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Supreme Court Says Offering to Settle Cannot Moot Class Action Suits

Last week, the US Supreme Court ruled that an offer of judgment under Federal Rule of Civil Procedure 68 made to the lead plaintiff in a class action lawsuit, in addition to a separate free-standing settlement offer in the same amount, does not render the lawsuit moot.

In Campbell-Ewald Co. v. Gomez, No. 14-857, 2016 WL 228345 (U.S. Jan. 20, 2016), Jose Gomez filed a class-action lawsuit seeking damages under the Telephone Consumer Protection Act as a result of unwanted text messages he and others received from Campbell-Ewald Company.  Before Gomez had filed his motion for class certification, Campbell made an offer of judgment to him under Federal Rule of Civil Procedure 68 which would have satisfied his personal claim entirely.  Gomez allowed this offer to lapse after 14 days, as specified by the rule.  Campbell then moved to dismiss the case, claiming that no controversy remained after its offer provided Gomez with complete relief.  Both the District Court and the Ninth Circuit Court of Appeals disagreed with Campbell.

The Court’s decision, however, hinted that an alternate approach may work.

In a 6-3 decision, with Justice Ginsburg delivering the majority opinion, the US Supreme Court held that the case was not rendered moot because the named plaintiff refused to accept the Campbell offer.  Under Rule 68, the Court held, a lapsed offer of judgment “is considered withdrawn.”  And, under basic principles of contract law, both the settlement bid and the Rule 68 offer of judgment “had no continuing efficacy” once rejected.  With both settlement offers having been in effect rejected, the parties were in the same position as where they had started.    And because Gomez was emptyhanded after Campbell’s offer had lapsed, his claim remained live, and would be relevant in determining the issue of class certification.

The Court’s decision, however, hinted that an alternate approach may work.  Because the Court’s ruling hinged on the plaintiff’s refusal to accept the defendant’s offer, a defendant who backs up its offer with the actual payment of funds (into an account payable to plaintiff, or to the Court) may moot the plaintiff’s claim if judgment is then entered in that amount.  The Court did not comment further on this “hypothetical” case, including specifically how a defendant would cause a District Court to enter judgment on a Rule 68 offer without the plaintiff having accepted that offer.

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Joseph J. Krasovec III, Schiff Hardin, Chicago, Mediation Dispute Resolution Lawyer, Arbitration Attorney
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Joseph J. Krasovec III works with a broad spectrum of companies to control and reduce their exposure to litigation risk. Regardless of the case,  his clients’ business and litigation objectives are always top of mind.

For 25 years, Joe has managed hundreds of cases to successful resolution, whether through a negotiated settlement, mediation, arbitration or jury trial. He performs early case assessments to determine the appropriate strategy and resources to deliver the most cost-effective outcome for his clients.

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