On Wednesday the U.S. Supreme Court handed a rare 6-3 victory
to consumers and employees seeking to bring class claims in Campbell-Edwald Co. v. Gomez. The Court was
tasked with deciding whether a defendant can properly dispose of a class case
by offering full relief to the named plaintiffs in an effort to render moot
their individual claims and thus get rid of the entire case. Such efforts by
defendants to dispose of class cases by paying off the named plaintiffs have
become commonplace in consumer and employee class actions.
The case involved a consumer class action under the
Telephone Consumer Protection Act (TCPA) against a Navy contractor hired to
send recruiting text messages to young people. The TCPA prohibits sending such marketing
text messages without the cellular phone user’s prior consent. Jose Gomez, who
had not provided consent and nonetheless received the Navy’s recruiting text
message, filed suit on behalf of a putative consumer class seeking treble
statutory damages for Cambell-Edwald’s knowing and willful violation of the
TCPA, as well as an injunction against further unsolicited text messages by
Campbell-Edwald.
Before Mr. Gomez’s deadline to file a motion for class
certification, Campbell-Edwald filed an offer of judgment to Mr. Gomez under
Federal Rule of Civil Procedure 68. Mr. Gomez did not accept that offer.
However, Campbell-Edwald contended that by providing Mr. Gomez with an offer of
complete relief, his claim became moot. Because his claim was mooted before he
moved for class certification, Campbell-Edwald argued, the putative class
claims also became moot. The district court rejected those arguments and ruled
in favor of Mr. Gomez on that issue. The Ninth Circuit Court of Appeals agreed.
At the Supreme Court, Justice Ginsberg wrote for the
majority, joined by Justices Kennedy, Breyer, Sotomayor, and Kagan. (Justice
Thomas concurred in the judgment but did not sign Justice Ginsberg’s majority
opinion.) Ultimately, Justice Ginsberg resolved the mootness question according
to fundamental principles of contract law, stating that “an unaccepted
settlement offer has no force. Like other unaccepted contract offers, it
creates no lasting right or obligation. With the offer off the table, and the
defendant’s continuing denial of liability, adversity between the parties
persists.”
In reaching that conclusion, Justice Ginsberg
addressed a 2013 decision of the Court, Genesis
HealthCare Corp. v. Symczyk, 133 S.Ct. 1523 (2013), a collective action
brought by employees under the Fair Labor Standards Act. In that case, the named
plaintiff had conceded in the lower courts that her individual claim was
rendered moot when she did not accept her employer’s Rule 68 offer to settle
her individual claim. Based on that early concession, a five-justice majority held
that without a named plaintiff’s live individual case, a class suit could not
be maintained. The four dissenting Justices, led by Justice Kagan, argued that the
employee’s unaccepted offer of judgment could not properly moot a case.
Justice Ginsberg thus adopted the reasoning of Justice
Kagan’s dissent in Genesis HealthCare
and secured a majority with the votes of Justices Kennedy and Thomas. The
decision was a rare victory for employees and consumers before a Supreme Court
that has often been hostile toward class action lawsuits. See previous blog posts here, here, and here. Justice
Kennedy’s decision to join the majority in deciding not to dispense with class
actions as a means to vindicate vital statutory rights – including job
protections--should delight employee and consumer advocates.
The argument advanced by Chief Justice Roberts and the
dissenters is a cynical one in its claim that a lawsuit brought on behalf of a
class is rendered moot if the defendant offers to pay off the named plaintiffs,
even if those named plaintiffs refuse the payment. The Chief’s contention that
no live case or controversy exists because a defendant offers to resolve one of
potentially thousands of putative class members’ claims cannot be taken at face
value.
Practically speaking, what company would not pay a few
thousand dollars to the named plaintiffs to escape the possibility of
multi-million dollar exposure? Simply put, a seemingly small point of procedural
law could have spelled the end of vigorous enforcement for numerous employee
and consumer protections enacted by Congress.
Although Justice Ginsberg confined her majority
opinion to a relatively narrow set of facts—suggesting the outcome could be different
if Mr. Gomez had in fact accepted full payment—employees, consumers, and those
who advocate on their behalf can breathe a collective sigh of relief that class
actions will live to fight another day.
