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An Unaccepted Settlement Offer Has No Force Holds the Supreme Court of the United States

The United States Supreme Court tackled two distinct issues in its January 20, 2016 opinion delivered by Justice Ginsburg in Campbell-Ewald Company v. Jose Gomez, 577 U.S. ___ (2016): (1) whether the company’s settlement offer of full relief to the named individual plaintiff ends the class action suit when the named plaintiff declines the offer; and (2) whether the company’s status as a government contractor entitles it to immunity from claims brought under the Telephone Consumer Protection Act (“TCPA” or “Act”). The Court held in accord with Rule 68 of the Federal Rules of Civil Procedure, that an unaccepted settlement offer has no force and therefore, the lawsuit continues. Additionally, the Court held that the company’s status as a government contractor does not entitle it to the “blanket immunity” enjoyed by the sovereign.

The named plaintiff, Jose Gomez, brought a claim under the TCPA, which prohibits anyone from “making any call” to any number assigned to a cellular telephone service, without the prior express consent from the recipient. 47 U.S.C. § 227(B)(1)(A)(iii). It is undisputed that a text message to a cellular telephone qualifies as a “call” within the compass of the TCPA. Under the act, a successful plaintiff may recover her “actual monetary loss” or $500 for each violation, “whichever is greater.” Damages may be “trebled” (tripled) if “the defendant willfully or knowingly violated” the Act.

Campbell-Ewald Company (“Campbell”) is a nationwide advertising and marketing communications agency. Beginning in 2000, the United States Navy entered into a contract with Campbell to develop and execute a multimedia recruiting campaign. In 2005 and 2006, Campbell proposed to the Navy sending text messages to young adults, the Navy’s target audience, encouraging them to learn more about the Navy. The Navy approved Campbell’s proposal, conditioned on sending the messages only to people who had “opted in” to receipt of marketing solicitations on topics that included service in the Navy.

Campbell then contracted with Mindmatics LLC, which generated a list of cellular phone numbers geared to the Navy’s target audience: people between the ages of 18 and 24 who had consented to receiving solicitations by text message. In May 2006, Mindmatics transmitted the Navy’s message to over 100,000 recipients.

Nearly 40-year-old Jose Gomez received the Navy’s recruiting message despite never having consented to the receipt of solicitations by text message. Gomez filed a class-action complaint in the District Court for the Central District of California in 2010 on behalf of a nationwide class of individuals who received the message without having consented to text message solicitations. He sought treble statutory damages, costs, and attorney’s fees, and an injunction against Campbell’s involvement in unsolicited messaging.

Prior to the deadline for Gomez to file a motion for class certification, Campbell offered to settle Gomez’s individual claim, and filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68. Campbell offered to pay Gomez his costs, excluding attorney’s fees, and $1,503 per message for the May 2006 text message and any other text Gomez could show he received, which would satisfy his personal treble-damages claim. Campbell also proposed a stipulated injunction in which it agreed to be barred from sending text messages in violation of the TCPA, but denied any liability for its actions. Gomez did not accept the settlement offer.

Campbell then moved to dismiss the case pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction, arguing that its settlement offer mooted Gomez’s individual claim by providing him with complete relief. Campbell also argued that Gomez had not moved for class certification before his claim became moot, and therefore, the class claims also became moot. The District Court denied Campbell’s motion because Gomez was not late in filing his certification request, and consequently, the class claims would relate back to the date Gomez filed the complaint.

Campbell then moved for summary judgment, arguing that the U.S. Navy enjoys the sovereign’s immunity from suit under the TCPA. The District Court granted the motion. However, the Court of Appeals for the Ninth Circuit reversed the summary judgment entered for Campbell. The appeals court disagreed with the District Court’s ruling on the immunity issue, but agreed that Gomez’s case remained lived. The United States Supreme Court granted certiorari to resolve a disagreement among the Courts of Appeals over whether an unaccepted offer can moot a plaintiff’s claim, and to resolve the federal contractor immunity question.

The Supreme Court adopted Justice Kagan’s analysis, writing in dissent, in Genesis HealthCare Corp. v. Symczyk, 569 U.S. ____ (2013). In Genesis HealthCare, Justice Kagan would have held that “an unaccepted offer of judgment cannot moot a case.” Id. at ____ (slip op., at 3). She explained, “As every first-year law student learns, the recipient’s rejection of an offer ‘leaves the matter as if no offer had ever been made.'” Id. (citing Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U.S. 149, 151 (1886)). In the instant matter, the Supreme Court adopted Justice Kagan’s analysis and held that Gomez’s complaint remained unaffected by Campbell’s unaccepted offer to satisfy his individual claim. The Court found that Rule 68 itself supports that conclusion, which states in relevant part, “An unaccepted offer is considered withdrawn, but it does not preclude a later offer.”

As to the second issue, the Court held that federal contractors do not share the government’s unqualified immunity from liability and litigation. The Court opined that government contractors obtain certain immunity, however, when a contractor violates federal law and the government’s explicit instructions, as here alleged, no “derivative immunity” shields the contractor from suit. Gomez presented evidence that the Navy authorized Campbell to send text messages only to people who had “opted in” to receive solicitations. The Court clarified that although it was subcontractor Mindmatics, not Campbell, that dispatched the text message to unconsenting recipients, the Federal Communications Commission has ruled that under federal common law principles of agency, there is vicarious liability for TCPA violations. Therefore, Campbell was vicariously liable for Mindmatics’ conduct when it failed to comply with the Navy’s instructions. In conclusion, the Court affirmed the Ninth Circuit’s decision, and remanded for further proceedings consistent with this opinion.

If you believe you have a lawsuit in New Jersey or Pennsylvania, please contact the Offices of Folkman Law today at 856-354-9444.