Opinion analysis: Justices deal twin blows to class-action defendants
on Jan 21, 2016 at 12:40 pm
In Campbell-Ewald Co. v. Gomez, the Court agreed to review a Ninth Circuit decision that allowed a class action under the Telephone Consumer Protection Act (TCPA) to proceed against a government contractor, petitioner Campbell-Ewald Company. A simplistic view would see “Ninth Circuit” and “class action” and predict an easy reversal. But that is not what happened. Rather, although the Court reviewed two entirely separate arguments for dismissal, the Court rebuffed the contractor on both grounds.
The first issue in the case is the important one: whether a complete offer of relief to the named plaintiff in a class action moots that individual’s claim. This is the second in what is likely to be a continuing line of cases grappling with a defendant’s ability to force a settlement of a class action by offering full relief to the named plaintiffs. In some areas, the size of the individual claims makes such a tactic unprofitable (securities cases being the most obvious), but the strategy is commonly used by defendants in consumer and employee class actions under statutes like the TCPA and the Fair Labor Standards Act.
The issue first reached the court in 2013, with Genesis HealthCare Corp. v. Symczyk. In that case, the plaintiff, Laura Symczyk, conceded that the defendants’ offer of relief mooted her own claim, but argued that her interest in pursuing a class action was enough to keep the case alive. The five Justices who addressed that question rejected it, which leaves us with an opinion of the Court holding that a defendant can moot a class action if it can moot the claim of the named plaintiff. Four Justices did not address that question, however. Rather, in a dissent by Justice Elena Kagan, those Justices argued that an unaccepted offer of relief does not moot the individual’s claim. [Full disclosure: I represented the defendants in Genesis.]
That brings us to this case, which presents the question answered by four of the nine Justices in Genesis. With Justice Anthony Kennedy joining the four dissenters from Genesis, a bare majority of the Court held that an unaccepted offer of relief is not enough to moot the plaintiff’s claim. Justice Ruth Bader Ginsburg’s opinion for the Court followed (and quoted extensively from) the reasoning from Kagan’s Genesis dissent. The basic point is the first-year contracts point, that an unaccepted offer binds neither the offeror nor the offeree. Because the offer has no binding effect, it cannot moot the plaintiff’s claim.
That might sound like a big victory for plaintiffs, but I’m skeptical. To my mind, everything of import is in the last two sentences of the Court’s analysis:
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.
That sounds suspiciously like a sentence added to keep on board one or more members of the majority who believe that a defendant can moot the plaintiff’s claim by depositing adequate funds with the Court.
If that sentence is not enough of a signal, the opinions of the four Justices who did not join the Court’s opinion make the point explicit. Justice Clarence Thomas concurred in the judgment, explaining that in his view the problem should be resolved under common-law rules for “tender.” Under those rules, the defendant has to offer the money unconditionally to the plaintiff. Because the Campbell-Ewald did not do that here, Thomas agreed with the Court that the case is not moot. Similarly, Chief Justice John Roberts (along with Justices Antonin Scalia and Samuel Alito) argued that the reality of the defendant’s willingness to pay removes any “controversy” cognizable under Article III. So those four Justices plainly would hold a case moot if the defendant in fact made an adequate tender of the funds into the trial court. The important question going forward will be whether any member of the majority in this case will agree with the four dissenters on that point. If one of them joins the dissenters (as Kennedy shifted here to join the Genesis dissenters), then defendants will have what they want: a road map for forced settlement of a class action.
It may be a few years before we know the answer to that question, but I wouldn’t bet on it being much longer than that. Faced with these opinions, it is reasonable to expect that Campbell-Ewald here will tender the money that they previously offered into the district court as soon as the case returns to that level. At that point, the district court will have to answer that question. And if Campbell-Ewald doesn’t, defendants in other class actions – faced with the Court’s holding that a stand-alone offer doesn’t work – certainly will be trying that strategy in short order.
A final note on the amusing symmetry. The Court in Genesis divided five to four, with four dissenters providing an answer to the obvious next question, left unaddressed by the majority. Yesterday, the Court divides six to three, with four Justices providing their answer to what obviously is the next question, again unaddressed by the majority. Perhaps the third time will be a charm!
The second question in this case is much simpler. Because Campbell-Ewald was acting under a government contract, it argued that it should enjoy the same qualified immunity from suit that government officers enjoy. In the Court’s view, that argument had a basic flaw: the contract required the contractor to comply with the TCPA. Because the TCPA is a clearly established rule and because the contract required the contractor to comply with it, Campbell-Ewald could have no claim of immunity. That part of the decision could come as little surprise, because the government appeared in support of Gomez. However solicitous of government contractors the Court may be – and prior decisions suggest considerable solicitude – it is a bit much to shelter the contractor under the government’s immunity in a case in which the government thinks the contractor should be liable.
PLAIN LANGUAGE: This is a class action brought by people who received unwanted text messages from the Navy. Because they can’t sue the Navy, they sued one of the contractors that prepared the list of people who would receive the messages. The contractor tried to get rid of the case by paying off the individual plaintiffs who brought the case everything they were owed. The Justices said that kind of “forced” settlement didn’t work if the plaintiff refused to accept the money. The contractor also claimed that the people who received the text messages shouldn’t be able to sue the contractor because it was just following the Navy’s instructions, but the Justices rejected that also.