Today, in a 6-3 decision, the Supreme Court of the United States held in Campbell-Ewald Co. v. Gomez that an unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case. As previously discussed, the Supreme Court granted a petition for a writ of certiorari on May 18, 2015 and heard arguments in the case on October 14, 2015.

The United States Navy contracted with petitioner Campbell-Ewald Company (Campbell) to develop a multimedia recruiting campaign that included the sending of text messages to young adults, but only if those individuals had “opted in” to receipt of marketing solicitations on topics that included Navy service. Campbell’s subcontractor generated a list of cellular phone numbers for consenting users and then transmitted the Navy’s message to over 100,000 recipients, including respondent Jose Gomez, who alleges that he did not consent to receive text messages. Gomez filed a nationwide class action, alleging that Campbell violated the Telephone Consumer Protection Act (TCPA) which prohibits “using any automatic dialing system” to send a text message to a cellular telephone, absent the recipient’s prior express consent. Gomez sought treble statutory damages for a willful and knowing TCPA violation and an injunction against Campbell’s involvement in unsolicited messaging. Before the deadline for Gomez to file a motion for class certification, Campbell proposed to settle Gomez’s individual claim and filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68.  This strategy, often referred to as a “pick-off” is seen in many class actions throughout the country.  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 then moved to dismiss the case pursuant to Rule 12(b)(1) for lack of subject-matter jurisdiction. Campbell argued first that its offer mooted Gomez’s individual claim by providing him with complete relief. Next, Campbell 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.

In reaching its holding, the Supreme Court found that Gomez’s complaint was not mooted by Campbell’s unaccepted offer to satisfy his individual claim. Rather, the Court stated that under basic principles of contract law, Campbell’s settlement bid and Rule 68 offer of judgment, once rejected, had no continuing effectiveness. With no settlement offer operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset.

The Court looked to its prior holding in Genesis HealthCare which involved an offer of judgment to satisfy alleged damages under the Fair Labor Standards Act. Specifically, in that case, the Court assumed, without deciding, that an offer of judgment of complete relief, even if unaccepted, moots a plaintiff’s claim. In Campbell, the Court adopted Justice Kagan’s analysis as set forth in the Genesis HealthCare dissent. In dissent, Justice Kagan wrote, “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.”

Interestingly, the Court limited its holding by specifically not deciding whether the result would be different 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. Instead, the Court reserved that question for a case in which it is not a hypothetical.

This case limits potential defense strategies when a company faces class claims, especially those under the TCPA. As such, it is imperative for organizations which utilize automated dialing systems to take steps to comply with the TCPA, its accompanying regulations, and related guidance. A great start to compliance, and to understanding the TCPA in general, would be a review of our Comprehensive TCPA FAQs.

For additional insight, including the broader implications the Campbell-Ewald decision may have for class actions, please see the excellent post from our colleagues in the Class and Collective Action group.