SCOTUS: Unaccepted Rule 68 offer does not moot class action

Campbell-Ewald Co v. Gomez (US Supreme Court 01/20/2016) is an important victory for class action plaintiffs in employment and consumer cases. In class action suits a defendant will often attempt to "pick off" the lead plaintiff by offering to that person a judgment in full satisfaction of that individual's claim. The defendant's idea is that complete satisfaction of the plaintiff's claim renders the case "moot" because there is no longer any legal dispute between the two. Under Article III of the constitution, federal courts have no jurisdiction over situations in which there's really no dispute between the litigating parties.

Defendants rely upon Federal Rule 68:

“(a) Making an Offer; Judgment on an Accepted Offer. At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.

“(b) Unaccepted Offer. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs."

What happens if the defendant makes the Rule 68 offer, but the plaintiff simply does nothing in response?

Every first year law student should know the answer to this question. If an offer is made, and the offeree does not accept the offer, then there has been no change in the legal relationship between the two parties. An unaccepted offer simply lapses, and the unaccepted offer is a legal nullity.

Justice Kagan once wrote (Genesis HealthCare Corp v. Symczyk, 569 U. S. ___ (US Supreme Court 2012):

“When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer— like any unaccepted contract offer—is a legal nullity, with no operative effect. 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.’ Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U. S. 149, 151 (1886). Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that ‘[a]n unaccepted offer is considered withdrawn.’ Fed. Rule Civ. Proc. 68(b). So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.”

In Campbell-Ewald Co v. Gomez (US Supreme Court 01/20/2016) the Supreme Court (splitting 6-3) adopted Justice Kagan's pithy explanation.

Gomez sued claiming that Campbell-Ewald Co had violated the Telephone Consumer Protection Act by using any automatic dialing system to send a text message to his cell phone, without his prior express consent. This was a class action claim. Before the deadline for Gomez to file a motion for class certification, Campbell-Ewald proposed to settle Gomez’s individual claim and filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68. Gomez did not accept the offer and allowed the Rule 68 submission to lapse on expiration of the time (14 days) specified in the Rule.

Campbell-Ewald argued that its offer mooted Gomez’s individual claim by providing him with complete relief. Next, Campbell-Ewald urged that Gomez’s failure to move for class certification before his individual claim became moot caused the putative class claims to become moot as well. Both the district court (805 F. Supp. 2d 923 (CD Cal. 2011)) and the 9th Circuit (768 F3d 871 (9th Cir 2014)) ruled that the case did not become moot, and the US Supreme Court agreed.

Dissenting for himself and two others, Chief Justice Roberts said:

"When a plaintiff files suit seeking redress for an alleged injury, and the defendant agrees to fully redress that injury, there is no longer a case or controversy for purposes of Article III. After all, if the defendant is willing to remedy the plaintiff ’s injury without forcing him to litigate, the plaintiff cannot demonstrate an injury in need of redress by the court, and the defendant’s interests are not adverse to the plaintiff."

Some pundits will exclaim that this case is a left-leaning pro-consumer, pro-employee decision (and the line-up of votes supports this), yet it really is the natural result of the text of Rule 68 and well-accepted rules of the common law of contracts.