Some Common Sense on Class Actions from the U.S. Supreme Court

Campbell-Ewald Co. v. Gomez, 136 S. Ct. 846 (2016).  The Supreme Court of the United States has made some dreadful decisions in the class action area, including notorious rulings restricting class certification, making it harder for plaintiffs to use expert testimony (though that ruling was likely limited to its own facts), and forcing putative class claimants into individual arbitrations.  This week, however, the Court made a sound decision in a case in which defendant sought to terminate a putative class action by “buying off” the representative plaintiff, making an offer of judgment to pay his claim in full.  Plaintiff rejected the offer.  By a 6-3 vote, the Court ruled that defendant’s unaccepted offer did not moot the case.  Justice Ginsburg wrote the majority opinion, in which Justices Kennedy, Breyer, Sotomayor, and Kagan joined.  Justice Thomas, the sixth vote, filed a concurring opinion, on very different legal grounds.  Chief Justice Roberts filed a dissent for himself and Justices Scalia and Alito, and Justice Alito filed a separate dissent as well.

The question presented, as noted by Justice Ginsburg at the outset of her opinion, was one that was reserved by the Court in Genesis HealthCare Corp. v. Symczyk, 569 U.S. ___ (2013), a case under the Fair Labor Standards Act, 29 U.S.C. §201, which operates under a regime where absent persons must opt into a case, as opposed to the opt-out procedure in class actions under Rule 23.  That case was discussed here.

As Justice Ginsburg phrased it, the issue was “[is] an unaccepted offer to satisfy the named plaintiff’s individual claim sufficient to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated?”  The majority was able to dispose of the issue, which had engendered a split in the Circuit Courts of Appeals [Disclosure:  I was counsel in one of those Circuit Court cases, Weiss v. Regal Collections, 385 F.3d 337 (3d Cir. 2004)], very concisely.

Justice Ginsburg recognized that Article III of the United States Constitution limits federal jurisdiction to “cases” or “controversies.”  Defendant contended that since an offer of full payment to the plaintiff was made, there was no longer a “case” or “controversy” and the case was therefore moot.  The majority disagreed.  “[A] concrete interest, however small, in the outcome of the litigation” avoids mootness.  Adopting the reasoning of Justice Kagan’s dissent in Genesis, which had reached this issue where the majority declined to do so, Justice Ginsburg said that when a plaintiff rejects an offer of judgment “her interest in the lawsuit remains just what it was before.  And so too does the court’s ability to grant her relief.”  A rejected offer of judgment is a “nullity” since, under fundamental contract law, a rejection of an offer “leaves the matter as if no offer had ever been made.”

Defendant cited several nineteenth century cases in support of its position.  But Justice Ginsburg observed that in those cases, there was not merely an offer of payment, but actual deposits of the sums involved.  The majority declined to decide whether a deposit of the full amount claimed by a plaintiff into an account for the benefit of that plaintiff would moot the case, reserving that question for “a case in which [that issue] is not hypothetical.”

The Chief Justice’s dissent complained that the majority had taken “authority from the federal courts and hand[ed] it to the plaintiff.”  Justice Ginsburg rightly retorted that “[t]he dissent’s approach would place the defendant in the driver’s seat.”  A plaintiff in a putative class action is acting for the putative class, not just for himself or herself.  The plaintiff’s decision to remain true to his or her obligation to the class by rejecting a “buy off” is praiseworthy, and should not be able to be circumvented by a defendant who, not wanting to be sued by anyone (let alone by numerous victims at once) seeks to cut off the putative class’s potential to recover.  That is common sense, as well as a proper understanding of the federal rules regarding class actions and offers of judgment.

The majority correctly reached that same result even in terms of “case or controversy,” the weapon that defendant sought to use.  If a case involving a plaintiff who spurns an actual deposit of monies, rather than just an offer, does present itself, the Court should reach the same result as it did here.  The plaintiff, not the defendant, should be the one to determine whether he or she has “a concrete interest” in his or her case.