The parameters of Constitutional standing, which have been in flux for decades, are solidifying before our very eyes. In recent months the U.S. Supreme Court has confirmed that a litigant must have a “live dispute” at all phases of litigation to confer jurisdiction to an Article III court, but has also held that a class representative cannot be deprived of constitutional standing—“picked off”—by a defendant offering full monetary relief. Within the next few months the Court will also answer the ultimate metaphysical issue behind Constitutional standing principles—what is an “injury in fact” and can Congress create one out of whole cloth? Of course, Justice Thomas’ intriguing concurrence in Campbell-Ewald opens the door to the possibility of “mootness via tender,” re-introducing an entire generation of lawyers to the ancient law of tender and satisfaction. All in all, it is a very exciting time to be a civil practitioner, although a somewhat confusing time for litigants and the courts.
These recent developments all stem from a somewhat unlikely source. In an effort to stop the growing wave of class action litigation, many businesses faced with such suits began using what is called a Federal Rule of Civil Procedure 68 offer of judgment. The primary statutory purpose behind the Rule 68 offer is merely to shift costs of suit in favor of the party that acted most reasonably during settlement discussions. Per the statute: “if the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.” This provision encourages the plaintiff’s lawyer to weigh the risks of proceeding to trial, given that the plaintiff could be ultimately liable to pay the offeror the costs it incurred after the date the offer of judgment was rejected. Thus, the purpose of Rule 68 is to encourage settlement and avoid unnecessary trials.
Bearing in mind that federal courts are courts of limited jurisdiction, however, creative litigators began using the Rule 68 procedure as a tool to “pick off” named class representatives—offering full relief of statutory claims so as to “moot” an action and deprive an Article III court of jurisdiction. This tactic worked particularly well in statutory based lawsuits such as employment discrimination cases and statutory violations of the Equal Pay Act, Worker Adjustment & Retraining Notification Act, Fair Credit Reporting Act, Telephone Consumer Protection Act and California Consumer Legal Remedies Act.
Perhaps not surprisingly, the Circuit Courts of Appeal split on whether this technique actually mooted a claim. The U.S. Courts of Appeal for the Third, Fourth, and Sixth Circuits had held that it did because a named plaintiff receiving an offer of full relief no longer had a personal stake in the outcome of the lawsuit. The First, Second Fifth, Seventh, and Eleventh Circuits had held, on the other hand, that an unaccepted offer had no effect on a named plaintiffs’ standing.
Until recently, only one Supreme Court case had come close to ruling on this issue. Genesis HealthCare Corp. v. Symczk, 133 S. Ct. 1523 (2013) involved a collective Fair Labor Standards Act claim. In Genesis, the plaintiff had conceded that the unaccepted offer of judgment made by the defendant in that case served to moot her individual claim, and the Supreme Court considered only whether the lawsuit was justiciable based solely on her interest in pursuing collective action allegations against the defendant. The Court held it was not, emphasizing that an uncertified FLSA class has no legal standing to pursue a claim and that a mooted claim for monetary damages must be dismissed for want of jurisdiction.
While this decision answered two important questions, it left another key inquiry unanswered: “Is an unaccepted offer to satisfy the named plaintiff’s individual claim sufficient to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated?”
On January 20, 2016, in a 6-3 decision in Campbell-Ewald Co. v. Gomez, No. 14-857 the U.S. Supreme Court answered that question in the negative. A mere offer of judgment, it was held, has no effect on a litigant’s standing to pursue a claim or upon a court’s jurisdiction to determine the dispute. But the court declined to answer the underlying question—can a class representative’s claim for damages be mooted at all, such as via the deposit of all disputed sums into a bank account at the court?
While the Campbell-Ewald majority punts on the issue, Justice Thomas takes it head on in his concurring opinion. His conclusion: absolutely a litigant’s claim can be mooted and it all stems back to the ancient law of tender. In his view, courts long held (albeit long ago) that the complete payment of a claim—rather than a complete offer to pay a claim—was sufficient to, and did as a legal matter, satisfy a claim. Such satisfaction of a claim, he reasons, is sufficient to “moot” the dispute and render the lawsuit academic and non-judiciable in an Article III court.1 Although he joined the Campbell-Ewald majority in holding that the defendant’s offer was insufficient to moot the claim, therefore, in his view the payment of all money owed to the Plaintiff would have deprived the court of jurisdiction.
With Justice Thomas approving a “mootness by tender” approach and with the majority opinion failing to reach the issue, it did not take long for class action defendants to employ this new (or is it old?) twist to picking off a class representative. Early returns have not been promising for defendants, however. For instance, just last week Judge Feuerstein denied a TCPA class defendant’s motion to deposit sums with the Court sufficient to moot a named class representative’s claims. See Brady v. Basic Research, L.L.C., 2016 WL 462916, at *2 (E.D.N.Y., 2016). In denying the motion, Judge Feuerstein pointed to dicta in Campbell-Ewald that “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” Id. at *2. It remains to be seen what other courts will do with Campbell-Ewald’s mysterious “fair opportunity” language, and the viability of the “mootness by tender” approach outlined by Justice Thomas might hang in the balance.
But yet looming on the horizon is a case under the Fair Credit Reporting Act (“FCRA”) that is likely to cause an even greater stir, Spokeo, Inc. v Robins. In Spokeo, the Plaintiff contended Defendant violated the FCRA by failing to “follow reasonable procedures to ensure maximum possible accuracy” of the information made available for credit reports. Problematically, however, the Plaintiff could not point to any actual harm suffered as a result of the publication of inaccurate information. The district court, therefore, dismissed his case because he suffered no “injury in fact”—real world harm—as opposed to a sterile violation of the words of a statute. The Ninth Circuit reversed, however, holding that “the violation of a statutory right is usually a sufficient interest to confer standing” regardless of the lack of any real world harm. The Supreme Court agreed to hear the case to decide whether a party that has suffered no actual loss of any kind might, nonetheless, pursue a claim in federal court merely because a Federal statute says he can. Viewed from one angle, the question is whether Congress can add to the “irreducible constitutional minimums” on standing imposed by the Courts over the last several decades. Viewed from another angle, however, the question is merely whether a “case or controversy” is created when Congress enacts a federal statute. Either way the ruling stands to provide clarity on the necessity and contours of the “injury in fact” prong of Constitutional standing.
Given the tug and pull of interests on this highly politicized, and polarized, Supreme Court, accurately predicting the outcome of Spokeo is impossible. We here at Dorsey are expecting the unexpected, and will be ready to employ the Court’s new guidance to further our clients’ interests, as soon as the decision is handed down.
1Notably, this approach is consistent with UCC principles. See U.C.C. § 3-310. EFFECT OF INSTRUMENT ON OBLIGATION FOR WHICH TAKEN (Noting that tender of an instrument suspends or discharges an obligation just as a cash payment would.)