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U.S. Supreme Court Rules Settlement Offer Can’t Moot Consumer Lawsuits

On January 20, 2016, the United States Supreme Court ruled that companies can't cut off class action claims by making an offer of full relief to individual plaintiffs, siding with a consumer who despite such an offer refused to drop his Telephone Consumer Protection Act (“TCPA”) suit against U.S. Navy advertising partner Campbell-Ewald.

Campbell-Ewald brought the dispute to the Supreme Court after the Ninth Circuit held that the company could be held liable for naval recruitment messages it sent to approximately 100,000 people in 2006 through a subcontractor. 

The company asked the court to consider whether it could strategically offer individual plaintiffs relief to make them whole at the outset of litigation in order to avoid a potential multimillion-dollar class action settlement down the line. The Ninth Circuit rejected this tactic in its ruling reviving the suit on the grounds that derivative sovereign immunity did not shield the contractor from federal tort liability.

In a 6-3 ruling, the Supreme Court rejected Campbell-Ewald’s contention that plaintiff Jose Gomez's TCPA case was mooted since it offered him $1,503 for each unsolicited text message, which represented more than three times the statutory amount of $500 per violation.

"We hold today, in accord with Rule 68 of the Federal Rules of Civil Procedure, that an unaccepted settlement offer has no force," the opinion said. "Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists."

The Supreme Court’s decision is likely to have a wide-ranging impact on defendants' ability to offer settlements to moot consumer class action claims, especially in cases that involve a statute such as the TCPA under which damages can be easily calculated.

The case is Campbell-Ewald Co. v. Gomez, case number 14-857, in the Supreme Court of the United States.