Supreme Court Rules Settlement Offers Can’t Moot Claims

Published: Jan. 20, 2016

Updated: Oct. 05, 2020

The “pick-off” move does not moot an individual plaintiff’s (or a putative class’s) claim. That’s the bottom line from the Supreme Court in the 6-3 ruling in Campbell-Ewald Co. v. Gomez, which resolved a circuit split and held that an unaccepted Rule 68 offer of judgment by itself cannot render a case moot. As described in our earlier coverage of this case, Gomez brought a putative class action under the Telephone Consumer Protection Act (“TCPA”) against Campbell-Ewald, a Navy contractor charged with sending text messages to potential recruits. Campbell-Ewald attempted to head off the suit by offering Gomez full payment of his individual damages claim under Federal Rule of Civil Procedure 68 and, when Gomez failed to accept the offer, moved to dismiss the case as moot. Campbell-Ewald also argued that it enjoyed derivative sovereign immunity resulting from its relationship with the Navy.

Leading the majority, Justice Ginsburg delivered the Court’s opinion which relied heavily on principles of contract law. Likening a Rule 68 offer to a contract offer, Justice Ginsburg noted that an unaccepted offer to contract is a legal nullity–it has “no continuing efficacy” and cannot bind either the plaintiff or the defendant. The Court distinguished several prior cases where a claim had been mooted by a settlement offer on the ground that those cases sought only declaratory or injunctive relief, or involved statutes expressly stating that payment extinguished an entity’s obligations. The majority opinion declined to decide whether the outcome would have been different if Campbell-Ewald had tendered payment to Gomez. With respect to the issue of sovereign immunity, the Court ruled that the Navy’s immunity did not extend to Campbell-Ewald due to its status as a Navy contractor. Because Campbell-Ewald’s messages reached Gomez in violation of both the TCPA and the Navy’s instructions to it, the Court held that Campbell-Ewald was not entitled to protection from suit under the doctrine of sovereign immunity.

The concurring and dissenting opinions offer additional clues regarding the question unanswered by the majority. Justice Thomas concurred in the judgment only, grounding his reasoning in common law settlement rules. Three justices (Roberts, Scalia, and Alito) dissented, asserting that a plaintiff’s desire to continue litigating should not be allowed to keep a case alive when he has already been offered full relief.

This case has far-reaching consequences for businesses exposed to consumer class actions where damages are capped by statute, such as the TCPA and the VPPA, because it severely limits the efficacy of the “pick-off” move. Though an individual plaintiff may voluntarily end a case by accepting a Rule 68 offer of judgment, an unaccepted offer alone cannot moot the case. The concurring and dissenting opinions, however, suggest that there are at least four justices who might rule that a Rule 68 offer combined with actual payment of the plaintiff’s alleged damages would moot a case, assuming such a case made its way to the Court. Campbell-Ewald also serves as a warning to government contractors. A contractor’s relationship to the government does not shield the contractor from a consumer class action if the contractor goes beyond its mandate.