiss, but later granted summary judgment. The Ninth Circuit reversed, holding that “an unaccepted offer alone is ‘insufficient’ to moot [plaintiff’s] claim.” In so doing, the Ninth Circuit rejected the defendant’s argument that the reasoning in Genesis HealthCare Corp. v. Symczyk, applies in the Rule 23 class action context. In Genesis HealthCare, the Supreme Court ruled 5-4 that a fully sufficient Rule 68 offer made to the plaintiff in a collective action under the Fair Labor Standards Act mooted the entire case. However, the Court merely assumed, without deciding, that a Rule 68 offer can moot a plaintiff’s individual claims. That issue, along with the question of whether Rule 23 class claims can be mooted by such an offer, is now before the Court in Gomez.

At oral argument, the Court focused on the threshold issue of what constitutes “complete relief,” and when a court properly can make that determination. Justices Kagan and Sotomayor, for example, questioned whether complete relief had been offered below, since the Rule 68 offer did not include attorneys’ fees. Although this was not at issue below, they suggested that mootness is precluded by a dispute over the plaintiff’s entitlement to any particular relief, and that any such dispute should be decided no earlier than on summary judgment. Other justices asked questions suggesting that these issues appropriately could be determined at the pleading stage. In one exchange, Justice Scalia observed that a plaintiff could seek to avoid an offer of full relief under Rule 68 by requesting legally impossible relief such as demanding “the key to Fort Knox,” and defendant’s counsel responded that “[h]e could ask for a unicorn, Your Honor.” 

As the argument progressed, the focus of virtually all of the questioning was on what should happen in the event a case has been mooted through a Rule 68 offer of complete relief. While some of the justices suggested that dismissal would be an appropriate outcome, others appeared to favor the Sixth Circuit approach, which is to enter judgment in favor of the plaintiff, even if doing so is against the plaintiff's wishes. There was little discussion, however, of what should happen to the putative class claims, or the effect of any of these outcomes on class actions generally.

The oral argument in Gomez reveals a Court deeply divided on the jurisdictional issues presented. If the 5-4 majority in Genesis Healthcare holds together in Gomez, class action defendants may have a powerful method for avoiding costly class action litigation.  A decision is expected next year.

Notably, there are proposals afloat that ironically could moot the impact of Gomez in future cases if they are adopted. A subcommittee of the Federal Rules Advisory Committee is working on proposed amendments to Rule 23 and is considering changes that would limit or eliminate altogether a defendant’s ability to moot a class action via a Rule 68 offer of judgment. Prior efforts to amend Rule 68 to exclude Rule 23 class actions were unsuccessful. According to the subcommittee’s report, the earliest that any rule changes would become effective is December 1, 2018. 

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). In addition to having vast experience in defending TCPA lawsuits, the Group has counseled a number of clients on establishing autodialing and monitoring protocols. For more information, contact Consumer Financial Services Group Practice Leader Alan S. Kaplinsky or the Ballard Spahr attorney with whom you work.

 


 

 

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