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Supreme Court rules that an unaccepted "offer of judgment" to the named plaintiff does not moot a class action

February 17, 2016

Employers cannot make a potential class action or collective action disappear by simply offering a plaintiff the full amount of relief he or she is seeking, according to a recently decided case from the U.S. Supreme Court.

In Campbell-Ewald Co. v. Gómez, the defendant, Campbell-Ewald Company, a U.S. Navy contractor, was sued by Jose Gómez, who claimed that Campbell-Ewald’s subcontractor sent him text messages on behalf of the Navy without obtaining his prior consent, in violation of the Telephone Consumer Protection Act (TCPA). Campbell-Ewald attempted to settle its lawsuit with Mr. Gómez by offering to pay Mr. Gómez all of the damages he was seeking in the lawsuit. Mr. Gómez ignored Campbell-Ewald’s settlement offer and later moved for class certification. Campbell-Ewald then moved to dismiss the case, arguing that Mr. Gómez should not have been allowed to continue with his class action lawsuit given that he had previously rejected Campbell-Ewald’s offer to settle his claim in full.

Prior to the Supreme Court’s recent ruling, some defense attorneys had speculated that such an offer – called an “offer of judgment” under Rule 68 of the Federal Rules of Civil Procedure – could essentially “moot” or terminate an active case due to the fact that the plaintiff is “made whole” by the settlement offer. If true, offers of judgment would prove to be very useful for defense attorneys in potential class actions and collective actions—particularly those alleging wage and hour violations—since a defendant could cut off the potential larger claim by offering the lead plaintiff an offer of full settlement prior to certification of the class. Please also refer to our coverage of this issue in a previous blog post.

Alas – for employers – the Supreme Court has held otherwise, handing down a 6-3 ruling in favor of Mr. Gómez and holding that a case is not mooted when a plaintiff, for whatever reason, rejects an offer of full settlement and chooses to go forward with his/her claim. The Supreme Court also rejected Campbell-Ewald’s second, unrelated argument that Campbell-Ewald should have been immune from suit due to the fact that it was acting on behalf of the Navy, which would otherwise enjoy immunity from such a suit (a concept referred to as “derivative sovereign immunity”).

The bottom line: while offers of judgment remain a valuable tool for employers, particularly in the context of potential class actions or collective actions, they can no longer be counted upon to moot a case in its early stages when the lead plaintiff rejects the offer. As a result, employers must continue to be vigilant and take proactive steps to avoid committing violations which may lend themselves to class action or collective action litigation down the road.

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