U.S. Supreme Court to Decide Whether a Rule 68 Offer that Extends Full Relief Can Moot a Class Action

June 15, 2015 | Bulletin No.

On May 18, 2015, The United States Supreme Court granted cert in Campbell-Ewald Co. v. Gomez (No. 14-857), a case alleging violation of the Telephone Consumer Protection Act (TCPA) from the Central District of California.  The U.S. Supreme Court will address whether a plaintiff's individual and class claims under Federal Rule of Civil Procedure 23 would be rendered moot if the plaintiff receives a Rule 68 offer of judgment providing complete relief before a class is certified.

Gomez filed a class action alleging unsolicited text messages he received violated the TCPA. The single identified  text message stated:

DESTINED FOR SOMETHING BIG?  DO IT IN THE NAVY.  GET A CAREER.  AN EDUCATION. AND A CHANCE TO SERVE A GREATER CAUSE.  FOR A FREE NAVY VIDEO CALL 1-80-510-2074.

Gomez also alleged that he received additional text messages without alleging how many.

On March 19, 2010, Gomez sued Campbell-Ewald Co., a marketing company hired by the Navy, which was responsible for sending the text messages.  The parties agreed to extend the deadline to file a motion for class certification until after all defendants had answered and the parties had filed a proposed discovery schedule.

After Campbell-Ewald Co. answered, but before the United States answered and before the parties had submitted a proposed discovery schedule, Campbell-Ewald Co. served and filed a Rule 68 offer purporting to offer all relief to which Mr. Gomez was entitled.  The January 5, 2011 Rule 68 Offer of Judgment consisted of $1,503 for the single text message identified in the Complaint and attorneys' fees and costs.  Campbell-Ewald Co. also offered to pay an additional $1,503 for each additional text message that Gomez claimed he received provided that Gomez and his counsel had a reasonable belief satisfying Federal Rule of Civil Procedure 11 that such messages were sent by Campbell-Ewald Co.  The figure offered per text message was derived from $501 multiplied by three.  The TCPA allows for statutory damages of $500 per call (text) for negligent violations and three times that amount for willful violations.  Campbell-Ewald Co. also offered to permit the Court to enter an injunction that would prohibit Campbell-Ewald Co. from sending text messages using automated telephone equipment unless the recipient has consented.  Campbell-Ewald Co. also extended the same offer outside of Rule 68's requirements.

Gomez rejected the offer.  And on January 19, 2011, after the Rule 68 10-day acceptance period, Gomez filed a Motion for Class Certification.  Campbell-Ewald Co. moved to dismiss the individual and class claims as moot.  The District Court denied the Motion to Dismiss and Denied the Motion for Class Certification without prejudice to bring again after class discovery was completed.  Campbell-Ewald Co. filed a motion for summary judgment based on derivative sovereign immunity, which was granted.

Plaintiff appealed.  Campbell-Ewald Co. filed a motion to dismiss because of lack of juridisction, arguing that Plaintiff's claims were mooted by the Rule 68 offer.  The Ninth Circuit in Gomez v. Campbell-Ewald Co., 768 F.3d 871 (2014) agreed with the District Court that the claims were not moot, but reversed the order granting summary judgment in favor of Campbell-Ewald Co.

In determining the claims were not moot, the Ninth Circuit distinguished Genesis HealthCare Corp. v. Symczyk, 133 S.Ct. 1523 (2013) where the Supreme Court in a 5-4 vote held that an employee plaintiff in a collective action brought pursuant to the Fair Labor Standards Act could not continue her claims or pursue a collective action because of her employer's offer of judgment.  The US Supreme Court specifically noted in Genesis HealthCare that its ruling did not address class actions under Rule 23.  The Ninth Circuit relied upon this statement in a footnote to distinguish Genesis HealthCare, holding that Gomez's action was not governed by the US Supreme Court's holding in Genesis HealthCare.

The Circuits are divided over whether an unaccepted offer of judgment that fully satisfies a plaintiff's claim is sufficient to render the individual claims moot. The Second, Ninth and Eleventh Circuits have held such offers do not render an individual plaintiff's claims moot, whereas the Third, Fourth, Fifth, Sixth, and Seventh Circuits disagree. The Circuits are likewise divided as to the effect of an unaccepted offer of judgment that fully satisfies a plaintiff's claim is sufficient to render the class claims moot, and whether that offer has to be made before a class certification motion is filed or decided.

The Supreme Court will resolve the open issue in Genesis HealthCare regarding the effect of an unaccepted Rule 68 offer has Rule 23 cases, hopefully addressing all aspects of this issue.  Should the Court also reach the derivative sovereign immunity issue, its decision may impact many government contractors and any potential liability they may face.

Questions

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June D. Coleman | 916.321.4500