In Campbell-Ewald Co. v. Gomez, the U.S. Supreme Court held that an unaccepted Rule 68 offer of judgment does not moot a plaintiff’s case. Relying on contract law principles, the Court concluded that “[a]n unaccepted settlement offer – like any unaccepted contract offer – is a legal nullity, with no operative effect.” Although the Defendant’s offer purported to provide complete relief to the Plaintiff, given that the Defendant continued to deny liability and Plaintiff remained “emptyhanded,” the parties remained adverse and the district court retained jurisdiction under Article III’s “case or controversy” requirement. The Court also held that Defendant’s status as a government contractor did not entitle it to sovereign immunity from such litigation.
A copy of this opinion is available here.
Background
Defendant (the Petitioner on appeal) contracted with the U.S. Navy to conduct a marketing campaign involving sending text messages for recruiting purposes. The Navy required that Defendant only send messages to those persons who had “opted in” to receive such texts, and within a specified age demographic. Defendant’s subcontractor transmitted the text message to over 100,000 recipients, including Plaintiff.
Plaintiff asserted that he had not given prior express consent for such messages, and filed a class action lawsuit on behalf of a nationwide class of individuals who had received the text message without their consent. Plaintiff alleged that Defendant violated the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227(b)(1)(A)(iii), which prohibits “using any automatic telephone dialing system” to send a text message to a cell phone absent the recipient’s prior express consent. Plaintiff sought treble statutory damages, costs, attorney’s fees, and an injunction against further unsolicited messaging.
Defendant made an offer of judgment pursuant to Federal Rule of Civil Procedure 68, which offered to pay Plaintiff’s costs (excluding attorney’s fees, which Defendant asserted were not provided for under the statute), the treble damages claim, and proposed a stipulated injunction agreeing not send text messages in violation of the TCPA. However, the proposed injunction denied liability and disclaimed the existence of grounds for the imposition of an injunction. Plaintiff did not accept the offer, and allowed it to lapse. Defendant thereafter moved to dismiss the case for lack of subject matter jurisdiction, arguing that no Article III case or controversy remained because the Rule 68 offer had mooted Plaintiff’s individual claim. Defendant further argued that the putative class claims were moot because Plaintiff had not yet moved for class certification. The district court denied Defendant’s motion to dismiss, but granted it summary judgment on the grounds that, as a contractor acting on the Navy’s behalf, it was protected by sovereign immunity.
The U.S. Court of Appeals for the Ninth Circuit reversed summary judgment for Defendant, holding that it was not entitled to sovereign immunity. The Ninth Circuit further held that the unaccepted Rule 68 offer did not moot Plaintiff’s individual claim. The Supreme Court granted certiorari to resolve a circuit split over the Rule 68 issue, as well as to address the sovereign immunity issue. Justice Ginsberg authored the Court’s majority opinion, which affirmed the decision of the Ninth Circuit.
Discussion
The Court first noted that, pursuant to Article III’s “case or controversy” requirement for federal jurisdiction, if the plaintiff is deprived of a “personal stake in the outcome of the lawsuit . . . the action can no longer proceed and must be dismissed as moot.” Op. at 6. “A case becomes moot, however, ‘only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.’” Op. at 6. The Court then considered whether a Rule 68 offer of complete relief could deprive a plaintiff of a “personal stake” and moot his claim, even if the offer was unaccepted. The Court concluded that it could not, and that “an unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case.” Op. at 11.
Relying on contract principles, the Court explained that “[a]n unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect.” Op. at 7. Thus, the Court determined that “[Plaintiff’s] complaint was not effaced by [Defendant’s] unaccepted offer to satisfy his individual claim.” Op. at 8. Given that Defendant continued to deny liability, and with no settlement offer still operative, the parties remained adverse and retained the same stake in the litigation they had at its outset. Op. at 9. According to the Court, this conclusion was consistent with the language of Rule 68, which provides that an offer of judgment “is considered withdrawn” if not accepted within 14 days. Op. at 9. Thus, when the Rule 68 offer expired, Plaintiff “remained emptyhanded; his TCPA complaint, which [Defendant] opposed on the merits, stood wholly unsatisfied.” Op. at 11.
The Court distinguished several cases cited by Defendant (and highlighted in a dissenting opinion). Those cases involved a dispute over state taxes that had been mooted because the defendant railroads had actually paid disputed amounts, and not merely offered to pay them. Op at 9-10. In contrast, when the Defendant’s settlement offer expired, Plaintiff remained “emptyhanded.” Op. at 11. However, the Court declined to 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.” Op. at 11.