Supreme Court: Settlement Offer Does Not Moot Class Action

In the first of three class-action cases this term, the U.S. Supreme Court held, in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), that a defendant cannot moot a class action by offering complete relief to the named plaintiff.

Gomez arose under The Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227. The TCPA prohibits “robo-calls” made without consumer consent. With technology constantly evolving, courts have held that text messaging constitutes a “call” under the TCPA. Where a defendant violates the TCPA, the consumer may recover $500 for each violation. These damages are tripled where the defendant “willingly or knowingly” violates the TCPA. So, where a defendant knowingly ignores this law, a consumer can collect up to $1,500 per text message/call.

In Gomez, the Navy hired a marketing agency to help recruits new members by targeting text messages to young adults. In May 2006, Jose Gomez received the following text message: “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 [phone number].” Gomez filed a nationwide class action against the marketing agency, seeking treble damages. In an attempt to defeat the class, the marketing agency extended to Gomez an offer of judgment under Rule 68 in an amount equal to the total damages he could individually recover ($1503 per text message). After Gomez let the offer of judgment lapse, the marketing company moved to dismiss the class action based on lack of subject matter jurisdiction. The agency argued that its offer mooted Gomez’s individual claims by providing complete relief, and that once his individual claim was mooted, the case had to be dismissed.

The Court rejected this argument. Relying on basic principles of contract law, the Supreme Court held that an unaccepted settlement—like any unaccepted contract offer–is a legal nullity, with no operative effect. Justice Ginsberg wrote: “As every first-year law student learns, the recipient’s rejection of an offer leaves the matter as if no offer had ever been made.” Thus, where a case is live prior to an offer of settlement, it remains live following the rejection of such offer.

The opposite result would have vindicated a tactic used by defendants faced with class claims, most commonly in wage-and-hour claims brought under the Fair Labor Standards Act. Still, the decision does not constitute a complete victory for class action plaintiffs because the Court left open the possibility of mooting a class plaintiff’s claims in other ways by, for example, actually depositing the full value of a plaintiff’s claim into the registry of the court (as opposed to merely offering settlement).

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