Recently, the U.S. Supreme Court held in Campbell-Ewald Co. v. Gomez, 577 U.S. --- (2016), that a lawsuit is not moot after a plaintiff declines to accept an offer of judgment made by the defendant pursuant to Federal Rule of Civil Procedure 68.  On January 20, 2016, Justice Bader Ginsberg, in a 6-3 majority opinion, explained that a district court retains jurisdiction over a case even after a plaintiff rejects a Rule 68 offer of judgment for complete relief because, since the claim has not been paid or settled, the plaintiff maintains a concrete interest in the lawsuit.  The Court left the door open to the possibility of mooting individual or class claims where a defendant transfers funds constituting complete relief to a plaintiff in conjunction with a Rule 68 offer.   

The Supreme Court’s Decision

Campbell-Ewald Company, a U.S. Navy advertising partner, developed a multimedia recruiting campaign that included sending text messages to approximately 100,000 individuals.  The named plaintiff, Jose Gomez, filed a nationwide putative class action, alleging that Campbell violated the Telephone Consumer Protection Act (TCPA).  Before Gomez moved for class certification, Campbell made a Rule 68 offer of complete relief for his individual claim plus reasonable costs.  After Gomez let the offer expire, Campbell moved to dismiss Gomez’s claim and the putative class claims as moot.  On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s holding that an unaccepted Rule 68 offer of judgment that would fully satisfy a plaintiff’s claim does not moot the individual or putative class claims.  The Supreme Court granted certiorari.   

The majority explicitly adopted the view from Justice Kagan’s dissent in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), that under  basic principles of contract law, the “rejection of an offer ‘leaves the matter as if no offer had ever been made.’” 133 S. Ct. at 1533­–34 (Kagan, J., dissenting) (quoting Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U.S. 149, 151 (1886)).  Thus, an unaccepted offer of complete relief is precisely that—an offer with “no lasting right or obligation.”  The text of Rule 68 similarly guided the Court’s conclusion: Rule 68 provides that an offer of judgment “is considered withdrawn” if not accepted within 14 days.  Fed. R. Civ. P. 68(a), (b).  The Court explained that because Gomez “remained emptyhanded,” his claim and the class claims “retained vitality” during the pendency of the class certification process. 

The fact that Gomez had not actually received the offered payment was central to the Court’s decision.  “We need not, and do not, now decide whether the result would be different,” the Court explained, “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.”  Accordingly, the Court left open the door to mooting a claim by a Rule 68 offer combined with payment.  In his separate dissent, Justice Alito noted that payment could be accomplished by transferring funds to a bank account in the plaintiff’s name or to the custody of the district court.

Chief Justice Roberts, joined by Justices Scalia and Alito, argued in his dissent that payment was not necessary and that, in declining to accept the offer,  Gomez was clinging to jurisdiction simply because he “want[ed] a federal court to say he is right.”  The dissent categorized this as not a “real dispute”—as required to confer standing to the federal courts under Article III of the Constitution—but as a request that a federal court “rule on a plaintiff ’s entitlement to relief already there for the taking.”  Under the dissent’s view, after a defendant agrees to fully redress an injury, there is no longer a case or controversy for purposes of Article III.

Implications of Campbell-Ewald

This Supreme Court decision alters the landscape for class action defense.  We offer the following conclusions:

  • Campbell-Ewald holds that defendants cannot “pick-off” either individual or class claims by making a Rule 68 offer of complete relief without also making the promised payment.
  • A defendant may still be able to moot a claim by making a Rule 68 offer and depositing the offered funds with the court or otherwise providing them to a plaintiff.  If a plaintiff rejects the Rule 68 offer, a defendant can move for dismissal based on mootness or move for an entry of judgment for the plaintiff under Rule 58(d).  Either path may lead to resolution of individual claims prior to class certification. 
  • Companies can still use Rule 68(d)’s cost shifting mechanism as a method of challenging class certification.  Rule 68(d)’s built in sanction, recognized by Justice Ginsberg, means that “[i]f the [ultimate] judgment . . . is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.”  To the extent a named plaintiff rejects a Rule 68 offer of judgment, companies may be able to argue the named plaintiff has individual affirmative defenses related to waiver or estoppel, or that the named plaintiff’s interests are in conflict with the class generally.  Thus, defendants may be able to challenge the typicality or adequacy of individual class representatives under Federal Rules of Civil Procedure 23(a)(3) and (a)(4). 

The general strategy of using Rule 68 offers will impact a wider swath of class actions that are based on statutes, such as the TCPA, that have damages subject to easy calculation.  With privacy and consumer class action litigation is on this rise, companies are well advised to ensure compliance with such statutes.

© 2016 Perkins Coie LLP


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