Consumer Finance Insights
January 25, 2016

Update Campbell-Ewald: SCOTUS Rules Against Defendant’s Ability to Moot Cases with Settlement Offers, But Provides a Roadmap for the Future

We have an update on Campbell-Ewald, one of the Supreme Court cases we were monitoring last fall.  While, contrary to our prediction, the majority decision in Campbell-Ewald, 577 U.S. ___ (2016) appears to deal a blow to companies seeking a mechanism to settle class actions effectively by offering complete relief to a named plaintiff, the opinion also offers hope for potential defendants.  Namely, the justices  indicated that this decision leaves open part of the mootness question, as well as a road map to allow defendants to potentially obtain a mootness finding, as discussed further below.

The opinion, authored by Justice Ginsburg, adopted the reasoning in Justice Kagan’s dissent in Genesis HealthCare Corp. v. Symczyk, 569 U. S. ___, ___, ___, n. 4 (2013) (slip op., at 5, 6, n. 4), that an unaccepted settlement offer functions as a legal nullity and does not moot a case.  (Justice Thomas joined in the judgment, although his concurrence disclaimed Justice Ginsberg’s reasoning).  The majority explained that an unaccepted settlement offer is like any other unaccepted offer in contract law and creates no lasting rights or obligations. Accordingly, the unaccepted settlement offer changes nothing, in that the plaintiff remains interested in the outcome and the court can still grant relief.  And further, for purposes of a class action, since the named plaintiff’s individual claim is not mooted through the settlement offer, the class representative can be accorded time to bring a motion to certify the class.

But the majority opinion left a large door open for defendants.  The key line in the ruling, and the one that provides hope for companies who fear being roped into class action cases with out-sized liability, is the following:

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. Campbell-Ewald, 577 U.S. at __ (2016).

First, the justices specifically left this scenario to render a case moot outside of the Campbell-Ewald holding, keeping it as an option for litigants.  Second, during oral argument, both Justices Breyer and Kennedy indicated that they believed that, if a defendant actually tendered the offered settlement to a plaintiff through the court or some other enforceable mechanism, that would make the case moot. In addition, given the dissent’s position that the unaccepted offer alone makes the case moot, it is reasonable to suppose that the five votes necessary to hold that an unaccepted offer of complete settlement, with payment tendered, makes a case moot may be had – once a case with the appropriate facts comes before the Court (i.e. the defendant makes the payment to the plaintiff in connection with the unaccepted offer).

While the outcome of Campbell-Ewald creates an incentive for plaintiff’s counsel to push to decline settlement offers in class settings, companies would be well served to go ahead and make arrangements to pay the plaintiff in the way outlined by the Justices, and make the argument that the unaccepted offer plus payment is sufficient to avoid the outcome in Campbell-Ewald.