The U.S. Supreme Court has ruled that an unaccepted Rule 68 settlement offer does not moot a class action even when the offer would provide the named plaintiff with complete individual relief. The decision in Campbell-Ewald Co. v. Gomez rested on the narrow ground that an unaccepted contract offer has no legal force. It did not address any of the broader constitutional and policy issues on which lower courts had disagreed.

In Campbell-Ewald, the defendant was sued in a class action under the Telephone Consumer Protection Act (TCPA). Before the deadline for filing a motion for class certification, the defendant made an offer of judgment pursuant to Federal Rule of Civil Procedure 68 that would have given the named plaintiff all statutory damages and costs available under the TCPA, but no admission of liability or award of attorneys' fees. The offer was not accepted by the plaintiff, who instead allowed it to lapse. The defendant then moved to dismiss the case for lack of Article III jurisdiction, arguing that the plaintiff's individual claim was mooted by the offer of complete relief. Both the District Court and the Ninth Circuit held that the plaintiff’s claim was not moot, reasoning that an unaccepted settlement offer cannot moot either individual or class claims.   

Agreeing with the Ninth Circuit, the Supreme Court held that because the plaintiff's claim was not mooted by the petitioner's unaccepted Rule 68 offer, the District Court retained Article III jurisdiction to adjudicate the class action complaint. According to the Court, "[u]nder basic principles of contract law," without the plaintiff's acceptance, the petitioner's settlement offer "remained only a proposal, binding neither Campbell nor Gomez." It observed that having "rejected" the offer and "given Campbell's continued denial of liability," the plaintiff "gained no entitlement" to the relief offered. Thus, the Court concluded that because "no settlement offer [was] still operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset." It noted, however, that it was reserving for "a case in which it is not hypothetical," whether the result would differ "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."

Chief Justice Roberts, in a dissenting opinion joined by Justices Scalia and Alito, wrote that although the majority correctly found an unaccepted settlement offer to be a "legal nullity" as a matter of contract law, the operative question "is not whether there is a contract; it is whether there is a case or controversy under Article III." In the dissenters' view, there is no longer a case or controversy for a court to adjudicate "[i]f the defendant is willing to give the plaintiff everything he asks for." However, the dissenters deemed it "good news" that the Court did not hold that payment of complete relief was also insufficient to moot a case. In a separate dissenting opinion, Justice Alito wrote that the decision "does not prevent a defendant who actually pays complete relief—either directly to the plaintiff or to a trusted intermediary—from seeking dismissal on mootness grounds."

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.


Copyright © 2016 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.