Supreme Court Rules on Effect of Offers to Named Class Plaintiffs

The U.S. Supreme Court issued a decision earlier this week in a case raising the issue whether a defendant can cut off a Telephone Consumer Protection Act class action by making an offer of full relief to individual named plaintiffs. See Campbell-Ewald Co. v. Gomez, No. 14-857 (U.S. 1/20/16).

Here is the background: the Navy contracted with petitioner Campbell to develop a multimedia recruiting campaign that included the sending of text messages to young adults, but only if those individuals had “opted in” to receipt of marketing solicitations on topics that included Navy service. Respondent Gomez alleged that he did not consent to receive text messages and, at age 40, was not in the Navy’s targeted age group anyway. Gomez filed a nationwide class action, alleging that Campbell violated the Telephone Consumer Protection Act (TCPA), 47 U. S. C. §227(b)(1)(A)(iii), which prohibits “using any automatic dialing system” to send a text message to a cellular telephone, absent the recipient’s prior express consent. He sought treble statutory damages for a willful and knowing TCPA violation and an injunction against Campbell’s involvement in unsolicited messaging.

Before the deadline for Gomez to file a motion for class certification, Campbell proposed to settle Gomez’s individual claim and filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68. Gomez did not accept the offer and allowed the Rule 68 submission to lapse on expiration of the time (14 days) specified in the Rule. Campbell then moved to dismiss the case pursuant to Rule 12(b)(1) for lack of subject-matter jurisdiction. Campbell argued first that its offer mooted Gomez’s individual claim by providing him with complete relief. Next, Campbell urged that Gomez’s failure to move for class certification before his individual claim became moot caused the putative class claims to become moot as well.

The District Court denied the motion. After limited discovery, the District Court then granted
Campbell’s motion for summary judgment on the merits, relying on the Navy’s sovereign
immunity from suit under the TCPA. The Ninth Circuit reversed. It agreed that Gomez’s case remained live but concluded that Campbell was not entitled to “derivative sovereign immunity.” 

The Supreme Court took the case and ruled that a mere unaccepted settlement offer or offer of judgment does not automatically moot a plaintiff’s case, so the District Court retained jurisdiction to adjudicate Gomez’s complaint.  While Article III’s “cases” and “controversies” limitation requires that “an actual controversy . . . be extant at all stages of review, not merely at the time the complaint is filed,” Arizonans for Official English v. Arizona, 520 U. S. 43, 67, a case does not become moot as “long as the parties have a concrete interest, however small,” in the litigation’s outcome. Here Gomez’s complaint was not effaced by Campbell’s unaccepted offer to satisfy his individual claim. Under principles of contract law, Campbell’s settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy. With no settlement offer operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset. (Of course, our readers may well recognize that laying a legal controversy to rest may not be quite the same thing as making a contract.) 

On the merits, less interesting to our readers, Campbell’s status as a federal contractor did not entitle it to immunity from suit for its violation of the TCPA. Unlike the United States and its agencies, federal contractors do not enjoy absolute immunity. A federal contractor who simply performs as directed by the Government may be shielded from liability for injuries caused by its conduct. But no “derivative immunity” exists when the contractor has exceeded its authority or its authority was not validly conferred.

The decision resolved a circuit split on the settlement offer issue, and closed the loop on an issue left open by the Court in its 2013 decision in Genesis Healthcare Corp. v. Symczyk.

Interestingly, the majority declined to address the related issue whether the result would have been different if Campbell had actually paid up rather than merely offered to pay. “That question is appropriately reserved for a case in which it is not hypothetical. "

The Chief Justice dissented, arguing that “The problem for Gomez is that the federal courts exist to solve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking.”  It seemed beyond dispute that the offer made would have fully satisfied Gomez’s claims. "That makes the case moot, and Gomez is not entitled to a ruling on the merits of a moot case.”  

The ruling may impact other consumer type claims under statutes, such as the TCPA, under which damages can be easily calculated.  But one has to wonder about a rule in which  federal courts are forced to preside over cases where plaintiffs insist on litigating, with all of the burden and expenses, even when they have been offered 100% of what they could possibly recover. 

 

Cert Granted in Interesting Class Action Appeal

The Supreme Court has granted cert in an important case raising the issue whether a federal court of appeals has jurisdiction under both Article III and 28 U. S. C. §1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice. See MICROSOFT CORPORATION, Petitioner, v. SETH BAKER, ET AL., No. 15-457 (U.S., petition granted 1/15/16).

A first group of plaintiffs appealed a denial of class certification, seeking interlocutory review under Fed. R. Civ. P. 23(f). Rule 23(f) gives federal courts of appeals “unfettered discretion” to “permit an appeal from an order granting or denying class-action certification.” Fed. R. Civ. P. 23(f); Fed. R. Civ. P. 23(f) advisory committee’s note to 1998 amendment. They argued the class-certification denial “constitute[d] the ‘death knell’ for this litigation” because the individual claims about their game consoles were too small to justify litigating on their own to final judgment. The Ninth Circuit denied the petition, and the plaintiffs eventually resolved their individual claims by an agreement with Microsoft.

A few years later, the same lawyers as in the original consolidated litigation filed a new lawsuit—again in the U.S. District Court for the Western District of Washington—on behalf of respondents, a handful of Xbox 360 owners who allegedly did not sue in the prior case. Respondents pressed the same claims as their predecessors and they likewise requested certification of a nationwide console class. They argued the Ninth Circuit’s intervening decision in Wolin v. Jaguar Land Rover North America, LLC, 617 F.3d 1168 (9th Cir. 2010) now allowed certification of their proposed classes.  (A careful reading shows that case did not  did not change the law relevant to this case.) As a result, the district court struck respondents’ class allegations. It found the reasoning in the first denial of class certification (by a different judge) persuasive and that nothing in Wolin undermined the previous analysis.  Baker v. Microsoft Corp., 851 F. Supp. 2d 1274, 1280 (W.D. Wash. 2012). Invoking Fed. R. Civ. P. 23(f), respondents sought immediately to appeal the district court’s order striking their class allegations. As in the previous case, respondents’ counsel asserted that “the district court’s order effectively kills this case.” The Ninth Circuit denied the petition, and remanded the case back to the district court.  

Instead of pressing their individual claims, respondents tried an end run, as they moved on remand to dismiss their claims with prejudice. Respondents explained that they wanted such an order so as to appeal the class decision, despite defendant's observation that plaintiffs would have no right to appeal the order striking class allegations after entry of their requested dismissal.  The district court granted the dismissal with prejudice.

The Ninth Circuit assumed jurisdiction over respondents’ appeal, holding that in the absence of a
settlement, a stipulation that leads to a dismissal with prejudice does not destroy the adversity in that judgment necessary to support an appeal of a class certification denial. That ruling seemed to conflict with Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), and the rule plaintiffs may not manufacture an immediate appeal by dismissing and thereby showing that a class certification denial has in fact sounded the “death knell” of their claims.

On the merits, the Ninth Circuit thought the district court had misread Wolin, and remanded for further proceedings. 

As our readers may know, courts disagree on whether plaintiffs seeking to represent a class “may appeal from a judgment entered after a voluntary dismissal with prejudice.” TASHIMA & WAGSTAFFE, FEDERAL CIVIL PROCEDURE BEFORE TRIAL § 16:396 (2015); see also 6 CYCLOPEDIA OF FEDERAL PROCEDURE §23.46 (3d ed. 2015) (explaining that while some courts allow such appeals of de-certification orders, “other courts consider this result untenable, because it allows the putative class representative to evade the policy against piecemeal review by waiving his or her individual claims”). Five circuits have held that a court of appeals lacks jurisdiction to review a denial of class  certification where the plaintiffs have voluntarily dismissed their claims with prejudice. E.g.,  Bowe v. First of Denver Mortg. Investors, 613 F.2d 798, 801 (10th Cir. 1980). The Third, Fourth, and Seventh Circuits have since adopted the same view. Reviewing a case in which the plaintiffs voluntarily dismissed all of their claims to manufacture finality, the Third Circuit held that such a “procedural sleight-of-hand” does not create appellate jurisdiction. Camesi v. Univ. of Pittsburgh Med. Ctr., 729 F.3d 239, 245-47 (3d Cir. 2013). The Fourth Circuit likewise has held that when a putative class plaintiff voluntarily dismisses the individual claims underlying a request for class certification, a court of appeals lacks jurisdiction to decide the issue whether the district court abused its discretion in denying the plaintiff's request for class certification. Rhodes v. E.I. DuPont de Nemours & Co., 636 F.3d 88, 100 (4th Cir.), cert. denied, 132 S. Ct. 499 (2011); see also Himler v. Comprehensive Care Corp., 993 F.2d 1537 (4th Cir. 1993) (unpublished opinion) (same). And the Seventh Circuit has held that it will not review the district court’s refusal to certify a class when the plaintiffs requested and were granted a voluntary dismissal of their claims. Chavez v. Illinois State Police, 251 F.3d 612, 629 (7th Cir. 2001). 

The Eleventh Circuit has gone even further, holding that it has no jurisdiction whenever a plaintiff appeals from a final judgment that resulted from a voluntary dismissal with prejudice.  See Druhan v. Am. Mut. Life, 166 F.3d 1324, 1325-26 (11th Cir. 1999). It does not matter whether the dismissal with prejudice was requested only as a means of establishing finality in the case such that the plaintiff could appeal an interlocutory order—an order that the plaintiff believes effectively disposed of her case. Id. at 1326. Nor does it matter whether the interlocutory order did, in fact, eliminate the plaintiff’s claim. Id. at 1327 n.7. In either case, neither 28 U.S.C. § 1291 nor Article III permits the
appeal. Id. at 1326-27. Druhan was not a class action, but courts have since confirmed that its 
categorical holding applies equally to class actions. See Woodard v. STP Corp., 170 F.3d 1043, 1044 (11th Cir. 1999); Kay v. Online Vacation Ctr. Holdings Corp., 539 F. Supp. 2d 1372, 1373-75 (S.D. Fla. 2008).

Only two circuits now hold that a named plaintiff’s voluntary dismissal with prejudice creates a sufficiently adverse—and thus appealable—final decision for the plaintiff to obtain review of a class-certification denial. Berger v. Home Depot USA, Inc., 741 F.3d 1061, 1065 (9th Cir. 2014); Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 178-79 (2d Cir. 1990), cert. denied, 498 U.S. 1025 (1991).

 The Supreme Court now looks poised to resolve this split.

American Tort Reform Foundation Releases Judicial Hellhole List

 The American Tort Reform Foundation recently published its report identifying the top "judicial Hellholes" for 2015-16.

The top (or bottom?)  jurisdictions are California, NY (asbestos), Florida, Missouri, Madison County, Ill., Louisiana, Hidalgo County, Texas, Newport News, Virginia. and the Eastern District of Texas.

The "watch list" includes West Virginia, Philadelphia (your humble blogger's home base), New Jersey, and Pottawatomie County, Oklahoma.

According to the ATRF, California is the epicenter for lawyers trolling to bring disability access lawsuits against small businesses and ridiculous class action lawsuits against food and beverage companies. Certain areas of the state are also a hotbed for asbestos litigation. Local district attorneys and government agencies have taken it upon themselves to partner with private contingency fee lawyers, leading them to bring novel claims against makers of paint and prescription drugs.

New York City is listed for its ongoing treatment of the asbestos mass tort.

Florida ranks next because, according the ATRF, the Florida Supreme Court issues liability-expanding rulings that are out of sync with courts in the rest of the country. Even when the state legislature, which is heavily influenced by trial lawyers, manages to enact reforms, the state’s high court "nullifies them in favor of boundless liability in the Sunshine State."

Our home base makes the watch list since the Philadelphia Court of Common Pleas hosts one of the largest mass tort dockets in the nation. The court effectively withdrew its open invitation to lawsuits from around the country with the adoption of some procedural reforms in 2012, but the jurisdiction is again experiencing a rise in out-of-state pharmaceutical claims, notes ATRF. Changes on the state high court that could favor plaintiffs, the state’s embattled attorney general’s alliance with private plaintiffs’ lawyers, and a doubling of disability access lawsuits are additional reasons for concern in the Keystone State, says ATRF.

This year's report also includes a discussion of the MDL process, noting the increase in the portion of the federal court docket that is in an MDL.  ATRF states that when the MDL discovery process is concluded, judges often follow a practice of selecting “bellwether” claimants for trial. The selection process can take many forms, including allowing each side to identify cases for trial. In some
instances, however, plaintiffs’ lawyers will simply dismiss the cases chosen by the defendant (or even cases selected by plaintiffs themselves) on the theory that they will be the weakest with respect to success on the merits. The plaintiffs’ lawyers try to select what they perceive to be their “best” cases as bellwethers, rather than representative cases, and when transferee judges have not performed any sort of gatekeeping function, neither the court nor the parties are in a position to know whether the bellwethers are in any way representative of many other claimants in the pool, argues ATRF.