Defense Implications of Campbell-Ewald: Sky is NOT Falling
On January 20, 2016, the U.S. Supreme Court issued its highly anticipated opinion in Campbell-Ewald Co. v. Gomez, ruling that an unaccepted settlement offer, or offer of judgment, without actual payment and/or entry of judgment does not moot a named plaintiff’s class action claims. In essence, the ruling prevents defendants from offering (but not paying) complete individual relief and then arguing for dismissal of a putative class action based on satisfaction of the class representative’s individual claim. Although this ruling was a loss for class action defendant Campbell-Ewald Co. (“Campbell”), the opinion potentially validates a powerful tool for class action defendants going forward because it suggests that actual payment of complete individual relief and/or entry of judgment for that individual relief, rather than a mere offer, is sufficient to fully satisfy a class representative’s individual claim, resulting in the entry of judgment based on the absence of Article III standing and in dismissal of the class claims without prejudice.
II. Factual Background
The case arose out of claims asserted under the Telephone Consumer Protection Act by lead class action plaintiff Jose Gomez (“Gomez”) against defendant Campbell, an advertising partner of the U.S. Navy. Before the deadline for Gomez to file for class certification, Campbell proposed to settle Gomez’s individual claim and made a Rule 68 offer of judgment (and also made a separate settlement offer). Gomez did not accept. Consequently, Campbell moved to dismiss the case for lack of subject-matter jurisdiction. Specifically, Campbell argued that no Article III case or controversy remained because its unaccepted Rule 68 offer of judgment mooted Gomez’s individual claim by providing him with complete relief (even though Campbell had not tendered payment to Gomez or sought entry of individual judgment).
III. The Decision
In a 6-3 ruling written by Justice Ginsburg, the Court rejected Campbell’s contention. The Court based its decision on principles of contract law, adopting the position outlined in Justice Kagan’s dissent from Genesis Healthcare Corp. v. Symczyk. In short, the Court explained that an unpaid settlement offer (or unpaid Rule 68 offer of judgment), once rejected and without entry of judgment by the court, has no continuing effect. The Court reasoned that, under ordinary principles of contract law, a settlement offer standing alone remains only a proposal, which is not binding as a matter of contract law until acceptance occurs. As a result, when a plaintiff refuses to accept a settlement offer or an offer of judgment and there is no actual payment of the offer and/or entry of judgment, the parties remain adverse, and Article III standing remains.
Although a loss for Campbell here, the opinion potentially validates an effective defense strategy, namely, actual payment of complete individual relief and/or entry of judgment for that complete individual relief. While the majority reserved ruling on this issue for another day, both the majority and dissenting opinions indicate that actual payment of complete relief and/or entry of individual judgment may eliminate individual Article III standing.
For example, the majority opinion distinguished two prior cases in which the plaintiffs’ claims were found to be moot, explaining that those “plaintiffs had received full redress for the injuries asserted in their complaints.” By contrast, “Campbell’s revocable offer, far from providing Gomez the relief sought in his complaint, gave him nary a penny.”
Additionally, Chief Justice Roberts, in a dissenting opinion, explained that “[t]he good news is that this case is limited to its facts.” That is, “[t]he majority [held] that an offer of complete relief is insufficient to moot a case,” but it “[did] not say that payment of complete relief leads to the same result.” That question was left for another day, Roberts explained, and “[f]or aught it appears, the majority’s analysis may have come out differently if Campbell had deposited the offered funds with the District Court.”
Finally, in a separate dissenting opinion, Justice Alito agreed, stating that he was “heartened that the Court appears to endorse the proposition that a plaintiff’s claim is moot once he has ‘received full redress’ from the defendant for the injuries he has asserted.” The decision, he explained, “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.”
IV. Practical Considerations
Although offers of complete individual relief, standing alone (without actual payment and/or entry of judgment), are now insufficient to moot a class representative’s individual claim, class action defendants could still have an equally effective tool available to them. Going forward, instead of making a mere offer of complete individual relief, defendants should make an offer and actually tender complete individual relief and/or seek entry of judgment based on the absence of individual Article III standing. The Court may soon have the opportunity to provide definitive guidance on this issue. Businesses involved in class action litigation will want to stay tuned.