Tuesday, January 26, 2016

When can a Rule 68 offer moot the case?

It is a statistical fact that most lawsuits will settle before trial. For defendants' lawyers, one way to push for settlement to serve the plaintiff with a Rule 68 offer, which proposes to enter a judgment against the defendant in exchange for a sum of money. The plaintiff has 14 days to accept the offer, at which time the offer expires. This case explores what happens if the Rule 68 offer would give the plaintiff everything he asks for and the plaintiff rejects it.

The case is Campbell-Ewald v. Gomez, decided by the Supreme Court on January 20. This case was brought under the Telephone Consumer Protection Act, which prohibits the use of an automatic dialing system to send an unsolicited text message to someone's cell phone. Plaintiff wanted to bring a class action under the TCPA. But the defendant tried to make the case go away by serving plaintiff with a Rule 68 offer. The offer would have paid plaintiff his maximum damages entitlement for all the text messages. It would also stipulate to an injunction against any further text messages. In other words, the Rule 68 offer would have given plaintiff all that he was suing for. Plaintiff rejected the offer.

The issue here is whether that Rule 68 offer mooted the case once plaintiff rejected it. At first glance, why wouldn't it? The defendant is giving the plaintiff everything he wants, right? By a 5-4 vote, the Supreme Court says the offer did not moot the case. The Court offers very technical reasoning: the unaccepted offer is simply that: an unaccepted offer.

When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect. 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.’ Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that ‘[a]n unaccepted offer is considered withdrawn.’ Fed. Rule Civ. Proc. 68(b). So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.
The significance of this ruling is that if the Supreme Court went the other way on this issue and held that a Rule 68 offer that gives away the store moots the case if the plaintiff rejects it, then corporate defendants could make class action lawsuits by doing this before the plaintiff moves for class certification. This would be so because there is no class action if the plaintiff settles the case before the court certifies the class. This particular case might have yielded relatively low damages, but a class action could have yielded a fortune if thousands of other people also got these unsolicited text messages.

The Court does say there might be other ways for defendants to moot cases like this:

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.
In other words, what if the defendant literally gives the plaintiff the money that plaintiff is seeking in the lawsuit? Would that moot the case? Some defendant right now is probably attempting that tactic. That issue will reach the Supreme Court in a few years. 

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