U.S. Supreme Court to Take Up Whether Complete Relief to Class Litigant Moots Class Claims

Don Maurice

Statutory damage claims, like those under the TCPA and the FCRA, will be scrutinized in the next session of the U.S. Supreme Court and its decisions could have broad implications for the financial services industry.

Today we look at one of the cases the court will consider, Gomez v. Campbell-Ewald Co. The case considers whether an offer of complete relief to a litigant will extinguish both her individual claims and, prior to class certification, render her class claims moot. A decision will likely impact litigation under the FDCPA, TILA, EFTA and other federal laws, which can expose financial services companies to extraordinary liability even though the injured party has suffered no real loss.

Mooting Individual Claims by Offering Judgment

Rather than engage in costly litigation to obtain a pyrrhic victory, some defendants choose not to fight and instead offer the plaintiff a judgment, usually exceeding the amount the plaintiff could recover if she were successful on her claim. Under the TCPA where only one communication is alleged to be a violation, a plaintiff with no actual loss might still be entitled to up to $1,500 in statutory damages. And that was the case in Gomez where Gomez alleged a violation of the TCPA from a single text message. The defendant offered Gomez a judgment of $1,503, plus costs. Gomez, though, sought to certify a class of other persons who had received a similar text message from the defendant, so he never accepted the offer and it lapsed.

The trial court denied the defendant’s request to dismiss Gomez’s case on the basis that it had offered him more than he could receive if he were successful at trial.  The Ninth Circuit affirmed the trial court’s decision, holding that unaccepted offers of judgment do not “moot” a plaintiff claim, pointing to its 2013 decision in Diaz v. First Am. Home Buyers Prot. Corp.

Circuit Law Conflicts 

Last week, the Second Circuit Court of Appeals handed down a decision in Tanasi v. New Alliance Bank, holding that an unaccepted offer of judgment, alone, does not moot a claim, siding with the Ninth Circuit and a similar holding from 2014 in the Eleventh Circuit decision Jeffrey M. Stein, D.D.S., M.S.D., P.A. v. Buccaneers L.P.

Tanasi does depart from the Ninth and Eleventh Circuits and suggests that a matter could be rendered moot by an unaccepted offer. Quoting the dissent from the Supreme Court’s 2013 decision Genesis Healthcare Corp. v. Symczyk, the Second Circuit wrote that an unaccepted offer of judgment will moot a case where the defendant “unconditionally surrenders . . . [such that] only the plaintiff’s obstinacy or madness prevents her from accepting total victory.” This second route sets in motion the potential for interesting lawyering.

These three Circuits are at odds with decisions from the Third, Fourth, Fifth, Seventh, Tenth, and Federal Circuits, which all have held that an unaccepted offer, alone, does moot the case and divest the federal court of jurisdiction.

Impact on Class Actions

Even in those Circuits which hold that an unaccepted Rule 68 offer of judgment can moot an individual’s claims, it does not necessarily follow that federal courts will find it divests them of jurisdiction over class claims, although the Fourth and Seventh Circuits have found a class can be mooted (Warren v. Sessoms & Rogers, P.A. and Damasco v. Clearwire Corp., respectively).

The Genesis decision threw a wrench into the majority view that pre-certification class claims cannot be mooted by unaccepted offers. Genesis found that a plaintiff’s refusal to accept such an offer of judgment in a “collective action” under the Fair Labor Standards Act rendered the plaintiff with “no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness.” You could readGenesis to mean that by mooting the individual class representative claims, the class claims are mooted as well.

But FLSA collective actions are not the same as class actions under federal rule 23, leaving some to strictly read Genesis as having no impact on class action litigation, as the Ninth Circuit wrote in Gomez. But the Second Circuit’s opinion in Tanasi suggests it sees otherwise and also left open the door to moot class claims if an offer is made before class certification.

Supreme Court Outlook

Gomez presents an opportunity for the Supreme Court to resolve whether an unaccepted offer of judgment of complete relief moots individual claims as well as whether it moots class claims prior to certification. If it does not moot either, the fallout is likely to mean Rule 68 offers of judgment will see less use. Defendants will be forced to litigate cases even when they have offered to give the plaintiff all that she seeks. It will mean litigation can occur solely for the purpose of litigation.

A ruling that unaccepted offers moot individual claims will likely increase the use of complete relief offers in the Ninth and Eleventh Circuits, promoting a quick end to pointless litigation. It would have less impact in the remaining Circuits.

If the Supreme Court were to hold that an unaccepted Rule 68 offer moots class claims prior to class certification, the effect would be dramatic, particularly upon those cases that seek only statutory damages, which are often asserted against financial services companies. By offering to make the individual plaintiff whole, regardless of the merits of the claim, defendants may avoid the cost and expense of class action litigation driven primarily, if not solely, by a desire for a large award of plaintiff’s attorneys fees.