Supreme Court Holds That Unaccepted Offer of Judgment Does Not Moot Class Action

As many employers facing wage and hour class and collective actions are aware, defendant employers often attempt to make an offer of judgment to a named plaintiff in an attempt to moot class and collective actions.   On January 20, 2016, in Campbell-Ewald v. Gomez, 136 S.Ct. 663 (2016), the United States Supreme Court ruled that an unaccepted settlement offer made under Federal Rule of Civil Procedure 68 has no force or effect. Creative defense attorneys have been using the offer of judgment strategy following both the Supreme Court’s 2013 ruling in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) and the resulting split among the circuit courts on the issue. However, the Gomez court found that Genesis never actually endorsed the use of the strategy as the plaintiff there did not contest whether the offer mooted her claim in the lower courts. Thus, Genesis did not expressly rule on the question of whether an unaccepted settlement offer moots a named plaintiff’s claim and defeats a class or collective action.  Gomez has now answered that open question.

In Gomez, the plaintiff alleged that he had received unsolicited advertising text messages in violation of the Telephone Consumer Protection Act. Prior to the deadline for class certification, defendants made a settlement offer that if accepted would have provided Gomez with full relief. Gomez did not accept the offer and Campbell-Ewald argued that the unaccepted offer rendered the class action moot and required dismissal of the lawsuit. Both the District Court and the Ninth Circuit Court of Appeals rejected defendant’s argument. The Supreme Court affirmed the Ninth Circuit’s ruling and held that the unaccepted offer did not moot the individual named plaintiff’s claim and, therefore, did not defeat the class action.  In so holding, the Court reasoned that an unaccepted offer of settlement is only a proposal with no legal effect and the “parties remain[ed] adverse.” Interestingly, the Court left open the question of 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.”

With this ruling, the Court has eliminated one often-used defense strategy for employers facing potentially costly class and collective actions. This case highlights the importance of avoiding class and collective actions in the first place by understanding wage and hour laws and regulations, and implementing strategies for avoiding such class and collective actions including, for example, using class and collective action waivers and arbitration agreements.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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