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By Perry Cooper
Jan. 20 — Defendants can no longer defeat class actions by offering to pay off the lead plaintiff, the U.S. Supreme Court ruled.
Even if the lead plaintiff rejects a defendant's offer of everything he asked for, the plaintiff's case—and the class action he seeks to represent—remain alive, Justice Ruth Bader Ginsburg wrote Jan. 20 for the six member majority.
“In short, with no settlement offer still operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset,” Ginsburg said. After the plaintiff rejected the settlement offer, he “remained emptyhanded.”
Plaintiffs' advocate Arthur H. Bryant hailed the court's ruling Jan. 20 but said that, given language by the ruling's dissenters, defendants are expected to pursue “variations on this gambit.”
But such variations will also likely be defeated, he predicted.
“Fundamentally, everyone knows if an offer is not accepted, there's no agreement, and we learn in first-year contracts class that one side can't wipe out a case on its own,” Bryant told Bloomberg BNA Jan. 20. “The decision should put this line of attack to bed, but given the defendants' prior activities, I will be astonished if it does.”
Bryant is chairman of the public interest firm Public Justice in Oakland, Calif., which filed an amicus brief on behalf of the plaintiff.
As if on cue, defense attorney David Almeida responded that the court “certainly left the defense bar significant strategy to chew on going forward.”
“The most interesting—and likely important—takeaway from the majority's opinion is what it did not address: the situation where a defendant deposits the full amount of the plaintiff's individual claim in an account payable to the plaintiff,” Almeida told Bloomberg BNA in a Jan. 20 e-mail.
A dissent by Chief Justice John G. Roberts Jr. “makes abundantly clear that such a scenario is very much available to defendants going forward,” Almeida said. Almeida is a partner in Sheppard, Mullin, Richter & Hampton LLP's Chicago office who specializes in consumer class actions.
The majority adopted the reasoning from a 2013 dissent by Justice Elena Kagan in a decision involving a collective action under the Fair Labor Standards Act, Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) (14 CLASS 477, 4/26/13).
The majority in that case assumed, without deciding, that an unaccepted offer that completely satisfied a claim would moot an individual plaintiff's claim. The majority then decided that when an individual claim is moot, a collective action claim brought under the FLSA is also moot.
But Kagan, joined by three justices in dissent, said that an unaccepted offer of judgment can't moot a plaintiff's individual claims because that offer is a legal nullity with no operative effect.
Here, the court embraced Kagan's analysis, noting that every court of appeals that has considered the issue since Genesis Healthcare has also done so.
The big question in this case was whether Kagan's dissent would find a fifth vote.
Justice Anthony M. Kennedy, who is often the swing vote in close cases, provided it.
Justice Clarence Thomas also concurred in the judgment but wrote separately, saying the majority “does not advance a sound basis for this conclusion.”
Instead, he based his ruling on the common-law history of tenders, under which “a mere offer of the sum owed is insufficient to eliminate a court's jurisdiction to decide the case to which the offer related.”
Roberts' dissent made a similar, but less extreme, argument.
He said an offer, rather than full tender, should be enough to moot the plaintiff's claim. “It would be mere pettifoggery to argue that Campbell might not make good on” its promise to the plaintiff of prompt payment.
But to avoid any uncertainty, Roberts suggested defendants deposit a certified check in the settlement offer amount with the trial court.
“The majority does not say that payment of complete relief leads to the same result” as a mere offer, he said.
Defense attorney Almeida sees Roberts' words as a call to action.
“I anticipate deposits of cash to be made with courts across the country this week, especially in the statutory class actions where, as Gomez was here, plaintiffs are entitled to $1,500 at most, but are using the class mechanism to extort eight-figure settlements,” he said.
Justices Antonin Scalia and Samuel A. Alito Jr. joined the dissent.
Alito wrote separately to say an offer is enough for the case to be dismissed as moot, as long as it is “absolutely clear” that the defendant will make good on its promise.
Jose Gomez brought a class complaint against Campbell-Ewald Co. after the marketing company sent him U.S. Navy recruitment text messages that allegedly violated the Telephone Consumer Protection Act, 47 U.S.C. § 227.
Campbell-Ewald offered Gomez $1,503—the value of his claim under the TCPA. Gomez rejected the offer.
Campbell-Ewald moved to dismiss for lack of jurisdiction, arguing that its offer of complete relief mooted both Gomez's individual and class claims. The district court denied the motion.
The district court later granted summary judgment to Campbell-Ewald on the basis of derivative sovereign immunity. The court said the defendant couldn't be held liable for an alleged TCPA violation for which the Navy itself couldn't be held liable.
On appeal, the Ninth Circuit agreed that the case wasn't mooted by the defendant's offer. It also reversed the district court's ruling on sovereign immunity.
The Supreme Court, in addition to upholding the Ninth Circuit's no-mootness ruling, also rejected the defendant's sovereign immunity argument.
It found that while government contractors may deserve certain immunity, that immunity is qualified and may be overcome if the defendant knew or should have known that his conduct violated a clearly established right.
Jonathan F. Mitchell of Stanford University in Stanford, Calif., argued for Gomez.
Gregory G. Garre of Latham & Watkins LLP in Washington argued for Campbell-Ewald.
Anthony A. Yang, assistant to the solicitor general, argued for the government in support of the plaintiffs.
To contact the reporter on this story: Perry Cooper in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Steven Patrick at email@example.com
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