Offers of Judgment after Campbell-Ewald v. Gomez and Fulton Dental LLC. v. Bisco Inc.

Federal Rule of Civil Procedure 68, Offers of Judgment, is a procedural mechanism that is used by defense counsel to resolve cases and avoid litigation. The purpose of the Rule is to encourage settlements. Rule 68 permits a defendant to serve the plaintiff with an offer of judgment up to 14 days before trial. See Fed. R. Civ. P. 68(a). If the plaintiff accepts, the clerk must enter the judgement as a judgment of the court. Id. However, if the offer is not accepted within 14 days, it is considered withdrawn. Id. at 68(b). If the plaintiff ultimately obtains a less favorable judgment, they must pay the costs incurred after the offer of judgment was made. Id. at 68(d).

The U.S. Supreme Court recently held in Campbell-Ewald v. Gomez, that an unaccepted offer under Rule 68 to satisfy a named plaintiff’s individual claim does not render a case moot. Campbell-Ewald v. Gomez, 136 S. Ct. 663 (2016). In this case, Gomez sued Campbell-Ewald in the District Court for the Central District of California under the Telephone Consumer Protection Act, claiming Campbell-Ewald sent him a text message without his prior express consent. Gomez filed a nationwide class action on the basis of these allegations. Before Gomez could certify the class, Campbell-Ewald filed an offer pursuant to Federal Rule of Civil Procedure 68. Id. at 668. Gomez did not respond to the offer. Campbell-Ewald then moved to dismiss the case pursuant to Rule 12(b)(1) for lack of subject-matter jurisdiction. Id. Campbell-Ewald argued that the offer mooted Gomez’s individual claim by providing him with complete relief, and because Gomez failed to move for class certification before his individual claim became moot, the class claims became moot as well. Id. Campbell-Ewald also moved for summary judgement.

The District Court granted Campbell-Ewald’s motion for summary judgment. On appeal, the Ninth Circuit reversed, joining a slight majority of the federal circuits by agreeing that Campbell-Edward’s offer of judgment did not moot either the individual or class case. The Supreme Court granted certiorari to resolve the circuit split regarding this issue. Id. at 669.

The Supreme Court held that Gomez’s claim was not mooted by Campbell-Ewald’s unaccepted offer of judgment. The Court reasoned that, because an unaccepted offer has no legal effect, there still exists a case or controversy between the parties under Article III of the United States Constitution. Id. at 681 (citing Allen v. Wright, 468 U.S. 737, 752 (1984)). By applying contract principles, the Court further reasoned that both the individual and class claims could not be dismissed as moot under these circumstances because, “absent acceptance of the offer, a case or controversy still existed.” Id. at 681 (emphasis added). Although the Court in Campbell-Ewald held that an “offer of complete relief is insufficient to moot a case,” the majority declined to decide if a “payment of complete relief leads to the same result.” Campbell-Ewald Co., 136 S. Ct. at 683 (Roberts, C.J., dissenting).

On June 20, 2017, the Seventh Circuit addressed in Fulton Dental whether the same reasoning should be applied if the offer is made using Rule 67 in lieu of rule Rule 68. In that case, the plaintiff filed a class action against the defendant. The defendant then made a Rule 68 offer to the plaintiff for its full requested individual relief. See Fulton Dental, LLC v. Bisco, Inc., 860 F.3d 541 (7th Cir. 2017). Two days after making the offer, the Supreme Court decided Campbell-Ewald. In an attempt to avoid the implications of this ruling, the defendant deposited the settlement payment with the district court under Rule 67, and argued that the deposit rendered the plaintiff’s claim moot. Id. The Court held that depositing an unaccepted settlement offer with a federal court under Rule 67 does not moot a class action. Id at 545. The court reasoned that Rule 67 is just a “procedural mechanism” that allows a party to use the court as an escrow agent. Id. at 544. The court further reasoned that there is no distinction between a settlement offer under Rule 68, or through a deposit under Rule 67. Id. at 545. Both Rules generate an offer. If this offer is not accepted, it is non-binding on the plaintiff or the class. Id.

The Fourth Circuit upheld these principles in Bennett v. Office of Fed. Empls. Grp. Life Ins., where the Court held that an offer to settle by the defendant, MetLife, which included MetLife tendering a check for the benefits that the plaintiff asserted was due, did not moot the plaintiff’s class claims. Bennett v. Office of Fed. Empls. Grp. Life Ins., 683 F. App’x 186, 188 (4th Cir. 2017).

The holdings in Campbell-Ewald and Fulton Dental, and the subsequent application of the Campbell-Ewald holding by the Fourth Circuit, clarify that unaccepted, non-binding offers under Rules 67 and 68 cannot be the basis for dismissing individual claims or mooting class claims. An unaccepted offer by the named plaintiff of a class is not sufficient to compensate that plaintiff for its loss of the opportunity to represent the putative class. Id at 547.

It is notable, however, that notwithstanding these decisions, Rule 68, and a deposit under Rule 67, can still be used by defendants as a fee-shifting strategy. See Fed. R. Civ. P. 68(d). Properly drafted offers permit a defendant to shift post-offer costs to the plaintiff, and under relevant substantive statutes, cut off a plaintiff’s right to attorney’s fees. Grissom v. Mills Corp., 549 F.3d 313, 316 (4th Cir. 2008).

In light of these rulings, defendants can still seek to persuade the plaintiff that potential class action claims need not be certified, and should be resolved on an individual basis. These decisions also place no restriction on parties’ ability to resolve cases through informal negotiations, settlement offers, or to shift costs following an unaccepted offer.