January 20, 2016

Supreme Court Decides Campbell-Ewald Co. v. Gomez

On January 20, 2016, the Supreme Court decided Campbell-Ewald Co. v. Gomez, holding that an unaccepted offer to satisfy a named plaintiff’s individual claim does not render a case moot. The Court also held that sovereign immunity does not shield a government contractor from liability when the contractor allegedly violated the government’s explicit instructions in performing its work.

The U.S. Navy engaged Campbell-Ewald Company (Campbell), an advertising agency, to advertise to potential recruits. Campbell developed a program to send text messages to young adults to encourage them to learn more about the Navy. The Navy approved the proposal, but instructed that text messages only be sent to individuals who had “opted in” to receive marketing solicitations. In 2006, text messages were transmitted to over 100,000 recipients, including Jose Gomez.

Gomez claimed that he had not consented to receive the message, and filed a class-action complaint alleging that Campbell had violated the Telephone Consumer Protection Act (TCPA), which (the parties agreed) prohibits the sending of certain text messages to cellular telephones. Before Gomez filed a class-certification motion, Campbell offered to settle Gomez’s individual claim by paying him slightly more than the maximum amount of damages provided in the TCPA, plus Gomez’s costs and a stipulated injunction barring Campbell from sending text messages in violation of the TCPA (although the stipulation denied any liability and denied any basis for imposing an injunction). Campbell did not offer to pay Gomez’s attorney’s fees because the TCPA does not provide for an award of attorney’s fees. Campbell filed its offer of judgment under Fed. R. Civ. P. 68.

Gomez did not accept the offer. Campbell then moved to dismiss Gomez’s claims, arguing that no case or controversy remained because Campbell’s offer of judgment had mooted Gomez’s individual claim by offering him everything that he could have received if he were successful on his TCPA claim. The District Court disagreed, and permitted Gomez’s case to proceed.

Campbell later moved for summary judgment, arguing that because it was a contractor for the Navy, it acquired the Navy’s sovereign immunity. The District Court granted Campbell’s motion on sovereign-immunity grounds, and dismissed the case.

The Ninth Circuit reversed, holding that Campbell was not entitled to the benefit of the Navy’s sovereign immunity. It also held that the unaccepted Rule 68 offer of judgment had not mooted Gomez’s claim.

The Supreme Court affirmed the Ninth Circuit’s opinion. The Court first concluded that Campbell’s unaccepted offer of judgment for Gomez’s individual claim did not moot Gomez’s claim. Because the settlement offer had lapsed without Gomez accepting it, it had “no continuing efficacy”—indeed, Gomez “remained emptyhanded” and Campbell continued to deny liability, so the parties remained adverse and a live controversy existed. The Court reasoned that permitting a defendant’s offer of judgment to moot a plaintiff’s claim would improperly “place the defendant in the driver’s seat.” In reaching its conclusion, the Court declined to decide the hypothetical question of whether the result would change if a defendant deposited the full amount of the plaintiff’s individual claim into an account payable to the plaintiff, and the court entered judgment for the plaintiff in that amount.

The Court also held that Campbell’s status as a federal contractor did not give it sovereign immunity from Gomez’s claims. While government contractors obtain certain immunity for the work that they do in accordance with their contract with the government, that immunity is not absolute, and is defeated if the contractor knew or should have known that its conduct violated a clearly established right. Here, Campbell had no basis to argue that Gomez’s right not to receive a text message unless he consented to it was not “clearly established.” Campbell allegedly violated both federal law and the government’s explicit instructions regarding the performance of its work, so it had no “derivative immunity.”

Justice Ginsburg delivered the opinion of the Court. Justice Thomas filed an opinion concurring in the judgment. Chief Judge Roberts filed a dissenting opinion, in which Justices Scalia and Alito joined.

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