Settlement Offer Not Enough to Douse Plaintiff’s Claim

By Allen Smith Jan 26, 2016
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If a plaintiff rejects a defendant’s full settlement offer to resolve a lawsuit, that doesn’t end the dispute, the U.S. Supreme Court decided on Jan. 20 in a case with significant workplace ramifications. Instead, it determined, courts still have jurisdiction to rule on the claim.

The decision may limit defense attorneys’ strategy of trying to pick off a plaintiff to avoid a class action, said Lori Armstrong, an attorney with Fisher & Phillips in Philadelphia.

Roger Meyers, an attorney with Honigman in Detroit, said that Chief Justice John Roberts Jr.’s dissent in the case leaves open the possibility that if the funds from a rejected settlement offer are deposited with the court, then that may bring an end to a case. (However, this situation did not occur with the case at issue.)

For purposes of litigation strategy, the court’s decision “eliminates one opportunity companies had to control their destiny in a class action,” said Ryan Mick, an attorney with Dorsey & Whitney in Minneapolis. But he agreed with Meyers that it may have presented an alternative method.

“Clearly, making an offer without something more will be insufficient,” Meyers said, as the case at hand showed. Ultimately, though, courts will face the question of whether depositing funds rather than merely making an offer is enough to moot a case.

That question is “the next battleground,” especially as employers defend themselves from wage and hour claims, according to Jeffrey Brecher, an attorney with Jackson Lewis in its Long Island, N.Y., office.

Claim over Text Message

The case arose after the U.S. Navy contracted with Campbell-Ewald Company, an advertising and marketing communications agency, to send text messages to recruit 18- to 24-year-olds.

Campbell-Ewald’s subcontractor, Mindmatics, generated a list of cellphone numbers in the target age range. Mindmatics then sent the recruiting message to more than 100,000 recipients.

Jose Gomez, a 40-year-old, received the message, which said, “Destined for something big? Do it in the Navy. Get a career. An education. And a chance to serve a greater cause. For a FREE Navy video call [phone number].” Gomez sued Campbell for violating the Telephone Consumer Protection Act (TCPA) by sending text messages to his cellphone without his prior consent.

A plaintiff in a TCPA action may recover $500 for each violation, which may be tripled if the violation is willful or knowing. Campbell offered to pay Gomez his court costs, excluding attorney fees, and $1,503 per message for a May 2006 text message and any other text message he could show he had received. Attorney fees weren’t included because the TCPA does not stipulate for the award of attorney fees.

Gomez declined the settlement offer. Campbell argued that the case should be dismissed because when it offered complete relief, there no longer was a controversy for the court to resolve. In addition, Gomez had not moved for class certification before his claim became moot, so the class claims no longer were viable, Campbell argued.

The Supreme Court granted review on the issue of whether an unaccepted offer can moot a plaintiff’s claim. Article III of the Constitution limits federal court jurisdiction to cases and controversies, noted Justice Ruth Bader Ginsburg in the court’s decision. “We have interpreted this requirement to demand that an actual controversy be extant at all stages of review, not merely at the time the complaint is filed,” she said.

The court distinguished this case from Genesis HealthCare Corp. v. Symczyk, where the court had assumed, without deciding, that an offer of complete relief, even if unaccepted, moots a plaintiff’s claim. The plaintiff made the mistake in that case of agreeing that the case was no longer viable after a settlement offer was made but rejected.

In this case, the Supreme Court adopted the dissent’s analysis in Genesis HealthCare Corp., as has every court of appeals ruling on the issue since the ruling, Ginsburg noted. The dissent in that case stated, “An unaccepted offer is considered withdrawn. … The litigation carries on.”

Ginsburg added, “Accordingly, we hold that Gomez’s complaint was not effaced by Campbell’s unaccepted offer to satisfy his individual claim.”

Dissenting, Roberts said, “The majority’s analysis may have come out differently if Campbell had deposited the offered funds with the district court. This court leaves that question for another day—assuming there are other plaintiffs out there who, like Gomez, won’t take ‘yes’ for an answer.”

This case is Campbell-Ewald Co. v. Gomez, No. 14-857.

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.

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