February 2, 2016
by E. Edward Farnsworth, Jr.
Samuel I. White, P.C. – USFN Member (Virginia)
In a 6-3 decision, the U.S. Supreme Court put to rest the issue of whether an unaccepted offer of judgment pursuant to FRCP 68, in the full amount of a plaintiff’s claim, renders a case moot and ripe for dismissal under FRCP 12(b)(1). [Campbell-Ewald Company v. Gomez, 577 U.S. __, 2016 WL 228345 (Jan. 20, 2016)].
Adopting Justice Kagan’s rationale from her dissent in Genesis Health Care Corp. v. Symczyk, 133 S. Ct. 1523 (2013), the majority held that an unaccepted offer to completely satisfy a plaintiff’s claim does not render a case moot, depriving a federal court of jurisdiction. Gomez, at *6-7. The decision resolved a conflict amongst the federal circuits as to whether such unaccepted full judgment offers can operate to remove the “case or controversy” requirement for subject matter jurisdiction under Article III of the United States Constitution.
Background — The named plaintiff (Jose Gomez) alleged that the defendant (the Campbell-Ewald Company, a nationwide marketing and advertisement agency) violated the Telephone Consumer Protection Act (TCPA) by sending him solicitations via text message without prior express consent. Id. at *4. The defendant agency had been engaged by the United States Navy to develop a multimedia recruiting campaign targeting young adults, which included the utilization of text messaging. Id. at *3.
The TCPA prohibits the use of automated dialing systems to cellular numbers without the prior express consent of the call recipient. Violation of the TCPA entitles the aggrieved to statutory damages of $500 per violation or actual monetary loss, whichever is greater, and treble damages for willful violations. The plaintiff filed a class action suit in the district court, alleging that he and a nationwide class had received such texts without prior express consent, seeking treble damages, costs, attorneys’ fees, and an injunction against further unsolicited messages.
Prior to class certification, the defendant filed an offer of judgment under FRCP 68, agreeing to pay $1,503 (treble damages) for each text for which the plaintiff could show receipt, as well as consenting to the requested injunction; the offer did not stipulate to liability or that grounds for the injunction existed. Gomez did not accept the offer and allowed the 14-day time period for acceptance to expire. The defendant subsequently filed a motion to dismiss under FRCP 12(b)(1), alleging that a “case or controversy” no longer existed because the unaccepted offer to pay the plaintiff’s claims in full afforded complete relief — mooting the case — and depriving the district court of subject matter jurisdiction under Article III.
The defendant further alleged that because its unaccepted offer of judgment mooted the plaintiff’s individual claims before class certification, the putative class claims were also moot. The district court denied the motion to dismiss; the U.S. Court of Appeals for the Ninth Circuit affirmed the denial, holding that the unaccepted offer of judgment did not moot the case.
Majority Opinion — Justice Ginsberg, writing for the majority, opined that “[u]nder basic principles of contract law, Campbell’s settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy” and, further, “Rule 68, hardly supports the argument that an unaccepted settlement offer can moot a complaint.” Id. at *7. A “case or controversy” still existed in the opinion of the majority because “with no settlement offer still operative, the parties remained adverse; both retained the same stake in the litigation they had from the outset.” Id. In summation, the majority affirmed the denial of the defendant’s motion to dismiss, holding that “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.” Id. at *8.
Concurring Opinion — Justice Thomas concurred in the opinion, disagreeing with Justice Ginsberg’s rationale that was based on principles of contract law and a dissent from a previous case. Instead, he relied upon the common law history leading to FRCP 68, which the Justice opined demonstrated a “mere offer of the sum owed is insufficient to eliminate a court’s jurisdiction to decide the case to which the offer is related.” Id. at *10.
Dissenting Opinion — Chief Justice Roberts dissented, joined by Justices Scalia and Alito. The dissent opined that an offer of judgment that would have completely satisfied the plaintiff’s claims eliminated any “case or controversy” and that “federal courts exist to resolve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking .... If there is no actual case or controversy, the lawsuit is moot.” Id. at *14. Moreover, the dissent criticized the majority’s rationale, asserting that it effectually places the decision as to whether a “case or controversy” exists in the hands of a plaintiff rather than the federal court. Id. at *16. To this the majority retorted that the dissent’s position would achieve the opposite result, placing a defendant “in the driver’s seat.” Id. at *8.
Wrap-Up — The Supreme Court left open the door for a defendant’s full offer of judgment to possibly moot a case under certain circumstances. Justice Ginsberg specifically indicated that the ruling was limited to the fact pattern at hand, which was an unaccepted offer for judgment without more, and reserved consideration of whether a “case or controversy” still existed where a defendant also deposits the full amount of the claim in an account payable to the individual plaintiff. The Court reserved the latter question for a case where the facts were actual and not hypothetical. It is noteworthy that the majority opinion distinguished cases cited by the defendant, which were also cited by the dissent, based on this factual distinction, indicating that such cases did not concern a mere offer to pay. Id. at *7.
The implications of this Supreme Court decision for those in the default servicing industry is that a full offer of judgment (without more) in RESPA, TILA, FCRA, FDCPA, and other similar actions will not have the stopping power to unilaterally end litigation out of the gate. However, it should be noted that the use of an offer of judgment under FRCP 68 still remains a viable and important piece of defense strategy in federal litigation. The Supreme Court pointed out that the federal rule still maintains the “built-in-sanction” whereby if a plaintiff does not achieve a better result than offered, then “the offeree must pay the costs incurred after the offer was made.” Id.
Indeed, many consumer attorneys remain highly motivated by the specter of attorneys’ fee awards allowed to prevailing plaintiffs under the federal statutes governing mortgage servicing and debt collection. Nothing in the Gomez decision operates to temper the limiting affect of FRCP 68 offers of judgment on such attorneys’ fee awards to plaintiffs who dare risk proceeding where the potential to recover above the amount offered is questionable.
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