Supreme Court Holds That Rule 68 Offer of Judgment Does Not Make Class Action Moot

Yesterday, the United States Supreme Court, in a 6-3 decision, with Justice Thomas providing the sixth vote, held that an unaccepted offer of judgment under Rule 68 of the Federal Rules of Civil Procedure in a case seeking class certification under Rule 23 does not render the case moot, even though the defendant’s offer of judgment would have provided the named plaintiff in the case all the relief to which he would have been entitled even if he won the case. A link to the decision in Campbell-Ewald Co. v. Gomez is available here. The decision is significant as the latest in a series of disputes between corporate defendants and class action plaintiffs about when federal courts can grant class action relief. In general, corporate defendants seek to limit class action relief for persons claiming injury and class action plaintiffs seek greater access to the courts and the possibility of large damages awards.

The plaintiff in this case brought the case claiming that he had received a text message from the defendant that violated the Telephone Consumer Protection Act (“TCPA”), a federal statute that limits the ability of companies to send unsolicited text messages. The defendant sent the text messages as a contractor for the United States Navy. The messages were designed to promote Navy recruiting.

The TCPA provides for actual damages or statutory damages of $500 per violation, whichever is greater, plus treble damages for willful and knowing violations as well as injunctive relief. The defendant made an offer of judgment under Rule 68 that if accepted would have provided the plaintiff with $1,503 (treble statutory damages plus three dollars) as well as injunctive relief. The plaintiff did not accept the offer, even though it provided all of the relief to which he would have been entitled if the case went all the way through trial and he won.

The defendant then sought to dismiss the case as moot under Article III of the Constitution, which provides that federal courts can only hear actual “cases or controversies.” Prior to yesterday’s decision, the federal circuit courts were split on the issue of whether an offer of judgment to a named plaintiff that provided all of the relief available renders the case subject to dismissal as moot.

Justice Ginsburg wrote the decision for the majority joined by Justices Kagan, Breyer, Sotomayor, and Kennedy, with Justice Thomas concurring in the result but writing his own opinion setting forth a different rationale for the result. In her opinion, Justice Ginsburg noted that contract principles govern offers of judgment under Rule 68, and that any unaccepted offer to enter into a contract has no legal effect. Her opinion also rejected a secondary argument made by the defendant that as a contractor to the Navy it was entitled to the sovereign immunity of the federal government on the grounds that the Navy’s contract with the defendant required compliance with the TCPA and sovereign immunity did not apply because the defendant allegedly exceeded its authority under the contract.

The decision is unquestionably an important victory for class action plaintiffs, as corporate defendants have for years been using Rule 68 offers of judgment to pick off named plaintiffs and render their cases moot, meaning that the substance of their claims on behalf of classes of other similarly situated persons never got to be heard. But the extent of the victory will remain unknown until the Supreme Court hands down its decision in two other important class action cases now pending before it. In Spokeo, Inc. v. Robins, the Court will decide whether a plaintiff who cannot show any actual harm from an alleged federal statutory violation nevertheless has standing under Article III of the U.S. Constitution to sue for statutory damages in federal court.  In Tyson Foods, Inc. v. Bouaphakeo, the Court will consider whether the trial court should have certified a Rule 23 class action and a Fair Labor Standards Act collective action for claims alleging that Tyson Foods had not paid its employees for all time spent donning and doffing protective gear. Decisions in Spokeo and Tyson Foods are expected before June. For now, its round one, at least this term, for class action plaintiffs.