Unaccepted Offers of Complete Relief to Named Plaintiff Do Not Moot Class/Collective Claims
Yesterday, the United States Supreme Court issued its opinion in Campbell-Ewald Co. v. Gomez, resolving a split among the federal Circuit Courts of Appeal on the issue of whether an unaccepted Rule 68 offer of judgment to the representative plaintiff in a class or collective action operates to moot the class/collective claims. Over the dissent of three Justices (Scalia, Roberts, and Alito), the majority of the Court applied basic contract law principles to hold that an unaccepted offer of judgment to the named plaintiff does not moot the class/collective claims. The Court reasoned that an offer that is not accepted has no legal effect and thus does not and cannot resolve the individual named plaintiff’s claims in order to render them moot. Under the express language of Federal Rules of Civil Procedure, Rule 68, an offer of judgment that is not accepted within 14 days expires and that is precisly what happened in this case. The defendant made an offer of judgment to the named plaintiff and the plaintiff let the offer lapse by not accepting it within 14 days. Thus, the unaccepted offer did not resolve the named plaintiff’s claims or otherwise eliminate the controversy between the parties. Under this basic contract law reasoning, the Court held that an unaccepted offer similarly does not moot the class/collective claims. The majority of Circuit Courts that have addressed the issue prior to the Campbell-Ewald decision have reached the same conclusion.
The dissent disagreed, arguing that once a defendant offers the named plaintiff the full relief (or more than the full relief) the plaintiff possibly could be awarded on his/her claims, there is no longer a real controversy between the plaintiff and the defendant, making the case moot.
Justice Thomas, who concurred in the judgment but not the majority’s reasoning, agreed that a mere offer to provide complete relief (even a formal offer under Rule 68), without more, does not moot a plaintiff’s claim. However, he opined that the majority’s focus on contract law principles to reach this result was misplaced. In Thomas’ view, something less than an enforceable contract but more than a mere offer of settlement may be enough to render a case moot. Thomas cited historical common laws that recognized formal tenders as a valid means of ending a lawsuit. With some variances, these historical laws allowed a defendant to end a case by actually and unconditionally tendering (not just offering to pay) the full amount due to the plaintiff, sometimes in connection with an admission of liability. Based on these historical principles, Thomas expressed his view that in some instances a tender might be sufficient to make a case moot. However, because there was no such tender in this case, he agreed with the majority that the defendant’s mere offer to pay was not enough to render the case moot.
Notably, the majority acknowledged that there may be a legally signficant difference between a mere offer to provide relief and an unconditional tender of relief. The majority noted some historical cases where the controversies were mooted by the defendant actually depositing the full amount sought by the plaintiff in an account in the plaintiff’s name. However, the majority declined to expressly hold that this type of arrangement or any other beyond a mere offer of settlement, would operate to moot the plaintiff’s claim. The Court stated: “We need not, and do not, now 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. That question is appropriately reserved for a case in which it is not hypothetical.”
The takeaway for employers based on the Campbell-Ewald decision is that employers will not be able to successfully defeat a class or collective action merely by trying to pick off the named plaintiff with a Rule 68 offer of relief that is not accepted by the plaintiff. That said, it is possible that if a defendant employer goes farther than making an offer and instead actually tenders the complete relief to the plaintiff, this may be enough to moot the plaintiff’s claims (and deprive the plaintiff of standing to continue to represent the proposed class). However, the boundaries of what type of tender will be deemed to suffice to moot the claim are not entirely clear (does handing a check to the plaintiff suffice? does the defendant need to have a judgment entered against it? can the defendant deny liability?) and likely will be tested in the courts in coming years. As a practical matter, it shoudl also be noted that an offer of complete relief is not feasible in many types of employment class actions. This type of offer was feasible in the Campbell-Ewald case because the plaintiff’s claim was based on a violation of a statute that set the amount of damages at $500 per violation, with a possiblity of that amount being trebled. The statute did not authorize attorneys’ fees. Thus, maximum damages were certain and enabled the defendant to make an offer of complete relief by offering $1503 per violation (slightly more than presumed treble damages). However, in many employment class actions (e.g. exempt/non-exempt misclassification actions for unpaid overtime where there are no records of hours worked), the damages are far from certain, making it more difficult (and in some instances very expensive) for an employer-defendant to make an effective offer or tender of complete relief as part of a strategy to moot class or collective claims.