Thursday, January 21, 2016

Supreme Court Holds Unaccepted Rule 68 Offer Does Not Moot Class Action

Campbell-Ewald Company v. Gomez, No. 14-857, resolved a Circuit split and concerned a Telephone Consumer Protection Act case where the defendant attempted to moot the claims of a plaintiff seeking to represent a class of individuals who had received text messages in violation of the TCPA.  The defendant, Cambell-Ewald Company, made a Rule 68 offer to the plaintiff in an amount greater than the plaintiff's potential statutory damages.  After the plaintiff allowed the offer to lapse, Campbell moved to dismiss the case under Rule 12(b)(1) for lack of subject matter jurisdiction.  The District Court denied the motion, and the Ninth Circuit upheld the decision.

Justice Ginsberg, echoing Justice Kagan's 2013 dissent in Genesis HealthCare Corp. v. Symczyk  (where Faruqi & Faruqi represented the plaintiff), hewed to traditional contract principles and wrote that "Like other unaccepted contract offers [Campbell's Rule 68 offer] 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."  Justice Ginsberg quoted the Genesis dissent, "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." 

Chief Justice Roberts' dissent, joined by Justices Scalia and Alito, focused on Article III issues, not contract doctrines.  "The problem for Gomez is that the federal courts exist to resolve real disputes, not to rule on a plaintiff's entitlement to relief already there for the taking" and noted the Court's centuries-old prohibition from issuing advisory opinions.   In Justice Roberts' view the Campbell decision takes control out of the hands of the federal courts to decide whether a case or controversy exists and hands it to the plaintiff.  Justice Ginsberg expressly disagreed, and noted that the Chief Justice's view would, in fact, have handed control to the defendant.  

Indeed, had the dissent's view prevailed, a Rule 68 offer to an individual could moot a class action before it even began.

Since its founding in 1995, Faruqi & Faruqi has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, consumers and employees.

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