Supreme Court’s Momentous Decision Bolsters Consumer Class Actions

United States Supreme Court BuildingPrologue: On June 5, 2015, I had the privilege of writing an article for the National List of Attorneys CRLF blog entitled To Moot or not to Moot. In the article, I analyzed Tanasi v. New Alliance Bank,[i] in which the Court of Appeals for the Second Circuit affirmed that a District Court maintains jurisdiction when a Plaintiff’s individual claims are not moot at the time the District Court denies a defendant’s motion to dismiss.[ii] This was despite the fact that the Tanasi defendants made a Rule 68 Offer of Judgment[iii] to Plaintiff for full relief on his individual claims. As noted in the prior article, the Second Circuit expressly declined to rule on the certified question as to whether the plaintiff’s putative class action claims, brought pursuant to Rule 23 of the Federal Rules of Civil Procedure,[iv] provided an independent basis for Article III standing (e.g., having a case or controversy before the court).

Abridged Summary of Facts

Yesterday, the Supreme Court of the United States, in Campbell-Ewald Co. v. Gomez,[v] resolved the disagreement among the Courts of Appeals over whether an unaccepted Offer of Judgment can moot claims made by a putative class action plaintiff, thereby depriving federal courts of Article III jurisdiction. Here, Gomez filed a putative class action lawsuit against Campbell-Ewald Co. (Campbell), a nationwide advertising and marketing communication agency, under the Telephone Consumer Protection Act (TCPA)[vi]. In response, Campbell offered to pay Gomez his costs, excluding attorney’s fees,[vii] and $1,503 per message for the text messages at issue and any other text message Gomez could show he had received, thereby fully satisfying plaintiff’s personal treble-damages claim. Additionally, Campbell proposed a stipulated injunction in which it agreed to be barred from sending text messages in violation of the TCPA.

Decision

Even though Campbell offered to pay the maximum amount that Gomez could recover under the TCPA,[viii] the Court found that “[a]s long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot.”[ix]  Undeterred by the fact that the phrase “concrete interest” is simply not concrete, Justice Ginsburg, in delivering the opinion of the majority, also chose to rely on “principles of contract law,” finding that “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” In his dissenting opinion, Chief Justice Roberts speaks directly to this point, stating “Gomez does not have standing to seek relief based solely on the alleged injuries of others, and Gomez’s interest in sharing attorney’s fees among class members or in obtaining a class incentive award does not create Article III standing.”

In essence, the majority’s decision allows a putative class plaintiff to seek redress for an alleged injury, even after the defendant agrees to fully redress that injury. Undoubtedly, self-proclaimed consumer attorneys are applauding this decision. However, many of you reading this are painfully aware that thousands of lawsuits are filed each year against law-abiding businesses that thought they were taking the right precautions to stay within the law. Unfortunately, this decision may serve to strengthen vexatious litigation tactics regularly used for the sole purpose of increasing the fees and costs associated with protracted litigation.

On the Moderately Bright Side

As expressed by Justice Alito in his dissenting opinion, “[the Court’s] decision thus does not prevent a defendant who actually pays complete relief—either directly to the plaintiff or to a trusted intermediary—from seeking dismissal on mootness grounds.” In fact, the Court did not 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.” Therefore, claims made by a plaintiff may still be automatically mooted by an unaccepted Rule 68 Offer of Judgment, thus insulating defendants willing to consent to judgment for full relief against incurring the costs of further litigation in an individual action. However, for the Offer of Judgment to be successful – as noted by Justice Alito, “the majority raises the possibility that a defendant must both pay the requisite funds and have the court enter judgment for the plaintiff in that amount.”

Conclusion

Because an unaccepted Offer of Judgment has no force (in this context), it is no longer an open question of law as to whether a putative class action claim under Rule 23 independently provides for Article III justiciability. On the other hand, the reallocation of risk effectuated through properly applying Rule 68 is still a powerful litigation tool. This especially applies to the archetypal statutory consumer case where class action pleadings are used for leverage rather than in anticipation of actual certification.

The information and materials in this article are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances. No attorney-client relationship is formed, nor should any such relationship be implied. Nothing here is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction. 

by Scott E. Wortman, Partner Warshaw Burstein, LLP

555 Fifth Avenue, New York, NY 10017

www.wbcsk.com,  attorney profile

E-Mail: SWORTMAN@wbcsk.com

Direct Telephone:  212-984-7723 , Cell phone: 646-709-6408, Facsimile: 212-972-9150

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Notes:

[i] Tanasi v. New Alliance Bank, 786 F.3d 195 (2d. Cir. 2015)

[ii] Since the district court had not yet entered judgment against the defendants when it reached its decision on the motion to dismiss, the court maintained Article III subject matter jurisdiction over the case regardless of Tansi’s putative class action claims. Id.

[iii] Federal Rule of Civil Procedure 68(a) provides that at least fourteen (14) days before trial, a “party defending against a claim may serve on the opposing party an offer to allow judgment on specified terms, with costs then accrued. If, within fourteen (14) days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance . . . . The clerk must then enter judgment.” Although, [a]n unaccepted offer is considered withdrawn . . . [i]f the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay costs incurred after the offer was made.” Fed. R. Civ. P. §§ 68(b), 68(d).

[iv] Rule 23 governs the procedure and conduct of class action suits brought in Federal courts.

[v] Campbell-Ewald Co. v. Gomez, 577 U.S. ____ (2016), No. 14-857 (S.Ct. January 20, 2016)

[vi] 42 U.S.C.S. § 227

[vii] The TCPA does not contain a statutory fee shifting provision.

[viii] $1,500.00 per text message, plus the costs of filing suit.

[ix] Citing, Chafin v. Chafin, 133 S.Ct. 1017, 1021, 185 L.Ed.2d 1 (2013)



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