It Ain’t Over ’til It’s Over”  (… Or, is it?)

Lenny Kravitz  (June 1991)

In my mediation practice, I have handled cases involving the Telephone Consumer Protection Act, 47 U. S. C. § 227 (“TCPA”) and class actions.  The other day, I came across a case argued before the U. S. Supreme Court on October 14, 2015 involving both of these issues. It caught my interest because the questions presented to the U. S. Supreme Court are; (1) whether a case becomes moot when the plaintiff receives a settlement offer that provides full and complete relief on his claim; and (2) Does such an offer of complete relief on his claim moot his class claim where that class has not yet been certified? (Campbell-Ewald Company v Gomez, Petition for Certiorari, U. S. Supreme Court, Case No. 14-857 at page 2.  (“Pet. For Cert.”))

The TCPA makes it unlawful for any person within the United States or from outside the United States if the recipient is located in the United States to make an unsolicited”… telephone call using any automatic telephone dialing system or an artificial or prerecorded voice…” In short, it prohibits those unwanted spam telephone calls and text messages that we sometimes get on our mobile telephones. The penalty for each violation is actual monetary loss or $500.00 whichever is greater. If the violation is knowing or willful, the damages are tripled.

Prior to 2006, the U. S. Navy contracted with an outside contractor – Campbell-Ewald – to create a mobile marketing campaign directed to those young adults aged 18-24 years of age. Campbell-Ewald outsourced this campaign and the actual dialing to Mindmatics with the direction that the message was to be sent only to those mobile telephone users consenting to the solicitation.  Gomez v Campbell-Ewald, 786 F.3d 871, 874 (9th Cir. 2014).   (“Ninth Circuit Opinion”)

In May 2006, Jose Gomez received a text message:

Destined for something big? Do it in

the Navy. Get a career. An education.

And a chance to serve a greater cause.

For a FREE Navy video call

[number]. (Id. at 873)

At the time, he was 40 years old and thus well outside the target market and contended that he did not consent to this solicitation. (Id. at 874.)  Three years and ten months later he filed suit alleging a single claim under the TCPA. (Pet. For Cert at p. 4.)Rule 68

Defendant Campbell-Ewald moved to dismiss the claim pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Failure to state a claim upon which relief can be granted;”) in the trial court. The trial court denied the motion.

Defendant Campbell-Ewald then offered plaintiff Gomez the sum of $1503.00 for its single alleged violation (or more than three times the statutory damage of $500 for each violation.)  In its formal Offer of Judgement Pursuant to Federal Rule of Civil Procedure 68, Defendant also offered to pay any and all reasonable costs available under the law and to allow the court to enter an injunction against it in the form attached. (Pet. For Cert. at p. 52a-61a.)Telephone Consumer

Gomez rejected the offer; he allowed it to lapse by its own terms. (Ninth Circuit Opinion at 874.)

Defendant then filed a motion to dismiss under Federal Rule of Civil Procedure 12(b) (1) (“lack of subject matter jurisdiction”) urging that Plaintiff’s rejection of its offer to settle (which provided full and complete relief) mooted the case. The trial court denied the motion. (Id. at 874.)

The defendant then filed a motion for summary judgment arguing that as it was under contract with the U.S. Navy which has sovereign immunity, it has derivative immunity.  The trial court agreed and granted the motion for summary judgment. (Ninth Circuit Opinion at 874.)

Gomez then appealed to the Ninth Circuit.  In its opinion, the Ninth Circuit vacated the summary judgment and remanded the matter back to the U.S. District Court. It concluded that Campbell-Ewald was NOT entitled to derivative immunity, and so could be subject to liability. More  importantly, it found that Gomez’s claim – both as an individual and as representative of a putative class or a class not yet certified – was not made moot by Campbell-Ewald‘s full and complete offer to settlement which would have given Gomez all of the relief to which he was entitled under the TCPA. (Ninth Circuit Opinion at 873-5.)  ““An unaccepted Rule 68 offer that would fully satisfy a plaintiff’s claim is insufficient to render the claim moot.” (Citation omitted)”. (Id. at 875.)

As the Ninth Circuit’s holding on this point is at odds with opinions rendered in the Third, Fourth, Fifth, Sixth and Seventh Circuits (which hold that an offer which fully satisfies a plaintiff’s claim moots the individual  claim) (Pet. For Cert. at p. 14), Campbell-Ewald filed its petition for Certiorari with the U. S. Supreme Court which was granted.  … And as stated above, oral argument was held on October 14, 2015.

You are probably wondering why Mr. Gomez did not accept the settlement offer. I suspect it had to do with attorneys’ fees. Although Mr. Gomez had demanded them, they were not part of the offer. While the TCPA does not provide for attorneys’ fees, there may be other statutes that do. For this reason, (and to make sure his attorneys DO get paid by defendants), Mr. Gomez probably rejected the offer. (“Justices Delve into Electricity Markets and Class Actions Demands” by Adam Liptak, October 14, 2015, New York Times (Business Day.)

As a mediator, I am interested in this case because if the Supreme Court holds that a settlement offer for full relief does moot a case, it will provide strong leverage to defendants in settlement negotiations.  During a mediation or a negotiation, Defendants will simply have to ask the mediator to convey that if the matter does not settle then and there, they will serve a formal offer for full relief thereby mooting the case. Such a comment will definitely give plaintiff pause and something serious to ponder!

( I am not going to even address the rationality of the time and expense involved  in pursing a possible $500 damage claim all the way to the U. S. Supreme Court; as is readily  apparent- it is all about the attorney’s fees available in a class action- millions of dollars!)

Stay tuned to see what the Supreme Court has to say when it issues its opinion later this term….!

… Just something to think about.


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