Civil and Human Rights

High Court Split Forms On Whether Offers Moot Cases

By Evan Weinberger

 

A divided U.S. Supreme Court considered Wednesday whether a company can fend off a consumer lawsuit by offering a settlement, without delving as deeply into a secondary question about what happens to potential class actions when such deals are accepted. At issue in the Campbell-Ewald Co. v. Gomez case — in which the U.S. Navy advertising partner is challenging the Ninth Circuit’s remand of a putative Telephone Consumer Protection Act class action over allegedly unsolicited text messages — is whether offering a consumer a settlement that would fulfill all the plaintiffs’ demands makes the case moot.

 

On that question, the justices appeared to get in their usual formation Wednesday, with the four conservative justices supporting Campbell-Ewald’s position that once a settlement offer is made, a case is moot, while the four liberals backed a plaintiff’s right to get a judgment on that settlement before a case can be closed.

 

In the middle, as usual, sat Justice Anthony Kennedy, who put tough questions to both sides.

 

“He’s thinking hard about the issue of what it means for a case to be moot,” commented Joshua D. Rogaczewski, a McDermott Will & Emery LLP partner.

 

Campbell-Ewald brought its case to the Supreme Court to overturn a September 2014 ruling from the Ninth Circuit that the company could be held liable for recruiting text messages it sent out in 2006 under a Navy contract. The messages went out to around 100,000 people through a subcontractor.

 

The company had argued that plaintiff Jose Gomez’s case was moot because the deal offered him the statutory maximum of treble damages per violation under the TCPA.

 

Justice Kennedy appeared skeptical Wednesday that a mere settlement offer could make a case moot, because there would be no way of enforcing a settlement without a court order, among other things.

 

“A settlement offer in a settlement contract and a settlement agreement are different from a judgment, and you do not have a judgment,” he said in questioning the company’s attorney Gregory G. Garre of Latham & Watkins LLP, according to the transcript.

 

Meanwhile, Gomez had asked for attorneys’ fees, which the company did not provide under its settlement offer, and that is a question that needs to be adjudicated, according to Justice Elena Kagan.

 

“And the ‘so the case is moot’ seems to me to be a non sequitur. In other words, he’s asked for these things, you haven’t offered these things, and there’s a dispute about whether he’s entitled to these things,” Justice Kagan said, according to the transcript.

 

Questions like attorneys’ fees would be eliminated if the high court overturns the Ninth Circuit, Garre said.

 

“And all of these practical concerns are going to go away if this court recognizes in this case that a defendant’s offer of complete relief ends any case or controversy over the individual claim. The case goes away,” Garre said, according to the transcript.

 

But the conservative justices appeared skeptical of the argument that a plaintiff’s rejection of a settlement that meets statutory requirements could rescue a lawsuit from being moot.

 

“I suppose he could ask for the key to Fort Knox, right?” Justice Antonin Scalia said. “And then no settlement offer would suffice, right?”

 

While the justices focused on the constitutional issue of when a case becomes moot, a subordinate question of what happens to a potential class action when a named plaintiff accepts a settlement offer did not get as much play.

 

And that came as a disappointment to the defense bar.

     

“If the Supreme Court were to answer the first question, then it would be a benefit to the courts and the bar to determine what happens to the class claims,” commented Eric Hochstadt, a Weil Gotshal partner.

         

Still, the issue did come up, with Garre arguing that once a settlement is offered, and particularly if it is accepted, a named plaintiff would be an inappropriate representative for the class, thus making certification impossible.

 

That would not necessarily be the case, since a bonus that lead plaintiffs receive in class action lawsuits “still gives him incentives to press for the fellow class members,” said Gomez’s attorney Jonathan F. Mitchell of Stanford University Law School.

 

If the court were to find that the mere offering of a settlement makes a lawsuit moot and kills off potential class actions, it could embolden companies to attempt to cut off such cases with quick-strike settlements, commented Morrison & Foerster LLP partner Sylvia Rivera.

 

“Defendants, particularly defendants who are sued in jurisdictions where the law is in opposite of that, would have this additional tool that they can use to nip a class action in the bud by making an offer of judgment to a plaintiff early in a case,” Rivera said.

 

And that has consumer advocates worried.

 

“I think what’s at stake is whether the Supreme Court will give corporations a powerful tool to defeat class action lawsuits, and defeat them in the context where they’re most important,” commented David Gans of the Constitutional Accountability Center.

 

Campbell-Ewald Co. is represented by Laura A. Wytsma and Meredith J. Siller of Loeb & Loeb LLP and Gregory G. Garre and Nicole Ries Fox of Latham & Watkins LLP.

 

The plaintiff-appellees are represented by Suzanne L. Havens Beckman and David C. Parisi of Parisi & Havens LLP, Michael J. McMorrow of McMorrow Law PC, Myles McGuire; Evan M. Meyers of McGuire Law PC and Scott L. Nelson, Allison M Zieve and Adina H. Rosenbaum of Public Citizen’s Litigation Group; and Jonathan F. Mitchell of Stanford University Law School.

 

The case is Campbell-Ewald Co. v. Gomez, case number 14-857, in the Supreme Court of the United States.

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