Campbell-Ewald Co. v. Gomez: Supreme Court Holds that Unaccepted Settlement Offer Does Not Moot Class Action

The Supreme Court of the United States yesterday announced its decision in Campbell-Ewald Co. v. Gomez (SCOTUS 1/21/16), which considers whether an unaccepted offer to satisfy the named plaintiff ’s individual claim renders a putative class action moot. 

In an opinion written by Justice Ginsburg, the majority held that it does not. This issue has been brewing for a number of years, and many (including yours truly) expected the Court to hold that no case or controversy exists after such an offer, causing the district court to lose subject matter jurisdiction under Article III of the Constitution. 

The decision's syllabus states:

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 Mindmatics LLC generated a list of cellular phone numbers for consenting 18- to 24-year-old 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 and, at age 40, was not in the Navy’s targeted age group. Gomez filed a nationwide class action, alleging that Campbell violated the Telephone Consumer Protection Act (TCPA), 47 U. S. C. §227(b)(1)(A)(iii), which prohibits “using any automatic dialing system” to send a text message to a cellular telephone, absent the recipient’s prior express consent. He 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. 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. The District Court denied the motion. After limited discovery, the District Court granted Campbell’s motion for summary judgment. Relying on Yearsley v. W. A. Ross Constr. Co., 309 U. S. 18, the court held that Campbell, as a contractor acting on the Navy’s behalf, acquired the Navy’s sovereign immunity from suit under the TCPA. The Ninth Circuit reversed. It agreed that Gomez’s case remained live but concluded that Campbell was not entitled to “derivative sovereign immunity” under Yearsley or on any other basis.

Held:

1. An unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case, so the District Court retained jurisdiction to adjudicate Gomez’s complaint.

Article III’s “cases” and “controversies” limitation requires that “an actual controversy . . . be extant at all stages of review, not merely at the time the complaint is filed,” Arizonans for Official English v. Arizona, 520 U. S. 43, 67 (internal quotation marks omitted), but a case does not become moot as “long as the parties have a concrete interest, however small,” in the litigation’s outcome, Chafin v. Chafin, 568 U. S. ___, ___ (internal quotation marks omitted).

Gomez’s complaint was not effaced by Campbell’s unaccepted offer to satisfy his individual claim. Under basic principles of contract law, Campbell’s settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy. With no settlement offer operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset. Neither Rule 68 nor the 19th century railroad tax cases California v. San Pablo & Tulare R. Co., 149 U. S. 308, Little v. Bowers, 134 U. S. 547, and San Mateo County v. Southern Pacific R. Co., 116 U. S. 138, support the argument that an unaccepted settlement offer can moot a complaint. Pp. 6–12.

2. Campbell’s status as a federal contractor does not entitle it to immunity from suit for its violation of the TCPA. Unlike the United States and its agencies, federal contractors do not enjoy absolute immunity. A federal contractor who simply performs as directed by the Government may be shielded from liability for injuries caused by its conduct. See Yearsley, 309 U. S., at 20–21. But no “derivative immunity” exists when the contractor has “exceeded [its] authority” or its authority “was not validly conferred.” Id., at 21. The summary judgment record includes evidence that the Navy authorized Campbell to send text messages only to individuals who had “opted in” to receive solicitations, as required by the TCPA. When a contractor violates both federal law and the Government’s explicit instructions, as alleged here, no immunity shields the contractor from suit. Pp. 12– 14. 

The opinion leaves open the following question: 

We need not, and do not, now decide 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. That question is appropriately reserved for a case in which it is not hypothetical.

Justice Ginsburg wrote the opinion, joined by Justices Kennedy, Breyer, Sotomayor, and Kagan. Justice Thomas concurred in the result. Chief Justice Roberts wrote a dissent, joined by Justices Scalia and Alito. Alito also wrote a separate dissent. 

The opinion is available here. The SCOTUSblog page for the case is here.