Defendants cannot defeat a class action by relying on an
unaccepted settlement offer made to the proposed representative
plaintiff for the full amount of his or her individual claim. That
is the conclusion reached by the Supreme Court of the United States
in Campbell-Ewald Co. v. Gomez, No.
14–857. The majority found that an unaccepted settlement
offer creates no lasting right or obligation and, therefore, does
not automatically render moot the claims of the representative
plaintiff or by extension, those of the putative class members.
That said, the decision does reveal a potential path forward for
class action defendants in both the United States and Canada.
In May 2006, the respondent, Jose Gomez received a recruitment
text message sent on behalf of the United States Navy. The Navy had
contracted with the petitioner, Campbell-Ewald to develop and
implement a multimedia recruitment campaign, which included the
sending of text messages to young adults. The Navy only authorized
Campbell-Ewald to transmit those text messages to individuals who
had expressly elected to receive marking solicitations on topics
that included service in the Navy. The list of recipients was
generated by Campbell-Ewald's subcontractor, Mindmatics LLC,
which was also responsible for the transmission of the text
The problem was that Gomez never consented to the receipt of the
Navy's text messages. Gomez filed a national class action on
the basis that Campbell-Ewald had violated the Telephone
Consumer Protection Act (the "TCPA"), which
prohibits the sending of text messages to a cellular telephone
without the recipient's prior express consent.
However, prior to filing his motion for certification,
Campbell-Ewald made a formal settlement offer under Rule 68 of the
Federal Rules of Civil Procedure to settle Gomez's personal
claim in full. Gomez did not accept the settlement and, pursuant to
Rule 68, the offer expired after 14 days. Campbell-Ewald then moved
to dismiss the class action on the basis that Gomez's personal
claim was rendered moot by the settlement offer for full relief.
Further, because Gomez had not moved for class certification before
his claim became moot, the claims of the putative class members
were also moot.
The District Court for the Central District of California denied
Campbell-Ewald's motion but allowed summary judgment on the
basis that the Navy's immunity from suit under the
TCPA extended to Campbell-Ewald as its contractor. The
Court of Appeals for the Ninth Circuit reversed the summary
judgment and confirmed that Gomez's claim remained live despite
the unaccepted settlement offer.
In a six to three decision, the Court found that
Campbell-Ewald's unaccepted settlement offer for complete
relief did not moot Gomez's claim. The majority opinion held
that an unaccepted settlement offer has no force and amounts to
nothing more than a rejected proposal that does not bind either
party. As such, Campbell-Ewald and Gomez remained adverse and an
actual "controversy" remained live between them as
required by Article III of the U.S. Constitution.
The Court also found that given Campbell-Ewald had violated
federal law and the Navy's explicit instructions regarding the
dissemination of the text messages, it did not enjoy derivative
Going forward, defendants likely will be less inclined to
attempt to defeat class actions by extending a unilateral
settlement offer to the representative plaintiff for full relief
for his or her claim. That said, the Court did leave open the
possibility that different permutations of this strategy may result
in a different outcome.
For example, the majority opinion declines to consider whether
the outcome would have been different if a defendant deposits the
full amount of the representative plaintiff's individual claim
in an account payable to the plaintiff, and the court then enters
judgment for the plaintiff in that amount. The minority opinions
also raise the possibility that the payment or guarantee of future
payment may have resulted in a different outcome. It is likely that
this permutation on the mooting strategy will be attempted both in
the United States and in other jurisdictions such as Canadian in
the near future.
In the recent case of Meehan v. Good, the Ontario Court of Appeal dealt with a situation in which a lawyer was retained to represent a client with respect to the assessment of the accounts of the client's former lawyer.
The recent case of Meehan v Good, 2017 ONCA 103, has some unsettling implications for lawyers, as the case leaves open the possibility of extending a lawyer's duty of care beyond the scope of the written retainer agreement...
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