On January 20, 2016, in a highly anticipated decision (see October 27, 2015 blog) that will have implications for class action practice nationwide, the U.S. Supreme Court ruled that an unaccepted offer of judgment sufficient to completely satisfy an individual claim does not moot that claim or any class claim. The Supreme Court’s decision partially resolves a vigorously contested question of constitutional law that has been the subject of great dispute among federal Courts of Appeals for the last decade—whether a Rule 68 offer of judgment for complete relief deprives a court of Article III jurisdiction to hear only a “case or controversy.”  In a 6-3 decision, the Supreme Court held that a live case and controversy still exists when a plaintiff refuses to accept an offer of judgment.  In so holding, however, the Supreme Court suggested that it might reach a different decision if a defendant deposits funds sufficient to satisfy the plaintiff’s individual claims, and then obtains a judgment from the trial court in this amount.       The decision, Campbell-Ewald v. Gomez, arises from a putative nationwide class action for alleged violation of the federal Telephone Consumer Protection Act (“TCPA”).  The plaintiff, Gomez, received a text message from the defendant, Campbell, a marketing firm that sent the message on behalf of the U.S. Navy as part of a naval recruiting campaign.  Gomez claims that he did not consent to receiving such text messages.  He does not claim any actual damage but instead seeks statutory penalties under the TCPA of $500 to $1,500 per text message.  Gomez received at least one text message, and may have received a few such messages.  Gomez sues not only for himself, but a putative class of over 100,000 individuals who received similar text messages.  Assuming 100,000 text messages, potential class action liability ranges from $50 million to $150 million.

Though Campbell claims it did not violate the TCPA, to avoid potentially crushing class action liability, it offered Gomez $1,503 per text message he received and a stipulated judgment barring Campbell from sending text messages without sufficient consent. Campbell did not offer to pay any money to the putative class, but to completely satisfy Gomez’s individual claims.  Gomez refused to accept this offer.  Campbell then moved to dismiss for lack of subject matter jurisdiction, due to lack of standing under Article III of the U.S. Constitution, which provides that federal courts only have jurisdiction to hear cases or controversies.  The district court denied this motion, and the Ninth Circuit Court of Appeals later affirmed.

In a 6-3 decision, the U.S. Supreme Court also affirmed. Justice Ginsburg wrote for the majority, joined by Kennedy, Breyer, and Sotomayor.  Justice Thomas concurred, but for different reasons.  Chief Justice Roberts wrote the dissent, joined by Scalia and Alito.  The majority held that an offer of judgment is just that—an offer.  When a plaintiff refuses to accept that offer, the offer holds no force or effect and a case or controversy remains alive.

The majority noted, however, that it “does not 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 a hypothetical.”

The dissent disagreed with the majority’s analysis, accusing the majority of “mere pettifoggery.” The dissent noted that Campbell is a multi-million dollar company, that it offered a few thousand dollars, that Campbell could easily make good on this offer, that this offer was sufficient to completely satisfy Gomez’s individual claims, and that requiring payment to be deposited first with the trial court was an unnecessary technicality.  According to the dissent, when Campbell made its offer of complete individual relief, this was sufficient to resolve any case or controversy, and thus moot the dispute, including the putative, uncertified class claims.

According to Chief Justice Roberts in dissent, the “good news is that this case is limited to its facts.” “The majority does not say that payment of complete relief leads to the same result.”  The “majority’s analysis may have come out differently if Campbell had deposited the offered funds in the District Court.”  “This Court leaves that question for another day—assuming there are other plaintiffs out there who, like Gomez, won’t take ‘yes’ for an answer.”