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Supreme Court Rules that Unaccepted Offer Does Not Moot a Claim But Leaves Door Open to Mooting Through Actual Payment

On January 20, 2016, the Supreme Court issued a long-awaited ruling in Campbell-Ewald Co. v. Gomez. Although their reasoning differed, six of the Justices held that an unaccepted offer of complete relief does not in and of itself deprive a court of Article III jurisdiction by mooting a plaintiff’s claim.

The Majority Opinion

The majority opinion written by Justice Ginsburg adopted the reasoning of Justice Kagan’s dissent in Genesis HealthCare Corp. v. Symczyk. The majority reasoned that, under the language of Rule 68(b) and “basic principles of contract law,” an unaccepted offer of judgment, like an unaccepted offer to contract, is a legal nullity that “creates no lasting right or obligation” and has “no continuing efficacy.” The fact that the offer was unaccepted was critical to the majority’s reasoning because it meant that the plaintiff’s claim “stood wholly unsatisfied.” Indeed, the majority noted several times throughout its opinion that the plaintiff “gained no entitlement to the relief” previously offered and had not received the relief previously sought, and thus retained a personal stake in the outcome of the litigation. See Campbell-Ewald v. Gomez, No. 14-857, slip op. at 8-12 (Jan. 20, 2016).

To be clear, however, the majority’s ruling is a narrow one: a mere unaccepted offer of complete relief, in and of itself, does not render a plaintiff’s claim moot. Although it’s a somewhat impractical outcome — clearly the defendant in Campbell-Ewald was ready, willing, and able to give the plaintiff everything he asked for — it is not necessarily surprising in light of the questioning during October’s oral argument, and the fact that most Courts of Appeals had reached the same conclusion after Genesis HealthCare.

The Dissenting Opinions and the Path Forward

Critically, the majority did not rule out the possibility that a defendant could moot the claims of a plaintiff by, for example, making an actual payment instead of a proposed payment. In fact, it expressly left that question open. Id. at 11 (“We need not, and do not, now 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 hypothetical.”). Clearly, Chief Justice Roberts and Justices Scalia and Alito would hold that a case is moot if a defendant actually provides complete relief to a plaintiff (all three believe that Campbell-Ewald’s offer alone was sufficient). See id. at 10 (Roberts, C.J., dissenting) (“the good news is . . . [t]he majority does not say that payment of complete relief leads to the same result”); id. at 4 (Alito, J., dissenting) (“outright payment is the surest way for a defendant to make the requisite mootness showing”). Justice Thomas endorsed mooting through a “tender” — an unconditional offer accompanied by payment. Id. at 5, 7 (Thomas, J., dissenting). And at oral argument, Justices Kennedy and Breyer (who ultimately sided with the majority’s narrow holding) appeared to agree that the adversity required by Article III disappears once a party actually receives everything he wanted.

“A Fair Opportunity to Show That Certification Is Warranted”

In a passage that is sure to be dissected in future filings, the majority wrote that “a would-be class representative with a live claim must be accorded a fair opportunity to show that certification is warranted.” Plaintiffs presumably will characterize that as an endorsement of the notion that Rule 23 empowers them to persist in pursuing class actions even if they lack the personal stake that Article III requires.

However, a closer reading of this passage shows that the majority was simply distinguishing offered payments from actual payments:

In urging that an offer of judgment can render a controversy moot, Campbell features a trio of 19th-century railroad tax cases…. None of those decisions suggests that an unaccepted settlement offer can put a plaintiff out of court…. In all three cases, the railroad’s payments had fully satisfied the asserted tax claims, and so extinguished them. In contrast to the cases Campbell highlights, when the settlement offer Campbell extended to Gomez expired, Gomez remained emptyhanded; his TCPA complaint, which Campbell opposed on the merits, stood wholly unsatisfied. Because Gomez’s individual claim was not made moot by the expired settlement offer, that claim would retain vitality during the time involved in determining whether the case could proceed on behalf of a class. While a class lacks independent status until certified, a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.

Id. at 9-11 (majority opinion). In other words, even the majority opinion appears to acknowledge that plaintiffs who have received “full payment” do not have a “live claim” such that they need “an opportunity to show that certification is warranted.”

Indeed, a contrary reading would run headlong into the Rules Enabling Act, which states that the rules “shall not abridge, enlarge or modify any substantive right,” and Rule 82, which states that the rules “do not extend … the jurisdiction of the district courts.” 28 U.S.C. § 2072(b); Fed. R. Civ. P. 82. Several of the Supreme Court’s recent class action decisions have hinged on the fact that Rule 23 cannot be interpreted or applied in a way that affects substantive rights. See Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2561 (2011) (“The Court of Appeals believed that it was possible to replace such proceedings with Trial by Formula…. We disapprove that novel project. Because the Rules Enabling Act forbids interpreting Rule 23 to ‘abridge, enlarge or modify any substantive right,’ a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.”); see also Am. Express Co. v. Italian Colors Restaurant, 133 S.Ct. 2304, 2319 & n.5 (2013) (explaining that the Federal Arbitration Act’s statutory “command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low-value claims.”). Any suggestion that a court could invoke Rule 23 as authority for allowing a plaintiff to pursue a moot claim would be hard to reconcile with that well-reasoned and well-settled precedent.

The Takeaway

Although both sides of the bar were hoping for further guidance beyond the majority’s narrow ruling, that will have to await another day. Going forward, we expect that defendants will scour the opinions and oral argument transcript for the optimal mechanism for providing full redress to the plaintiffs who, as Chief Justice Roberts put it, “won’t take ‘yes’ for an answer.”

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About this Author

Michael Daly, Drinker Biddle Law Firm, Philadelphia, Litigation and Retail Attorney

Michael P. Daly defends class actions and other complex litigation matters, handles appeals in state and federal courts across the country, and counsels clients on maximizing the defensibility of their marketing and enforceability of their contracts. A recognized authority on class action and consumer protection litigation, he often speaks, comments, and writes on recent decisions and developments in the class action arena. He is also a founder of the firm’s TCPA Team; the senior editor of the TCPA Blog, which provides important information and insight...

Matthew Fedor, Commercial Lawyer, Drinker Biddle

Matthew J. Fedor defends clients in consumer class actions and complex commercial disputes. Matt also conducts internal investigations, and counsels clients on sales and marketing practices, and compliance with consumer protection statutes and regulations. He is a partner in the firm’s Litigation Group and a member of the Class Actions Team.

Matt defends companies in class actions and consumer disputes involving sales and marketing practices, product defects, and federal and state consumer protection statutes and regulations, such as the Telephone Consumer Protection Act (TCPA), New Jersey Consumer Fraud Act (CFA), New Jersey Truth-in-Consumer Contract Warranty and Notice Act (TCCWNA), California Anti-Spam Act (CASA), the New Jersey Gift Card Act and the Americans with Disabilities Act (ADA).

Jenna Poligo, Securities Lawyer, Drinker Biddle

Jenna M. Poligo represents a wide variety of clients in civil litigation in federal and state court and arbitrations involving complex commercial matters, including consumer protection claims, contract disputes, and corporate governance matters. Jenna also defends clients in criminal litigation in federal court and represents clients in investigations and enforcement actions by the United States Department of Justice, state Attorneys General, and other regulatory bodies.

Jenna also counsels clients on potential litigation and is a contributor to...