Attorney: U.S. SC ruling in case over offer of complete relief could change class action landscape

By Jessica Karmasek | Dec 7, 2015


WASHINGTON (Legal Newsline) - The U.S. Supreme Court could very well change the future of class action lawsuits if they rule, in the coming months, that an offer of complete relief renders a case moot.

The nation’s high court heard arguments in the case at issue, Campbell-Ewald Co. v. Gomez, in October.

The court agreed to review Gomez on the following issues:

- Whether a case becomes moot, and thus beyond the judicial power of Article III, when the plaintiff receives an offer of complete relief on his claim;

- Whether the answer to the first question is any different when the plaintiff has asserted a class claim under Federal Rule of Civil Procedure 23, but receives an offer of complete relief before any class is certified; and

- Whether the doctrine of derivative sovereign immunity recognized in Yearsley v. W.A. Ross Construction Co. for government contractors is restricted to claims arising out of property damage caused by public works projects.

Scott Pearson, a partner at Ballard Spahr LLP, says the case is a public policy question for the court.

“It’s, should we allow this?” said Pearson, whose practice focuses on complex business litigation and regulatory enforcement matters with an emphasis on the financial services industry. He is particularly well known for his work in lending disputes, real estate and consumer class actions.

Plaintiffs lawyers, he argues, hate the idea.

“This could prevent these really great class actions from being brought, and, of course, they don’t want that,” said Pearson, who has defeated or favorably settled more than 80 class actions himself.

“But there’s really nothing unfair about it. Defendants are giving the plaintiffs literally everything they want.”

In Gomez, the high court will review the U.S. Court of Appeals for the Ninth Circuit’s 2014 decision in Gomez v. Campbell-Ewald Co., which vacated and remanded a summary judgment ruling in favor of the defendant in a case brought under the Telephone Consumer Protection Act, or TCPA.

The TCPA restricts telephone solicitations, i.e. telemarketing, and the use of automated telephone equipment.

In particular, the law limits the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages and fax machines. It also specifies several technical requirements for fax machines, autodialers and voice messaging systems -- principally with provisions requiring identification and contact information of the entity using the device to be contained in the message.

Generally, the act makes it unlawful “to initiate any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party” except in emergencies or in circumstances exempted by the Federal Communications Commission.

The law permits any “person or entity” to bring an action to enjoin violations of the statute and/or recover actual damages or statutory damages ranging from $500 to $1,500 per violation.

The plaintiff, Gomez, alleged Campbell-Ewald Co. violated the federal law by sending -- through a third-party vendor -- unsolicited text messages on behalf of the U.S. Navy.

The defendant offered Gomez full relief on his claims -- $1,503 per violation, plus reasonable costs -- but the offer was rejected.

The Ninth Circuit held that the unaccepted offer did not moot the named plaintiffs’ individual claims or the putative class claims.

“When you make an offer of judgment -- which is a very formal settlement offer -- it’s just to the named plaintiff, and you offer that person everything they could possibly get on their individual claims, including attorneys fees and injunctive relief,” Pearson explained.

“At that point, you can make the argument that you’ve now offered this person everything they could get, so why should you waste the court’s time? There’s no dispute there.”

As Pearson notes, several federal courts have said the tactic works and is acceptable, but the other half have ruled against such a stratagem.

“They basically say, no, we can’t allow that because we think class actions are a good thing and this is a get-out-of-jail-free card for corporations and big businesses,” he said.

But class actions are being abused, Pearson argues, and are no longer being used for the purpose of resolving disputes more efficiently.

“They have become a way for lawyers to make money, period,” he said. “They (class actions) have become a really unjust thing in our legal system.”

But the Supreme Court in Gomez could change that, he contends.

“From the oral argument, I’d say there’s a good chance that the court is going to rule in favor of the defendants on this issue,” Pearson said. “I’m guessing it’ll be a 5-4 decision.

“Of course, you’re reading the tea leaves a little bit.”

According to some reports, the Oct. 14 arguments were at times heated. At one point, Chief Justice John Roberts, seemingly exasperated with the plaintiff’s lawyer, said, “You won’t -- you won’t take ‘yes’ for an answer.”

Pearson also points to the Supreme Court’s prior decision in Genesis Healthcare Corp. v. Symczyk.

In its 2013 ruling, the court majority ruled that an unaccepted offer of full relief had mooted the plaintiff’s claim, because that issue had not been disputed below.

The majority held that the collective-action allegations were moot, noting that “[w]hile settlement [with the named plaintiff] may have the collateral effect of foreclosing unjoined claimants from having their rights vindicated in respondent’s suit, such putative plaintiffs remain free to vindicate their rights in their own suits.

“They are no less able to have their claims settled or adjudicated following respondent’s suit than if her suit had never been filed at all.”

If the court reverses the Ninth Circuit in Gomez, Pearson argues such a ruling would “significantly” cut back on what he describes as class action “extortions.”

“You won’t completely get rid of class actions,” he said. “You’ll see legitimate cases being brought, but you won’t see as many of these dumb claims that are clearly being brought to extort companies.”

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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