United States: Supreme Court Hands Defendants A Potentially Powerful Class Action Weapon

Last Updated: January 29 2016
Article by David A. Jones

Last week, the U.S. Supreme Court decided Campbell-Ewald Co. v. Gomez, a closely watched Telephone Consumer Protection Act (TCPA) case. The plaintiff, Gomez, filed a TCPA class action after he received allegedly unwanted (and therefore illegal) text messages from an advertising firm, Campbell-Ewald. Under the TCPA, Gomez could recover $500 in statutory damages, with the potential to triple that amount if he could prove Campbell-Ewald willfully violated the TCPA. Hoping to cut off the certification of a potential class, Campbell-Ewald made a creative decision—it offered to pay Gomez $1500, the full amount he could potentially recover on his individual claim. When he declined—no doubt so the lawyers could pursue the far more lucrative class claims—Campbell-Ewald made an offer of judgment in the same amount. Again, Gomez declined. Campbell-Ewald then moved to dismiss the case, arguing that the case became moot and no longer presented a "case" or "controversy" under the Constitution in view of the fact that Gomez had been offered full and unconditional relief. The district court agreed, the court of appeals reversed, and the Supreme Court accepted the case as one of three class actions on the current docket.

By a 6-3 margin, the Supreme Court ruled that an offer to pay—even in the form of an offer of judgment—the full amount a plaintiff could recover if he filed for himself only (and not for a potential class) does not moot that plaintiff's ability to move forward and pursue the class allegations. However, both the majority and the dissent hinted that if Campbell-Ewald had actually tendered the $1,500 to Gomez or paid that money into the registry of the court, the outcome might be different because at that point the defendant would actually have paid plaintiff's claim. Seeing this, TCPA defendants—perhaps even Campbell-Ewald when the Gomez case returns to the district court—are certain to test the premise by tendering the full amount a potential class representative could win for himself into the registry of the court and moving to dismiss. Will they win? In some cases and in some circuits, they probably will, and that will put this issue on a fast track back to the Supreme Court a couple of years from now.

For years, the business community has complained the TCPA and other federal statutes that allow statutory damages but do not require proof of individual harm have enabled a wave of lawyer-driven class actions that companies have no choice but to settle because class certification is near-automatic and the cost of defending these cases is so high. Examples include the Truth in Lending Act, the Cable Piracy Act, the Copyright Act, the Stored Communications Act and the Fair Credit Reporting Act, among others. (Interestingly, these very statutes have been cited in the briefing in another case pending at the Supreme Court, Spokeo v. Robins, as the cause of abusive class action practices. In that case, the Supreme Court will address whether a plaintiff may sue in cases where laws may technically have been broken but there is no proof the violation actually harmed the plaintiff.)

The "tender the money" strategy outlined in Campbell-Ewald is worth considering, but has its limits. For instance, if the statute allows for attorney's fees, it would be hard to predict the amount a company would have to tender to satisfy that part of a claim. In addition, if a case involves damages that are not set at a specific amount or range by statute or in a contract or other document, the plaintiff could dispute that the tender constitutes full payment. In the right case, though, tendering money to the individual plaintiff might bring an abrupt end to a class action that a company would have been stuck defending before the decision in Campbell-Ewald.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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